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EXHIBIT 10.2   INTELLECTUAL PROPERTY PURCHASE AGREEMENT   by and among   G. Randall and Sons, Inc.   and   FBEC Worldewide Inc.   Dated as of June 29, 2015             1   Table of Contents       Page ARTICLE I PURCHASE AND SALE OF ASSETS   3 Section 1.1 Purchase and Sale of Assets.   3 Section 1.2 Excluded Liabilities.   3 Section 1.3 Purchase Price.   3 Section 1.4 Closing Transactions.   3         ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER   4 Section 2.1 Organization.   4 Section 2.2 Authority Relative to this Agreement and Related Matters.   4 Section 2.3 No Conflict; Required Filings and Consents.   4 Section 2.4 Absence of Litigation.   4 Section 2.5 Conveyed Intellectual Property.   5 Section 2.6 Data.   5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER   5 Section 3.1 Organization.   5 Section 3.2 Authority Relative to this Agreement and Related Matters.   5 Section 3.3 No Conflict; Required Filings and Consents.   5 Section 3.4 Absence of Litigation.   5         ARTICLE IV COVENANTS OF SELLER   6 Section 4.1 Conduct of Seller Pending the Closing.   6 Section 4.2 Notification of Certain Events.   6         ARTICLE V COVENANTS OF BUYER   6 Section 5.1 Representations and Warranties.   6 Section 5.2 Notification of Certain Events.   6         ARTICLE VI ADDITIONAL AGREEMENTS OF THE PARTIES   7 Section 6.1 Commercially Reasonable Efforts.   7 Section 6.2 Public Announcements.   7 Section 6.3 Amendment of Trademark Coexistence Agreement.   7         ARTICLE VII CONDITIONS TO THE CLOSING   7 Section 7.1 Conditions to Obligations of Each Party.   7 Section 7.2 Additional Conditions to Obligations of Buyer.   8 Section 7.3 Additional Conditions to Obligations of Seller.   8         ARTICLE VIII TERMINATION   8 Section 8.1 Termination.   8 Section 8.2 Effect of Termination.   9         ARTICLE IX INDEMNIFICATION PROVISIONS   9 Section 9.1 Seller’s Indemnification Obligation.   9 Section 9.2 Buyer’s Indemnification Obligation.   9 Section 9.3 Procedures for Indemnification for Third Party Claims.   9 Section 9.4 Indemnification Limitations.   10 Section 9.5 Exclusive Remedy.   10         ARTICLE X GENERAL PROVISIONS   11 Section 10.1 Survival of Representations and Warranties.   11 Section 10.2 Notices.   11 Section 10.3 Headings.   11 Section 10.4 Entire Agreement.   11 Section 10.5 Assignment: Parties in Interest.   12 Section 10.6 Governing Law; Consent to Jurisdiction.   12 Section 10.7 Counterparts.   12 Section 10.8 Severability.   12 Section 10.9 Specific Performance.   12 Section 10.10 Fees and Expenses.   12 Section 10.11 Amendment.   12 Section 10.12 Waiver.   12 Section 10.13 dELiA*s Undertaking and Guaranty.   13         ARTICLE XI CERTAIN DEFINITIONS   13   2     INTELLECTUAL PROPERTY PURCHASE AGREEMENT   INTELLECTUAL PROPERTY PURCHASE AGREEMENT, dated as of June 29, 2015 (this “Agreement”), by and among G. Randall & Sons, Inc., a California Corporation (“Seller”), and FBEC Worldwide, Inc., a Wyoming Corporation (“Buyer”), are referred to collectively herein as the “Parties.”   WHEREAS, Buyer is engaged in the business of manufacturing beverages and proprietary HEMP based products under the trade name “HEMP ENERGY” (the “Business”); and   WHEREAS, Seller desires to sell, and Buyer desires to purchase, the Purchased Assets (as defined below) upon the terms and subject to the conditions set forth in this Agreement.   NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants and agreements herein contained and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be   ARTICLE I   PURCHASE AND SALE OF ASSETS   Section 1.1 Purchase and Sale of Assets.   On and subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of all Encumbrances (other than Permitted Encumbrances), all of Seller’s right, title and interest, as of the Closing, in and to the following assets, properties and rights (collectively, the “Purchased Assets”):   (a) The Seller will provide a formulation and preparation of a 2 oz hemp energy shot as described in Exhibit-A: 2 oz Extra Strength Hemp Energy Shot - Original Formula. (b) The Buyer seeks to purchase the formula of a specific HEMP energy drink, the “Conveyed Intellectual Property”) inclusive of irrevocable rights to provide the Seller with a Royalty Agreement and Consulting Agreement as a part of, and not limited to, the purchase of the said Formula; and   (b) all of the goodwill relating to the Purchased Assets.   Section 1.2 Excluded Liabilities.   Buyer will not assume any liability or obligation of Seller in connection with Buyer’s purchase of the Purchased Assets pursuant to this Agreement.   Section 1.3 Purchase Price.   In consideration for the sale by Seller of the Purchased Assets to Buyer, at the Closing, Buyer shall pay to Seller the amount of FIFTY THOUSAND DOLLARS ($50,000.00) (the “Purchase Price”), as follows;   (a)$15,000 down payment in cash wired to the Seller’s bank account, and   (b)$35,000 in the form of an 8% Convertible Note with a 6 month maturity, whereas the Seller may convert the note at 75% of the average of the closing price 20 days previous to conversion.   Section 1.4 Closing Transactions.   (a) Closing. Unless this Agreement shall have been terminated in accordance with Section 8.1, and subject to the satisfaction or, if permissible, waiver of the conditions set forth in Article VII, the closing of the Transactions (the “Closing”) will take place at 10:00 a.m., June 30, 2015, Pacific Standard Time, on this date to be specified by the Parties (the “Closing Date”), if permissible, a waiver of the conditions set forth in Article VII (other than those that by their terms are to be satisfied or waived at the Closing), at a time, date or place as agreed to in writing by the Parties.   (b) Actions and Deliveries by Seller. At the Closing, Seller shall deliver to Buyer:   (i) an energy drink formula in agreement in the form of Exhibit A dated the Closing Date and duly executed by Seller, assigning all of Seller’s right, title and interest in and to the Buyer (the “Formula”);   (ii) the certificates and documents required to be delivered by Seller pursuant to Sections 7.1 and 7.2; and   3     (iii) all such other instruments of assignment and transfer as are reasonably required to effect the transfer to Buyer of all of Seller’s right, title and interest in and to the Purchased Assets in accordance with this Agreement, in form and substance reasonably satisfactory to Buyer.   (c) Actions and Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller:   (i) the Purchase Price specified in Section 1.3 above; and   (ii) the certificates and documents required to be delivered by Buyer pursuant to Sections 7.1 and 7.3.     ARTICLE II     Seller hereby represents and warrants to Buyer that, except as set forth in the disclosure schedule delivered by Seller to Buyer and attached hereto and made a part hereof (the “Seller Disclosure Schedule”):   Section 2.1 Organization.   Seller is duly incorporated, validly existing and in good standing under the Laws of the jurisdiction of its incorporation and has the requisite corporate power and authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted.   Section 2.2 Authority Relative to this Agreement and Related Matters.   Seller has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery by Seller of this Agreement and the consummation by Seller of the transactions contemplated hereby (the “Transactions”) have been duly authorized by all necessary corporate action on the part of Seller. This Agreement has been duly executed and delivered by Seller and, assuming the due authorization, execution and delivery hereof by Buyer, constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).   Section 2.3 No Conflict; Required Filings and Consents.   The execution and delivery of this Agreement by Seller do not, and the consummation by Seller of the Transactions will not, (a) conflict with or violate the certificate of incorporation or bylaws, each as amended to date, of Seller, (b) conflict with or violate any Law or Order applicable to Seller or by which Seller or any of its properties is bound, (c) result in a breach of or would become a default) under, or give rise to any right of termination, acceleration or cancellation under, or result in the creation of an Encumbrance on any of the Purchased Assets pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license or other instrument or obligation to which Seller is a party or by which Seller or any of its properties is bound, or (d) require Seller to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Authority, except (i) as set forth in Section 2.3 of the Seller Disclosure Schedule, or (ii) for any filings required pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”).   Section 2.4 Absence of Litigation.   Except as disclosed in Section 2.4 of the Seller Disclosure Schedule, as of the date hereof, (a) there is no private or governmental action, suit, proceeding, litigation, arbitration or investigation (“Action”) pending or, to the knowledge of Seller, threatened against Seller before any Governmental Authority that, if adversely determined, would prohibit, prevent, enjoin, restrict or materially impair or delay any of the Transactions, and (b) there is no legally binding judgment, decree, order, injunction, decision or award of any Governmental Authority (“Order”) against Seller that would prohibit, prevent, enjoin, restrict or materially impair or delay any of the Transactions.   4     Section 2.5 Conveyed Intellectual Property.   Section 2.5 of the Seller Disclosure Schedule sets forth a list of all registrations and applications for registration in respect of the Conveyed Intellectual Property. Except as set forth in Section 2.5 of the Seller Disclosure Schedule, Seller owns (beneficially and of record) all right, title and interest in and to all Conveyed Intellectual Property, free and clear of all Encumbrances, other than Permitted Encumbrances. Except as set forth in Section 2.5 of the Seller Disclosure Schedule, the Formula has been validly registered under FDA and CFR-21for a Closing Date. Except as set forth in Section 2.5 of the Seller Disclosure Schedule, there is no Action that is pending or, to the knowledge of Seller, threatened that challenges the rights of Seller in respect of any Conveyed Intellectual Property or the validity, enforceability or effectiveness thereof. Seller has not received any written communication alleging that the Business has infringed the Intellectual Property rights of any third party and there are no Actions that are pending or, to the knowledge of Seller, threatened against Seller with respect thereto. Except as set forth in Section 2.5 of the Seller Disclosure Schedule, to the knowledge of Seller, there is no unauthorized use, infringement or misappropriation of the Conveyed Intellectual Property by any third party and there is no Action that is pending or threatened by Seller with respect thereto. Notwithstanding anything to the contrary, this representation shall not limit or restrict the transfer to Buyer pursuant to this Agreement of all right, title and interest in and to (i) the Conveyed Intellectual Property owned by Seller throughout the world and (ii) any other client names associated with the Formula owned by Seller; provided, however, that Seller does not represent, warrant or covenant that any rights in or to the Conveyed Intellectual Property exist anywhere within or outside of the United States of America.   Section 2.6 Formula.   As of the Closing, as among the Parties, each of Seller, and Buyer (and any transferee of Seller or Buyer) will have unrestricted rights to sell, rent, send communications to customers whose information is included in, and otherwise use the Formula, without notification to, consent of, or payment of any further consideration (other than pursuant to any agreement or arrangement negotiated between Seller and any third party to whom Buyer allows the Formula, or any parent entity of such third party), in all such cases subject to applicable Law, consumer opt-ins and opt-outs, and applicable privacy and usage policies.     ARTICLE III     Buyer hereby represents and warrants to Seller that, except as set forth in the disclosure schedule delivered by Buyer to Seller and attached hereto and made a part hereof (the “Buyer Disclosure Schedule”):   Section 3.1 Organization.   Buyer is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization and has the requisite limited liability company   Section 3.2 Authority Relative to this Agreement and Related Matters.   The Buyer has all necessary corporate company power and authority, as the case may be, to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery by the Buyer of this Agreement and the consummation by Buyer of the Transactions have been duly authorized by all necessary corporate company (as applicable) action on the part of the Buyer. This Agreement has been duly executed and delivered by the Buyer and, assuming the due authorization, execution and delivery hereof by Seller, constitutes the legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a     The execution and delivery of this Agreement by the Buyer does not, and the consummation of the Transactions will not, (a) conflict with or violate the organizational or governing documents of Buyer, (b) conflict with or violate any Law or Order applicable to Buyer or by which Buyer or any of their respective properties is bound, (c) result in a breach of or constitute a default (or an or give rise to any right of termination, acceleration or cancellation under, any note, bond, mortgage, indenture, contract, agreement, lease, license or other instrument or obligation to which Buyer is a party or by which Buyer or any of their respective properties is bound, or (d) require Buyer to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Authority, except (i) as set forth in Section 3.3 of the Buyer Disclosure Schedule, or (ii) for any filings required pursuant to the Exchange Act.   Section 3.4 Absence of Litigation.   Except as disclosed in Section 3.4 of the Buyer Disclosure Schedule, as of the date hereof, (a) there is no Action pending or, to the knowledge of Buyer, threatened against Buyer before any Governmental Authority that, if adversely determined, would prohibit, prevent, enjoin, restrict or materially impair or delay any of the Transactions, and (b) there is no Order against Buyer that would prohibit, prevent, enjoin, restrict or materially impair or delay any of the Transactions.   5     ARTICLE IV   COVENANTS OF SELLER   Section 4.1 Conduct of Seller Pending the Closing.   Seller shall not, between the date of this Agreement and the Closing Date or the earlier termination of this Agreement, do or agree to do any of the following without the prior written consent of Buyer:   (a) take or fail to take, or agree to take or fail to take, any action which would make any representation or warranty made by Seller herein untrue or incorrect in any material respect;   (b) sell, lease, license, encumber, transfer or otherwise dispose of any Purchased Assets; and   (c) agree to do any of the foregoing.   Section 4.2 Notification of Certain Events.   Seller shall give prompt notice to Buyer if any of the following occurs after the date of this Agreement: (i) there has been a material failure of Seller to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; (ii) receipt by Seller of any material notice or other communication from any Governmental Authority in connection with the Transactions; (iii) the occurrence of an event which would cause a condition in Section 7.2 not to be satisfied; or (iv) the commencement or threat, in writing, of any Action against Seller, or any of its properties, with respect to the Transactions and/or any of the Purchased Assets. No such notice to Buyer shall have any effect on the determination of whether or not any of the conditions to Closing or to the consummation of the Transactions have been satisfied or in determining whether or not any of the representations, warranties or covenants contained in this Agreement have been breached.     ARTICLE V   COVENANTS OF BUYER   Section 5.1 Representations and Warranties.   Buyer covenants and agrees that, except as otherwise contemplated by this Agreement or unless Seller shall give its prior written consent, Buyer shall not, between the date of this Agreement and the Closing Date or the earlier termination of this Agreement, take or fail to take, or agree to take or fail to take, any action which would make any representation or warranty made by Buyer herein untrue or incorrect in any material respect.   Section 5.2 Notification of Certain Events.   Buyer shall give prompt notice to Seller if any of the following occurs after the date of this Agreement: (i) there has been a material failure of Buyer to or satisfied by it hereunder; (ii) receipt by Buyer of any material notice or Section 7.3 not to be satisfied; or (iv) the commencement or threat, in writing, of any Action against Buyer, or any of its properties, with respect to the Transactions. No such notice to Seller shall have any effect on the determination of whether or not any of the conditions to Closing or to the consummation of the Transactions have been satisfied or in determining whether or not any of the representations, warranties or covenants contained in this Agreement have been breached.   6     ARTICLE VI   ADDITIONAL AGREEMENTS OF THE PARTIES   Section 6.1 Commercially Reasonable Efforts.   (a) Upon the terms and subject to the conditions hereof, each of the Parties agrees to use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the Transactions and to vest in Buyer (and any transferee of Buyer) good and marketable title to the Conveyed Intellectual Property, including obtaining all consents, waivers, authorizations and approvals from Governmental Authorities and other third parties required for the consummation of the Transactions.   (b) From time to time after the Closing, at the request of Buyer (or any transferee of Buyer) and at such requesting party’s expense, and without further consideration, Seller agrees on its own behalf, as well as on behalf of its subsidiaries, affiliates, successors, assigns and legal representatives, to execute and deliver to Buyer any further documents or instruments and perform any further acts that may reasonably be deemed necessary or desirable by Buyer to vest, record, perfect, support and/or confirm the rights herein conveyed, or intended so to be, to Buyer (and any transferee of Buyer) with respect to the Conveyed Intellectual Property, including without limitation such assignments, agreements and limited powers of attorney as may be needed for recording or effectuating the transfer of the Conveyed Intellectual Property in the United States. Nothing herein shall be deemed a waiver by Buyer of its right to receive at the Closing an effective assignment of such rights by Seller as otherwise set forth in this Agreement. Without limiting the generality of the foregoing, Seller shall execute and deliver to Buyer or obtain for delivery to Buyer, at the request of Buyer and at its expense, and without further consideration, any documents required to update record title to the owned Conveyed Intellectual Property to reflect Buyer (and any transferee of Buyer) as the record owner in each jurisdiction in which such Conveyed Intellectual Property exists. At the request of Buyer and at its expense, and without further consideration, Seller shall reasonably cooperate with Buyer (and any transferee of Buyer) in connection with the registration of the Conveyed Intellectual Property in jurisdictions outside of the United States.   (c) From time to time after the Closing, at the request of Buyer and at its expense, and without further consideration, Seller shall assist Buyer (and any transferee of Buyer) as Buyer may reasonably require in connection with the defense or prosecution of any claim by or against any third party with respect to the ownership, validity, enforceability, infringement or other violation of or by the Conveyed Intellectual Property.   Section 6.2 Public Announcements.   Each of the Parties agrees that no press release or announcement concerning this Agreement or the Transactions shall be issued by it or any of its Affiliates without the prior consent of the other Party (which consent shall not be unreasonably withheld or delayed), except as such release or announcement may be required by applicable Law or the rules or regulations of any securities exchange, in which case such Party shall use its commercially reasonable efforts to allow the other Party reasonable time to comment on such release or announcement in advance of such issuance.   Section 6.3 Amendment of Formula Coexistence Agreement.   On the Closing Date, the Formula shall be amended to delete the reference to Seller’s ownership on Exhibit A thereto.     ARTICLE VII   CONDITIONS TO THE CLOSING   Section 7.1 Conditions to Obligations of Each Party.   The respective obligations of each Party to consummate the Transactions shall be subject to the satisfaction or waiver (where permissible), on or prior to the Closing Date, of each of the following conditions:   (a) No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) that is then in effect and has the effect of making the Transactions illegal or otherwise preventing or prohibiting consummation of the Transactions.   (c)The closing under the Commercial Supply Agreement, dated as of the date hereof, by and among Buyer, and Seller (the “Commercial Supply Agreement”) shall have occurred. Notwithstanding the foregoing, the Closing under this Agreement shall be deemed to occur immediately prior to the closing under the Commercial Supply Agreement .   7     Section 7.2 Additional Conditions to Obligations of Buyer.   The obligation of Buyer to consummate the Transactions shall also be subject to the satisfaction or waiver (where permissible), on or prior to the Closing Date, of each of the following conditions:   (a) The representations and warranties of Seller set forth in Article II of this Agreement (i) that are qualified by the words “material” or “material adverse effect” shall be true and correct in all respects on and as of the Closing Date as if made on and as of such date and (ii) that are not so qualified shall be true and correct in all material respects on and as of the Closing Date as if made on and as of such date, except in any such case (x) for changes contemplated by this Agreement and by the Seller Disclosure Schedule, and (y) to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall remain true and correct (in all material respects, as the case may be) as of such date.   (b) Seller shall in all material respects have performed or complied with each obligation and covenant to be performed or complied with by Seller hereunder on or prior to the Closing Date, including the deliveries under Section 1.4(b).   (c) Buyer shall have received a certificate of Seller, dated the Closing Date, signed by an officer of Seller, to the effect that the conditions specified in Sections 7.2(a) and (b) have been satisfied.   Section 7.3 Additional Conditions to Obligations of Seller.   The obligation of Seller to consummate the Transactions shall also be subject to   (a) The representations and warranties of Buyer set forth in Article III of this contemplated by this Agreement and by the Buyer Disclosure Schedule, and (y) to   (b) Buyer shall in all material respects have performed or complied with each obligation and covenant to be performed or complied with by it hereunder on or prior to the Closing Date, including the deliveries under Section 1.4(c).   (c) Seller shall have received a certificate of Buyer, dated the Closing Date, signed by an executive officer of Buyer, to the effect that the conditions specified in Sections 7.3(a) and (b) have been satisfied.   (d) The Commercial Supply Agreement between Buyer and Seller in the form attached as Exhibit B shall have been executed and delivered by the parties thereto and shall be in full force and effect.     ARTICLE VIII   TERMINATION   Section 8.1 Termination.   This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing Date:   (a) By mutual written consent of Buyer and Seller;   (b) by either Seller or Buyer, if the Closing shall not have occurred on or before July 1, 2015 (the “Outside Date”); provided, however, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Transactions to be consummated on or before the Outside Date;   (c) by either Seller or Buyer if any Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Order that is, in each case, then in effect and is final and non-appealable and has the effect of making the Transactions illegal or otherwise preventing or prohibiting consummation of the Transactions; provided, however, that the right to terminate this Agreement under this Section 8.1(c) shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, any such Law or Order to have been enacted, issued, promulgated, enforced or entered;   8     (d) by Buyer (if Buyer is not in material breach of any of its representations, warranties, covenants or agreements under this Agreement), if there has been a breach by Seller of any of its representations, warranties, covenants or agreements contained in this Agreement, or if any representation or warranty of Seller shall have become inaccurate, in either case that would result in a failure of a condition set forth in Section 7.2(a) or 7.2(b) (a “Terminating Seller Breach”); provided, that if such Terminating Seller Breach is reasonably curable by Seller, within 30 days after Seller has received written notice from Buyer of such Terminating Seller Breach, through the exercise of its commercially reasonable efforts and for as long as Seller continues to exercise such commercially reasonable efforts, Buyer may not terminate this Agreement under this Section 8.1(d) until the earlier of the expiration of such 30-day period and the Outside Date;   (e) by Seller (if Seller is not in material breach of any of its representations, warranties, covenants or agreements under this Agreement), if there has been a breach by Buyer of any of its representations, warranties, covenants or agreements contained in this Agreement, or if any representation or warranty of Buyer shall have become inaccurate, in either case that would result in a failure of a condition set forth in Section 7.3(a) or 7.3(b) (a “Terminating Buyer Breach”); provided, that if such Terminating Buyer Breach is reasonably curable by Buyer, within 30 days after Buyer has received written notice from Seller of such Terminating Buyer Breach, through the exercise of its commercially reasonable efforts and for as long as Buyer continues to exercise such commercially reasonable efforts, Seller may not terminate this Agreement under this Section 8.1(e) until the earlier of the expiration of such 30-day period and the Outside Date; and   (f) by either Buyer or Seller if the Asset Purchase Agreement has been terminated in accordance with its terms.   Section 8.2 Effect of Termination.   In the event of the termination of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become void, and there shall be no liability on the part of any Party hereto or any of their respective Affiliates or the directors, officers, partners, members, managers, employees, agents or other representatives of any of them, and all rights and obligations of each Party hereto shall cease, except that nothing herein shall relieve any Party from liability for any willful breach of this Agreement. Without limiting the foregoing, Section 6.2, this Section 8.2 and Article X shall survive the termination of this Agreement. Notwithstanding anything to the contrary contained in this Agreement, nothing shall limit or prevent any Party from exercising any rights or remedies it may have under Section 10.9 hereof in lieu of terminating this Agreement pursuant to Section 8.1.     ARTICLE IX   INDEMNIFICATION PROVISIONS   Section 9.1 Seller’s Indemnification Obligation.   Seller agrees that, from and after the Closing, it shall indemnify, defend and hold harmless Buyer, its officers, directors, Affiliates, partners, members, managers, employees, agents and other representatives (“Buyer Indemnified Parties”) from and against any damages, claims, losses, liabilities, costs and expenses (including, without limitation, reasonable attorneys’ fees) (each, a “Liability” and, collectively, “Liabilities”) incurred by any of the foregoing Persons arising out of (a) any inaccuracy or breach of any representation or warranty of Seller contained in Article II of this Agreement, (b) any breach of any covenant or agreement of Seller contained in this Agreement or (c) any use by Seller, its Affiliates or their respective licensees prior to the Closing, including, without limitation, any claims of infringement relating thereto.   Section 9.2 Buyer’s Indemnification Obligation.   Buyer agrees that, from and after the Closing, it shall indemnify, defend and hold harmless Seller, its officers, directors, Affiliates, partners, members, managers, employees, agents and other representatives (“Seller Indemnified Parties”) from and against any Liabilities incurred by any of the foregoing warranty of Buyer contained in Article III of this Agreement, (b) any breach of any covenant or agreement of Buyer contained in this Agreement, or (c) any use by Buyer, its Affiliates or their respective licensees after the Closing,   Section 9.3 Procedures for Indemnification for Third Party Claims.   For purposes of this Article IX, any Party entitled to be indemnified under Article IX is referred to herein as an “Indemnified Party,” and any Party obligated to provide indemnification under Article IX is referred to herein as an “Indemnifying Party.” The obligations and liabilities of the Parties under this Article IX with respect to, relating to or arising out of claims of third parties (individually, a “Third Party Claim” and, collectively, the “Third Party Claims”) shall be subject to the following terms and conditions:   9     (a) The Indemnified Party shall give the Indemnifying Party prompt written notice of any Third Party Claim, and the Indemnifying Party may undertake the defense of that claim by representatives chosen by it and reasonably satisfactory to the Indemnified Party, provided, that, in such event, the Indemnified Party will have the right to participate in such defense through counsel of its own choice and at its own expense. Any such notice of a Third Party Claim shall identify with reasonable specificity the basis for the Third Party Claim, the facts giving rise to the Third Party Claim and the amount of the Third Party Claim (or, if such amount is not yet known, a reasonable estimate of the amount of the Third Party Claim). The Indemnified Party shall make available to the Indemnifying Party copies of all relevant documents and records in its possession. Failure of an Indemnified Party to give prompt notice shall not relieve the Indemnifying Party of its obligation to indemnify, except to the extent that the failure to so notify materially prejudices the Indemnifying Party’s ability to defend such claim against a third party.   (b) If the Indemnifying Party, within 20 days after notice from the Indemnified Party of any such Third Party Claim, notifies the Indemnified Party in writing of its election not to, or fails to, assume the defense thereof in accordance with Section 9.3(a) of this Agreement, the Indemnified Party shall have the right (but not the obligation) to undertake the defense of the Third Party Claim. Any failure on the part of the Indemnifying Party to notify the Indemnified Party within the time period provided above regarding its election shall be deemed an election by the Indemnifying Party not to assume and control the defense of the Third Party Claim.   (c) Anything in this Section 9.3 to the contrary notwithstanding, the Indemnified Party, settle or compromise any Third Party Claim or consent to the entry of judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of an unconditional release from all liability in respect of the Third Party Claim. The Indemnified Party shall not, without the prior written consent (which shall not be unreasonably withheld or delayed) of the Indemnifying Party, settle, compromise or pay any Third Party Claim or consent to the entry of judgment with respect thereto.   Section 9.4 Indemnification Limitations.   (a) Time Limits On Indemnification. No claim on account of a breach or inaccuracy of a representation or warranty shall be made after the expiration of the survival periods referred to in Section 10.1 of this Agreement. Notwithstanding the foregoing, if a written claim or written notice is given under Article IX with respect to any representation or warranty prior to the expiration of its survival period, the claim with respect to such representation or warranty shall continue until such claim is finally resolved.   (b) Limitations on Damages.   (i) In no event shall Seller be liable for indemnification pursuant to Section 9.1(a) unless and until the aggregate of all Liabilities which are incurred or suffered by the Buyer Indemnified Parties exceeds $50,000 (the “Basket”), in which case the Buyer Indemnified Parties shall be entitled to indemnification for all such Liabilities including the Basket (subject to Section 9.4(b)(ii)). In no event shall Buyer be liable for indemnification pursuant to Section 9.2(a) unless and until the aggregate of all Liabilities which are incurred or suffered by the Seller Indemnified Parties exceeds the Basket, in which case the Seller Indemnified Parties shall be entitled to Section 9.4(b)(ii)).   (ii) Notwithstanding anything to the contrary in this Agreement, (x) the maximum aggregate liability of Seller pursuant to Section 9.1(a) shall not exceed $7,500,000 and (y) the maximum aggregate liability of Buyer pursuant to Section 9.2(a) shall not exceed $7,500,000.   (iii) Notwithstanding anything to the contrary contained in this Agreement or otherwise, no Party to this Agreement shall be liable to any Indemnified Party for any special, incidental, punitive, consequential or similar damages.   (c) Waiver of Conditions. The right of an Indemnified Party to indemnification hereunder shall not be affected by any investigation conducted with respect to the accuracy of or compliance with any of the representations, warranties, covenants or obligations set forth in this Agreement. Notwithstanding the foregoing, the waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, shall negate the right to indemnification or other remedy based on such representations, warranties, covenants and obligations.   Section 9.5 Exclusive Remedy.   The remedies provided in this Article IX shall be the sole and exclusive remedies of the Parties with respect to the matters arising from or related to this Agreement or the Transactions, except that nothing herein shall prevent a Party from seeking specific performance pursuant to Section 10.9, subject to the provisions thereof, including with respect to the obligations in Section 6.1.   10     ARTICLE X   GENERAL PROVISIONS   Section 10.1 Survival of Representations and Warranties.   The representations and warranties made by Seller in Article II of this Agreement shall survive until the earlier of the date that is fifteen (15) months after the Closing Date, or the expiration date of any substantially similar representations and warranties with respect to the Conveyed Intellectual Property made by Buyer to any transferee of Buyer. The representations and warranties made by Buyer in Article III of this Agreement shall survive until the date that is fifteen (15) months after the Closing Date.   Section 10.2 Notices.   and shall be deemed given (a) when delivered personally by hand (with written confirmation of receipt) or (b) one Business Day following the day sent by nationally-recognized overnight courier (with written confirmation of receipt), in each case at the following addresses (or to such other address as a Party may have specified by notice given to the other Party pursuant to this provision):     (a) if to Buyer :   Robert Sand, CEO FBEC Worldwide, Inc. 16639 Rocker Road Rough and Ready, CA 95975     William B. Haseltine, ESQ, Haseltine Law Firm 1629K Street, NW, Suite 300     (b) If to Seller:   Tyler Strause, President G. Randall & Sons, Inc. 2069 Coast Blvd Del Mar CA 92014   Any notice or other communication that has been given or made as of a date that is not a Business Day shall be deemed to have been given or made on the next succeeding day that is a Business Day.   Section 10.3 Headings.   The headings contained in this Agreement and the disclosure schedules are for interpretation of this Agreement or the disclosure schedules. Unless the context of this Agreement otherwise requires, words of any gender are deemed to include each other gender and words using the singular or plural number also include the plural or singular number, respectively.   Section 10.4 Entire Agreement.   This Agreement, together with the exhibits and schedules attached hereto, constitutes the entire agreement, and supersede all prior agreements and undertakings, both written and oral, between the Parties with respect to the subject matter hereof.   11     Section 10.5 Assignment: Parties in Interest.   Neither this Agreement nor any rights or obligations hereunder shall be assigned by any Party without the prior written consent of the other Party. This Agreement shall be binding upon and inure solely to the benefit of each Party hereto and its successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under this Agreement, other than Article IX hereof (which is intended to be for the benefit of the Persons covered thereby and may be enforced by such Persons).   Section 10.6 Governing Law; Consent to Jurisdiction.   This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Wyoming applicable to contracts executed in and to be performed entirely in that State, without regard to conflicts of Laws principles thereof to the extent that the general application of the Laws of another jurisdiction would be required thereby. The Parties hereto hereby irrevocably submit to the jurisdiction of any Wyoming state or federal court sitting in the County of Wyoming, State of Wyoming, in any action or proceeding arising out of or relating to this Agreement, and the Parties hereby irrevocably agree that all exclusively in such Wyoming state or federal court. The Parties hereto hereby irrevocably waive, to the fullest extent permitted by Law, any objection which they or any of them may now or hereafter have to the laying of the venue of any such action or proceeding brought in any such court, and any claim that any such inconvenient forum.   Section 10.7 Counterparts.   This Agreement may be executed and delivered (including by facsimile transmission or .pdf) in one or more counterparts, and by the Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.   Section 10.8 Severability.   In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction.   Section 10.9 Specific Performance.   The Parties hereto agree that irreparable damage would occur in the event that their specific terms or were otherwise breached. Accordingly, the Parties further agree that each Party shall be entitled to seek an injunction or restraining order to prevent breaches of this Agreement and to seek to enforce specifically the terms and provisions hereof, this being in addition to any other right or remedy to which such Party may be entitled under this Agreement,   Section 10.10 Fees and Expenses.   All fees, costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the Party incurring the same, regardless of the termination, if any, of this Agreement pursuant to Section 8.1.   Section 10.11 Amendment.   This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by Buyer and Seller.   Section 10.12 Waiver.   At any time prior to the Closing Date, any Party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other Party hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the Parties hereto. The failure of any Party hereto to assert any of its rights hereunder shall not constitute a waiver of such rights.   12     Section 10.13 Buyer Undertaking and Guaranty.   Buyer, for the benefit of Seller, in consideration of the promises, covenants and agreements of Seller under this Agreement, hereby (i) agrees to cause Buyer to take all actions as are necessary for it to perform its obligations under Section 1.3, Section 6.1(c) and Article IX of this Agreement and (ii) unconditionally guarantees the performance of all the obligations of Buyer under Section 1.3, Section 6.1(c) and Article IX of this Agreement, including but not limited to the full and prompt payment by Buyer of any and all payments required to be made by Buyer to Seller pursuant to Section 1.3, Section 6.1(c) and Article IX of this Agreement. This guarantee is an absolute and continuing guarantee.   ARTICLE XI   CERTAIN DEFINITIONS   For purposes of this Agreement, the term:   “Action” shall have the meaning ascribed to it in Section 2.4.   “Affiliate” of a Person means a Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, the first mentioned Person.   “Agreement” shall have the meaning ascribed to it in the preamble.   “Asset Purchase Agreement” shall have the meaning ascribed to it in Section 7.1(b).   “Business” shall have the meaning ascribed to it in the recitals.   “Business Day” means any calendar day which is not a Saturday, Sunday or federal holiday.   “Buyer” shall have the meaning ascribed to it in the Preamble.   “Buyer Disclosure Schedule” shall have the meaning ascribed to it in the preamble to Article III.   “Closing” shall have the meaning ascribed to it in Section 1.4(a).   “Closing Date” shall have the meaning ascribed to it in Section 1.4(a).   “Control” (including the terms “Controlled by” and “under common Control with”) means the possession, directly or indirectly or as trustee or executor, of the Person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise.   “Conveyed Intellectual Property” shall have the meaning ascribed to it in Section 1.1(a).   “Data” means all information gathered in the conduct of the Business that identifies or describes an individual or an individual’s record of behavior or action, including without limitation, name, telephone, postal address, phone number, email, date of birth, gender, but specifically excluding credit card data, as such information exists as of the Closing Date.   “Domain Name Assignment Agreement” shall have the meaning ascribed to it in Section 1.4(b)(ii).   “Encumbrance” means any charge, claim, community property interest, condition, easement, covenant, warrant, demand, encumbrance, equitable interest, lien, mortgage, option, purchase right, pledge, security interest, right of first refusal or other right of third parties or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.   “Exchange Act” shall have the meaning ascribed to it in Section 2.3.   “Governmental Authority” means any United States federal, state or local government, governmental, regulatory or administrative authority, agency, self-regulatory body, instrumentality or commission, and any court, tribunal or judicial or arbitral body (including private bodies) and any political or other subdivision, department or branch of any of the foregoing.   “Indemnified Party” shall have the meaning ascribed to it in Section 9.3.   13     “Indemnifying Party” shall have the meaning ascribed to it in Section 9.3.   “Intellectual Property” means all United States and foreign intellectual property and all other similar proprietary rights, including all (i) patents and patent applications, including divisionals, continuations, continuations-in-part, reissues, reexaminations and extensions thereof and counterparts claiming priority therefrom; utility models; invention disclosures; and statutory invention registrations and certificates; (ii) registered, pending and unregistered trademarks, service marks, trade dress, logos, trade names, corporate names and other source identifiers, domain names, Internet sites and web pages; and registrations and applications for registration for any of the foregoing, together with all of the goodwill associated therewith; (iii) registered copyrights, and registrations and applications for registration thereof; rights of publicity; and copyrightable works; (iv) all inventions and design rights (whether patentable or unpatentable) and all categories of trade secrets as defined in the Uniform Trade Secrets Act, including business, technical and financial information; and (v) confidential and proprietary information, including know-how.   “knowledge” means, with respect to Seller, the actual knowledge, with no duty to make inquiries, of one or more of the persons set forth in Section 11 of the Seller Disclosure Schedule.   “Laws” means any federal, state or local statute, law, rule, ordinance, code or regulation of any Governmental Authority.   “Liability” and, collectively, “Liabilities” shall have the meaning ascribed to it in Section 9.1.   “Order” shall have the meaning ascribed to it in Section 2.4.   “Outside Date” shall have the meaning ascribed to it in Section 8.1(b).   “Parties” shall have the meaning ascribed to it in the preamble.   “Permitted Encumbrance” means: (i) statutory liens for Taxes, assessments and governmental charges or levies not yet due and payable or that are being contested in good faith by appropriate proceedings; (ii) mechanics’, materialmen’s, carriers’, warehousemen’s or similar statutory liens for amounts not yet due or being diligently contested in good faith in appropriate proceedings; and (iii) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations.   company, association, trust, unincorporated organization or other entity.   “Purchase Price” shall have the meaning ascribed to it in Section 1.3.   “Purchased Assets” shall have the meaning ascribed to it in Section 1.1.   “Seller” shall have the meaning ascribed to it in the Preamble.   “Seller Disclosure Schedule” shall have the meaning ascribed to it in the preamble to Article II.   “Subsidiary” means any Person with respect to which a specified Person directly or indirectly (A) owns a majority of the equity interests, (B) has the power to elect a majority of that Person’s board of directors or similar governing body, or (C) otherwise has the power, directly or indirectly, to direct the business and policies of that Person.   “Tax” or “Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority, including: taxes or other charges on or with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, equity interests, payroll, employment, social security, workers’ compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customers’ duties, tariffs and similar charges.   “Terminating Buyer Breach” shall have the meaning ascribed to it in Section 8.1(e).   “Terminating Seller Breach” shall have the meaning ascribed to it in Section 8.1(d).   “Third Party Claim” and, collectively, “Third Party Claims” shall have the meaning ascribed to it in Section 9.3.   “Trademark Assignment Agreement” shall have the meaning ascribed to it in Section 1.4(b)(i)   “Transactions” shall have the meaning ascribed to it in Section 2.2.     14     duly executed as of the date first written above.             G. Randall & Sons, Inc.         By:   /s/ Linda Strause   Name:   Linda Strause, Ph. D.   Title:   Vice President             FBEC WORLDWIDE, INC.         By:   /s/ Robert Sand   Name:   Robert Sand   Title:   Chief Executive Officer         15   EXHIBIT A:   2oz - Extra Strength, Hemp Energy Drink - Original Formula   Hemp Juice Energy Shot –   ● A two ounce shot made with hemp juice, aloe, sweetened with stevia and agave nectar.   ● Fortified with vital nutrients and amino-acids enriched with a proprietary blend of herbal   extracts to deliver a boost of energy and all day focus.   Base Ingredients   ● Hemp Juice   ● Vegetable Glycerine   ● Agave Nectar   ● Aloe Juice   ● Sweetener of Choice   Vital Nutrients & Amino Acids   ● Beta-Carotene (Vitamin A)   ● Caffeine   ● Niacin (Vitamin B3)   ● Thiamine (Vitamin B1)   ● Pantothenic Acid (Vitamin B5)   ● Sodium (Sodium Ascorbate)   ● Biotin (Vitamin B7)   ● Phosphatidylserine   Proprietary Herbal Blend   ● Green Tea Extract (Camellia sinensis)   ● Siberian Ginseng Extract (Eleutheroccoccus senticosus)   ● American Ginseng Root Extract (Panax Ginseng)   ● Chinese Licorice Root Extract (Glycyrrhiza Uranelsis Radix)   ● Ginkgo Biloba Leaf Extract (Ginkgo biloba)   ● Guayusa Leaf Extract (Ilex guayusa)   Other Ingredients : Soy Lecithin, Sodium Benzoate, Natural Flavor   16
Exhibit 10.62 After recording please return: 1675 Broadway Attention: Ronald S. Brody, Esq. MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING made by MONTICELLO RACEWAY MANAGEMENT, INC., Mortgagor, to as Trustee and Collateral Agent, Mortgagee THIS INSTRUMENT AFFECTS REAL AND PERSONAL PROPERTY SITUATED IN THE STATE OF NEW YORK, COUNTY OF SULLIVAN, KNOWN BY THE STREET ADDRESS OF ST. REGIS TRUST PARCEL (232 ACRES MORE OR LESS) MONTICELLO, NEW YORK. THIS MORTGAGE CONSTITUTES A FINANCING STATEMENT FILED AS A FIXTURE FILING, AND IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS AND ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS (FIXTURE FILINGS) UNDER THE NAMES OF MORTGAGOR, AS "DEBTOR," AND MORTGAGEE, AS "SECURED PARTY." SEE GRANTING CLAUSES AND SECTION 18 OF THIS INSTRUMENT FOR DESCRIPTION OF FIXTURES AND OTHER DETAILS. THIS MORTGAGE DOES NOT COVER REAL PROPERTY PRINCIPALLY IMPROVED OR TO BE IMPROVED BY ONE OR MORE STRUCTURES CONTAINING IN THE AGGREGATE NOT MORE THAN SIX RESIDENTIAL DWELLING UNITS EACH HAVING THEIR OWN SEPARATE COOKING FACILITIES. THE "MAXIMUM PRINCIPAL AMOUNT" SECURED BY THIS MORTGAGE IS $65,000,000 (SEE SECTION 33 FOR THE MAXIMUM TOTAL AMOUNT THAT THIS MORTGAGE SECURES). Dated as of March 22, 2006 TABLE OF CONTENTS PAGE 4. Payment of Taxes and Other Impositions...............................5 6. Restrictions on Liens and Encumbrances...............................7 7. Due on Sale and Other Transfer Restrictions..........................7 8. Casualty; Condemnation/Eminent Domain................................7 15. Right of Mortgagee to Credit Sale...................................10 18. Security Agreement under Uniform Commercial Code....................11 34. Maximum Amount of Indebtedness......................................17 35. Last Dollars Secured; Priority......................................18 -i- ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING, dated as of March 22, 2006 is made by MONTICELLO RACEWAY MANAGEMENT, INC., a New York corporation (the "MORTGAGOR"), with an address at c/o Monticello Raceway, Route 17B, Monticello, New York 12701, to THE BANK OF NEW YORK, a New York banking corporation, as Collateral Agent (in such capacity, the "MORTGAGEE"), with an address at 101 Barclay Street - 8W, New York, New York 10286, Attn.: Corporate Trust Administration. References to this "MORTGAGE" shall mean this instrument and any and all renewals, modifications, amendments, supplements, extensions, consolidations, substitutions, spreaders and replacements of this instrument. BACKGROUND A. Mortgagor is a party to the Indenture, dated as of July 23, 2004 (as amended, supplemented or otherwise modified from time to time, the "INDENTURE"), among the Mortgagor, as the Issuer, the Guarantors named therein (each, a "SUBSIDIARY GUARANTOR" and collectively together with the Company, the "CREDIT PARTIES") and THE BANK OF NEW YORK, as Trustee (in such capacity, the "TRUSTEE") and as Collateral Agent. B. Pursuant to the terms of the Indenture, the Mortgagor is issuing SIXTY FIVE MILLION AND NO DOLLARS ($65,000,000) aggregate principal amount of 5 1/2% Senior Notes due 2014 (the "NOTES"), which will be guaranteed on a senior basis, in part, by each of the Credit Parties. The terms of the Indenture are incorporated by reference in this Mortgage as if the terms thereof were fully set forth herein. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture. References in this Mortgage to the "OVERDUE RATE" shall mean the applicable interest rate pursuant to the Indenture for any overdue payment. C. The Mortgagor is the owner of the fee simple estate in the parcel(s) of real property described on EXHIBIT A attached hereto (the "OWNED LAND") and owns, leases or otherwise has the right to use all of the buildings, improvements, structures, and fixtures now or subsequently located on the Owned Land (the "IMPROVEMENTS"; the Owned Land and the Improvements being collectively referred to as the "REAL ESTATE"). D. As an inducement to the Trustee to enter into the Indenture and the Initial Purchaser to purchase the Notes, the Mortgagor is executing and delivering this Mortgage to the Mortgagee. References herein to the "SECURED PARTIES" shall mean the collective reference to the Mortgagee, the Trustee, each Holder and any holder of the Obligations (as hereinafter defined), and their respective successors, endorsees, transferees and assigns. GRANTING CLAUSES For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Mortgagor agrees that to secure the payment and performance of all obligations and liabilities of the Mortgagor and the Credit Parties which may arise under or in connection with the Collateral Agreements, in each case whether on account of reimbursement obligations, for fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Mortgagee or to any Secured Party that are required to be paid by the Mortgagee pursuant to the terms of this Mortgage or any other Collateral Agreement) (collectively, the "OBLIGATIONS"); THE MORTGAGOR HEREBY GRANTS TO THE MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND HEREBY MORTGAGES AND WARRANTS, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER UNTO THE MORTGAGEE FOR THE USE AND BENEFIT OF THE MORTGAGEE, AS COLLATERAL AGENT: (a) the Owned Land; (b) all right, title and interest the Mortgagor now has or may hereafter acquire in and to the Improvements or any part thereof (whether owned in fee by the Mortgagor or held pursuant to any Lease or otherwise) and all the estate, right, title, claim or demand whatsoever of the Mortgagor, in possession or expectancy, in and to the Real Estate or any part thereof; (c) all right, title and interest of the Mortgagor in, to and under all easements, rights of way, licenses, operating agreements, abutting strips and gores of land, streets, ways, alleys, passages, sewer rights, waters, water courses, water and flowage rights, development rights, air rights, mineral and soil rights, plants, standing and fallen timber, and all estates, rights, titles, interests, privileges, licenses, tenements, hereditaments and appurtenances belonging, relating or appertaining to the Real Estate, and any reversions, remainders, rents, issues, profits and revenue thereof and all land lying in the bed of any street, road or avenue, in front of or adjoining the Real Estate to the center line thereof; (d) all of the fixtures, chattels, business machines, machinery, apparatus, equipment, furnishings, fittings, appliances and articles of personal property of every kind and nature whatsoever, and all appurtenances and additions thereto and substitutions or replacements thereof (together with, in each case, attachments, components, parts and accessories) currently owned or subsequently acquired by the Mortgagor and now or subsequently attached to, or contained in or used or usable in any way in connection with any operation or letting of the Real Estate, including but without limiting the generality of the foregoing, all screens, awnings, shades, blinds, curtains, draperies, artwork, carpets, rugs, storm doors and windows, furniture and furnishings, heating, electrical, and mechanical equipment, lighting, switchboards, plumbing, ventilating, air conditioning and air-cooling apparatus, refrigerating, and incinerating equipment, escalators, elevators, loading and unloading equipment and systems, stoves, ranges, laundry equipment, cleaning systems (including window cleaning apparatus), telephones, communication systems (including satellite dishes and antennae), televisions, computers, sprinkler systems and other fire prevention and extinguishing apparatus and materials, security systems, motors, engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of every kind and description (all of the foregoing in this paragraph (d) being referred to as the "EQUIPMENT"); 2 (e) all right, title and interest of the Mortgagor in and to all substitutes and replacements of, and all additions and improvements to, the Real Estate and the Equipment, subsequently acquired by or released to the Mortgagor or constructed, assembled or placed by the Mortgagor on the Real Estate, immediately upon such acquisition, release, construction, assembling or placement, including, without limitation, any and all building materials whether stored at the Real Estate or offsite, and, in each such case, without any further deed, conveyance, assignment or other act by the Mortgagor; (f) all right, title and interest of the Mortgagor in, to and under all leases, subleases, underlettings, concession agreements, management agreements, licenses and other agreements relating to the use or occupancy of the Real Estate or the Equipment or any part thereof, now existing or subsequently entered into by the Mortgagor and whether written or oral and all guarantees of any of the foregoing (collectively, as any of the foregoing may be amended, restated, extended, renewed or modified from time to time, the "LEASES"), and all rights of the Mortgagor in respect of cash and securities deposited thereunder and the right to receive and collect the revenues, income, rents, issues and profits thereof, together with all other rents, royalties, issues, profits, revenue, income and other benefits arising from the use and enjoyment of the Mortgaged Property (as defined below) (collectively, the "RENTS"); (g) all unearned premiums under insurance policies now or subsequently obtained by the Mortgagor relating to the Real Estate or Equipment and the Mortgagor's interest in and to all proceeds of any such insurance policies (including title insurance policies) including the right to collect and receive such proceeds, subject to the provisions relating to insurance generally set forth below; and all awards and other compensation, including the interest payable thereon and the right to collect and receive the same, made to the present or any subsequent owner of the Real Estate or Equipment for the taking by eminent domain, condemnation or otherwise, of all or any part of the Real Estate or any easement or other right therein; (h) to the extent not expressly prohibited under the applicable contract, consent, license or other item unless the appropriate consent has been obtained, all right, title and interest of the Mortgagor in and to (i) all contracts from time to time executed by the Mortgagor or any manager or agent on its behalf relating to the ownership, construction, maintenance, repair, operation, occupancy, sale or financing of the Real Estate or Equipment or any part thereof and all agreements and options relating to the purchase or lease of any portion of the Real Estate, together with the right to exercise such options and all leases of Equipment, (ii) all consents, licenses, building permits, certificates of occupancy and other governmental approvals relating to construction, completion, occupancy, use or operation of the Real Estate or any part thereof, and (iii) all drawings, plans, specifications and similar or related items relating to the Real Estate; and (i) all proceeds, both cash and noncash, of the foregoing; 3 (All of the foregoing property and rights and interests now owned or held or subsequently acquired by the Mortgagor and described in the foregoing clauses (a) through (c) are collectively referred to as the "PREMISES", and those described in the foregoing clauses (a) through (i) are collectively referred to as the "MORTGAGED PROPERTY"). TO HAVE AND TO HOLD the Mortgaged Property and the rights and privileges hereby mortgaged unto the Mortgagee, its successors and assigns for the uses and purposes set forth, until the Obligations are discharged in accordance with Section 12.01 of the Indenture, PROVIDED, HOWEVER, that the condition of this Mortgage is such that if the Obligations are so discharged, then the estate hereby granted shall cease, terminate and become void, but shall otherwise remain in full force and effect. Notwithstanding anything to the contrary contained herein, the Lien of this Mortgage shall be released in compliance with the terms of the Indenture. This Mortgage covers advances, in the aggregate amount of the obligations secured hereby, made by the Secured Parties for the benefit of the Mortgagor. TERMS AND CONDITIONS The Mortgagor further represents, warrants, covenants and agrees with the Mortgagee and the Secured Parties as follows: 1. WARRANTY OF TITLE. The Mortgagor warrants that it has good and marketable record title in fee simple to the Real Estate, and good title to the rest of the Mortgaged Property, subject only to the matters that are set forth in Schedule B of the title insurance policy or policies being issued to the Mortgagee to insure the lien of this Mortgage and any other Permitted Liens (as defined in the Indenture). The Mortgagor shall warrant, defend and preserve such title and the lien of this Mortgage against all claims of all persons and entities (not including the holders of the Permitted Liens). The Mortgagor represents and warrants that it has the power and lawful authority to grant, bargain, sell, assign, transfer, mortgage and convey a mortgage lien and security interest in all of the Mortgaged Property to the Mortgagee in the manner and form herein provided and without obtaining the authorization, approval, consent or waiver of any grantor, lessor, sublessor, governmental authority or other Person whomsoever. 2. PAYMENT OF OBLIGATIONS. The Mortgagor shall pay and perform the Obligations at the times and places and in the manner specified in the Collateral Agreements. 3. REQUIREMENTS. The Mortgagor shall promptly comply with all laws, ordinances, judgments, decrees, injunctions, writs and orders of any court, arbitrator or governmental agency or authority, and all rules, regulations, orders, interpretations, directives, licenses and permits, applicable to the Mortgaged Property, and all covenants, restrictions and conditions now or later of record which may be applicable to any of the Mortgaged Property, or to the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or reconstruction of any of the Mortgaged Property. The Mortgagor shall not commit, nor permit or suffer to occur, any material waste with respect to the Mortgaged Property. 4. PAYMENT OF TAXES AND OTHER IMPOSITIONS. (a) Promptly when due or prior to the date on which any fine, penalty, interest or cost may be added thereto or imposed, the Mortgagor shall pay and discharge all taxes, charges and assessments of every kind and nature, all charges for any easement or agreement 4 maintained for the benefit of any of the Real Estate, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, vault taxes and all other public charges even if unforeseen or extraordinary, imposed upon or assessed against or which may become a lien on any of the Real Estate, or arising in respect of the occupancy, use or possession thereof, together with any penalties or interest on any of the foregoing (all of the foregoing are collectively referred to herein as the "IMPOSITIONS"), except where (i) the validity or amount thereof is being contested in good faith by appropriate proceedings, which the Mortgagee determines suspends the obligation to pay the Imposition and that non-payment thereof will not result in forfeiture, sale, loss or diminution of any interest of the Mortgagee in the Mortgaged Property and (ii) the Mortgagor has set aside on its books adequate reserves with respect thereto in accordance with GAAP, which reserves shall include reasonable additional sums to cover possible interest, costs, and penalties; PROVIDED, HOWEVER, that the Mortgagor shall promptly cause to be paid any amount adjudged by a court of competent jurisdiction to be due, with all interest, costs and penalties thereon, promptly after such judgment becomes final (and, subject to the Mortgagee's rights and remedies during an Event of Default and subject to any provisions set forth in the Collateral Agreements to the contrary, the Mortgagee shall make any sum deposited in such reserve available for such payment); and provided, further, that, in all events, Impositions, interest costs and penalties shall be paid prior to the date any writ or order is issued under which the Mortgaged Property may be sold, lost or forfeited. Upon request by the Mortgagee, the Mortgagor shall deliver to the Mortgagee evidence reasonably acceptable to the Mortgagee showing the payment of any such Imposition. If by law any Imposition, at the Mortgagor's option, may without penalty or premium be paid in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), the Mortgagor may elect to pay such Imposition in such installments and shall be responsible for the payment of such installments with interest, if any. (b) Nothing herein shall affect any right or remedy of the Mortgagee under this Mortgage or otherwise, without notice or demand to the Mortgagor, to pay any Imposition after the date such Imposition shall have become due, and add to the Obligations the amount so paid, together with interest from the time of payment at the Overdue Rate. Any sums paid by the Mortgagee in discharge of any Impositions shall be (i) a lien on the Premises secured hereby prior to any right or title to, interest in, or claim upon the Premises subordinate to the lien of this Mortgage, and (ii) payable on demand by the Mortgagor to the Mortgagee together with interest at the Overdue Rate as set forth above. (c) As of the date hereof, the Mortgagor represents and warrants that the Mortgagor (i) has filed all federal, state, commonwealth, county, municipal and city income and other material tax returns required to have been filed by it and has paid all taxes and other impositions which have become due or pursuant to any assessments or charges received by it, (ii) does not know of any basis for any additional assessment or charge in respect of any such taxes or other Impositions, and (iii) has paid in full all sums owing or claimed for labor, material, supplies, personal property (whether or not forming an Improvement hereunder) and services of every kind and character used, furnished or installed in or on the Mortgaged Property that are now due and owing and no claim for same exists or will be permitted to be created, except such claims as may arise in the ordinary course of business and that are not yet past due. 5 5. INSURANCE. (a) The Mortgagor promptly shall comply with and conform in all material respects to (i) all provisions of each such insurance policy, and (ii) all requirements of the insurers applicable to the Mortgagor or to any of the Mortgaged Property or to the use, manner of use, occupancy, possession, operation, maintenance, alteration or repair of any of the Mortgaged Property. The Mortgagor shall not use or permit the use of the Mortgaged Property in any manner which would permit any insurer to cancel any insurance policy or void coverage required to be maintained by this Mortgage. (b) In the event of foreclosure of this Mortgage or other transfer of title to the Mortgaged Property, all right, title and interest of the Mortgagor in and to any insurance policies then in force shall pass to the purchaser or grantee. 6. RESTRICTIONS ON LIENS AND ENCUMBRANCES. Except for the Permitted Liens, the Mortgagor shall not further mortgage, nor otherwise encumber the Mortgaged Property nor create or suffer to exist any lien, charge or encumbrance on the Mortgaged Property, or any part thereof, whether superior or subordinate to the lien of this Mortgage and whether recourse or non-recourse. 7. DUE ON SALE AND OTHER TRANSFER RESTRICTIONS. Except as expressly permitted in the Collateral Agreements, the Mortgagor shall not sell, transfer, convey or assign all or any portion of, or any interest in, the Mortgaged Property. 8. CASUALTY; CONDEMNATION/EMINENT DOMAIN. Immediately upon obtaining knowledge of any casualty or the institution of any proceedings for the condemnation of the Mortgaged Property, or any material portion thereof, the Mortgagor will notify the Mortgagee of the pendency of such proceedings. In all events, the Mortgagor hereby covenants and agrees to promptly commence and to diligently prosecute the restoration of the Mortgaged Property upon the occurrence of any casualty loss affecting the Mortgaged Property, without regard to the availability of any proceeds or award. Notwithstanding any damage to, destruction or loss of or other casualty with respect to any of the Mortgaged Property, the Mortgagor shall continue to pay the Obligations at the time and in the manner provided for in the Indenture and the other Collateral Agreements, until the Obligations have been paid in full. If the Mortgaged Property is sold, through foreclosure or otherwise, prior to the receipt by the Mortgagee of such insurance proceeds, the Mortgagee shall have the right, whether or not a deficiency judgment on any Collateral Agreement shall have been sought, recovered or denied, to receive such insurance proceeds, or a portion thereof sufficient to pay the then unpaid Obligations, whichever is less. 9. LEASES. Except as expressly permitted under the Indenture, the Mortgagor shall not (a) execute an assignment or pledge of any Lease relating to all or any portion of the Mortgaged Property other than in favor of the Mortgagee, (b) execute or permit to exist any Lease of any of the Mortgaged Property, or (c) mortgage, pledge, assign, hypothecate, amend, modify, or otherwise encumber or transfer any Lease or any interest in any Lease. 10. FURTHER ASSURANCES. To further assure the Mortgagee's rights under this Mortgage, the Mortgagor agrees promptly upon demand of the Mortgagee to do any act or execute and deliver, record and/or file any additional documents (including, but not limited to, security agreements on any personalty included or to be included in the Mortgaged Property and a separate assignment of each 6 Lease in recordable form) as may be reasonably required by the Mortgagee to confirm the lien of this Mortgage and all other rights or benefits conferred on the Mortgagee by this Mortgage. 11. MORTGAGEE'S RIGHT TO PERFORM. If an Event of Default has occurred and is continuing, the Mortgagee, without waiving or releasing the Mortgagor from any obligation or default under this Mortgage, may, pay or perform the same, and the amount or cost thereof, with interest at the Overdue Rate, shall immediately upon written demand be due from the Mortgagor to the Mortgagee and the same shall be secured by this Mortgage and shall be a lien on the Mortgaged Property prior to any right, title to, interest in, or claim upon the Mortgaged Property attaching subsequent to the lien of this Mortgage. No payment or advance of money by the Mortgagee under this Section shall be deemed or construed to cure the Mortgagor's default or waive any right or remedy of the Mortgagee. 12. EVENTS OF DEFAULT. The occurrence of an Event of Default under any of the Collateral Agreements shall constitute an Event of Default hereunder. 13. REMEDIES. (a) Upon the occurrence and during the continuance of any Event of Default, the Mortgagee may immediately take such action, without notice or demand, under the Collateral Agreements and otherwise as it deems advisable to protect and enforce its rights against the Mortgagor and in and to the Mortgaged Property, including, but not limited to, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such manner as the Mortgagee may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of the Mortgagee: (i) The Mortgagee may, to the extent permitted by applicable law, (A) institute and maintain an action of mortgage foreclosure against all or any part of the Mortgaged Property, (B) institute and maintain an action on the Indenture or any other Collateral Agreement, or (C) take such other action at law or in equity for the enforcement of this Mortgage or any of the Collateral Agreements as the law may allow. The Mortgagee may proceed in any such action to final judgment and execution thereon for all sums due hereunder, together with interest thereon at the Overdue Rate and all costs of suit, including, without limitation, reasonable attorneys' fees and disbursements. Interest at the Overdue Rate shall be due on any judgment obtained by the Mortgagee from the date of judgment until actual payment is made of the full amount of the judgment; and (ii) The Mortgagee may personally, or by its agents, attorneys and employees and without regard to the adequacy or inadequacy of the Mortgaged Property or any other collateral as security for the Obligations enter into and upon the Mortgaged Property and each and every part thereof and exclude the Mortgagor and its agents and employees therefrom without liability for trespass, damage or otherwise (the Mortgagor hereby agreeing to surrender possession of the Mortgaged Property to the Mortgagee upon demand at any such time) and use, operate, manage, maintain and control the Mortgaged Property and every part thereof. Following such entry and taking of possession, the Mortgagee shall be entitled, without limitation, (A) to lease all or any part or parts of the Mortgaged Property for such periods of 7 time and upon such conditions as the Mortgagee may, in its discretion, deem proper, (B) to enforce, cancel or modify any Lease and (C) generally to execute, do and perform any other act, deed, matter or thing concerning the Mortgaged Property as the Mortgagee shall deem appropriate as fully as the Mortgagor might do. (b) In case of a foreclosure sale, the Real Estate may be sold, at the Mortgagee's election, in one parcel or in more than one parcel and the Mortgagee is specifically empowered (without being required to do so, and in its sole and absolute discretion) to cause successive sales of portions of the Mortgaged Property to be held. (c) In the event of any breach of any of the covenants, agreements, terms or conditions contained in this Mortgage, the Mortgagee shall be entitled to enjoin such breach and obtain specific performance of any covenant, agreement, term or condition and the Mortgagee shall have the right to invoke any equitable right or remedy as though other remedies were not provided for in this Mortgage. (d) It is agreed that if an Event of Default shall occur and be continuing, any and all proceeds of the Mortgaged Property received by the Mortgagee shall be held by the Mortgagee for the benefit of the Secured Parties as collateral security for the Obligations (whether matured or unmatured), and shall be applied in payment of the Obligations in the order set forth in Section 6.10 of the Indenture. 14. RIGHT OF MORTGAGEE TO CREDIT SALE. Upon the occurrence of any sale made under this Mortgage, by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, the Mortgagee may bid for and acquire the Mortgaged Property or any part thereof. In lieu of paying cash therefor, the Mortgagee may make settlement for the purchase price by crediting upon the Obligations or other sums secured by this Mortgage, the net sales price after deducting therefrom the expenses of sale and the cost of the action and any other sums which the Mortgagee is authorized to deduct under this Mortgage. In such event, this Mortgage, the Indenture and the other Collateral Agreements evidencing expenditures secured hereby may be presented to the person or persons conducting the sale in order that the amount so used or applied may be credited upon the Obligations as having been paid. 15. APPOINTMENT OF RECEIVER. If an Event of Default shall have occurred and be continuing, the Mortgagee as a matter of right and without notice to the Mortgagor, unless otherwise required by applicable law, and without regard to the adequacy or inadequacy of the Mortgaged Property or any other collateral or the interest of the Mortgagor therein as security for the Obligations, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers or other manager of the Mortgaged Property, without requiring the posting of a surety bond, and without reference to the adequacy or inadequacy of the value of the Mortgaged Property or the solvency or insolvency of the Mortgagor or any other party obligated for payment of all or any part of the Obligations, and whether or not waste has occurred with respect to the Mortgaged Property, and the Mortgagor hereby irrevocably consents to such appointment and waives notice of any application therefor (except as may be required by law). Any such receiver or receivers or manager shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of the Mortgagee in case of entry as provided in this Mortgage, including, without 8 limitation and to the extent permitted by law, the right to enter into leases of all or any part of the Mortgaged Property, and shall continue as such and exercise all such powers until the date of confirmation of sale of the Mortgaged Property unless such receivership is sooner terminated. 16. EXTENSION, RELEASE, ETC. (a) Without affecting the lien or charge of this Mortgage upon any portion of the Mortgaged Property not then or theretofore released as security for the full amount of the Obligations, the Mortgagee may, from time to time and without notice, agree to (i) release any person liable for the indebtedness borrowed or guaranteed under the Collateral Agreements, (ii) extend the maturity or alter any of the terms of the indebtedness borrowed or guaranteed under the Collateral Agreements or any other guaranty thereof, (iii) grant other indulgences, (iv) release or reconvey, or cause to be released or reconveyed at any time at the Mortgagee's option any parcel, portion or all of the Mortgaged Property, (v) take or release any other or additional security for any obligation herein mentioned, or (vi) make compositions or other arrangements with debtors in relation thereto. (b) No recovery of any judgment by the Mortgagee and no levy of an execution under any judgment upon the Mortgaged Property or upon any other property of the Mortgagor shall affect the lien of this Mortgage or any liens, rights, powers or remedies of the Mortgagee hereunder, and such liens, rights, powers and remedies shall continue unimpaired. (c) If the Mortgagee shall have the right to foreclose this Mortgage or to direct a power of sale, the Mortgagor authorizes the Mortgagee at its option to foreclose the lien of this Mortgage (or direct the sale of the Mortgaged Property, as the case may be) subject to the rights of any tenants of the Mortgaged Property. The failure to make any such tenants parties defendant to any such foreclosure proceeding and to foreclose their rights, or to provide notice to such tenants as required in any statutory procedure governing a sale of the Mortgaged Property, or to terminate such tenant's rights in such sale will not be asserted by the Mortgagor as a defense to any proceeding instituted by the Mortgagee to collect the Obligations or to foreclose the lien of this Mortgage. (d) Unless expressly provided otherwise, in the event that ownership of this Mortgage and title to the Mortgaged Property or any estate therein shall become vested in the same person or entity, this Mortgage shall not merge in such title but shall continue as a valid lien on the Mortgaged Property for the amount secured hereby. 17. SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE. (a) It is the intention of the parties hereto that this Mortgage shall constitute a Security Agreement within the meaning of the UCC (as defined in the Uniform Commercial Code of the State of New York (the "UCC"). If an Event of Default shall occur and be continuing under this Mortgage, then in addition to having any other right or remedy available at law or in equity, the Mortgagee shall have the option of either (i) proceeding under the Code and exercising such rights and remedies as may be provided to a secured party by the Code with respect to all or any portion of the Mortgaged Property which is personal property (including, without limitation, taking possession of and selling such property) or (ii) treating such property as real property and proceeding with respect to both the real and personal property constituting the Mortgaged Property in accordance with the Mortgagee's rights, powers and remedies with respect to the real property (in which event the default provisions of the Code shall not apply). If the Mortgagee shall elect to proceed under the Code, then ten days' notice of 9 sale of the personal property shall be deemed reasonable notice and the reasonable expenses of retaking, holding, preparing for sale, selling and the like incurred by the Mortgagee shall include, but not be limited to, attorneys' fees and legal expenses. At the Mortgagee's request, the Mortgagor shall assemble the personal property and make it available to the Mortgagee at a place designated by the Mortgagee which is reasonably convenient to both parties. (b) The Mortgagor and the Mortgagee agree, to the extent permitted by law, that: (i) all of the goods described within the definition of the word "Equipment" are or are to become fixtures on the Real Estate; (ii) this Mortgage upon recording or registration in the real estate records of the proper office shall constitute a financing statement filed as a "fixture filing" within the meaning of Sections 9a-334 and 9a-502 of the Code; (iii) the Mortgagor is the record owner of the Owned Land; and (iv) the addresses of the Mortgagor and the Mortgagee are as set forth on the first page of this Mortgage. (c) The information provided in this paragraph is provided in order that this Mortgage shall comply with the requirements of applicable law for a mortgage instrument to be filed as a financing statement. The Mortgagor is the "Debtor" and its name and mailing address are set forth hereinabove. The "Secured Party" is the Mortgagee and its name and mailing address from which information concerning the security interest granted herein may be obtained are as set forth hereinabove. A statement describing the portion of the Mortgaged Property comprising of goods or other personal property that may now be or hereafter become fixtures hereby secured is set forth in the description of the Mortgaged Property contained herein. The Mortgagor is the record owner of the Mortgaged Property. (d) After written request, Mortgagor shall file all financing statements necessary to perfect the Mortgagee's lien thereon. Additionally, Mortgagor authorizes Mortgagee to file financing statements describing the Mortgaged Property on the Mortgagors behalf; provided that the Mortgagee shall not be responsible for the filing of any financing or continuation statement. 18. FUTURE ADVANCES. The lien of this Mortgage with respect to any future advances and/or obligations up to a maximum of $65,000,000, modifications, extensions, and renewals referred to herein and made from time to time shall have the same priority to which this Mortgage otherwise would be entitled as of the date this Mortgage is executed and recorded without regard to the fact that any such future advance, obligation, modification, extension, or renewal may occur after this Mortgage is executed. 19. ASSIGNMENT OF RENTS. (a) The Mortgagor hereby assigns to the Mortgagee the Rents as further security for the payment of and performance of the Obligations, and the Mortgagor grants to the Mortgagee the right to enter the Mortgaged Property for the purpose of collecting the same and to let the Mortgaged Property or any part thereof, and to apply the Rents on account of the Obligations. The foregoing assignment and grant is present, irrevocable and absolute and shall continue in effect until the Obligations are fully paid and performed, but the Mortgagee hereby grants the Mortgagor a revocable license to collect, receive, use and retain the Rents until the occurrence of an Event of Default; such license to collect, receive, use and retain the Rents shall be immediately and automatically revoked by the Mortgagee without the necessity of any action of the Mortgagee upon the occurrence and during the continuance of any Event of Default; in the event such license is revoked, the Mortgagor shall pay over to the Mortgagee, or to any receiver appointed to collect the Rents, 10 any lease security deposits, and shall pay monthly in advance to the Mortgagee, or to any such receiver, the fair and reasonable rental value as determined by the Mortgagee for the use and occupancy of such part of the Mortgaged Property as may be in the possession of the Mortgagor or any affiliate of the Mortgagor, and upon default in any such payment the Mortgagor and any such affiliate will vacate and surrender the possession of the Mortgaged Property to the Mortgagee or to such receiver, and in default thereof may be evicted by summary proceedings or otherwise. The Mortgagor shall not accept prepayments of installments of Rent to become due for a period of more than one month in advance (except for security deposits and estimated payments of percentage rent, if any). (b) The Mortgagor has not affirmatively done any act which would prevent the Mortgagee from, or limit the Mortgagee in, acting under any of the provisions of the foregoing assignment. (c) Except for any matter disclosed in the Collateral Agreements, no action has been brought or, so far as is known to the Mortgagor, is threatened, which would interfere in any way with the right of the Mortgagor to execute the foregoing assignment and perform all of the Mortgagor's obligations contained in this Section and in the Leases. 20. ADDITIONAL RIGHTS. The holder of any subordinate lien or subordinate mortgage on the Mortgaged Property shall have no right to terminate any Lease whether or not such Lease is subordinate to this Mortgage nor shall the Mortgagor consent to any holder of any subordinate lien or subordinate mortgage joining any tenant under any Lease in any action to foreclose the lien or modify, interfere with, disturb or terminate the rights of any tenant under any Lease. By recordation of this Mortgage all subordinate lienholders and the mortgagees and beneficiaries under subordinate mortgages are subject to and notified of this provision, and any action taken by any such lienholder or beneficiary contrary to this provision shall be null and void. Upon the occurrence and during the continuance of any Event of Default, the Mortgagee may, in its sole discretion and without regard to the adequacy of its security under this Mortgage, apply all or any part of any amounts on deposit with the Mortgagee under this Mortgage against all or any part of the Obligations. Any such application shall not be construed to cure or waive any Default or Event of Default or invalidate any act taken by the Mortgagee on account of such Default or Event of Default. 21. MORTGAGOR'S INDEMNITIES. The Mortgagor agrees to protect, indemnify and hold harmless the Mortgagee and each Secured Party (collectively, the "INDEMNITEES") from and against any and all losses which the Mortgagee or any such Indemnitee may incur under or by reason of the assignment of Leases and Rents, or for any action taken by the Mortgagee or any Lender or Indemnitee hereunder, or by reason or in defense of any and all claims and demands whatsoever which may be asserted against the Mortgagee or any such Indemnitee arising out of the Leases, including, without limitation, any claim by any third Person for credit on account of Rents paid to and received by the Mortgagor, but not delivered to the Mortgagee or its agents, representatives or employees, for any period under any Lease more than one (1) month in advance of the due date thereof. In the event that the Mortgagee or any of the Secured Parties incurs 11 any losses covered by the indemnity set forth in this Section, the amount thereof, including reasonable attorneys' fees, with interest thereon at the Overdue Rate, shall be payable by the Mortgagor to the Mortgagee within ten (10) days after demand therefor, and shall be secured hereby and by all other security for the payment and performance of the Obligations, including, without limitation, the lien and security interest of this Mortgage. The liabilities of the Mortgagor as set forth in this Section shall survive the termination of this Mortgage and the repayment of the Obligations. 22. NO LIABILITY OF MORTGAGEE. Neither the acceptance nor the exercise of the rights and remedies hereunder nor any other action on the part of Mortgagee or any Person exercising Mortgagee's rights hereunder shall be construed to: (a) be an assumption by Mortgagee or any such Person or to otherwise make Mortgagee or such Person liable or responsible for the performance of any of the obligations of Mortgagor under or with respect to the Leases or for any Rent, security deposit or other amount delivered to Mortgagor, provided that Mortgagee or any such Person exercising the rights of Mortgagee shall be accountable for any Rents, security deposits or other amounts actually received by Mortgagee or such Person, as the case may be; or (b) obligate Mortgagee or any such Person to take any action under or with respect to the Leases or with respect to the Mortgaged Property, to incur any expense or perform or discharge any duty or obligation under or with respect to the Leases or with respect to the Mortgaged Property, to appear in or defend any action or proceeding relating to the Leases or the Mortgaged Property, to constitute Mortgagee as a mortgagee-in-possession (unless Mortgagee actually enters and takes possession of the Mortgaged Property), or to be liable in any way for any injury or damage to Persons or property sustained by any Person in or about the Mortgaged Property, other than to the extent caused by the willful misconduct or gross negligence of Mortgagee or any Person exercising the rights of Mortgagee hereunder. 23. NOTICES. All notices, requests, demands and other communications hereunder shall be given in accordance with the provisions of the Collateral Agreements to the Mortgagor and to the Mortgagee as specified therein. 24. NO ORAL MODIFICATION. This Mortgage may not be amended, supplemented or otherwise modified except in accordance with the provisions of the Collateral Agreements. Any agreement made by the Mortgagor and the Mortgagee after the date of this Mortgage relating to this Mortgage shall be superior to the rights of the holder of any intervening or subordinate lien or encumbrance. 25. PARTIAL INVALIDITY. In the event any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, but each shall be construed as if such invalid, illegal or unenforceable provision had never been included. Notwithstanding to the contrary anything contained in this Mortgage or in any provisions of any Collateral Agreement, the obligations of the Mortgagor and of any other obligor under any Collateral Agreements shall be subject to the limitation that the Mortgagee shall not charge, take or receive, nor shall the Mortgagor or any other obligor be obligated to pay to the Mortgagee, any amounts constituting interest in excess of the maximum rate permitted by law to be charged by the Mortgagee. 12 26. MORTGAGOR'S WAIVER OF RIGHTS. (a) The Mortgagor hereby voluntarily and knowingly releases and waives any and all rights to retain possession of the Mortgaged Property after the occurrence of an Event of Default hereunder and any and all rights of redemption from sale under any order or decree of foreclosure (whether full or partial), pursuant to rights, if any, therein granted, as allowed under any applicable law, on its own behalf, on behalf of all persons claiming or having an interest (direct or indirectly) by, through or under each constituent of the Mortgagor and on behalf of each and every person acquiring any interest in the Mortgaged Property subsequent to the date hereof, it being the intent hereof that any and all such rights or redemption of each constituent of the Mortgagor and all such other persons are and shall be deemed to be hereby waived to the fullest extent permitted by applicable law or replacement statute. Each constituent of the Mortgagor shall not invoke or utilize any such law or laws or otherwise hinder, delay, or impede the execution of any right, power, or remedy herein or otherwise granted or delegated to the Mortgagee, but shall permit the execution of every such right, power, and remedy as though no such law or laws had been made or enacted. (b) To the fullest extent permitted by law, the Mortgagor waives the benefit of all laws now existing or that may subsequently be enacted providing for (i) any appraisement before sale of any portion of the Mortgaged Property, (ii) any extension of the time for the enforcement of the collection of the Obligations or the creation or extension of a period of redemption from any sale made in collecting such debt and (iii) exemption of the Mortgaged Property from attachment, levy or sale under execution or exemption from civil process. To the full extent the Mortgagor may do so, the Mortgagor agrees that the Mortgagor will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, exemption, extension or redemption, or requiring foreclosure of this Mortgage before exercising any other remedy granted hereunder and the Mortgagor, for the Mortgagor and its successors and assigns, and for any and all persons ever claiming any interest in the Mortgaged Property, to the extent permitted by law, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature (except as expressly provided in the Collateral Agreements) or declare due the whole of the secured indebtedness and marshalling in the event of exercise by the Mortgagee of the foreclosure rights, power of sale, or other rights hereby created. 27. REMEDIES NOT EXCLUSIVE. The Mortgagee shall be entitled to enforce payment and performance of the Obligations and to exercise all rights and powers under this Mortgage or under any of the other Collateral Agreements or other agreement or any laws now or hereafter in force, notwithstanding some or all of the Obligations may now or hereafter be otherwise secured, whether by deed of trust, mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this Mortgage nor its enforcement, shall prejudice or in any manner affect the Mortgagee's rights to realize upon or enforce any other security now or hereafter held by the Mortgagee, it being agreed that the Mortgagee shall be entitled to enforce this Mortgage and any other security now or hereafter held by the Mortgagee in such order and manner as the Mortgagee may determine in its absolute discretion. No remedy herein conferred upon or reserved to the Mortgagee is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in Collateral Agreements to the Mortgagee or to which either may otherwise be 13 entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Mortgagee, as the case may be. In no event shall the Mortgagee, in the exercise of the remedies provided in this Mortgage (including, without limitation, in connection with the assignment of Rents to the Mortgagee, or the appointment of a receiver and the entry of such receiver on to all or any part of the Mortgaged Property), be deemed a "mortgagee in possession," and the Mortgagee shall not in any way be made liable for any act, either of commission or omission, in connection with the exercise of such remedies. 28. MULTIPLE SECURITY. If (a) the Premises shall consist of one or more parcels, whether or not contiguous and whether or not located in the same county, or (b) in addition to this Mortgage, the Mortgagee shall now or hereafter hold or be the beneficiary of one or more additional mortgages, liens, deeds of trust or other security (directly or indirectly) for the Obligations upon other property in the State in which the Premises are located (whether or not such property is owned by the Mortgagor or by others) or (c) both the circumstances described in clauses (a) and (b) shall be true, then to the fullest extent permitted by law, the Mortgagee may, at its election, commence or consolidate in a single foreclosure action all foreclosure proceedings against all such collateral securing the Obligations (including the Mortgaged Property), which action may be brought or consolidated in the courts of, or sale conducted in, any county in which any of such collateral is located. The Mortgagor acknowledges that the right to maintain a consolidated foreclosure action is a specific inducement to the Mortgagee to extend the indebtedness borrowed pursuant to or guaranteed by the Collateral Agreements, and the Mortgagor expressly and irrevocably waives any objections to the commencement or consolidation of the foreclosure proceedings in a single action and any objections to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have. The Mortgagor further agrees that if the Mortgagee shall be prosecuting one or more foreclosure or other proceedings against a portion of the Mortgaged Property or against any collateral other than the Mortgaged Property, which collateral directly or indirectly secures the Obligations, or if the Mortgagee shall have obtained a judgment of foreclosure and sale or similar judgment against such collateral, then, whether or not such proceedings are being maintained or judgments were obtained in or outside the State in which the Premises are located, the Mortgagee may commence or continue any foreclosure proceedings and exercise its other remedies granted in this Mortgage against all or any part of the Mortgaged Property and the Mortgagor waives any objections to the commencement or continuation of a foreclosure of this Mortgage or exercise of any other remedies hereunder based on such other proceedings or judgments, and waives any right to seek to dismiss, stay, remove, transfer or consolidate either any action under this Mortgage or such other proceedings on such basis. Neither the commencement nor continuation of proceedings to foreclose this Mortgage, nor the exercise of any other rights hereunder nor the recovery of any judgment by the Mortgagee in any such proceedings or the occurrence of any sale in any such proceedings shall prejudice, limit or preclude the Mortgagee's right to commence or continue one or more foreclosure or other proceedings or obtain a judgment against any other collateral (either in or outside the State in which the Premises are located) which directly or indirectly secures the Obligations, and the Mortgagor expressly waives any objections to the commencement of, continuation of, or entry of a judgment in such other sales or proceedings or exercise of any remedies in such sales or proceedings based upon any action or judgment connected to this Mortgage, and the Mortgagor also waives any right to seek to 14 dismiss, stay, remove, transfer or consolidate either such other sales or proceedings or any sale or action under this Mortgage on such basis. It is expressly understood and agreed that to the fullest extent permitted by law, the Mortgagee may, at its election, cause the sale of all collateral which is the subject of a single foreclosure action at either a single sale or at multiple sales conducted simultaneously and take such other measures as are appropriate in order to effect the agreement of the parties to dispose of and administer all collateral securing the Obligations (directly or indirectly) in the most economical and least time-consuming manner. 29. SUCCESSORS AND ASSIGNS. All covenants of the Mortgagor contained in this Mortgage are imposed solely and exclusively for the benefit of the Mortgagee, and its successors and assigns, and no other person or entity shall have standing to require compliance with such covenants or be deemed, under any circumstances, to be a beneficiary of such covenants, any or all of which may be freely waived in whole or in part by the Mortgagee at any time if in the sole discretion of Mortgagee such a waiver is deemed advisable. All such covenants of the Mortgagor shall run with the land and bind the Mortgagor, the successors and assigns of the Mortgagor (and each of them) and all subsequent owners, encumbrances and tenants of the Mortgaged Property, and shall inure to the benefit of the Mortgagee and its successors and assigns. The word "Mortgagor" shall be construed as if it read "Mortgagors" whenever the sense of this Mortgage so requires and if there shall be more than one Mortgagor, the obligations of the Mortgagors shall be joint and several. 30. NO WAIVERS, ETC. Any failure by the Mortgagee to insist upon the strict performance by the Mortgagor of any of the terms and provisions of this Mortgage shall not be deemed to be a waiver of any of the terms and provisions hereof, and the Mortgagee, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by the Mortgagor of any and all of the terms and provisions of this Mortgage to be performed by the Mortgagor. The Mortgagee may release, regardless of consideration and without the necessity for any notice to or consent by the holder of any subordinate lien on the Mortgaged Property, any part of the security held for the obligations secured by this Mortgage without, as to the remainder of the security, in any way impairing or affecting the lien of this Mortgage or the priority of such lien over any subordinate lien or deed of trust. 31. GOVERNING LAW, ETC. This Mortgage shall be governed by and construed and interpreted in accordance with the laws of the State of New York. 32. CERTAIN DEFINITIONS. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Mortgage shall be used interchangeably in singular or plural form and the word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of the Mortgaged Property or any part thereof or interest therein," the word "Mortgagee" shall mean "Mortgagee or any successor agent for the Secured Parties," the word "person" shall include any individual, corporation, government, governmental authority, or other entity, and the words "Mortgaged Property" shall include any portion of the Mortgaged Property or interest therein. Whenever the context may require, any pronouns used herein shall form of nouns and pronouns shall include the plural and vice versa. The captions 15 in this Mortgage are for convenience or reference only and in no way limit or amplify the provisions hereof. 33. MAXIMUM AMOUNT OF INDEBTEDNESS. Notwithstanding anything to the contrary in this Mortgage, the maximum aggregate principal amount of indebtedness that is, or under any contingency may be, secured by this Mortgage, either at execution or any time thereafter (the "SECURED AMOUNT"), is $65,000,000.00, plus amounts that Mortgagee expends under this Mortgage to the extent that any such amounts shall constitute payment of (i) taxes, charges or assessments that may be imposed by law upon the Mortgaged Property, (ii) premiums on insurance policies covering the Mortgaged Property; (iii) expenses incurred in upholding the lien of this Mortgage, including the expenses of any litigation to prosecute or defend the rights and lien created by this Mortgage; or (iv) any amount, cost or charge to which Mortgagee becomes subrogated, upon payment, whether under recognized principles of law or equity, or under express statutory authority; THEN, and in each such event, such amounts or costs, together with interest thereon, shall be added to the indebtedness secured hereby and shall be secured by this Mortgage. 34. LAST DOLLARS SECURED; PRIORITY. This Mortgage secures only a portion of the indebtedness owing or which may become owing by the Mortgagor to the Secured Parties. The parties agree that any payments or repayments of such indebtedness shall be and be deemed to be applied first to the portion of the indebtedness that is not secured hereby, it being the parties' intent that the portion of the indebtedness last remaining unpaid shall be secured hereby. If at any time this Mortgage shall secure less than all of the principal amount of the Obligations, it is expressly agreed that any repayments of the principal amount of the Obligations shall not reduce the amount of the lien of this Mortgage until the lien amount shall equal the principal amount of the Obligations outstanding. 35. RELEASE. If any of the Mortgaged Property shall be sold, transferred or otherwise disposed of by any Mortgagor in a transaction permitted by, and in accordance with, the Collateral Agreements, then the Mortgagee, at the request and sole expense of such Mortgagor, shall execute and deliver to such Mortgagor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Mortgaged Property. The Mortgagor shall deliver to the Mortgagee, at least ten (10) Business Days prior to the date of the proposed release, a written request for release identifying the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Mortgagor stating that such transaction is in compliance with, and permitted by, the Indenture and the other Collateral Agreements. 36. INCONSISTENCY WITH INDENTURE. In the event of any conflict between the terms of this Mortgage and the terms of the Indenture and/or the other Collateral Agreements, the terms of the Indenture, first and the other Collateral Agreements, second, shall govern and control. 37. INDENTURE. Mortgagor has received a copy of and is fully familiar with the terms and provisions of the Indenture and the other Collateral Agreements. All representations and warranties made by Mortgagor in the Indenture and the other Collateral Agreements are incorporated herein by reference and are hereby 16 made by Mortgagor as to itself and the Mortgaged Property as though such representations and warranties were set forth at length herein as the representations and warranties of Mortgagor. 38. NO MERGER OF ESTATES. So long as any part of the Obligations remain unpaid, unperformed or undercharged, the fee, easement and leasehold estates to the Mortgaged Property shall not merge but rather shall remain separate and distinct, notwithstanding the union of such estates either in the Mortgagor, the Mortgagee, any lessee, any third-party purchaser or otherwise. 39. NO PARTNERSHIP. Nothing contained in this Mortgage is intended to, or shall be construed to, create to any extent and in any manner whatsoever any partnership, joint venture, or association between the Mortgagor and the Mortgagee, or in any way make the Mortgagee a co-principal with the Mortgagor with reference to the Mortgaged Property, and any inferences to the contrary are hereby expressly negated. 40. LIMITATION OF AMOUNT. Notwithstanding the foregoing, the maximum principal amount of indebtedness that may be secured by this Mortgage is the Maximum Principal Amount as set forth on the cover of this Mortgage, and the maximum total amount that may be secured by this Mortgage is limited as set forth in SECTION 33. 41. FUTURE ASSIGNMENTS. If Mortgagor obtains mortgage financing secured by the Mortgaged Property and the proceeds of such new mortgage financing are applied to repay the Obligations in full, then in place of delivering a discharge, satisfaction, or release of this Mortgage, the Mortgagee shall at Mortgagor's request, deliver to the new lender an assignment of this Mortgage, all in form reasonably satisfactory to Mortgagee. Effective upon Mortgagee's assignment of this Mortgage, the Mortgagee shall be released from any remaining obligations and liabilities under the Indenture and Collateral Agreements. 42. LIEN LAW. This Mortgage is made subject to the trust fund provisions of Section 13 of the New York Lien Law. Mortgagor covenants that it shall receive all monies and advances secured by this Mortgage and shall hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of improvement before using any part of the same for any other purpose. 43. STATUTORY INTERPRETATION. The covenants and conditions in this Mortgage shall be construed as affording to Mortgagee rights additional to, and not exclusive of, the rights conferred under the provisions of New York Real Property Law Sections 254, 271 and 272; provided Mortgagor shall have received notice required under the Indenture. The following provisions of New York Real Property Law Section 254 shall, however, not apply to this Mortgage and the rights and obligations of the parties to this Mortgage: (1) subsection "4," covering the use and application of casualty or flood insurance proceeds; and (2) the portion of subsection "4-a" that begins with the word "however" and continues to the end of the paragraph. Any inconsistency between this Mortgage and Real Property Law Section 254, 271 or 272 shall be resolved in favor of this Mortgage. 44. POWER OF SALE. If an Event of Default has occurred and is continuing, then without limiting any other rights or remedies of Mortgagee, Mortgagee may, either with or without entry or taking possession of the Mortgaged Property as 17 attorneys, and without prejudice to the right to bring an action for foreclosure of this Mortgage, sell the Mortgaged Property or any part of it pursuant to any procedures provided by applicable law, including the procedures set forth in New York Real Property Actions and Proceedings Law Article 14 (and any amendments or substitute statutes in regard thereto), and all estate, right, title, interest, claim, and demand therein, and right of redemption thereof, at one or more sales as an entirety, or in parcels, and at such time and place upon such terms and after such notice thereof as may be required or permitted by applicable law. 45. MULTIPLE PARCELS. If the Mortgaged Property consists of multiple parcels, then in any sale of the Mortgaged Property pursuant to Mortgagee's exercise of its remedies after an Event of Default (including any judicial foreclosure sale under Real Property Actions and Proceedings Law Article 14), the multiple parcels shall be sold at one time and in a single sale, except to the extent that Mortgagee, in its sole absolute discretion, determines to sell any one or more of the parcel(s) separately. Any such separate sales may be made in whatever order Mortgagee determines in its sole and absolute discretion. Mortgagee may, in its sole and absolute discretion, cause the entire Mortgaged Property to be offered for sale as a single auction lot and may also cause bids to be solicited for individual parcels of the Mortgaged Property as separate auction lots in any order, but shall be under no obligation to proceed in either manner or the other. Mortgagor acknowledges that if Mortgagee sells multiple parcels individually, no fair value or deficiency hearing shall be required after each sale. 46. HEADINGS. The Section headings herein are inserted for convenience of reference only and shall in no way alter, modify or define, or be used in construing, the text of such Sections. 47. DEFENSE OF CLAIMS. The Mortgagor shall promptly notify the Mortgagee in writing of the commencement of any legal proceedings affecting the Mortgagor's title to the Mortgaged Property or the Mortgagee's Lien on or security interest in the Mortgaged Property, or any part thereof, and shall take all such action, employing attorneys agreeable to the Mortgagee, as may be necessary to preserve the Mortgagor's and the Mortgagee's rights affected thereby. If the Mortgagor fails or refuses to adequately or vigorously, in the sole judgment of the Mortgagee, defend the Mortgagor's or the Mortgagee's rights to the Mortgaged Property, the Mortgagee may take such action on behalf of and in the name of the Mortgagor and at the Mortgagor's expense. All costs, expenses and attorneys' fees incurred by the Mortgagee (or its agents) pursuant to this Section or in connection with the defense by the Mortgagee of any claims, demands or litigation relating to the Mortgagor, the Mortgaged Property or the transactions contemplated in this Mortgage shall be paid by the Mortgagor upon written demand, plus interest thereon from the date of the advance by the Mortgagee until reimbursement of the Mortgagee at the Overdue Rate. 48. EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS MORTGAGE; AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS MORTGAGE; THAT IT HAS IN FACT READ THIS MORTGAGE AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS MORTGAGE; THAT IT HAS BEEN REPRESENTED BY 18 ITS EXECUTION OF THIS MORTGAGE AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS MORTGAGE. 49. DEFINITIONS. Any capitalized term used in this Mortgage and not otherwise defined herein shall have the meaning assigned to such term in the Collateral Agreements. 50. INCORPORATION BY REFERENCE. In connection with its appointment and acting hereunder, Mortgagee is entitled to all rights, privileges, benefits, protections, immunities and indemnities provided to it as trustee under the Indenture. [NO FURTHER TEXT ON THIS PAGE; SIGNATURE PAGE FOLLOWS.] 19 IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor and its corporate seal has been duly affixed hereto. MONTICELLO RACEWAY MANAGEMENT, INC., a New York corporation By: /s/ David P. Hanlon Name: David P. Hanlon Title: President This Mortgage Was Prepared By And When Recorded Return to: 1675 Broadway ACKNOWLEDGMENTS STATE OF NEW YORK ) ): ss. COUNTY OF SULLIVAN ) On the 20th day of March, in the year 2006, before me, the undersigned, personally appeared David P. Hanlon, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. Witness My Hand and Official Seal. /s/ Donna J. Bradbury Signature My Commission expires on September 3, 2009 21 EXHIBIT A to Mortgage DESCRIPTION OF THE OWNED LAND (see attached)
Exhibit 10(vi)(a)   BANK OF NORTH CAROLINA ENDORSEMENT SPLIT DOLLAR AGREEMENT   THIS ENDORSEMENT SPLIT DOLLAR AGREEMENT (this “Agreement”) is entered into as of this 31st day of December, 2004 by and between Bank of North Carolina, a North Carolina-chartered commercial bank (the “Bank”), and W. Swope Montgomery, Jr., its President and Chief Executive Officer (the “Executive”). This Agreement shall append the Split Dollar Policy Endorsement entered into on even date herewith or as subsequently amended, by and between the aforementioned parties.   To encourage the Executive to remain an employee of the Bank, the Bank is willing to divide the death proceeds of a life insurance policy on the Executive’s life. The Bank will pay life insurance premiums from its general assets.   The Bank and the Executive agree as set forth herein.   Article 1 General Definitions   Capitalized terms not otherwise defined in this Agreement are used herein as defined in the Salary Continuation Agreement dated as of the date of this Agreement between the Bank and the Executive. The following terms shall have the meanings specified:   1.1 Administrator means the administrator described in Article 7.   1.2 Executive’s Interest means the benefit set forth in Section 2.2(a).   1.3 Insured means the Executive.   1.4 Insurer means each life insurance carrier in which there is a Split Dollar Policy Endorsement attached to this Agreement.   1.5 Net Death Proceeds means the total death proceeds of the Policy minus the cash surrender value.   1.6 Policy means the specific life insurance policy or policies issued by the Insurers.   1.7 Split Dollar Policy Endorsement means the form required by the Administrator or the Insurer to indicate the Executive’s interest, if any, in a Policy on such Executive’s life.   Article 2 Policy Ownership/Interests   2.1 Bank Ownership. The Bank is the sole owner of the Policy and shall have the right to exercise all incidents of ownership. The Bank shall be the beneficiary of the remaining death proceeds of the Policy after the Executive’s Interest has been paid according to Section 2.2 below. 2.2 Death Benefit. (a) Executive’s Interest If the Policy Is Not Cancelled. Provided the Policy is not cancelled, surrendered, terminated, or allowed to lapse, the Executive’s beneficiary designated in accordance with the Split Dollar Policy Endorsement shall be entitled to 100% of the Net Death Proceeds (the “Executive’s Interest”). The Executive shall have the right to designate the beneficiary of the Executive’s Interest. The Executive or the Executive’s transferee shall also have the right to elect and change settlement options that may be permitted for the Executive’s Interest.   (b) If the Policy Is Cancelled. If the Policy is cancelled, surrendered, terminated, or allowed to lapse, in any such case without replacement, the Executive’s beneficiary designated in accordance with the Split Dollar Policy Endorsement shall be entitled to death proceeds payable by the Bank in an amount in cash equal to the sum of (1) the amount specified in paragraph (a) of this Section 2.2, measured at the time the Policy is cancelled, surrendered, terminated, or allowed to lapse, plus (2) a tax gross-up payment to compensate for federal and state taxes imposed on the benefit specified in clause (1) of this Section 2.2(b). The tax gross-up payment required under this clause (2) of Section 2.2(b) shall be calculated in two steps, first by dividing the total death benefit specified in clause (1) of this Section 2.2(b) by one minus the sum of (x) the highest marginal individual federal income tax rate under the Internal Revenue Code at the time of the Executive’s death (offset or reduced to account for the deductibility at the federal level of state income taxes), plus (y) the highest marginal individual state income tax rate under North Carolina law at the time of the Executive’s death. Second, the death benefit specified in clause (1) of this Section 2.2(b) shall then be subtracted from the amount calculated in that first step. The difference shall be the additional tax gross-up payment to be made to compensate for taxes, regardless of whether it exceeds or is less than taxes imposed on the Executive’s estate for “income in respect of a decedent.” To illustrate with a simple hypothetical based on an assumed death benefit amount of $100,000 paid directly by the Bank under clause (1) of this Section 2.2(b), the additional tax gross-up payment would be calculated as follows if the highest marginal individual income tax rates are 34% (federal) and 7.5% (North Carolina), taking into account the deductibility at the federal level of state income taxes:   First Step:    $ 100,000 / divided by (1 - ((34% + 7.5%) - (34% x 7.5%))      =         $ 100,000 / divided by (1 minus 38.95%) =    $ 100,000 / divided by 61.05%, or .6105      =         $ 163,800 Second Step:    $ 163,800 minus $ 100,000 =    $ 63,800, the amount of the additional tax gross-up payment   2.3 Comparable Coverage. The Bank may replace the Policy with a comparable insurance policy to cover the benefit provided under this Agreement, in which case the Bank and the Executive shall execute a new Split Dollar Policy Endorsement for the comparable insurance policy. 2.4 Internal Revenue Code Section 1035 Exchanges. The Executive recognizes and agrees that the Bank may after this Split Dollar Agreement is adopted wish to exchange the Policy of life insurance on the Executive’s life for another contract of life insurance insuring the Executive’s life. Provided that the Policy is replaced (or intended to be replaced) with a comparable policy of life insurance, the Executive agrees to provide medical information and cooperate with medical insurance-related testing required by a prospective insurer for implementing the Policy or, if necessary, for modifying or updating to a comparable insurer.   Article 3 Premiums   3.1 Premium Payment. The Bank shall pay any premiums due on the Policy.   3.2 Economic Benefit. The Administrator shall annually determine the economic benefit attributable to the Executive based on the amount of the current term rate for the Executive’s age multiplied by the aggregate death benefit payable to the Executive’s beneficiary. The “current term rate” is the minimum amount required to be imputed under applicable Internal Revenue Service authority.   3.3 Imputed Income. The Bank shall impute the economic benefit to the Executive on an annual basis.   Article 4 Assignment   The Executive may irrevocably assign without consideration all of the Executive’s rights and interest in this Agreement to any person, entity, or trust established by the Executive or the Executive’s spouse. If the Executive transfers all of the Executive’s rights and interest in this Agreement, then all of the Executive’s rights and interest in the Agreement shall be vested in the Executive’s transferee, who shall be substituted as a party hereunder and the Executive shall have no further interest in this Agreement.   Article 5 Insurer   The Insurer shall be bound only by the terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the Policy shall fully discharge it from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have notice of the provisions of this Agreement. Article 6 Claims and Review Procedures   6.1 Claims Procedure. Any person or entity who has not received benefits under this Agreement that he or she believes should be paid (the “claimant”) shall make a claim for such benefits as follows –   6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Administrator a written claim for the benefits.   6.1.2 Timing of Administrator Response. The Administrator shall respond to such claimant within 90 days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 90 days forth the special circumstances and the date by which the Administrator expects to render its decision.   6.1.3 Notice of Decision. If the Administrator denies part or all of the claim, the Administrator shall notify the claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth –     (a) The specific reasons for the denial,   denial is based,   claimant to perfect the claim and an explanation of why it is needed,   applicable to such procedures, and   section 502(a) following an adverse benefit determination on review.   6.2 Review Procedure. If the Administrator denies part or all of the claim, the Administrator of the denial, as follows –   6.2.1 Initiation – Written Request. To initiate the review, within 60 days after receiving the Administrator’s notice of denial the claimant must file with the Administrator 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. Upon request and free of charge, the Administrator shall also provide the claimant 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.   6.2.3 Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the claimant submits or considered in the initial benefit determination.   6.2.4 Timing of Administrator Response. The Administrator shall respond in If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period Administrator expects to render its decision.   6.2.5 Notice of Decision. The Administrator shall notify the claimant in writing of its decision on review. The Administrator shall write the notification in a forth –     denial is based,   claimant’s claim for benefits, and   section 502(a).   Article 7 Administration of Agreement   7.1 Administrator Duties. This Agreement shall be administered by an Administrator, which shall consist of the board or such committee as the board shall appoint. The Executive may be a member of the Administrator. The Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement.   7.2 Agents. In the administration of this Agreement, the Administrator may (including acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Administrator administration, interpretation, and application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.   7.4 Indemnity of Administrator. The Bank shall indemnify and hold harmless the members of the Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Administrator or any of its members.   7.5 Information. To enable the Administrator to perform its functions, the Bank shall supply full and timely information to the Administrator on all matters relating to the date and circumstances of the retirement, death, or Termination of Employment of the Executive and such other pertinent information as the Administrator may reasonably require.   Article 8 Miscellaneous   8.1 Binding Effect. This Agreement shall bind the Executive and the Bank and any Policy beneficiary.   8.2 Amendment and Termination of Agreement. This Agreement may be amended solely by a written agreement signed by the Bank and the Executive. This Agreement shall automatically terminate and the Executive’s rights and interest in this Agreement shall be forfeited if benefits under the Salary Continuation Agreement are neither paid nor payable because of termination under Article 5 of the Salary Continuation Agreement. This Agreement shall also terminate upon distribution of death benefits in accordance with Section 2.2 above.   8.3 Successors; Binding Agreement. By an assumption agreement in form and substance satisfactory to the Executive, the Bank 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 Bank to expressly extent that the Bank would be required to perform this Agreement if no succession had occurred.   8.4 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 discharge the Executive. It also does not require the Executive to remain an employee or interfere with the Executive’s right to terminate employment at any time. 8.5 Applicable Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of North Carolina, except to   8.6 Entire Agreement. This Agreement and the Salary Continuation Agreement constitute the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by this Agreement other than those specifically set forth herein.   8.7 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of the provision not held invalid, and the remainder of the provision together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law.   8.8 Headings. Caption headings and subheadings herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement.   8.9 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to the address of the Executive on the books and records of the Bank at the time of the delivery of such notice, and properly addressed to the Bank if addressed to the Board of Directors, Bank of North Carolina, 831 Julian Avenue, P.O. Box 1148, Thomasville, North Carolina 27361-1148.   Bank have executed this Agreement as of the date first written above.   EXECUTIVE:   BANK:     Bank of North Carolina /s/ W. Swope Montgomery, Jr.   By:   /s/ W. Groome Fulton, Jr. W. Swope Montgomery, Jr.   Its:   Chairman     And By:   /s/ David B. Spencer     Its:   EVP and CFO AGREEMENT TO COOPERATE WITH INSURANCE UNDERWRITING INCIDENT TO INTERNAL REVENUE CODE SECTION 1035 EXCHANGE   I acknowledge that I have read the Endorsement Split Dollar Agreement and agree to be bound by its terms, particularly the covenant on my part set forth in section 2.4 of the Endorsement Split Dollar Agreement to provide medical information and cooperate with medical insurance-related testing required by an insurer to issue a comparable insurance policy to cover the benefit provided under this Endorsement Split Dollar Agreement.     Witness   Executive SPLIT DOLLAR POLICY ENDORSEMENT   Insured: W. Swope Montgomery, Jr.    Insurers:    Life Investors, John Hancock,           and Mass Mutual   Policy No. Confidential   Pursuant to the terms of the Bank of North Carolina Endorsement Split Dollar Agreement dated as of December 31, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights to the Insured:   1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph.   2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:   Confidential Personal Information   PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER   Confidential Personal Information   CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER   The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph.   3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy.   4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy.   The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed.   Signed at Thomasville, North Carolina, this 31st day of December, 2004.   INSURED:   OWNER:     Bank of North Carolina   By:   W. Swope Montgomery, Jr.   Its:   EVP and CFO
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 2, 2010 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number000-18548 Xilinx, Inc.(Exact name of registrant as specified in its charter) Delaware 77-0188631 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2100 Logic Drive, San Jose, California 95124 (Address of principal executive offices) (Zip Code) (408) 559-7778(Registrant's telephone number, including area code) N/A(Former name, former address, and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNoo Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes oNoo Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filerxAccelerated filer oNon-accelerated filer oSmaller reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNox Shares outstanding of the registrant’s common stock: Class Shares Outstanding as of January 27, 2010 Common Stock, $.01 par value 276,646,832 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS XILINX, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited) Three Months Ended Nine months Ended Jan 2, Dec 27, Jan 2, Dec 27, (In thousands, except per share amounts) 2010 2008* 2010 2008* Net revenues $ 513,349 $ 458,387 $ 1,304,534 $ 1,430,170 Cost of revenues 184,320 165,331 486,319 519,244 Gross margin 329,029 293,056 818,215 910,926 Operating expenses: Research and development 101,867 86,967 275,245 267,202 Selling, general and administrative 85,037 85,032 237,214 266,116 Amortization of acquisition-related intangibles — 1,475 2,493 4,326 Restructuring charges 5,531 — 27,217 22,023 Total operating expenses 192,435 173,474 542,169 559,667 Operating income 136,594 119,582 276,046 351,259 Gain on early extinguishment of convertible debentures — 58,290 — 58,290 Impairment loss on investments (3,041 ) (19,540 ) (3,041 ) (53,162 ) Interest and other income (expense), net (542 ) (1,743 ) (13,234 ) 9,975 Income before income taxes 133,011 156,589 259,771 366,362 Provision for income taxes 26,103 37,145 50,819 82,680 Net income $ 106,908 $ 119,444 $ 208,952 $ 283,682 Net income per common share: Basic $ 0.39 $ 0.44 $ 0.76 $ 1.03 Diluted $ 0.38 $ 0.44 $ 0.75 $ 1.02 Cash dividends declared per common share $ 0.16 $ 0.14 $ 0.44 $ 0.42 Shares used in per share calculations: Basic 276,832 273,997 275,989 276,584 Diluted 278,566 274,223 277,030 277,603 * As adjusted for the retrospective adoption of the accounting standard for convertible debentures in the first quarter of fiscal 2010 (see Note 1) See notes to condensed consolidated financial statements. 2 XILINX, INC.CONDENSED CONSOLIDATED BALANCE SHEETS Jan 2, Mar 28, (In thousands, except par value amounts) 2010 2009* (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,037,564 $ 1,065,987 Short-term investments 452,429 258,946 Accounts receivable, net 231,078 216,390 Inventories 128,935 119,832 Deferred tax assets 83,482 63,709 Prepaid expenses and other current assets 25,238 27,604 Total current assets 1,958,726 1,752,468 Property, plant and equipment, at cost 720,990 776,808 Accumulated depreciation and amortization (353,476 ) (388,901 ) Net property, plant and equipment 367,514 387,907 Long-term investments 503,106 347,787 Goodwill 117,955 117,955 Acquisition-related intangibles, net — 2,493 Other assets 174,650 203,291 Total Assets $ 3,121,951 $ 2,811,901 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 108,452 $ 48,201 Accrued payroll and related liabilities 115,269 89,918 Income taxes payable 4,028 10,171 Deferred income on shipments to distributors 77,395 62,364 Other accrued liabilities 56,824 22,412 Total current liabilities 361,968 233,066 Convertible debentures 354,460 352,110 Deferred tax liabilities 247,822 196,189 Long-term income taxes payable 122,287 80,699 Other long-term liabilities 1,506 1,077 Commitments and contingencies (Note 17, Note 19) Stockholders’ equity: Preferred stock, $.01 par value (none issued) — — Common stock, $.01 par value 2,765 2,755 Additional paid-in capital 1,067,748 1,085,745 Retained earnings 959,909 879,118 Accumulated other comprehensive income (loss) 3,486 (18,858 ) Total stockholders’ equity 2,033,908 1,948,760 Total Liabilities and Stockholders’ Equity $ 3,121,951 $ 2,811,901 * Derived from audited financial statements and adjusted for the retrospective adoption of the accounting standard for convertible debentures in the first quarter of fiscal 2010 (see Note 1) See notes to condensed consolidated financial statements. 3 XILINX, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine months Ended Jan 2, Dec 27, (In thousands) 2010 2008* Cash flows from operating activities: Net income $ 208,952 $ 283,682 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 37,932 42,167 Amortization 11,777 12,420 Stock-based compensation 41,010 41,188 Gain on early extinguishment of convertible debentures — (58,290 ) Net (gain) loss on sale of available-for-sale securities 12 (2,740 ) Amortization of debt discount on convertible debentures 2,893 3,797 Convertible debt derivatives – revaluation and amortization (542 ) 798 Impairment loss on investments 3,041 53,162 Tax benefit (expense) from exercise of stock options (7,662 ) 668 (Excess) reduction of tax benefit from stock-based compensation 15,868 (4,759 ) Changes in assets and liabilities: Accounts receivable, net (14,688 ) 35,557 Inventories (8,883 ) (19,297 ) Deferred income taxes 35,307 63,453 Prepaid expenses and other current assets (5,272 ) 6,180 Other assets 25,042 (15,220 ) Accounts payable 60,250 (5,996 ) Accrued liabilities (including restructuring activities) 57,893 18,772 Income taxes payable (27,540 ) (33,699 ) Deferred income on shipments to distributors 15,031 (40,167 ) Net cash provided by operating activities 450,421 381,676 Cash flows from investing activities: Purchases of available-for-sale securities (1,325,973 ) (832,919 ) Proceeds from sale and maturity of available-for-sale securities 1,001,091 1,078,161 Purchases of property, plant and equipment (17,540 ) (32,711 ) Other investing activities (2,972 ) (493 ) Net cash provided by (used in) investing activities (345,394 ) 212,038 Cash flows from financing activities: Repurchases of convertible debentures — (146,324 ) Repurchases of common stock (25,000 ) (275,000 ) Proceeds from issuance of common stock through various stock plans 29,035 79,620 Payment of dividends to stockholders (121,617 ) (115,982 ) Excess (reduction of) tax benefit from stock-based compensation (15,868 ) 4,759 Net cash used in financing activities (133,450 ) (452,927 ) Net increase (decrease) in cash and cash equivalents (28,423 ) 140,787 Cash and cash equivalents at beginning of period 1,065,987 866,995 Cash and cash equivalents at end of period $ 1,037,564 $ 1,007,782 Supplemental disclosure of cash flow information: Interest paid $ 10,776 $ 17,055 Income taxes paid, net of refunds $ 25,238 $ 59,400 * As adjusted for the retrospective adoption of the accounting standard for convertible debentures in the first quarter of fiscal 2010 (see Note 1) See notes to condensed consolidated financial statements. 4 XILINX, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) Note 1. Basis of Presentation The accompanying interim condensed consolidated financial statements have been prepared in conformity with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X, and should be read in conjunction with the Xilinx, Inc. (Xilinx or the Company) consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) on Form 10-K/A for the fiscal year ended March 28, 2009. The interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, of a normal, recurring nature necessary to provide a fair statement of results for the interim periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending April 3, 2010 or any future period. The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2010 is a 53-week year ending on April 3, 2010, while fiscal 2009, which ended on March 28, 2009, was a 52-week fiscal year. The third quarter of fiscal 2010 was a 14-week quarter ended on January 2, 2010, while the third quarter of fiscal 2009 was a 13-week quarter ended on December 27, 2008. The first and second quarters of fiscal 2010 and 2009 were all 13-week quarters. Adoption of New Accounting Standard for Convertible Debentures Effective March 29, 2009, the Company retrospectively adopted the authoritative guidance for convertible debentures issued by the Financial Accounting Standards Board (FASB), which affected the Company’s 3.125% convertible debentures (debentures).
Exhibit 10.2   PLAN AND AGREEMENT OF TRIANGULAR MERGER BETWEEN MARSHALL HOLDINGS INTERNATIONAL, INC., MARSHALL ACQUISITION COMPANY, INC. AND RUDY NUTRITION MARSHALL HOLDINGS INTERNATIONAL, INC., a Nevada corporation (“Marshall”), MARSHALL ACQUISITION COMPANY, INC., a Nevada corporation (the “Subsidiary”), and RUDY NUTRITION, a Nevada corporation (“Rudy”), hereby agree as follows: WHEREAS, the Subsidiary is a wholly-owned subsidiary of Marshall; and WHEREAS, Rudy desires to merge, subject to the approval of its stocholders (the “Rudy Stockholders”), with and into the Subsidiary (the “Merger”); and WHEREAS, as a result of the Merger, the Rudy Stockholders will receive shares of the common stock of Marshall, par value $0.001 per share (the “Marshall Common Stock”) in exchange for all of their shares of the common stock of Rudy, par value $0.001 per share (the “Rudy Common Stock”); and NOW, THEREFORE, in consideration of the foregoing and the following mutual covenants and agreements, the parties agree as follows: 1.              Plan Adopted.  A plan of merger whereby Rudy merges with and into the Subsidiary (this “Plan of Merger”), pursuant to the provisions of Chapter 92A of the Nevada Revised Statutes (the “NRS”) and Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended, is adopted as follows: (a)            Rudy shall be merged with and into the Subsidiary, to exist and be governed by the laws of the State of Nevada. (b)            The Subsidiary shall be the Surviving Corporation and its name shall be changed to Rudy Nutrition (the “Surviving Corporation”) and will continue to be a wholly-owned subsidiary of Marshall. (c)            When this Plan of Merger shall become effective, the separate existence of Rudy shall cease and the Surviving Corporation shall succeed, without other transfer, to all the rights and properties of Rudy and shall be subject to all the debts and liabilities of such corporation in the same manner as if the Surviving Corporation had itself incurred them.  All rights of creditors and all liens upon the property of each constituent entity shall be immediately prior to the Merger. (d)            The Surviving Corporation will be responsible for the payment of all fees and franchise taxes of the constituent entities payable to the State of Nevada, if any. (e)            The Surviving Corporation will carry on business with the assets of Rudy, as well as the assets of the Subsidiary. (f)             The Surviving Corporation will be responsible for the payment of the fair value of shares, if any, required under Chapter 92A of the NRS. (g)            The Rudy Stockholders will surrender all of their shares of the Rudy Common Stock in the manner hereinafter set forth. (h)            In exchange for the shares of the Rudy Common Stock surrendered by the Rudy Stockholders, Marshall will issue and transfer to them on the basis hereinafter set forth, shares of the Marshall Common Stock.   1   (i)             A copy of this Plan of Merger will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of any constituent corporation. (j)             The authorized capital stock of the Subsidiary is 1,000 shares of common stock, par value $0.001 per share (the “Subsidiary Common Stock”), of which 1,000 shares are issued and outstanding. (k)            The authorized capital stock of Rudy is 400,000,000 shares of preferred stock, par value $0.01 per share (the “Rudy Preferred Stock”) and 5,000,000,000 shares of the Rudy Common Stock.  As of the date of this Agreement, there are 126,614,995 shares of the Rudy Preferred Stock and 2,221,817,606 shares of the Rudy Common Stock duly and validly issued and outstanding, fully paid, and non-assessable.  Before the Effective Date, hereinafter defined, all shares of the Rudy Preferred Stock shall be converted into shares of the Rudy Common Stock, and the Rudy Common Stock will be reverse split into 667,314 shares (the “Rudy Corporate Action”), whereupon, as of the Effective Date, then there will be 127,282,309 shares of the Rudy Common Stock duly and validly issued and outstanding, fully paid, and non-assessable and subject to the terms of the Merger held by 67 Rudy Stockholders, of which no more than 35 will be “unaccredited investors” after referencing the term “accredited investor” as defined in the Securities Act of 1933, as amended (the “Securities Act”). (l)             Before the Effective Date, with respect the Rudy Common Stock, Rudy shall file a Form 15 with the United States Securities and Exchange Commission (the “SEC”) which will contain a Certification and Notice of Termination of Registration under Section 12(g) of the Securities Exchange Act 2.              Effective Date.  The effective date of the Merger (the “Effective Date”) shall be the date of the filing of Articles of Merger for the Subsidiary and Rudy in the State of Nevada. 3.              Submission to Stockholders.  This Plan of Merger shall be submitted for approval separately to the Rudy Stockholders and to Marshall as the sole stockholder of the Subsidiary in the manner provided by the laws of the State of Nevada. 4.              Manner of Exchange.  On the Effective Date, the Rudy Stockholders shall surrender their stock certificates representing the Rudy Common Stock to Marshall in exchange for certificates representing the shares of the Marshall Common Stock to which they are entitled.  In exchange, the Subsidiary shall receive all of the issued and outstanding shares of the Rudy Common Stock held by the Rudy Stockholders. 5.              Basis of Exchange.  Following the Rudy Corporate Action, the Rudy Stockholders will own 127,282,309 shares of the Rudy Common Stock, which shares shall constitute all of the issued and outstanding shares of the capital stock of Rudy.  As a result of the Merger, the Rudy Stockholders shall be entitled to receive, in exchange for all of their Rudy Common Stock, 10,000,000 shares of the Marshall Common Stock. 6.              Restricted Shares.  All shares of the Marshall Common Stock to be received by the Rudy Stockholders hereunder shall be restricted in their resale as provided in the Securities Act, and shall contain a legend as required by Rule 144 promulgated under the Securities Act (“Rule 144”), which shall read as follows: THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. The restricted nature of such shares shall not be taken into account or any quoted price of the shares on the Effective Date.  Upon receipt of the Marshall Common Stock, each Rudy Stockholder shall execute a Subscription Agreement in the form attached hereto as Exhibit A.  In that regard, the Rudy Stockholders shall acknowledge that Marshall does not have any obligation to register for resale pursuant to the Securities Act, the shares of the Marshall Common Stock to be received by them hereunder.   2   7.              Directors and Officers. (a)            The present Board of Directors of the Subsidiary shall serve as the Board of Directors of the Surviving Corporation until the next annual meeting or until such time as their successors have been elected and qualified. (b)            If a vacancy shall exist on the Board of Directors of the Surviving Corporation on the Effective Date, such vacancy may be filled by the Board of Directors as provided in the Bylaws of the Surviving Corporation. (c)            All persons who, on the Effective Date, are executive or administrative officers of the Subsidiary shall be officers of the Surviving Corporation until the Board of Directors of the Surviving Corporation shall otherwise determine.  The Board of Directors of the Surviving Corporation may elect or appoint such additional officers as it may deem necessary or appropriate. 8.              Articles of Incorporation.  The Articles of Incorporation of the Subsidiary existing on the Effective Date, as amended to reflect the change of name to Rudy Nutrition, a copy of which is attached hereto as Exhibit B shall continue in full force as the Articles of Incorporation of the Surviving Corporation until altered, amended, or repealed as provided therein or as provided by law. 9.              Bylaws.  The Bylaws of the Subsidiary existing on the Effective Date, as amended to reflect the change of name to Rudy Nutrition, a copy of which is attached hereto as Exhibit C shall continue in full force as the Bylaws of the Surviving Corporation until altered, amended, or repealed as provided therein or as provided by law. 10.            Copies of the Plan of Merger.  A copy of this Plan of Merger is on file at 1343 Rocky Hills Road, Las Vegas, Nevada 89118, the principal offices of Rudy, and 2750 West Brooks Avenue, Suite 103, North Las Vegas, Nevada 89032, the principal offices of Marshall and the Subsidiary.  A copy of this Plan of Merger will be furnished to any stockholder of Rudy, Marshall, or the Subsidiary, on written request and without cost. 11.            Representations and Warranties of Rudy.  Where a representation contained in this Agreement is qualified by the phrase “to the best knowledge of Rudy” (or words of similar import), such expression means that, after having conducted a due diligence review, Rudy believes the statement to be true, accurate, and complete in all material respects.  Knowledge shall not be imputed nor shall it include any matters which such person should have known or should have been reasonably expected to have known.  Rudy represents and warrants to Marshall as follows: (a)            Power and Authority.  Rudy has full power and authority to execute, deliver, and perform this Agreement and all other agreements, certificates or documents to be delivered in connection herewith, including, without limitation, the other agreements, certificates and documents contemplated hereby (collectively the “Other Agreements”). (b)            Binding Effect.  Upon execution and delivery by Rudy, this Agreement and the Other Agreements shall be and constitute the valid, binding and legal obligations of Rudy, enforceable against Rudy in accordance with the terms hereof and thereof, except as the enforceability hereof or thereof may be subject to the effect of (i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally, and (ii) general principles of equity (regardless of whether (c)            Effect.  Neither the execution and delivery of this Agreement or the Other Agreements nor full performance by Rudy of its obligations hereunder or thereunder will violate or breach, or otherwise constitute or give rise to a default under, the terms or provisions of the Articles of Incorporation or Bylaws of Rudy or, subject to obtaining any and all necessary consents, of any contract, commitment or other obligation of Rudy or necessary for the operation of Rudy’s business (the “Business”) following the Merger or any other material contract, commitment, or other obligation to which Rudy is a party, or create or result in the creation of any encumbrance on any of the property of Rudy.  Except as otherwise disclosed to Marshall before the date of this Agreement and disclosed on Schedule 11(c) attached hereto, Rudy is not in violation of its Articles of Incorporation, its Bylaws, or of any indebtedness, mortgage, contract, lease, or other agreement or commitment.   3   (d)            No Consents.  No consent, approval or authorization of, or registration, declaration or filing with any third party, including, but not limited to, any governmental department, agency, commission or other instrumentality, will, except such consents, if any, delivered or obtained on or prior to the Effective Date, be obtained or made by Rudy prior to the Effective Date to authorize the execution, delivery and performance by Rudy of this Agreement or the Other Agreements. (e)            Capitalization.  Rudy is authorized by its Articles of Incorporation to issue 400,000,000 shares of the Rudy Preferred Stock and outstanding, fully paid, and non-assessable.  There are no outstanding options, contracts, commitments, warrants, preemptive rights, agreements or any rights of any character affecting or relating in any manner to the issuance of the Rudy Preferred Stock or the Rudy Common Stock or other securities or entitling anyone to acquire the Rudy Preferred Stock or the Rudy Common Stock or other securities of Rudy. (f)            Stock Ownership.  Following the Rudy Corporate Action and on the Effective Date, Rudy will have 67 stockholders, of which no more than 35 will be “unaccredited investors” after referencing the term “accredited investor” as defined in the Securities Act, who will have good, absolute, and marketable title to 127,282,309 shares of the Rudy Common Stock as described herein, which will constitute 100 percent of the issued and outstanding shares of the Rudy Common Stock.  Rudy has the complete and unrestricted right, power and authority to cause the Merger pursuant to this Agreement.  The delivery of the Rudy Common Stock to the Subsidiary as herein contemplated will vest in the Subsidiary good, absolute and marketable title to the shares of the Rudy Common Stock as described herein, free and clear of all liens, claims, encumbrances, and restrictions of every kind, except those restrictions imposed by applicable securities laws or this Agreement. (g)           Organization and Standing of Rudy.  Rudy is a duly organized and validly existing Nevada corporation in good standing, with all requisite corporate power and authority to carry on the Business as presently conducted in each of the jurisdictions where it is currently doing business.  Rudy has qualified to do business in the states reflected on Schedule 11(g) attached hereto. (h)            Rudy Subsidiaries.  Rudy has one subsidiary, Rudy Beverage, Inc., a Nevada corporation. (i)             Employees.  Rudy has no employees. (j)             Financial Statement.  Rudy has furnished Marshall and the Subsidiary an audited consolidated balance sheet of Rudy as of June 30, 2008, and the related consolidated statement of income and retained earnings for the period covered thereby (the “Financial Statement”).  The Financial Statement (i) is in accordance with the books and records of Rudy; (ii) fairly presents the financial condition of Rudy at such date and the results of its operations for the period therein specified; (iii) was prepared in accordance with generally accepted accounting principles applied upon a basis consistent with prior accounting periods; and (iv) with respect to all contracts and commitments of Rudy, reflects adequate reserves for all reasonably anticipated losses and costs in excess of anticipated income.  Specifically, but not by way of limitation, the Financial Statement discloses all of the debts, liabilities, and obligations of any nature (whether absolute, accrued, contingent, or otherwise and whether due or to become due) of Rudy on the dates therein specified (except such debts, liabilities, and obligations as are not required to be reflected therein in accordance with generally accepted accounting principles). (k)            Present Status.  Since the date reflected on the Financial Statement, except as reflected on Schedule 11(k) attached hereto, Rudy has not (i) incurred any material obligations or material liabilities, absolute, accrued, contingent, or otherwise, except current trade payables; (ii) discharged or satisfied any liens or encumbrances, or paid any obligations or liabilities, except current Financial Statement liabilities and current liabilities incurred since the dates reflected on the Financial Statement, in each case, in the ordinary course of business; (iii) declared or made any stockholder payment or distribution or purchased or redeemed any of its securities or agreed to do so; (iv) mortgaged, pledged, or subjected to lien, encumbrance, or charge any of its assets except as shall be removed prior to or at the Effective Date; (v) canceled any debt or claim; (vi) sold or transferred any assets of a material value except sales from inventory in the ordinary course of business; (vii) suffered any damage, destruction, or loss (whether or not covered by insurance) materially affecting its properties, business, or prospects; (viii) waived any rights of a material value; (ix) entered into any transaction other than in the ordinary course of business.  Further, since the date reflected on the Financial Statement, except as reflected on Schedule 11(k) attached hereto, there has not been any change in or any event or condition (financial or otherwise) affecting the property, assets, liabilities, operations, or prospects of Rudy, other than changes in the ordinary course of its business, none of which has (either when taken by itself or taken in conjunction with all other such changes) been materially adverse.   4   (l)             Tax Returns and Audits.  As of the date of this Agreement, except as reflected on Schedule 11(l) attached hereto, Rudy has duly filed all federal, state, and local tax returns as required to be filed by it (including, but not limited to, all payroll or other employment related tax returns), and has paid all federal, state and local taxes, including, but not limited to all payroll and employment taxes, required to be paid with respect to the periods covered by such returns.  Except as reflected on Schedule 11(l) attached hereto, Rudy has not been delinquent in the payment of any tax, assessment, or governmental charge, and has not had any tax deficiencies proposed or assessed against it and has not executed any waiver of the statute of limitations on the assessment or collection of any tax. (m)           Litigation.  Other than as reflected on Schedule 11(m) attached hereto, Rudy has disclosed all litigation, arbitrations, claims, governmental or other proceedings (formal or informal), or investigations pending, threatened, or in prospect (or any basis therefor known to Rudy) with respect to Rudy, or any of its business, properties, or assets prior to the execution of this Agreement.  Except as reflected on Schedule 11(m) attached hereto, Rudy is not affected by any present or threatened strike or other labor disturbance or, to the best knowledge of Rudy, is any union attempting to represent any employee of Rudy as collective bargaining agent.  Rudy is not in material violation of, or in material default with respect to, any law, rule, regulation, order, judgment, or decree; nor are Rudy required to take any action in order to avoid such a violation or default. (n)            Compliance with Laws and Regulations.  Except as otherwise disclosed in Schedule 11(n) attached hereto, to the best knowledge of Rudy, Rudy is in material compliance, with all laws, ordinances, codes, restrictions, regulations (environmental and otherwise) and other legal requirements applicable to the conduct of the Business, the noncompliance with which would be likely to have a material adverse effect on the Business; and there are no lawsuits or proceedings pending or, to its best knowledge, threatened with (o)            No Defaults.  Other than as reflected on Schedule 11(o) attached hereto, to the best knowledge of Rudy, Rudy is not in default under any provision, of any lease, contract, commitment, obligation, note, bond, debenture, mortgage, indenture, security agreement, guaranty, or other instrument of indebtedness, and no existing condition exists which, with the giving of notice or the passage of time, or both, would constitute such a default, in either case, which default is or would be likely to have a material adverse effect on the Business. (p)            Permits and Approvals.  Except as otherwise disclosed on Schedule 11(p) attached hereto, to the best knowledge of Rudy, Rudy has all permits and approvals required for the conduct of the Business and is not in material default under any permit, approval or qualification, which default is likely to have a material adverse effect on Rudy or the Business, nor is there any existing condition which, with the giving of notice or the passage of time, or both, would constitute such a material default; (ii) other than those items listed on Schedule 11(p) attached hereto, no permit, approval or qualification of any government or governmental unit, agency, board, body or instrumentality, whether federal, state or local, is necessary for the conduct of the Business as same has been and is being conducted; and (iii) there is no lawsuit or proceeding pending or threatened with respect to any of the foregoing.  Provided, however, Marshall recognizes there may be products which have not been introduced to the market or under development that do not have required approvals. (q)            Properties.  Except as reflected on Schedule 11(q) attached hereto, Rudy has good and marketable title in fee simple absolute to all real properties and good title to all other properties and assets used in its business or owned by it (except real and other properties and assets as are held pursuant to leases or licenses), free and clear of all liens, mortgages, security interests, pledges, charges, and encumbrances, other than as shown on the Financial Statement, including, but not limited to a tax lien for unpaid real estate taxes.  Moreover:   5   (i)             No real property owned, leased, licensed, or used by Rudy lies in an area which is, or to the best knowledge of Rudy will be, subject to zoning, use, or building code restrictions which would prohibit, and no state of facts relating to the actions or inaction of another person or entity or their ownership, leasing, licensing, or use of that real property in the business in which Rudy is now engaged or the business in which it contemplates engaging. (ii)            The real and other properties and assets owned, leased, or licensed by Rudy constitute all such properties and assets which are necessary to the business of Rudy as presently conducted or as it contemplates conducting. (r)             Patents and Trademarks.  Except as reflected on Schedule 11(r) attached hereto, to the best of the best knowledge of Rudy, Rudy owns, possesses and has good title to all of the copyrights, trademarks, trademark rights, patents, patent rights, and licenses necessary in the conduct of the Business.  Except as reflected on Schedule 11(r) attached hereto, to the best knowledge of Rudy, Rudy is not infringing upon or otherwise acting adversely to the rights of any person, under, or in respect to, any copyrights, trademarks, trademark rights, patents, patent rights, or licenses owned by any person or entity, and there is no claim or pending or threatened action with respect thereto.  Rudy has the unrestricted right to use (free and clear of any rights or claims of others) all trade secrets, customer lists, manufacturing and other processes incident to the manufacture, use or sale of any and all products presently sold by it. (s)            Compliance with Environmental Laws.  Except as otherwise disclosed on Schedule 11(s) attached hereto, to the best knowledge of Rudy, Rudy has not violated and is not in violation of the Federal Clean Air Act (42 U.S.C. 7401, et seq.), Federal Water Pollution Control Act (33 U.S.C. 1251, et seq.), the Federal Resource Conservation and Recovery Act of 1976 (42 U.S.C. 6901, et seq.), the Federal Comprehensive Environmental Responsibility, Clean Up and Liability Act of 1980 (42 U.S.C. 9601, et seq.), the Federal Toxic Substance Control Act of 1976 (15 U.S.C. 2601, et seq.) or any state or local laws or ordinances regulating the subjects covered by the federal statutes identified above, including rules and regulations thereunder.  Prior to the Effective Date, Rudy either directed, participated in and/or authorized that studies of the environmental status of Rudy’s properties and operations of the Business be prepared, which studies are listed or otherwise described in Schedule 11(s) hereto (collectively the “Studies”).  The Studies, as well as those other matters, correspondence, reports and the like disclosed in Schedule 11(s) hereto, have been delivered to Marshall and Marshall’s counsel and environmental consultants and are incorporated herein by reference as though set out herein. (t)            Absence of Certain Changes or Events.  Except as otherwise disclosed on Schedule 11(t) attached hereto, since June 30, 2008, there has not been any change in or any event or condition (financial or otherwise) affecting the property, assets (including cash and all accounts receivable), liabilities, (u)            Purchase and Outstanding Bids.  No purchase commitments of Rudy are in excess of normal, ordinary, and usual requirements of its business, or were made at any price in excess of the then current market price or contained terms and conditions more onerous than those usual and customary in the industry. (v)            Insurance Policies.  There are in full force all policies of fire, liability, and other forms of insurance pertaining to the properties and assets of Rudy as disclosed on Schedule 11(v) attached hereto.  Such policies are in an amount and against such losses and risks as are generally maintained by comparable businesses, copies of which have been delivered to Marshall upon the execution of this Agreement. (w)           Compensation of Officers and Others.  Except as otherwise disclosed on Schedule 11(w) attached hereto, since June 30, 2008, there has not been any change in any compensation, commission, bonus, or other remuneration payable to any officer, director, agent, employee, or consultant of Rudy, other than in the ordinary course of business.   6   (x)            Inventory.  Except as otherwise disclosed on Schedule 11(x) attached hereto, the inventory of Rudy which is reflected on the Financial Statement and all inventory items which have been acquired since June 30, 2008, consists of goods of such quality and in such quantities as are salable in the ordinary course of its business with normal markup at prevailing market prices.  Each item of the inventory was valued at the then current cost, if possible, and if not, at the then current manufacturer’s regular cost sheet available to distributors.  Except as otherwise disclosed on Schedule 11(x) attached hereto, since June 30, 2008, Rudy has continued to replenish its inventory in a normal and customary manner consistent with the prior and prudent practice prevailing in the business of Rudy. (y)            Schedule of Assets.  As disclosed on Schedule 11(y) attached hereto, is a schedule of assets owned by Rudy containing (i) a true and complete listing of all property owned by Rudy; (ii) a true and complete legal description of all real properties in which Rudy has a leasehold interest, together with a description of each indenture, lease, sublease, or other instrument under which Rudy claims or holds such leasehold interest, each of which is a good and valid leasehold interest, and all of which are in effect and enforceable according to their respective terms; (iii) a true and complete list of all patents, patent applications, patent licenses, trademarks, trademark registrations, and applications therefor, trade names, copyrights, and copyright registrations and applications therefor owned by Rudy; and (iv) as of June 30, 2008, a true and complete list of all accounts receivable of Rudy, together with information as to the aging of each such account receivable. (z)            Status on the Effective Date.  On the Effective Date, Rudy shall have (i) cash balances, plus certificates of deposit, equal to not less than $150,000; (ii) accounts receivable, plus inventory, less accounts payable, equal to not less than $20,000; and (iii) a stockholders’ equity of not less than $200,000.  Rudy shall deliver to Marshall on the Effective Date a schedule prepared by the Chief Financial Officer of Rudy stating the amount of the items described in this paragraph as of the Effective Date. (aa)          Labor Matters.  Except as disclosed in Schedule 11(aa) hereto, to the best knowledge of Rudy, Rudy is in material compliance with all applicable laws, rules or regulations respecting employment and employment practices, terms and conditions of employment and wages and hours, and Rudy has not engaged in any unfair or illegal labor practice which has not been remedied as of the date hereof.  There is no unfair labor practices complaint or charge of employment discrimination pending or, to the best knowledge of Rudy, threatened in writing against Rudy with respect to any of the employees before the National Labor Relations Board, if applicable, the Equal Employment Opportunity Commission, or any other state, federal or local court or governmental board, agency or commission.  There is no labor strike, dispute, work slowdown, work stoppage or other job action pending or, to the best knowledge of Rudy, threatened against Rudy. (bb)          Employment Contracts.  Except as disclosed in Schedule 11(bb) hereto, Rudy has no employment contract, written or otherwise, with any employee or former employee. (cc)          Compliance with Law and Other Instruments.  The business and operations of Rudy have been and are being conducted in accordance with all applicable laws, rules and regulations of all authorities, except those which do not (either individually or in the aggregate) materially and adversely affect Rudy. (dd)          Contracts.  Except as disclosed on Schedule 11(dd) attached hereto or on any other schedule attached to this Agreement, Rudy is not a party to, or otherwise bound by any (i) written or oral contract; (ii) employment or consultant contract not terminable at will without cost or other liability; (iii) labor union contracts; (iv) bonus, pension, profit sharing, retirement, share purchase, stock option, hospitalization, group insurance, or similar employee benefit plan; (v) any real or personal property lease, as lessor or lessee; (vi) advertising or public relations contract; (vii) purchase, supply or service contract, which cannot be terminated without cost or expense to Rudy if such termination occurs with less than 30 day’s notice; (viii) deed of trust, mortgage, conditional sales contract, security agreement, pledge agreement, trust receipt, or any other agreement or arrangement whereby any of the assets or property of Rudy is subject to a lien, encumbrance, charge or other restriction except such as shall be satisfied prior to the Effective Date; (ix) license agreement, whether as licensee or licensor; (x) contract or agreement involving any expenditure by Rudy of more than $2,500.00 in the aggregate; (xi) contract or agreement which Rudy cannot terminate by giving less than 30 day’s notice; and (xii) contract to be performed in whole or in part more than 90 days from the date thereof and which cannot be terminated without cost or liability to Rudy.   7   Other than as disclosed on Schedule 11(dd) attached hereto, to the best knowledge of Rudy, Rudy has in all respects performed all obligations required to be performed to date, and is not in material default in any respect under any of the contracts, agreements, leases, documents, or other commitments to which it is a party or otherwise bound or affected.  All parties having material contracts with Rudy are in material compliance therewith, and are not in material default thereunder. (ee)          Authority to Merge.  Rudy has all requisite power and authority to execute, deliver, and perform this Agreement.  All necessary corporate proceedings of Rudy have been duly taken to authorize the execution, delivery, and performance of this Agreement by Rudy.  This Agreement has been duly authorized, executed and delivered by Rudy; is the legal, valid, and binding obligation of Rudy; and is enforceable as to it in accordance with its terms subject to any laws relating to bankruptcy or any other similar laws. No consent, authorization, approval, order, license, certificate, or permit of or from, or declaration of filing with, any federal, state, local, or other governmental authority or any court or other tribunal is required by Rudy for the execution, delivery, or performance of this Agreement by Rudy.  No consent of any party to any contract, agreement, instrument, lease, license, arrangement, or understanding to which Rudy is a party, or to which any of its properties or assets are subject, is required for the execution, delivery or performance of this Agreement; and the execution, delivery, and performance of this Agreement will not violate, result in a breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any contract, agreement, instrument, lease, license, arrangement, or understanding, or violate or result in a breach of any term of the articles of incorporation (or other charter document) or bylaws of Rudy or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree binding on Rudy or to which any of its operations, business, properties, or assets are subject. (ff)            Records.  The books of account and minute books of Rudy are complete and correct, and reflect all those transactions involving its business which properly should have been set forth in such books. (gg)          SEC Filings.  Rudy has had the opportunity to review and has reviewed all of Marshall’s filings with the SEC (the “SEC Filings”). (hh)          Representations and Warranties True and Complete.  All representations and warranties of Rudy in this Agreement and the Other Agreements are true, accurate and complete in all material respects as of the Effective Date. (ii)            No Knowledge of Default.  Rudy has no knowledge that any representations and warranties of Marshall and the Subsidiary contained in this Agreement or the Other Agreements are untrue, inaccurate or incomplete or that Marshall or the Subsidiary is in default under any term or provision of this (jj)            No Untrue Statements.  No representation or warranty by Rudy in this Agreement or in any writing furnished or to be furnished pursuant hereto, contains or will contain any untrue statement of a material fact, or omits, or will omit to state any material fact required to make the statements herein or therein contained not misleading. (kk)          Reliance.  The foregoing representations and warranties are made by Rudy with the knowledge and expectation that Marshall and the Subsidiary are placing complete reliance thereon. 12.            Representations and Warranties of Marshall.  Where a representation contained in this Agreement is qualified by the phrase “to the best knowledge of Marshall” (or words of similar import), such expression means that, after having conducted a due diligence review, Marshall believes the statement to be true, accurate, and complete in all material respects.  Knowledge shall not be imputed nor shall it include any matters which such person should have known or should have been reasonably expected to have known.  Marshall hereby represents and warrants to Rudy as follows:   8   (a)            Power and Authority.  Marshall and the Subsidiary have full power and authority to execute, deliver and perform this Agreement and the Other Agreements. (b)            Binding Effect.  Upon execution and delivery by Marshall and the Subsidiary, this Agreement and the Other Agreements shall be and constitute the valid, binding and legal obligations of Marshall and the Subsidiary enforceable against them in accordance with the terms hereof or thereof, except as the enforceability hereof and thereof may be subject to the effect of (i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally, and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c)            No Consents.  No consent, approval or authorization of, or prior to the Effective Date, be obtained or made by Marshall and the Subsidiary prior to the Effective Date to authorize the execution, delivery and performance by Marshall and the Subsidiary of this Agreement or the Other Agreements. (d)            Access to Records.  Marshall shall afford Rudy and its attorneys, accountants, investment bankers and other representatives access, during normal business, to all of its business operations, properties, books, files, and records, and will cooperate in their examination thereof.  No such examination, however, shall constitute a waiver or relinquishment by Rudy of its right to rely upon covenants, representations, and warranties of Marshall and the Subsidiary made herein or pursuant hereto.  Until the Effective Date or the termination of this Agreement, whichever shall occur first, and after the termination of this Agreement in the event this Agreement does not close, Rudy will hold in confidence all information so obtained by Rudy as a result of such examination. (e)            Financial Statement.  Marshall has furnished Rudy by means of the SEC Edgar web site containing Marshall’s SEC Filings an audited consolidated balance sheet of Marshall as of June 30, 2008, and the related consolidated statement of income and retained earnings for the period covered thereby (the “Marshall Financial Statement”).  The Marshall Financial Statement (i) is in accordance with the books and records of Marshall; (ii) fairly presents the financial condition of Marshall at such date and the results of its operations for the period therein specified; (iii) was prepared in accordance with generally accepted accounting principles applied upon a basis consistent with prior accounting periods; and (iv) with respect to all contracts and commitments of Marshall, reflects adequate reserves for all reasonably anticipated losses and costs in excess of anticipated income.  Specifically, but not by way of limitation, the Marshall Financial Statement discloses all of the debts, liabilities, and obligations of any nature (whether absolute, accrued, contingent, or otherwise and whether due or to become due) of Marshall on the dates therein specified (except such debts, liabilities, and obligations as are not required to be reflected therein in accordance with generally accepted accounting principles). (f)             Litigation.  Other than as reflected on the SEC Edgar web site containing Marshall’s SEC Filings, Marshall has disclosed all litigation, arbitrations, claims, governmental or other proceedings (formal or informal), or investigations pending, threatened, or in prospect (or any basis therefor known to Marshall) with respect to Marshall, or any of its business, properties, or assets prior to the execution of this Agreement.  Except as reflected on the SEC Edgar web site containing Marshall’s SEC Filings, Marshall is not affected by any present or threatened strike or other labor disturbance or, to the best knowledge of Marshall, is any union attempting to represent any employee of Marshall as collective bargaining agent.  Marshall is not in material violation of, or in material default with respect to, any law, rule, regulation, order, judgment, or decree; nor is Marshall required to take any action in order to avoid such a violation or default. (g)            Compliance with Laws and Regulations.  Except as otherwise disclosed on the SEC Edgar web site containing Marshall’s SEC Filings, to the best knowledge of Marshall, Marshall is in material compliance, with all laws, ordinances, codes, restrictions, regulations (environmental and otherwise) and other legal requirements applicable to the conduct of its business, the noncompliance with which would be likely to have a material adverse effect on its business; and there are no lawsuits or proceedings pending or, to its best knowledge, threatened with respect to the foregoing. (h)            Absence of Certain Changes or Events.  Except as otherwise disclosed on the SEC Edgar web site containing Marshall’s SEC Filings, since June 30, 2008, there has not been any change in or any event or condition (financial or otherwise) affecting the property, assets (including cash and all accounts receivable), liabilities, operations, or prospects of Marshall, other than changes in the ordinary course of its business, none of which has (either when taken by itself or taken in conjunction with all other such changes) been materially adverse.   9   (i)             Representations and Warranties of True and Complete.  All representations and warranties of Marshall and the Subsidiary in this Agreement and the Other Agreements are true, accurate and complete in all material respects as of the Effective Date. (j)             No Knowledge of Default.  Marshall and the Subsidiary have no knowledge that any of the representations and warranties of Rudy contained in this Agreement or the Other Agreements are untrue, inaccurate or incomplete in any respect or that Rudy are in default under any term or provision of this (k)            No Untrue Statements.  No representation or warranty by Marshall and the Subsidiary in this Agreement or in any writing furnished or to be furnished pursuant hereto, contains or will contain any untrue statement of a material fact, or omits, or will omit to state any material fact required to make the statements herein or therein contained not misleading. (l)             Reliance.  The foregoing representations and warranties are made by Marshall and the Subsidiary with the knowledge and expectation that Rudy is 13.            Actions of Rudy Pending the Effective Date.  Rudy agrees that from the date hereof until the Effective Date: (a)            Operations.  Rudy will use its best efforts to cause Rudy to (i) be operated in keeping with its customary practices and in compliance with all applicable laws, rules and regulations; and (ii) not engage in any transaction or make any commitment or expenditure. (b)            No Change in Corporate Charter.  No change will be made in the Articles of Incorporation or Bylaws of Rudy, except as may be first approved in writing by Marshall. (c)            No Change in Compensation.  No increase will be made in the compensation payable to or to become payable by Rudy to any officer, employee, or agent, nor will any bonus payment or arrangement be made by Rudy to or with any officer, employee, or agent thereof, except as may be first approved in writing by Marshall. (d)            No Default.  Rudy shall timely pay and/or not suffer any default with respect to any of its contracts, commitments or obligations.  Rudy shall also continue to pay as they become due all accounts payable of Rudy. (e)            No Contracts.  No contract or commitment will be entered into by or on behalf of Rudy, except as may be first approved in writing by Marshall. (f)             Banking Relations.  No change will be made affecting the banking and safe deposit arrangements of Rudy, except as may be first approved in writing by Marshall. (g)            Insurance.  Rudy shall keep all of its property and assets covered hereby insured in accordance with the present practice, and maintain, preserve and keep all improvements on its properties, all equipment, machinery and other personal property covered hereby in reasonably good condition and state of repair, reasonable wear excepted. (h)            No Liabilities.  Rudy shall not issue nor sell any of its stock, bonds, notes, or other corporate securities, nor incur any obligation or liability except current liabilities incurred in the ordinary course of business, nor mortgage, pledge, grant security interests covering, or additionally subject to lien or encumbrance any of its properties except as may be first approved in writing by Marshall.   10   (i)             Reduction of Assets.  Rudy shall not reduce any of its assets from what is reflected on the Schedule of Assets to be furnished to Marshall as described in Paragraph 11(y) hereof. (j)             Access to Records.  Rudy shall afford Marshall and the Subsidiary and their attorneys, accountants, investment bankers and other representatives access, during normal business, to all of its business operations, properties, books, files, and records, and will cooperate in their examination thereof.  No such examination, however, shall constitute a waiver or relinquishment by Marshall and the Subsidiary of their right to rely upon covenants, representations, and warranties of Rudy made herein or pursuant hereto.  Until the Effective Date or the termination of this Agreement, whichever shall occur first, and after the termination of this Agreement in the event this Agreement does not close, Marshall and the Subsidiary will hold in confidence all information so obtained by Marshall and the Subsidiary as a result of such examination. 14.            Conditions Precedent to Obligations of Marshall and the Subsidiary.  All obligations of Marshall and the Subsidiary under this Agreement are subject to the fulfillment, prior to or at the Effective Date, of the following conditions which must be satisfied as herein specified.  In connection with any item to be furnished by Rudy prior to the Effective Date to Marshall under this Paragraph 14, each such item shall be furnished within five days from the date hereof, and Marshall, as well as the counsel of Marshall, must be reasonably satisfied with any such item within 10 days after receipt of any such item.  If Marshall, or the counsel of Marshall, is not reasonably satisfied within 10 days after receipt of any such item to be furnished under this Paragraph 14, then Marshall may, at its sole option, declare that this Agreement is null and void, whereupon no party shall have any liability to the other hereunder or in connection with any other instrument executed in connection with the transactions contemplated herein.  As used herein, the term “reasonably satisfied” shall mean that if any item furnished under this Paragraph 14 is not at material variance with information previously furnished to Marshall or if such item is as specified in this Paragraph 14, then the conditions of this Paragraph 14 shall be deemed to have been satisfied.  Such conditions are as follows: (a)            Representations and Warranties True at the Effective Date.  The representations and warranties of Rudy herein shall be deemed to have been made again as of the Effective Date, and then be true and correct, subject to any changes contemplated by this Agreement.  Rudy shall have performed all of the obligations to be performed by it hereunder on or prior to the Effective Date. (b)            Proof of Authority.  Marshall’s counsel shall have received evidence reasonably sufficient to such counsel that Rudy has all requisite authorizations necessary for consummation by Rudy of the transactions contemplated hereby, and there has not been issued, and there is not in effect, any injunction or similar legal order prohibiting or restraining consummation of any of the transactions herein contemplated, and no legal or governmental action, proceeding or investigation which might reasonably be expected to result in any such injunction or order is pending. (c)            Form 15 Filing.  Proof of the filing and effectiveness of a Form 15 filed by Rudy with the SEC containing a Certification and Notice of of 1934, as amended, with respect to the Rudy Common Stock. (d)            Deliveries at the Effective Date.  Rudy shall have delivered to Marshall and the Subsidiary at the Effective Date all of the documents required to be delivered hereunder. (e)            Inventory.  Rudy shall take a physical inventory for each item on the perpetual inventory system of Rudy in order to determine the value of each item in the books and records of Rudy and that each item so priced has a realizable value equal to the amount so recorded for each such item.  The manner of pricing each item of the inventory shall be by using the current cost, if available, and if not, then by using the current manufacturer's regular cost sheets made available to distributors.  Provided, however, any broken, damaged, incomplete or obsolete items and items not then listed in the cost or the purposes of determining the value of the inventory.  Marshall, or any of its representatives, shall have the right to observe the taking of such inventory and to test the results thereof.  Upon completion of such inventory, a schedule of inventory results will be prepared by the Chief Financial Officer of Rudy and delivered to Marshall.  If such inventory is not satisfactory to Marshall, then Marshall shall have the option to terminate this Agreement pursuant to the terms of this Paragraph 14.   11   (f)             Form 10-Q.  Marshall shall have received a copy of Rudy’s Form 10-Q for the quarterly period ended September 30, 2008. (g)            Compensation Paid by Rudy.  Rudy shall have delivered to Marshall a true and complete list as of the date of this Agreement, certified by the Treasurer of Rudy, showing (i) the names of all persons whose compensation from Rudy for the fiscal year ending June 30, 2008, equaled or exceeded $5,000 per month, together with a statement of the full amount paid or payable to any such person for services rendered or to be rendered to Rudy for the period ending June 30, 2008, and the basis therefor; (ii) the name of each bank in which Rudy has an account, or safe deposit box, and the names of all persons authorized to draw thereon, or have access thereto. (h)            Environmental Matters.  Before the Effective Date, Marshall shall have access to the properties of Rudy and the Business to perform the environmental studies that it deems reasonably necessary.  In the event that Marshall shall not be reasonably satisfied with any such environmental studies, Rudy shall have the right, but not the obligation, to remedy any condition noted by Marshall within a reasonable time after written notice from Marshall.  If such noted condition has not been corrected by the Effective Date, Marshall shall have the option to terminate this Agreement, whereupon no party shall have any liability to any other party hereunder or in connection with any other instrument executed in relation to the transactions contemplated herein. (i)             Certificates of Good Standing.  Rudy shall have delivered to Marshall certificates or telegrams issued by appropriate governmental authorities evidencing the good standing of Rudy as of a date not more than 10 days prior to the Effective Date, in the State of Nevada and in each state where Rudy is qualified to do business. (j)             Resolutions.  Marshall’s counsel shall have received certified resolutions of the Board of Directors of Rudy and the Rudy Stockholders pursuant to which this Agreement and the transactions contemplated hereby were duly and validly approved, adopted and ratified by the Board of Directors of Rudy and the Rudy Stockholders, all in form and content satisfactory to such counsel, authorizing (i) the execution, delivery and performance of this Agreement, (ii) transactions contemplated hereby and thereby, and (iii) all actions to be taken by Rudy hereunder. (k)            Opinion of Counsel.  Rudy shall have delivered at the Effective Date to Marshall an opinion of its counsel dated as of date of the Effective Date in form and substance reasonably satisfactory to Marshall and its counsel, to the effect that (i) Rudy is a duly and validly organized and existing corporation in good standing under the laws of the State of Nevada, and in each state where Rudy may be qualified as a foreign corporation, with full corporate power to carry on the business in which it is engaged; (ii) the performance of this Agreement and the consummation of the transactions contemplated herein will not result in any breach or violation of any terms or provisions of or cause a default under the Articles of Incorporation or Bylaws of Rudy or, to Rudy’s said counsel best knowledge and belief any order, rule, or regulation of any court, governmental agency or body having jurisdiction over Rudy, or any of its activities, properties, any statute, indenture, mortgage, deed of trust, lease, loan agreement, security agreement, or other agreement or instrument known to said counsel, to which Rudy is a party or by which it is bound or to which any of its property is subject; (iii) no provision of the Articles of Incorporation, Bylaws, minutes or share certificates of Rudy or, to Rudy’s said counsel’s best knowledge and belief, any contract to which Rudy is a party or otherwise bound or affected, prevents the Rudy Stockholders from delivering good, absolute, and marketable title to the Rudy Common Stock to Marshall as contemplated by this Agreement; (iv) Rudy is authorized by its Articles of Incorporation to issue 400,000,000 shares of the Rudy Preferred Stock and 5,000,000,000 shares of the Rudy Common Stock; (v) that as of the date of this Agreement, there were 126,614,995 shares of the Rudy Preferred Stock and 2,221,817,606 shares of the Rudy Common Stock duly and validly issued and outstanding, fully paid, and non-assessable; (vi) before the Effective Date, all shares of the Rudy Preferred Stock were converted into shares of the Rudy Common Stock, and the Rudy Common Stock was reverse split into 667,314 shares, whereupon there are 127,282,309 shares of the Rudy Common Stock duly and validly issued and outstanding, fully paid, and non-assessable held by 67 Rudy Stockholders of which no more than 35 will be “unaccredited investors” after referencing the term “accredited investor” as defined in the Securities Act, and subject to the terms of the Merger as of the Effective Date; (vii) to the best knowledge and belief of such counsel the issuance and sale of the Rudy Preferred Stock and the Rudy Common Stock did not violate the Securities Act, or the rules and regulations of the SEC thereunder, or applicable state securities or Blue Sky Laws, and that Rudy has no other authorized or outstanding series or class of capital stock or other securities; and (viii) such counsel has no knowledge of any litigation, proceeding, or governmental investigation or labor dispute pending or threatened against or relating to Rudy, its properties or businesses, except as set forth herein or in said opinion.   12   (l)             Status of Litigation.  With respect to any matters affecting Rudy and in litigation as described in Schedule 11(m) attached hereto, Marshall shall have the right to make an independent review of such matters.  If Marshall is not satisfied with such review, then Marshall shall have the option to terminate this Agreement pursuant to the terms of this Paragraph 14. (m)           Tax Returns.  Rudy shall have delivered to Marshall copies of all federal and state tax returns for Rudy, including but not limited to all income, payroll, sales, excise, use and franchise tax returns for Rudy, together with any audit reports issued in connection with any such returns. (n)            Corporate Records, etc.  Rudy shall have delivered to Marshall copies of the Articles of Incorporation, Bylaws, minute books, and other corporate governance materials used since the inception of Rudy. (o)            Certification.  Rudy shall have delivered to Marshall at the Effective Date a certificate dated as of the Effective Date, executed by Rudy, certifying that the conditions specified in this Paragraph 14 have been fulfilled. (p)            Other Matters.  All corporate and other proceedings and actions taken in connection with the transactions contemplated hereby and all certificates, opinions, agreements, instruments and documents mentioned herein or incident to any such transaction shall be satisfactory in form and substance to Marshall and its counsel, whose approval shall not be unreasonably withheld. 15.            Conditions Precedent to Obligations of Rudy.  All obligations of Rudy under this Agreement are subject to the fulfillment, prior to or at the Effective Date, of the following conditions: (a)            Representations and Warranties True at Effective Date.  The representations and warranties of Marshall and the Subsidiary herein shall be deemed to have been made again at the Effective Date, and then be true and correct, subject to any changes contemplated by this Agreement.  Marshall and the Subsidiary shall have performed all of the obligations to be performed by Marshall and the Subsidiary hereunder on or prior to the Effective Date. (b)            Proof of Authority.  Counsel for Rudy shall have received evidence reasonably sufficient to such counsel that Marshall and the Subsidiary have all requisite authorizations necessary for consummation by Marshall and the Subsidiary of the transactions contemplated hereby, and there has not been issued, and there is not in effect, any injunction or similar legal order prohibiting or restraining consummation of any of the transactions herein contemplated, and no legal or governmental action, proceeding or investigation that might reasonably be expected to result in any such injunction or order is pending. (c)            Form 10-Q.  Rudy shall have received a copy of Marshall’s Form (d)            Opinion of Counsel.  Marshall shall have delivered at the Effective Date to Rudy an opinion of their counsel dated as of date of the Effective Date in form and substance satisfactory to Rudy and their counsel, to the effect that (i) each of Marshall and the Subsidiary is a duly and validly organized and existing corporation in good standing under the laws of the state of its organization, with full corporate power to carry on the business in which it is engaged; (ii) the performance of this Agreement and the consummation of the transactions contemplated herein will not result in any breach or violation of any terms or provisions of or cause a default under the Articles of Incorporation, as amended, or Bylaws, as amended, of Marshall and the Subsidiary or, to said counsel’s best knowledge and belief, any order, rule, or regulation of any court, governmental agency or body having jurisdiction over Marshall or the Subsidiary or any of its activities, properties, any statute, indenture, mortgage, deed of trust, lease, loan agreement, security agreement, or other agreement or instrument known to said counsel, to which it is a party or by which it is bound or to which any of its property is subject; (iii) no provision of the Articles of Incorporation, as amended, Bylaws, as amended, minutes or share certificates of Marshall or the Subsidiary or, to its said counsel’s best knowledge and belief, any contract to which it is a party or otherwise bound or affected, prevents Marshall and the Subsidiary from performing their obligations as contemplated by this Agreement; and (iv) to the best knowledge and belief of such counsel the issuance and sale of the Marshall Common did not violate the Securities Act, or the rules and regulations of the SEC thereunder, or applicable state securities or Blue Sky Laws.   13   (e)            No Orders.  There has not been issued, and there is not in effect, any injunction or similar legal order prohibiting or restraining consummation of any of the transactions herein contemplated, and no legal or governmental action, proceeding or investigation which might reasonably be expected to result in any such injunction or order is pending. (f)             Other Matters.  All corporate and other proceedings and actions to Rudy and its counsel, whose approval shall not be unreasonably withheld. 16.            The Nature and Survival of Representations, Covenants and Warranties.  All statements and facts contained in any memorandum, certificate, instrument, or other document delivered by or on behalf of the parties hereto for information or reliance pursuant to this Agreement, shall be deemed representations, covenants and warranties by the parties hereto under this Agreement.  All representations, covenants and warranties of the parties shall survive the Effective Date and all inspections, examinations, or audits on behalf of the parties, shall expire 18 months following the Effective Date. 17.            Records of Rudy.  For a period of five years following the Effective Date, the books of account and records of Rudy pertaining to all periods prior to the Effective Date shall be available for inspection by the Rudy Stockholders for use in connection with tax audits. 18.            Destruction of Property.  If, on or before the Effective Date, any substantial portion of the fixed assets of Rudy shall suffer a loss of fire, flood, tornado, hurricane, riot, accident or other calamity, whether or not insured, to such an extent that in the opinion of Marshall there will be such a delay in repairing or replacing said assets so as to materially affect the future operations of Rudy, then Marshall may, at its sole option, terminate this Agreement without cost, expense, or liability to either party. 19.            Default by Marshall or the Subsidiary.  If Rudy does not default hereunder and either of Marshall or the Subsidiary defaults hereunder, Rudy may elect to terminate this Agreement as well as any other agreement executed by Rudy in connection with the transactions contemplated by this Agreement, including but not limited to any independent nondisclosure agreement or any other independent agreements, whereupon no party shall be liable to the others hereunder, or Rudy may assert any remedy, including specific performance, which Rudy may have by reason of any such default.  From and after the Effective Date, subject to the terms and provisions hereof, in the event of a breach by any party of the terms of this Agreement or any obligation of a party which survives the Effective Date, the non-defaulting party may assert any remedy, either at law or in equity to which such non-defaulting party may be entitled. 20.            Default by Rudy.  If Marshall and the Subsidiary do not default hereunder and Rudy defaults hereunder, Marshall may elect to terminate this Agreement as well as any other agreement executed by Marshall and the Subsidiary in connection with the transactions contemplated by this Agreement, including but not limited to any independent nondisclosure agreement or any other independent agreements, whereupon no party shall be liable to the others hereunder, or Marshall and the Subsidiary may assert any remedy, including specific performance, which Marshall and the Subsidiary may have by reason of any such default of Rudy.  From and after the Effective Date, subject to the terms and provisions hereof, in the event of a breach by any party of the terms of this Agreement or any obligation of a party which survives the Effective Date, the non-defaulting party may assert any remedy, either at law or in equity, to which such non-defaulting party may be entitled. 21.            Termination.  In the event of the termination of this Agreement prior to the Effective Date, no party shall have any obligation to any other in connection herewith or in connection with any other documents which may have been executed by any party with respect to the transactions contemplated by this Agreement whether or not such documents are described herein.   14   22.            Cooperation.  The parties hereto will each cooperate with the other, at the other’s request and expense, in furnishing information, testimony, and other assistance in connection with any actions, proceedings, arrangements, disputes with other persons or governmental inquiries or investigations involving the parties hereto or the transactions contemplated hereby. 23.            Further Conveyances and Assurances.  After the Effective Date, Rudy, Marshall, and the Subsidiary each, will, without further cost or expense to, or consideration of any nature from the other, execute and deliver, or cause to be executed and delivered, to the other, such additional documentation and instruments of transfer and conveyance, and will take such other and further actions, as the other may reasonably request as more completely to consummate 24.            Effective Date.  The Effective Date of the Merger contemplated hereunder shall be on or before December 15, 2008, subject to acceleration or postponement from time to time as the parties hereto may mutually agree.  The closing of the Merger shall be at 122 Ocean Park Boulevard, Suite 411, Santa Monica, California 90405 at 10:00 a.m. California time on the Effective Date, unless another hour or place is mutually agreed upon by the parties hereto, at which time Articles of Merger for the Subsidiary and Rudy shall be filed with the State of Nevada as described herein 25.            Deliveries on the Effective Date by Rudy.  Following the filing of Articles of Merger for the Subsidiary and Rudy as described herein, on the Effective Date: (a)            Rudy shall deliver to the Subsidiary certificates representing 127,282,309 shares of the Rudy Common Stock, duly endorsed by the Rudy Stockholders, free and clear of all liens, claims, encumbrances, and restrictions of every kind except for those imposed by applicable securities laws. (b)            Each of the Rudy Stockholders shall deliver to Marshall the Subscription Agreement in the form described in Exhibit A. (c)            Rudy shall deliver the certificate of its Chief Financial Officer as described in Paragraph 11(z) hereof. (d)            Rudy shall deliver the proof of authority as described in Paragraph 14(b) hereof. (e)            Rudy shall deliver the proof of the effectiveness of the Form 15 containing a Certification and Notice of Termination of Registration under Section 12(g) of the Securities Exchange Act of 1934, as amended, as described in Paragraph 14(c) hereof. (f)             Rudy shall deliver the schedule of inventory as described in Paragraph 14(e) hereof. (g)            Rudy shall deliver a copy of Rudy’s Form 10-Q for the quarterly period ended September 30, 2008 as described in Paragraph 14(f) hereof. (h)            Rudy shall deliver the Schedule of Compensation as described in Paragraph 14(g) hereof. (i)             Rudy shall deliver the certificates of good standing as described in Paragraph 14(i) hereof. (j)             Rudy shall deliver copies of the resolutions as described in Paragraph 14(j) hereof. (k)            Rudy shall deliver the opinion of counsel as described in Paragraph 14(k) hereof. (l)             Rudy shall deliver the tax returns as described in Paragraph 14(m) hereof.   15   (m)           Rudy shall deliver the corporate records as described in Paragraph 14(n) hereof. (n)            Rudy shall deliver the certificate as described in Paragraph 14(o) hereof. (o)            Rudy shall deliver any other document which may be necessary to carry out the intent of this Agreement. All documents reflecting any actions taken, received or delivered by Rudy pursuant to this Paragraph 25 shall be reasonably satisfactory in form and substance to Marshall and the Subsidiary and their counsel. 26.            Deliveries on the Effective Date by Marshall.  Following the filing of Articles of Merger for the Subsidiary and Rudy as described herein, on the Effective Date, Marshall shall deliver the following: (a)            To the Rudy Stockholders, 10,000,000 shares of the Marshall Common Stock free and clear of all liens, claims, encumbrances, and restrictions of every kind, except those restrictions imposed by applicable securities laws or this Agreement. (b)            To Rudy, the proof of authority as described in Paragraph 15(b) hereof. (c)            To Rudy, a copy of Marshall’s Form 10-Q for the quarterly period ended September 30, 2008 as described in Paragraph 15(c) hereof. (d)            To Rudy, the opinion of counsel as described in Paragraph 15(d) hereof. (e)            To Rudy, any other document which may be necessary to carry out the intent of this Agreement. All documents reflecting any actions taken, received or delivered by Marshall pursuant to this Paragraph 26 shall be reasonably satisfactory in form and substance to Rudy and its counsel. party without the prior written consent of the other parties, which consent shall be subject to such party’s sole, absolute and unfettered discretion. 28.            Brokerage.  The parties hereto agree to indemnify and hold harmless each other against, and in respect of, any claim for brokerage or other commissions relative to this Agreement, or the transactions contemplated hereby, based in any way on agreements, arrangements, understandings or contracts made by either party with a third party or parties whatsoever. 29.            Mediation and Arbitration.  All disputes arising or related to this Agreement must exclusively be resolved first by mediation with a mediator selected by the parties, with such mediation to be held in Irvine, California.  If such mediation fails, then any such dispute shall be resolved by binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association in effect at the time the arbitration proceeding commences, except that (a) California law and the Federal Arbitration Act must govern construction and effect, (b) the locale of any arbitration must be in Irvine, California, and (c) the arbitrator must with the award provide written findings of fact and conclusions of law.  Any party may seek from a court of competent jurisdiction any provisional remedy that may be necessary to protect its rights or assets pending the selection of the arbitrator or the arbitrator’s determination of the merits of the controversy.  The exercise of such arbitration rights by any party will not preclude the exercise of any self-help remedies (including without limitation, setoff rights) or the exercise of any non-judicial foreclosure rights.  An arbitration award may be entered in any court having jurisdiction. 30.            Attorneys’ Fees.  In the event that it should become necessary for any party entitled hereunder to bring suit against any other party to this Agreement for a breach of this Agreement, the parties hereby covenant and agree that the party who is found to be in breach of this Agreement shall also be liable for all reasonable attorneys’ fees and costs of court incurred by the other parties.  Provided, however, in the event that there has been no breach of this Agreement, whether or not the transactions contemplated hereby are consummated, each party shall bear its own costs and expenses (including any fees or disbursements of its counsel, accountants, brokers, investment bankers, and finder’s fees).   16     31.            Benefit.  All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto, and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns. 32.            Notices.  All notices, requests, demands, and other communications hereunder shall be in writing and delivered personally or sent by registered or certified United States mail, return receipt requested with postage prepaid, or by telecopy or e-mail, if to Rudy, addressed to Mr. Daniel E. (“Rudy”) Ruettiger at P.O. Box 93507, Las Vegas, Nevada 89118, telephone (866) 783-9738, telecopier (702) 948-7215, and e-mail nd45@rudyinternational.com, with a copy to Kevin J. Quinn, Esq. at Quinn & Associates, 122 Ocean Park Boulevard, Suite 411, Santa Monica, California 90405, telephone (310) 392-8865, telecopier (310) 399-3444, and email goirish@kquinn.net, with an additional copy to David J. Levenson, Esq., 7947 Turncrest Drive, Potomac, Maryland 20854, telephone (301) 299-8092, telecopier (301) 299-8093, and email levensonfam@msn.com; and if to Marshall and the Subsidiary, addressed to Mr. Elwood Sprenger at 2750 West Brooks Avenue, Suite 103, North Las Vegas, Nevada 89032, telephone (702) 289-4387, telecopier (702) 442-7756, and e-mail zoobles@earthlink.net, with a copy to Norman T. Reynolds, Esq., Glast, Phillips & Murray, P.C., 815 Walker Street, Suite 1250, Houston, Texas, telephone (713) 237-3135, telecopier (713) 237-3202, and e-mail nreynolds@gpm-law.com.  Any party hereto may change its address upon 10 days’ written notice to any other party hereto. 33.            Construction.  Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise. 34.            Waiver.  No course of dealing on the part of any party hereto or its agents, or any failure or delay by any such party with respect to exercising any right, power or privilege of such party under this Agreement or any instrument referred to herein shall operate as a waiver thereof, and any single or partial exercise of any such right, power or privilege shall not preclude any later exercise thereof or any exercise of any other right, power or privilege hereunder or thereunder. 35.            Cumulative Rights.  The rights and remedies of any party under this Agreement and the instruments executed or to be executed in connection herewith, or any of them, shall be cumulative and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any other right or remedy. 36.            Invalidity.  In the event any one or more of the provisions contained in this Agreement or in any instrument referred to herein or executed in connection herewith shall, for any reason, be held to be invalid, illegal or shall not affect the other provisions of this Agreement or any such other instrument. 37.            Time of the Essence.  Time is of the essence of this Agreement. 38.            Incorporation by Reference.  The Exhibits and Schedules to this Agreement referred to or included herein constitute integral parts to this Agreement and are incorporated into this Agreement by this reference. 39.            Multiple Counterparts.  This Agreement may be executed in one or together shall constitute one and the same instrument.  A facsimile transmission or PDF of this signed Agreement shall be legal and binding on all parties hereto. 40.            Controlling Agreement.  In the event of any conflict between the terms of this Agreement or any of the Other Agreements or exhibits referred to herein, the terms of this Agreement shall control. 41.            Law Governing; Jurisdiction.  This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to any conflicts of laws provisions thereof.  Each party hereby irrevocably submits to the personal jurisdiction of the United States District Court for Orange County, California, as well as of the Superior Courts of the State of California in Orange County, California over any suit, action or proceeding arising out of or relating to this Agreement.  Each party hereby it may now or hereafter have to the laying of the venue of any such mediation, arbitration, suit, action or proceeding brought in any such county and any claim that any such mediation, arbitration, suit, action or proceeding brought in such county has been brought in an inconvenient forum.   17   42.            Entire Agreement.  This instrument and the attachments hereto contain the entire understanding of the parties and may not be changed orally, but only by an instrument in writing signed by the party against whom sought. IN WITNESS WHEREOF, the parties have executed this Plan of Merger on November ___, 2008.   MARSHALL HOLDINGS INTERNATIONAL, INC.                     By       Elwood Sprenger, Chief Executive Officer                             By               RUDY NUTRITION                     By       Daniel E. (“Rudy”) Ruettiger, President Attachments: Exhibit A Subscription Agreement Exhibit B Articles of Incorporation of Marshall Acquisition Company, Inc. Exhibit C Bylaws of Marshall Acquisition Company, Inc. Schedule 11(c) Violations under Documents Schedule 11(g) Qualification in Foreign States Schedule 11(k) Changes in Financial Statements Schedule 11(l) Tax Returns Status Schedule 11(m) Litigation Schedule 11(n) Compliance with Laws and Regulations Schedule 11(o) Defaults Schedule 11(p) Permits and Approvals Schedule 11(q) Exceptions to Title Schedule 11(r) Patents and Trademarks Schedule 11(s) Compliance with Environmental Laws Schedule 11(t) Changes or Events Schedule 11(v) Schedule of Insurance Policies Schedule 11(w) Compensation of Officers and Others Schedule 11(x) Inventory Schedule 11(y) Schedule of Assets   18   Schedule 11(aa) Labor Matters Schedule 11(bb) Employment Contracts Schedule 11(dd) Contracts   19     EXHIBIT A SUBSCRIPTION AGREEMENT     SUBSCRIPTION AGREEMENT   Marshall Holdings International, Inc. 2750 West Brooks Avenue, Suite 103 North Las Vegas, Nevada 89032     Re: Offering of Common Stock Pursuant to a Plan of Merger   Gentlemen:   1.             Subscription.  The undersigned Rudy Stockholder hereby applies to accept shares of the common stock, par value $0.001 per share (the “Marshall Common Stock”) of Marshall Holdings International, Inc., a Nevada corporation (the “Company”) indicated below in accordance with the terms of this Subscription Agreement and the private placement relating to that certain Plan and Agreement of Triangular Merger between Marshall Holdings International, Inc., Marshall Acquisition Company, Inc. and Rudy Nutrition dated November ___, 2008 (the “Plan of Merger”).  The undersigned Rudy Stockholder is a stockholder of Rudy Nutrition, a Nevada corporation, and pursuant to the Plan of Merger and the Merger between Marshall Acquisition Company, Inc. and Rudy Nutrition shall receive _______ shares of the Marshall Common Stock in exchange for all of his ________ shares of common stock in Rudy Nutrition, par value $0.001 per share (the “Rudy Common Stock”).  All capitalized terms which are not otherwise defined herein shall have the meaning ascribed to such terms as defined in the Plan of Merger.   2.     Representations and Warranties of the Rudy Stockholder.  The undersigned Rudy Stockholder represents and warrants as follows:   (a)           The undersigned Rudy Stockholder has received information provided to him in writing by the Company, or information from books and records of the Company, as specified below.  The undersigned Rudy Stockholder understands that all documents, records and books pertaining to this investment have been made available for inspection by him, his attorney and/or his accountant and/or his “Purchaser Representative” as defined in Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and that the books and records of the Company will be available, upon reasonable notice, for inspection by Rudy Stockholders during reasonable business hours at the Company’s principal place of business.  The undersigned Rudy Stockholder and/or his advisers have had a reasonable opportunity to ask questions of and receive answers from the Company, or a person or persons acting on its behalf, concerning the Merger, and all such questions have been answered to the full satisfaction of the undersigned Rudy Stockholder.  No oral representations have been made and, to the extent oral information has been furnished to the undersigned Rudy Stockholder or his advisers in connection with the Merger, such information was consistent with all written information furnished   (b)           Specifically, the undersigned Rudy Stockholder was provided with access to the Company’s filings with the Securities and Exchange Commission, including the following:   (i)            The Company’s annual report to stockholders for the most recent fiscal year, any definitive proxy statement or information statement filed in connection with that annual report, and, if requested by the undersigned Rudy Stockholder in writing, a copy of the Company’s most recent Form 10-K pursuant   (ii)           The information contained in an annual report on Form 10-K   (iii)          The information contained in any reports or documents required to be filed by the Company under Sections 13(a), 14(a), 14(c), and 15(d) of the Exchange Act since the distribution or filing of the reports specified above.   (iv)           A brief description of the securities being offered, the terms of the Merger, and any material changes in the Company’s affairs that are not disclosed in the documents furnished.   1     (c)            The undersigned Rudy Stockholder (i) has adequate means of providing for his current needs and possible personal contingencies, (ii) has no need for liquidity in this investment, (iii) is able to bear the economic risks of an investment in the Marshall Common Stock for an indefinite period, and (iv) at the present time, could afford a complete loss of such investment.   (d)            The undersigned Rudy Stockholder recognizes that the Marshall Common Stock as an investment involves special risks, including those disclosed to the undersigned Rudy Stockholder by the Company.   (e)            The undersigned Rudy Stockholder understands that the shares of the Marshall Common Stock have not been nor will be registered under the Securities Act or the securities laws of any state, in reliance upon an exemption therefrom for non-public offerings.  The undersigned Rudy Stockholder understands that the shares of the Marshall Common Stock received by him must be held indefinitely unless they are subsequently registered or an exemption from such registration is available.  The undersigned Rudy Stockholder further understands that the Company has not agreed and is under no obligation to register the Marshall Common Stock on his behalf or to assist him in complying with any exemption from registration.   (f)            The shares of the Marshall Common Stock are being accepted solely for his own account for investment and not for the account of any other person and not for distribution, assignment, or resale to others and no other person has a direct or indirect beneficial interest in the shares of the Marshall Common Stock.  The undersigned Rudy Stockholder or his advisers have such knowledge and experience in financial, tax, and business matters to enable him to utilize the information made available to him in connection with the Merger to evaluate the merits and risks of the prospective investment and to make an informed investment decision with respect thereto.   (g)           The undersigned Rudy Stockholder, if a corporation, partnership, trust, or other entity, is authorized and otherwise duly qualified to purchase and hold the Marshall Common Stock.   (h)           All information which the undersigned Rudy Stockholder has provided to the Company concerning himself, his financial position, and his knowledge of financial and business matters, or, in the case of a corporation, partnership, trust or other entity, the knowledge of financial and business matters of the person making the investment decision on behalf of such entity, is correct and complete as of the date set forth at the end hereof, and if there should be any adverse change in such information prior to his subscription being accepted, he will immediately provide the Company with such information.   (i)            The undersigned Rudy Stockholder understands and agrees that the following restrictions and limitations are applicable to his purchase and his resales, hypothecations or other transfers of the Marshall Common Stock pursuant to Regulation D under the Securities Act:   (i)            The undersigned Rudy Stockholder agrees that the shares of the Marshall Common Stock shall not be sold, pledged, hypothecated or otherwise transferred unless the shares of the Marshall Common Stock are registered under the Securities Act, and the securities laws of any state or is exempt therefrom;   (ii)           A legend in substantially the following form has been or will be placed on any certificate(s) or other document(s) evidencing the shares of the Marshall Common Stock:   THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE.  WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, THE SECURITIES LAW OF ANY STATE, OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.   2     (iii)          Stop transfer instructions to the transfer agent of the Marshall Common Stock have been or will be placed with respect to the Marshall Common Stock so as to restrict the resale, pledge, hypothecation or other transfer thereof, subject to the further items hereof, including the provisions of the legend set forth in subparagraph (ii) above; and   (iv)           The legend and stop transfer instructions described in subparagraphs (ii) and (iii) above will be placed with respect to any new certificate(s) or other document(s) issued upon presentment by the undersigned Rudy Stockholder of certificate(s) or other document(s) for transfer.   (j)            The undersigned Rudy Stockholder understands that neither the Securities and Exchange Commission nor the securities commission of any state has made any finding or determination relating to the fairness for public investment in the Marshall Common Stock and that the Securities and Exchange Commission as well as the securities commission of any state will not recommend or endorse any offering of securities.   (k)           The undersigned Rudy Stockholder acknowledges and is aware that it never has been represented, guaranteed, or warranted to him by the Company, its directors, officers, agents or employees, or any other person, expressly or by implication, that the limited past performance or experience on the part of the Company, or any future projections will in any way indicate the predictable results of the ownership of the Marshall Common Stock or of the overall financial performance of the Company.   (l)            The undersigned Rudy Stockholder acknowledges that ___________________________ (complete if applicable) has acted as the “Purchaser Representative” as defined in Regulation D promulgated under the Securities Act, and (i) that he can bear the economic risk of this investment; (ii) he has relied upon the advice of the Purchaser Representative as to the merits of an investment in the Company and the suitability of such investment for the undersigned Rudy Stockholder; and (iii) the Purchaser Representative has confirmed to him, in writing, any past, present or future material relationship, actual or contemplated, between the Purchaser Representative or its affiliates and the Company or its affiliates.   (m)           The undersigned Rudy Stockholder acknowledges that the Company has made available to him or the Purchaser Representative, if any, or other personal advisers the opportunity to obtain additional information to verify the accuracy of the information furnished to him and to evaluate the merits and risks of this investment.   (n)            The undersigned Rudy Stockholder confirms that he has consulted with the Purchaser Representative, if any, or other personal advisers and that the Purchaser Representative or other advisers have analyzed the information furnished to him and the documents relating thereto on his behalf and have advised him of the business and financial aspects and consequences of and potential liabilities associated with his investment in the Marshall Common Stock.  The undersigned Rudy Stockholder represents that he has made other risk capital investments or other investments of a speculative nature, and by reason of his business and financial experience and of the business and financial experience of those persons he has retained to advise him with respect to investments of this nature.  In reaching the conclusion that he desires to acquire the Marshall Common Stock, the undersigned Rudy Stockholder has carefully evaluated his financial resources and investments and acknowledges that he is able to bear the economic risks of this investment.   (o)            The undersigned Rudy Stockholder acknowledges that all information made available to him and/or the Purchaser Representative, if any, and/or personal advisers in connection with his investment in the Marshall Common Stock, including the information furnished to him, is and shall remain confidential in all respects and may not be reproduced, distributed or used for any other purpose without the prior written consent of the Company.   (p)            The undersigned Rudy Stockholder is either an “Accredited Investor” (Yes __ or No __) “Unaccredited Investor” (Yes __ or No __) as defined in Rule 501(a) of the Securities Act (signify which).   3.             Indemnification.  The undersigned Rudy Stockholder agrees to indemnify and hold harmless the Company and its affiliates from and against all damages, losses, costs, and expenses (including reasonable attorneys’ fees) which they may incur by reason of the failure of the undersigned Rudy Stockholder to fulfill any of the terms or conditions of this subscription, or by reason of any breach of the representations and warranties made by the undersigned Rudy Stockholder herein, or in any document provided by the undersigned Rudy Stockholder to the Company.   3     4.             Survival.  The foregoing representations, warranties and undertakings are made with the intent that they may be relied upon in determining the undersigned Rudy Stockholder’s suitability as a stockholder in the Company and the undersigned Rudy Stockholder hereby agrees that such representations and warranties shall survive his acceptance of the Marshall Common Stock in connection with the Merger.  The undersigned Rudy Stockholder hereby acknowledges and agrees that he is not entitled to cancel, terminate or revoke this Subscription Agreement, or any agreements hereunder, and that this Subscription Agreement and such agreements shall survive (a) changes in the transactions, documents, and instruments previously furnished to the undersigned Rudy Stockholder which are not materially adverse, and (b) the undersigned Rudy Stockholder’s death or disability.   5.             Incorporation by Reference.  The Plan of Merger and all other agreements or documents referred to or included herein constitute integral parts to this Agreement and are incorporated into this Agreement by this reference.   6.             Notices.  All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the undersigned Rudy Stockholder or to the Company at the respective addresses set forth herein.   7.             Miscellaneous.   (a)           Notwithstanding any of the representations, warranties, acknowledgments, or agreements made herein by the undersigned Rudy Stockholder, the undersigned Rudy Stockholder does not thereby or in any other manner waive any rights granted to the undersigned Rudy Stockholder under federal or state securities laws.   (b)           Words of any gender used in this Subscription Agreement shall be otherwise.   (c)           In the event of any conflict between the terms of this Subscription Agreement or the Plan of Merger, the terms of the Plan of Merger shall control.   (d)           This Subscription Agreement contains the entire understanding of the parties and may not be changed orally, but only by an instrument in writing signed by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought.   (e)           This Subscription Agreement shall be enforced, governed, and construed in all respects in accordance with the laws of the State of California and all obligations hereunder shall be deemed performable in Orange County, California.   IN WITNESS WHEREOF, I have executed this Subscription Agreement as of the ___ day of November, 2008.                 (Signature)               (Print or Type Name)               Social Security Number               Address               Number of Shares of Rudy Common Stock Held         Subscription Accepted this ____ day of November, 2008.                                 By                 4     EXHIBIT B ARTICLES OF INCORPORATION OF MARSHALL ACQUISITION COMPANY, INC., A Nevada corporation       Seal [logo1.jpg] ROSS MILLER Secretary of State 206 North Carson Street Carson City, Nevada 89701-4299 (775) 684 5708 Website: www.nvsos.gov     Articles of Incorporation (PURSUANT TO NRS CHAPTER 78)             USE BLACK INK ONLY - DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY         1. Name of Corporation: Marshall Acquisition Company, Inc.   2. Registered Agent for Service of Process: (check only one box) T Commercial Registered Agent: The Corporation Trust Company of Nevada                                                             Name £ Noncommercial Registered Agent    OR    £ Office or Position with Entity            (name and address below)                                    Name of Noncommercial Registered Agent   OR   Name of Title of Office or Other Position with Entity   6100 Neil Road, Suite 500                                              Reno                                       Nevada  89511 Street Address                                                                City                                                      Zip Code                                                                                                                                            Nevada Mailing Address (if different from street address)    City                                                      Zip Code 3. Authorized Stock: (number of shares corporation is authorized to issue) Number of shares with par value: See attached Article III Par value per share: $ Number of shares without par value: 4. Names and Addresses of the Board of Directors/ Trustees: (each Director/Trustee must be a natural person at least 18 years of age; attach additional page if more than two directors/trustees) 1)   Elwood Sprenger       Name 2750 West Brooks Avenue, Suite 103                         North Las Vegas                  NV        89032 Street Address                                                                City                                        State     Zip Code   2)  Jamie Plante Name Vegas                  NV        89032 Street Address                                                                City                                        State     Zip Code 5. Purpose: (optional; see instructions) The purpose of the corporation shall be: See attached Article II. 6. Name, Address and Signature of Incorporator: (attach additional page if more than one incorporator) Norman T. Reynolds                                                      X /s/ Norman T. Reynolds                                Name                                                                                 Incorporator Signature 815 Walker, Suite 1250                                                   Houston                                TX        77002 Address                                                                           City                                         State    Zip Code 7. Certificate of Acceptance of Appointment of Registered Agent: I hereby accept appointment as Registered Agent for the above named Entity.   X                                                                                                                                                     Authorized Signature of Registered Agent or On Behalf of Registered Agent Entity         Date Nevada Secretary of State NRS 78 Articles This form must be accompanied by appropriate fees. Revised on 7-1-08     CONTINUATION TO ARTICLES OF INCORPORATION OF   ARTICLE II Business   The purpose and nature of the business, objectives, or purposes to be transacted, promoted, or carried on by the Company shall be as follows:   1.           To engage in any lawful activity.   2.           To do all and everything necessary, suitable, and proper to accomplish the foregoing, and to engage in any and every activity and business enterprise which the Company’s board of directors (the “Board of Directors”) may, from time to time, deem reasonably necessary, providing the same shall not be inconsistent with the NRS.   ARTICLE III Capital Stock   1.           Authorized Stock.  The total number of shares of stock which the Company shall have authority to issue is 1,000, par value $0.001 per share (the “Common Stock”).  The Common Stock shall be subject to the express terms of any preferred stock and any series thereof which may hereafter be authorized and issued by the Company (the “Preferred Stock”).  Each share of the Common Stock shall be equal to each other share of the Common Stock.  The holders of shares of the Common Stock shall be entitled to one vote for each such share upon all questions presented to the stockholders.   2.           Voting Rights.  Except as may be provided in these Articles of Incorporation or in a Preferred Stock Designation with respect to the Preferred Stock, or as may be required by applicable law, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of shares of the Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote.  At each election for directors, every stockholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote.  It is expressly prohibited for any stockholder to cumulate his votes in any election of directors.   3.           Denial of Preemptive Rights.  No stockholder of the Company shall, by reason of his holding shares of any class, have any preemptive or preferential right to purchase or subscribe to any shares of any class of the Company, now or hereafter to be authorized, or any notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class, now or hereafter to be authorized, whether or not the issuance of any such shares, or such notes, debentures, bonds or other securities would adversely affect dividend or voting rights of such stockholder, other than such rights, if any, as the Board of Directors in its discretion may fix; and the Board of Directors may issue shares of any class of the Company, or any notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class, without offering any such shares of any class, either in whole or in part, to the existing stockholders of any class.   4.           Record Date.  The Board of Directors may prescribe a period not exceeding 60 days before any meeting of the stockholders during which no transfer of stock on the books of the Company may be made, or may fix, in advance, a record date not more than 60 or less than 10 days before the date of any such meeting as the date as of which stockholders entitled to notice of and to vote at such meetings must be determined.  Only stockholders of record on that date are entitled to notice or to vote at such a meeting.  If a record date is not fixed, the record date is at the close of business on the day before the day on which notice is given or, if notice is waived, at the close of business on the day before the meeting is held.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders applies to an adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting.  The Board of Directors must fix a new record date if the meeting is adjourned to a date more than 60 days later than the date set for the original meeting.   - 1 -   ARTICLE IV Election of Directors   1.           Number.  The business and affairs of the Company shall be conducted and managed by, or under the direction of, the Board of Directors.  The total number of directors constituting the entire Board of Directors shall be fixed and may be altered from time to time by or pursuant to a resolution passed by the stockholders of the Company or the Board of Directors, but shall not be less than one.   2.           Vacancies.  Except as otherwise provided for herein, newly created directorships resulting from any increase in the authorized number of directors, and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause, may be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors.  Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the newly created directorship or for the directorship in which the vacancy occurred, and until such director’s successor shall have been duly elected and qualified, subject to his earlier death, disqualification, resignation or removal.  Subject to the provisions of these Articles of Incorporation, no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.   3.           Removal of Directors.  Except as otherwise provided in any Preferred Stock Designation, any director may be removed from office only by the affirmative vote of the holders of a majority or more of the combined voting power of the then outstanding shares of capital stock of the Company entitled to vote at a meeting of stockholders called for that purpose, voting together as a single class.   ARTICLE V Meetings of Stockholders   Meetings of stockholders of the Company (the “Stockholder Meetings”) may be held within or without the State of Nevada, as the Bylaws of the Company (the “Bylaws”) may provide.  Special Stockholder Meetings may be called only by (a) the Chairman of the Board, (b) the Chief Executive Officer, (c) the President, (d) the Secretary, (e) the Treasurer, (f) the holders of at least 10 percent of all of the shares entitled to vote at the proposed special meeting, or (g) the Board of Directors pursuant to a duly adopted resolution.  Special Stockholder Meetings may not be called by any other person or persons or in any other manner.  Elections of directors need not be by written ballot unless the Bylaws shall so provide.   ARTICLE VI Limitation of Liability   Except as otherwise provided in the NRS, a director or officer of the Company shall not be personally liable to the Company or its stockholders for damages as a result of any act or failure to act in his capacity as a director or officer; provided, however, that this Article shall not eliminate or limit the liability of a director or officer (a) if it is proven that his act or failure to act constituted a breach of his fiduciary duties and such breach involved intentional misconduct, fraud or a knowing violation of law, or (b) under Section 78.300 of the NRS.   If the NRS is amended after the date of filing of these Articles of Incorporation to authorize corporate action further limiting or eliminating the personal liability of a director, then the liability of the directors of the Company shall be limited or eliminated to the fullest extent permitted by the NRS, as so amended, or a similar successor provision.  Any repeal or modification of this Article by the stockholders of the Company or otherwise shall not adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification.   - 2 -   ARTICLE VII Indemnification   1.           Discretionary Indemnification.  (a) The Company may indemnify any criminal, administrative or investigative, except an action by or in the right of the Company, by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (i) is not liable pursuant to Section 78.138 of the NRS; or (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person is liable pursuant to Section 78.138 of the NRS or did not act in good faith and in a interests of the Company, or that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.   (b)          The Company may indemnify any person who was or is a party or is suit by or in the right of the Company to procure a judgment in its favor by the Company, or is or was serving at the request of the Company as a director, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (i) is not liable pursuant to Section 78.138 of the NRS; or (ii) acted in good faith and in a interests of the Company.  Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the courts deem proper.   2.           Determination of Discretionary Indemnification.  Any discretionary indemnification pursuant to Section 1 of this Article VII, unless ordered by a court or advanced pursuant to this Section 2, may be made by the Company only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances.  The determination must be made:   (a)          By the stockholders; or   (b)          By the Board of Directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding; or   (c)          If a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion; or   (d)          If a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.   The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Company as they are incurred in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Company.   - 3 -   3.           Mandatory Indemnification.  To the extent that a director, officer, employee or agent of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 of this Article VII, or in defense of any claim, issue or matter therein, the Company shall indemnify him against expenses, including attorneys’ fees actually and reasonably incurred by him in connection with the defense.   4.           Non-Exclusivity.  The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article VII:   (a)          Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to Section 1 of this Article VII, or for the advancement of expenses made pursuant to Section 2 of this Article VII may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.   (b)          Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of any such person.   5.           Insurance.  The Company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the Company has the authority to indemnify him against such liability expenses.   ARTICLE VIII Amendment of Corporate Documents   1.           Articles of Incorporation.  Whenever any vote of the holders of voting shares of the capital stock of the Company is required by law to amend, alter, repeal or rescind any provision of these Articles of Incorporation, such alteration, amendment, repeal or rescission of any provision of these Articles of Incorporation must be approved by the affirmative vote of the holders of at least a majority of the combined voting power of the then outstanding voting shares of capital stock of the Company, voting together as a single class.   Subject to the provisions hereof, the Company reserves the right at any time, and from time to time, to amend, alter, repeal or rescind any provision contained in these Articles of Incorporation in the manner now or hereafter prescribed by law, and other provisions authorized by the laws of the State of Nevada at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to these Articles of Incorporation in their present form or as hereafter amended are granted subject to the rights reserved in this Article.   2.           Bylaws.  In addition to any affirmative vote required by law, any change of the Bylaws may be adopted either (a) by the affirmative vote of the Board of Directors, or (b) by the stockholders by the affirmative vote of the holders of at least a majority of the combined voting power of the then outstanding voting shares of capital stock of the Company, voting together as a single class.     ARTICLE IX Application of NRS 78.411 to 78.444, Inclusive   These Articles of Incorporation expressly provide that the Company shall not be governed by Sections 78.411 to 78.444 of the NRS, inclusive.   - 4 -   ARTICLE X Existence   The Company is to have perpetual existence.   - 5 -   EXHIBIT C BYLAWS OF A Nevada corporation       BYLAWS OF ARTICLE I Offices   1.1.           Registered Office.  The registered office of Marshall Acquisition Company, Inc. (the “Company”) required by Section 78.035 of the Nevada Revised Statutes or any successor statute (the “NRS”) to be maintained in the State of Nevada shall be the registered office named in the Articles of Incorporation of the Company, as they may be amended or restated from time to time in accordance with the NRS (the “Articles of Incorporation”).   1.2.           Other Offices.  The Company may also have offices at such other places both within and without the State of Nevada as the Board of Directors of the Company (the “Board of Directors”) may determine from time to time or as the business of the Company may require.   ARTICLE II Meetings of Stockholders   2.1.           Place of Meetings.  Meetings of the Company’s stockholders shall be held at such place within or without the State of Nevada as may be designated by the Board of Directors or the officer calling the meeting, or, in the absence of such designation, at the principal office of the Company.   2.2.           Annual Meeting.  An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire or to fill vacancies meeting, shall be held on such date and at such time as the Board of Directors shall fix and set forth in the notice of the meeting, which date shall be within 13 months subsequent to the last annual meeting of stockholders.  At the annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the annual meeting as set forth in Paragraph 2.8 hereof.  Failure to hold the annual meeting at the designated time shall not work a dissolution of the Company.   2.3.           Special Meetings.  Subject to the rights of the holders of any series of the Company’s preferred stock (the “Preferred Stock”), as designated in any resolutions adopted by the Board of Directors and filed with the State of Nevada (a “Preferred Stock Designation”), special meetings of the stockholders may be called at any time only by (a) the Chairman of the Board, (b) the Chief Executive Officer, (c) the President, (d) the holders of at least 10 percent of all of the shares entitled to vote at the proposed special meeting, or (e) the shall so provide.  Upon written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary to fix the date of the meeting to be held not less than 10 nor more than 60 days after the receipt of the request and to give due notice thereof, as required by the NRS.  If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so.   2.4.           Notice of Meeting.  Written or printed notice of all meetings, stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board or Secretary, to each stockholder delivered to a stockholder when deposited in the United States mail addressed to such stockholder at such stockholder’s address as it appears on the stock transfer records of the Company, with postage thereon prepaid.   2.5.           Registered Holders of Shares; Closing of Share Transfer Records; and Record Date.   (a)           Registered Holders as Owners.  Unless otherwise provided under the NRS, the Company may regard the person in whose name any shares are registered in the stock transfer records of the Company at any particular time (including, without limitation, as of a record date fixed pursuant to subparagraph (b) of this Paragraph 2.5) as the owner of such shares at that time for purposes of voting, receiving distributions thereon or notices in respect thereof, transferring such shares, exercising rights of dissent with respect to such shares, entering into agreements with respect to such shares, or giving proxies with respect to such shares; and neither the Company nor any of its officers, directors, employees or agents shall be liable for regarding that person as the owner of such shares at that time for those purposes, regardless of whether that person possesses a certificate for such shares.   1     (b)           Record Date.  For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive a distribution by the Company (other than a distribution involving a purchase or redemption by the Company of any of its own shares) or a share dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than 60 days and, in the case of a meeting of stockholders, not less than 10 days, prior to the date on which the particular action requiring such determination of stockholders is to be taken.  The Board of Directors shall not close the books of the Company against transfers of shares during the whole or any part of such period.   If the Board of Directors does not fix a record date for any meeting of the stockholders, the record date for determining stockholders entitled to notice of or to vote at such meeting shall be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with Paragraph 7.3 of these Bylaws notice is waived, at the close of business on the day next preceding the day on which the meeting is held.   2.6.           Quorum of Stockholders; Adjournment.  Unless otherwise provided in the Articles of Incorporation, a majority of the outstanding shares of capital stock of the Company entitled to vote, present in person or represented by proxy, shall constitute a quorum at any meeting of the stockholders, and the stockholders present at any duly convened meeting may continue to do business until adjournment notwithstanding any withdrawal from the meeting of holders of shares counted in determining the existence of a quorum.  Unless otherwise provided in the Articles of Incorporation or these Bylaws, any meeting of the stockholders may be adjourned from time to time by the chairman of the meeting or the holders of a majority of the issued and outstanding stock, present in person or represented by proxy, whether or not a quorum is present, without notice other than by announcement at the meeting at which such adjournment is taken, and at any such adjourned meeting at which a quorum shall be present any action may be taken that could have been taken at the meeting originally called; provided that if the adjournment is for more than 30 days, or if after the vote at the adjourned meeting.   2.7.           Voting by Stockholders.   (a)           Voting on Matters Other than the Election of Directors.  With respect to any matters as to which no other voting requirement is specified by the NRS, the Articles of Incorporation or these Bylaws, and, subject to the rights of the holders of any series of Preferred Stock to elect directors under specific circumstances, the affirmative vote required for stockholder action shall be that of a majority of the shares present in person or represented by proxy at the meeting (as counted for purposes of determining the existence of a quorum at the meeting).   (b)           Voting in the Election of Directors.  Unless otherwise provided in the Articles of Incorporation or these Bylaws in accordance with the NRS, directors shall be elected by a plurality of the votes cast by the holders of outstanding shares of capital stock of the Company entitled to vote in the election of directors at a meeting of stockholders at which a quorum is present.   (c)           Consents in Lieu of Meeting.  Any action that is required or permitted to be taken by the stockholders of the Company at any annual or special meeting of stockholders may be taken without a meeting if, before or least a majority of the voting power, except that if a different proportion of of written consents is required.  In no instance where action is authorized by written consent need a meeting of stockholders be called or notice given.   2     (d)           Telephone Meetings.  Stockholders may participate in a meeting of stockholders by means of a telephone conference or similar methods of communication by which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this subsection constitutes presence in person at the meeting.   (e)            Other.  The Board of Directors, in its discretion, or the officer of the Company presiding at a meeting of stockholders of the Company, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot.   2.8.           Business to be Conducted at Annual or Special Stockholder Meetings. At any annual or special meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been disclosed in the notice delivered to the stockholders with respect to such meeting.   2.9.           Proxies.  Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy.  Proxies for use at any meeting of stockholders shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting.  All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting who shall decide all questions relating to the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions.   2.10.         Approval or Ratification of Acts or Contracts by Stockholders.  The Board of Directors in its discretion may submit any act or contract for approval or ratification at any annual meeting of the stockholders, or at any special meeting of the stockholders called for the purpose of considering any such act or contract, and any act or contract that shall be approved or be ratified by the vote of the stockholders holding a majority of the issued and outstanding shares of stock of the Company entitled to vote and present in person or by proxy at such meeting (provided that a quorum is present), shall be as valid and as binding upon the Company and upon all the stockholders as if it has been approved or ratified by every stockholder of the Company.   2.11.         Inspectors of Election.  The Company shall, in advance of any meeting of stockholders, appoint one or more inspectors of election, who may be employees of the Company, to act at the meeting or any adjournment thereof and to make a written report thereof.  The Company may designate one or more persons as alternate inspectors to replace any inspector who fails to act.  If no inspector so appointed or designated is able to act at a meeting of stockholders, the chairman or the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.  Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his ability.   The inspector or inspectors so appointed or designated shall: (a) ascertain the number of shares of capital stock of the Company outstanding and the voting power of each such share; (b) determine the shares of capital stock of the Company represented at the meeting and the validity of proxies and ballots; (c) count all votes and ballots; (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and (e) certify their determination of the number of shares of the capital stock of the Company represented at the meeting and such inspectors’ count of all votes and ballots.  Such certification and report shall specify such other information as may be required by law.  In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Company, the inspectors may consider such information as is permitted by applicable law.  No person who is a candidate for an office at an election may serve as an inspector at such election.   3     ARTICLE III Directors   3.1.           Powers, Number, Classification and Tenure.   (a)           The powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, the Board of Directors.  Each director shall hold office for the full term for which such director is elected and until such director’s successor shall have been duly elected and qualified or until his earlier death or resignation or removal in accordance with the Articles of Incorporation or these Bylaws.   (b)           Within the limits specified in the Articles of Incorporation, and subject to the rights of the holders of any series of Preferred Stock to elect directors under specific circumstances, the number of directors that shall constitute the whole Board of Directors shall be fixed by, and may be increased or decreased from time to time by, the affirmative vote of a majority of the stockholders of the Company or a majority of the members at any time constituting the Board of Directors.  Except as provided in the Articles of Incorporation, and subject to the rights of the holders of any series of Preferred Stock to elect directors under specific circumstances, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors.  Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified or until his earlier death, resignation or removal.  No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.   3.2.           Qualifications.  Directors need not be residents of the State of Nevada or stockholders of the Company.   3.3.           Place of Meeting; Order of Business.  Except as otherwise provided by law, meetings of the Board of Directors, regular or special, may be held either within or without the State of Nevada, at whatever place is specified by the person or persons calling the meeting.  In the absence of specific designation, the meetings shall be held at the principal office of the Company.  At all meetings of the Board of Directors, business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board, or in his absence by the President, or by resolution of   3.4.           Regular Meetings.  Regular meetings of the Board of Directors shall be held, in each case, at such hour and on such day as may be fixed by resolution of the Board of Directors, without further notice of such meetings.  The time or place of holding regular meetings of the Board of Directors may be changed by the Chairman of the Board by giving written notice thereof as provided in Paragraph 3.6 hereof.   3.5.           Special Meetings.  Special meetings of the Board of Directors shall be held, whenever called by the Chairman of the Board or by resolution adopted by the Board of Directors, in each case, at such hour and on such day as may be stated in the notice of the meeting.   3.6.           Attendance at and Notice of Meetings.  Written notice of the time and place of, and general nature of the business to be transacted at, all special meetings of the Board of Directors, and written notice of any change in the time or place of holding the regular meetings of the Board of Directors, shall be given to each director personally or by mail or by telegraph, telecopier or similar communication at least one day before the day of the meeting; provided, however, that notice of any meeting need not be given to any director if waived by him in writing, or if he shall be present at such meeting.  Participation in a meeting of the Board of Directors shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.   3.7.           Quorum of and Action by Directors.  A majority of the directors in office shall constitute a quorum of the Board of Directors for the transaction of business; but a lesser number may adjourn from day to day until a quorum is present.  Except as otherwise provided by law or in these Bylaws, all questions shall be decided by the vote of a majority of the directors present at a meeting at which a quorum is present.   4     3.8.           Board and Committee Action Without a Meeting.  Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at a meeting of the Board of Directors or any committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the members of the Board of Directors or such committee, as the case may be, and shall be filed with the Secretary.   3.9.           Board and Committee Telephone Meetings.  Subject to the provisions required or permitted by the NRS for notice of meetings, unless otherwise restricted by the Articles of Incorporation or these Bylaws, members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in and hold a meeting of such Board of Directors or committee by means of conference telephone or similar communications each other, and participation in a meeting pursuant to this Paragraph 3.9 shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.   3.10.         Compensation.  Directors shall receive such compensation for their services as shall be determined by the Board of Directors.   3.11.         Removal.  Except as otherwise provided in any Preferred Stock Designation, any director may be removed from office only by the affirmative vote of the holders of a majority or more of the combined voting power of the then outstanding shares of capital stock of the Company entitled to vote at a meeting of stockholders called for that purpose, voting together as a single class.   3.12.         Committees of the Board of Directors.   (a)           The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members one or more committees, each of which shall be comprised of one or more of its members, and may designate one or more of its members as alternate members of any committee, who may, subject to any limitations by the Board of Directors, replace absent or disqualified members at any meeting of that committee.  Any such committee, to the extent provided in such resolution or in the Articles of Incorporation or these Bylaws, shall have and may exercise all of the authority of the Board of Directors to the extent permitted by the NRS, including, without limitation, the power and authority to declare a dividend, to authorize the issuance of stock or to adopt a plan of merger pursuant to Section 78.125 of the NRS.  Any such committee may authorize the seal of the Company to be affixed to all papers which may require it.  In addition to the above, such committee or committees shall have such other powers and limitations of authority as may be determined from time to time by resolution adopted by the Board of Directors.   (b)           The Board of Directors shall have the power at any time to change the membership of any such committee and to fill vacancies in it.  A majority of the number of members of any such committee shall constitute a quorum for the transaction of business unless a greater number is required by a resolution adopted by the Board of Directors.  The act of the majority of the members of a committee present at any meeting at which a quorum is present shall be the act of such committee, unless the act of a greater number is required by a resolution adopted by the Board of Directors.  Each such committee may elect a chairman and appoint such subcommittees and assistants as it may deem necessary.  Except as otherwise provided by the Board of Directors, meetings of any committee shall be conducted in accordance with Paragraphs 3.4, 3.5, 3.6, 3.7, 3.8, 3.9 and 7.3 hereof.  In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.  Any member of any such committee elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Company will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.  Election or appointment of a member of a committee shall not of itself create contract rights.   5   (c)           Any action taken by any committee of the Board of Directors shall promptly be recorded in the minutes and filed with the Secretary.   ARTICLE IV Officers   4.1.           Designation.  The officers of the Company shall consist of a Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer, Secretary, Chief Financial Officer, Treasurer, Controller and such Executive, Senior or other Vice Presidents, Assistant Secretaries, Assistant Treasurers, Assistant Controllers and other officers as may be elected or appointed by the Board of Directors from time to time.  Any number of offices may be held by the same person.  The Chairman of the Board may also serve as the Chief Executive Officer.  The Chairman of the Board shall be chosen from the directors.  All officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective stockholders and of   4.2.           Election and Term of Office.  The elected officers of the Company shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held at the time of each annual meeting of the stockholders.  If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient.  Subject to Paragraph 4.17 of these Bylaws, each officer shall hold office until such officer’s successor shall have been duly elected and shall have qualified or until such officer’s death or until such officer shall resign.   4.3.           Chairman of the Board.  The Chairman of the Board shall be the Chief Executive Officer of the Company and shall preside at all meetings of the stockholders and of the Board of Directors.  Except where by law the signature of the President is required, the Chairman of the Board shall possess the same power as the President to sign all contracts, certificates and other instruments of the Company which may be authorized by the Board of Directors.  The Chairman of the Board shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors.  In the absence or incapacity to act of the President, the Chairman of the Board shall serve as acting President, and when so acting, shall have all the powers of and be subject to the restrictions of such office.   4.4.           Chief Executive Officer.  The Chief Executive Officer shall be responsible for the general management of the affairs of the Company and shall perform all duties incidental to the Chief Executive Officer’s office which may be required by law and all such other duties as are properly required of him by the Board of Directors.  The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect.   4.5.           President.  The President shall be the Chief Operating Officer of the Company and shall have general supervision and control of the business, affairs and properties of the Company and its general officers, and shall see effect.  He shall have the power to appoint and remove all subordinate officers, agents and employees, except those elected or appointed by the Board of Directors, and shall execute all bonds, mortgages, contracts and other instruments of the Company requiring a seal, under the seal of the Company, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Company may sign and execute documents when so authorized by these Bylaws, the Board of Directors or the President.  The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors.  In the incapacity to act of the Chairman of the Board, the President shall serve as acting Chairman of the Board, and when so acting, shall have all the powers of and be subject to the restrictions of such office.   4.6.           Chief Operating Officer.  As the Chief Operating Officer, the President shall have general charge and supervision of the day to day operations of the Company (subject to the direction of the Board of Directors), and, in general, shall perform such other duties as are incident to the office of a chief operating officer of a corporation, including those duties customarily performed by persons occupying such office, and shall perform such other duties as, from time to time, may be assigned to him by the Board of Directors.   6     4.7.           Vice President.  The Board of Directors may appoint such Vice Presidents as may be recommended by the President or as the directors deem necessary or appropriate.  Vice Presidents may be designated as Senior Vice Presidents, Executive Vice Presidents or some other designation as the Board of Directors deems appropriate (each a “Vice President”).  Each Vice President shall perform such duties as the Board of Directors may from time to time prescribe and have such other powers as the President may from time to time prescribe.   4.8.           Chief Financial Officer.  The Chief Financial Officer shall be the chief accounting officer of the Company and shall have general charge and supervision of the day to day financial operations of the Company (subject to the direction of the Board of Directors), and, in general, shall perform such other duties as are incident to the office of a chief financial officer of a corporation, including those duties customarily performed by persons occupying such office, and shall perform such other duties as, from time to time, may be assigned to him by the Board of Directors or the Audit Committee.   4.9.           Secretary.  The Secretary shall attend the meetings of the Board of Directors and all meetings of stockholders and record the proceedings thereof in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required.  The Secretary shall supervision he shall be.  If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then the Chairman of the Board may choose another officer to cause such notice to be given.  The Secretary shall have custody of the seal of the Company and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary.  The Board of Directors may give general authority to any other officer to affix the seal of the Company and to attest the affixing by his signature.  The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.   4.10.         Treasurer.  The Treasurer shall have the custody of the Company’s disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Chief Financial Officer or the Board of Directors.  The Treasurer shall disburse the funds of the Company as may be ordered by the Chief Financial Officer or the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board and the Board of Directors, at its regular meeting, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the liquidity of the Company.  If required by the Board of Directors, the Treasurer shall give the Company a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Company, books papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Company.   4.11.         Controller.  The Controller, if there is one, shall maintain records of all assets, liabilities, and transactions of the Company and shall be responsible for the design, installation and maintenance of accounting and cost control systems and procedures for the Company and shall perform such other duties and have such other powers as from time to time may be assigned to him by the Chief Financial Officer, Board of Directors or the Audit Committee.   4.12.         Assistant Secretaries.  Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.   7     4.13.         Assistant Treasurers.  Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer.  If required by the Board of Directors, an Assistant Treasurer shall give the Company a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Company, in case of his his control belonging to the Company.   4.14.         Assistant Controllers.  Except as may be otherwise provided in these Bylaws, Assistant Controllers, if there be any, shall perform such duties of Directors, the President, any Vice President, or the Controller, and in the absence of the Controller or in the event of his disability or refusal to act, shall perform the duties of the Controller, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Controller.   4.15.         Other Officers.  Such other officers as the Board of Directors may choose shall perform such duties and have such powers, subordinate to those powers specifically delegated to certain officer in these Bylaws, as from time to time may be assigned to them by the Board of Directors.  The President of the Company shall have the power to choose such other officers and to prescribe their respective duties and powers, subject to control by the Board of Directors.   4.16.         Vacancies.  Whenever any vacancies shall occur in any office by death, resignation, increase in the number of offices of the Company, or otherwise, the same shall be filled by the Board of Directors (or the President, in accordance with Paragraph 4.3 of these Bylaws, subject to control by the Board of Directors), and the officer so appointed shall hold office until such officer’s successor is elected or appointed in accordance with these Bylaws or until his earlier death, resignation or removal.   4.17.         Removal.  Any officer or agent of the Company may be removed by the Board of Directors whenever in its judgment the best interests of the Company will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.  Election or appointment of an officer or agent shall not of itself create contract rights.   4.18.         Action with Respect to Securities of Other Corporations.  Unless otherwise directed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President and the Treasurer of the Company shall each have power to vote and otherwise act on behalf of the Company, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which the Company may hold securities and otherwise to exercise any and all rights and powers which the Company may possess by reason of its ownership of securities in such other corporation.   ARTICLE V Capital Stock   5.1.           Certificates for Shares.  The certificates for shares of the capital stock of the Company shall be in such form as may be approved by the Board of Directors from time to time.  The Company shall deliver one or more certificates to each of the Company’s stockholders, which shall represent the number of shares to which such stockholder is entitled.  Certificates shall be signed by the Chairman of the Board, the President or a Vice President and either the Secretary or an Assistant Secretary, and may bear the seal of the Company or a facsimile thereof.  The signatures of such officers upon a certificate may be facsimiles.  The stock record books and the blank stock certificates shall be kept by the Secretary, or at the office of such transfer agent or transfer agents as the Board of Directors may from time to time by resolution determine.  In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Company with the same effect as if such person were such officer at the date of its issuance.   8     5.2.           Multiple Classes of Stock.  As the Company is authorized to issue more than one class of capital stock and more than one series of preferred stock, a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of each of the certificates the Company issues to represent such class or series of stock; provided that, to the extent allowed by law, in lieu of such statement, the face or back of such certificates may state that the Company will furnish a copy of such statement without charge to each requesting stockholder.   5.3.           Transfer of Shares.  The shares of stock of the Company shall be transferable only on the books of the Company by the holders thereof in person or by their duly authorized attorneys or legal representatives upon surrender and cancellation of certificates for a like number of shares.   5.4.           Ownership of Shares.  As the Company is entitled to treat the holder of record of any share or shares of capital stock as the holder in fact thereof under Paragraph 2.5 hereof, the Company shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part thereof, except as otherwise provided by the laws of the State of Nevada.   5.5.           Regulations Regarding Certificates.  The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of capital stock of the Company.   5.6.           Lost or Destroyed Certificates.  The Board of Directors may determine the conditions upon which a new certificate representing shares of the capital stock of the Company may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed; and may, in its discretion, require the owner of such certificate or his legal representative to give bond, with sufficient surety, to indemnify the Company and each transfer agent and registrar against any and all losses or claims that may arise by reason of the issue of a new certificate in the place of the one so lost, stolen or destroyed.   ARTICLE VI Indemnification   6.1.           General.  The Company shall indemnify its directors, officers, employees, agents and others as provided in the Articles of Incorporation.     6.2.           Request for Indemnification.  A party requesting indemnification (the “Indemnitee”) shall submit notice of such request in writing to the Secretary of the Company.  Such notice of request for indemnification shall contain sufficient information to reasonably inform the Company about the nature and extent of the indemnification or advance sought by the Indemnitee.  The Secretary shall promptly advise the Board of Directors of any such request.   6.3.           Extension of Rights.  No amendment, alteration or repeal of this Article VI 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 Article VI shall continue as to an Indemnitee whose Corporate Status has ceased for any reason and shall inure to the benefit of his heirs, executors and administrators.  Neither the provisions of this Article VI nor those of any agreement to which the Company is a party shall be deemed to preclude the indemnification of any person who is not specified in this Article VI as having the right to receive indemnification or is not a party to any such agreement, but whom the Company has the power or obligation to indemnify under the provisions of the NRS.   6.4.           Insurance and Subrogation.  The Company shall not be liable under the Articles of Incorporation or this Article VI to make any payment of amounts otherwise indemnifiable hereunder if, but only to the extent that, the 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 the Indemnitee, who shall execute all papers required and take all action reasonably requested by the Company to secure such rights, bring suit to enforce such rights.   9     6.5.           Severability.  If any provision or provisions of this Article VI 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 Article VI shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.   6.6.           Notices.  Promptly after receipt by the Indemnitee of notice of the commencement of any action, suit or proceeding, the Indemnitee shall, if he anticipates or contemplates making a claim for expenses or an advance pursuant to the terms of the Articles of Incorporation and this Article VI, 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 the Indemnitee of rights hereunder and that any omission by the Indemnitee to so notify the Company shall not relieve the Company from any liability that it may have to the Indemnitee otherwise than under the Articles of Incorporation or this Article VI.  Any communication required or permitted to the Company shall be addressed to the Secretary and any such communication to the Indemnitee shall be addressed to the Indemnitee’s address as shown on the Company’s records unless he specifies otherwise and shall be personally delivered or delivered by overnight mail delivery.  Any such notice shall be effective upon receipt.   6.7.           Contractual Rights.  The right to be indemnified or to the advancement or reimbursement of expenses (a) is a contract right based upon good and valuable consideration, pursuant to which the Indemnitee may sue as if these provisions were set forth in a separate written contract between the Indemnitee and the Company, (b) is and is intended to be retroactive and shall be available as to events occurring prior to the adoption of these provisions, and (c) shall continue after any rescission or restrictive modification of such provisions as to events occurring prior thereto.   ARTICLE VII Miscellaneous Provisions   7.1.           Bylaw Amendments.  These Bylaws may be amended as provided in the Articles of Incorporation.   7.2.           Books and Records.  The Company shall keep books and records of account and shall keep minutes of the proceedings of its stockholders, its Board of Directors and each committee of its Board of Directors.   7.3.           Notices; Waiver of Notice.  Whenever any notice is required to be given to any stockholder, director or committee member under the provisions of the NRS, the Articles of Incorporation or these Bylaws, said notice shall be deemed to be sufficient if given by deposit of the same in the United States mail, with postage paid thereon, addressed to the person entitled thereto at his address as it appears on the records of the Company, and such notice shall be deemed to have been given on the day of such mailing.   Whenever any notice is required to be given to any stockholder, director or committee member under the provisions of the NRS, the Articles of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person called or convened.   7.4.           Resignations.  Any director or officer may resign at any time.  Such resignations shall be made in writing and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the President or the Secretary.  The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.   7.5.           Seal.  The seal of the Company shall be in such form as the Board of Directors may adopt.   7.6.           Fiscal Year.  The fiscal year of the Company shall be as provided by a resolution adopted by the Board of Directors.   10     7.7.           Facsimile Signatures.  In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any director or officer of the Company may be used whenever and as authorized by the Board of Directors.   7.8.           Reliance upon Books, Reports and Records.  Each director and each member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Company by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Company.   ARTICLE VIII Adoption of Bylaws   8.1.           Adoption.  These Bylaws were adopted by the Board of Directors as of _______, 2008.   11   Violations under Documents None.     Qualification in Foreign States None.     Changes in Financial Statements None.     Tax Returns Status Information to be provided prior to the Closing.     Litigation None.     None.     Defaults None.     Permits and Approvals None.     Exceptions to Title None.     Patents and Trademarks None.     Compliance with Environmental Laws None.     Changes or Events None.     Schedule of Insurance Policies None.     None.     Inventory     Schedule of Assets     Labor Matters None.     Employment Contracts None.     Contracts    
Title: What gives the US the right to extradite cyber criminals? [Worldwide] Question:I hear a lot about how the US extradites cybercriminals, but I often wonder how does the US even have the right to do such an extradition, even if the US wasn't even remotely involved as a victim or otherwise? So think of the following scenarios: Country A, B, C has extradition treaties with US. Country Z, X, Y don't. Hacker in Country A, Hacks Servers in B, while owner of servers are HQ in C. Which country is the crime considered to have taken place in? Would the US have the ability to prosecute and extradite this crime that had nothing to do with the US? Hacker in Country A, Hacks Servers in US, Owners are in Z. Same questions. Hacker in Country A, Hacks Servers in Z, Owners in US. Same Questions. Hacker in Z, Servers in A, Owners in US. Hacker in Z, Servers in US, Owners in X. Etc. Essentially what criteria dictates if/when the US can extradite a cyber criminal? Also if the US isn't involved in any step of the crime, why the hell is their idea of "justice" applied universally around the world? What if what is considered a cybercrime in the US is completely legal in another country? What happens then? I'm largely asking because I feel like when I read about these kind of extraditions the US is just trying to prosecute and claim dibs on as many hackers as possible to get them to work for the US gov't in lieu of jail time. Which is extremely underhanded and dirty. But also I wonder how the US has the audacity to think it's definition of cybercrime is universally applicable to the entire world. Answer #1: Extradition (to any country) only happens when the person in question is accused of a crime in the country attempting the extradition. The US extradites people who commit crimes that impact the US or happen in the US. It just happens that cybercrime can have a pretty broad impact across borders, unlike most "traditional" crimes. So all of your hypos depend on whether or not you violated US law in a way that the US has the authority to enforce. All 3 could have jurisdiction, if what you did is a crime in each of them. To use a physical example: If we're on the US-Mexico border and I'm in the US, while you're in Mexico, and I shoot & kill you without ever crossing the border, either or both countries can charge me with murder. This is the same thing, just electronic
Rule 424 (b) (3) Registration No. 333-155631 CALCULATION OF REGISTRATION FEE Title of Each Class of Securities Offered Maximum Aggregate Offering Price Amount of Registration Fee(1)(2) Senior Debt Securities $300,000.00 $11.79 (1) Calculated in accordance with Rule 457(r) of the Securities Act of 1933. (2) The amount in this column has been transmitted to the SEC in connection with the securities offered by means of this pricing supplement. TRADE DATE:February 11, 2009 PRICING SUPPLEMENT NO. 4ebruary 11, 2009 TO PROSPECTUS SUPPLEMENT DATED November 26, 2008 AND PROSPECTUS DATED November 24, 2008 NATIONAL RURAL UTILITES COOPERATIVE FINANCE CORPORATION Medium-Term Notes, Series C Due Nine Months or More from Date of Issuance Principal Amount: $300,000.00 Issue Price: 100% of Principal Amount Original Issue Date: 02/17/2009 Maturity Date: 02/16/2010 Interest Rate: 3.62% per annum Regular Record Dates: Each January 1 and July 1 Interest Payment Dates: Each January 15 and July 15 Redemption Date: None Agent's Commission: None Form of Note: Certificated (Book-Entry or Certificated) Other Terms: None Medium-Term Notes, Series C, may be issued by National Rural Utilities Cooperative Finance Corporation in an unlimited aggregate principal amount.
  Exhibit 10.5   SECURITIES PURCHASE AGREEMENT   This Securities Purchase Agreement (this “Agreement”) is dated as of October 8, 2020, by and between Cardax, Inc., a Delaware corporation (the “Company”), and _______________ (the “Purchaser”). Certain capitalized terms used in this Agreement are defined in Section 1.1.   WHEREAS, the Company is a public company with its shares of common stock, par value $0.001 per share (the “Common Stock”) traded on the OTCQB under the symbol “CDXI”;   WHEREAS, the Company and the Purchaser are executing and delivering this (the “Securities Act”);   WHEREAS, subject to the terms and conditions set forth in this Agreement the Company desires to sell to the Purchaser and the Purchaser desires to purchase the “Securities” (as defined below) for aggregate consideration of $_______________:   (a) a convertible promissory note (the “Note”), in the form attached hereto as Exhibit I, with an aggregate principal amount of $_______________, convertible into shares of Common Stock at $____, subject to adjustment and upon the terms and conditions set forth in the Transaction Documents; and   (b) a warrant (the “Warrant”), in the form attached hereto as Exhibit II, exercisable for 5 years from issuance, to purchase __________ shares of Common Stock at a price per share of $____, subject to adjustment and upon the terms and conditions set forth in the Transaction Documents.   adequacy of which are hereby acknowledged, the Company and the Purchaser, intending to be legally bound hereby, hereby agree as follows:   ARTICLE I DEFINITIONS     Securities Act.   “Business Day” means any day except any Saturday, any Sunday, any day that is a federal legal holiday in the United States, or any day on which banking   to Section 2.1.           “Company Sub” means Cardax Pharma, Inc., a Delaware corporation and a wholly owned subsidiary of the Company.     of any kind.   “Registration Statement” means the registration statement filed by the Company with the Securities and Exchange Commission for the public offering of Common Stock and warrants to purchase Common Stock (registration no. 333-233281).   “Securities” means the Note, the Warrant, and any shares of Common Stock issued or issuable to the Purchaser under the Note and the Warrant.   “Securities Purchase Amount” means the aggregate amount to be paid for the Securities, which amount shall be paid by the Purchaser making a payment to the Company as provided in this Agreement.   “Short Sale” means any securities transaction in which a Person sells a number of shares or other units of a security that are not owned by such Person at the time of such sale.   Select Market, the New York Stock Exchange, OTCQB or the OTC Bulletin Board (or any successors to any of the foregoing).   “Transaction Documents” means this Agreement, the Note, the Warrant, and all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transaction contemplated hereunder.   ARTICLE II PURCHASE AND SALE   2.1 Closing.   (a) On the Closing Date, the Purchaser shall purchase the Securities and the Company shall issue the Securities.   2.2 Deliveries.   (a) On the Closing Date, the Purchaser shall deliver or cause to be delivered to the Company a check or wire transfer of the Securities Purchase Amount of the Purchaser in accordance with the check or wire transfer instructions set forth on Schedule A to this Agreement.   (b) On the Closing Date, the Company and the Purchaser shall close the purchase and sale of the Securities and the Company shall promptly deliver or cause to be delivered to the Purchaser evidence of the issuance and delivery of the Securities by appropriate instructions to the stock transfer agent of the Company.   2     ARTICLE III REPRESENTATIONS AND WARRANTIES   3.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Purchaser as of the date hereof and as of the Closing Date (unless such representation is made as of a specific date therein in which case such representation and warranty shall be accurate as of such date):   (a) Organization and Qualification. Each of the Company and the Company Sub is an entity duly incorporated, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, with the requisite power and as currently conducted.   (b) Capitalization. The capitalization of the Company is properly reflected in all material respects by the SEC Filings as of the date indicated in such filings.   (c) Private Placement. Assuming the accuracy of the Purchaser’s representations Act is required for the offer and sale of the Securities to the Purchaser as contravene the rules and regulations of the Trading Market applicable to the Company.   (d) SEC Filings. The documents (the “SEC Filings”) that have been filed by the Company with the SEC do not (as amended and supplemented) contain a material misstatement of fact or does not omit to state any material fact necessary in which they were made, not misleading, as interpreted by the Exchange Act.   (e) Financing Needs. The Company requires immediate financing through the offering of the securities under this Agreement to acquire additional funds for certain working capital and general corporate purposes that are due and payable within 30 days and if not paid would cause a material adverse effect to the Company, including the payment of payroll and other cash compensation and insurance. Accordingly, the purpose of the offering under this Agreement is different than the planned use of proceeds from the public offering described in the Registration Statement.   3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):   (a) Organization; Authority.   (i) The Purchaser is either an individual or an entity that is duly incorporated or formed, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company, or similar power and authority to enter into and to consummate the transaction contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.   (ii) The execution and delivery of the Transaction Documents and performance by the Purchaser of the transaction contemplated by the Transaction Documents have company, or similar action, as applicable, on the part of the Purchaser.   3     (iii) Each Transaction Document to which it is a party has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except: (a) as reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally; (b) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies; and (c) insofar as indemnification and contribution provisions may be   (b) Own Account. The Purchaser understands that the Securities are “restricted its own account and not with a view to or for distributing or reselling the any other person to distribute or regarding the distribution of such Securities representation and warranty not limiting the Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws). The Purchaser is acquiring the Securities hereunder in the ordinary course of its business or investment strategy.   (c) Purchaser Status. At the time the Purchaser was offered the Securities, it was, and as of the date hereof it is an “accredited investor” as defined in Rule 501 under the Securities Act; or (ii) a Non U.S. Person within the meaning of Regulation S under the Securities Act. The information provided by the Purchaser to the Company in the Certificate of Accredited Investor Status is true and correct.   (d) Experience of the Purchaser. The Purchaser, either alone or together with merits and risks of such investment. The Purchaser is able to bear the economic   (e) No Short Sales. The Purchaser shall not directly or indirectly, nor shall Purchaser, execute any Short Sales of the securities of the Company while the Note is outstanding.   (f) Disclosure.   (i) The Purchaser acknowledges and agrees that the information provided and available to the Purchaser at the time that this Agreement is executed and delivered (including, but not limited to the SEC Filings) (the “Execution Date Information”) may not include all of the material information that would be provided to a purchaser of securities in an offering of securities that is registered under the Securities Act and included in a prospectus that is required to be delivered in accordance with Section 5 of the Securities Act. Additionally, the Purchaser acknowledges that it will not have the benefits of the disclosures and the civil remedies that flow from an offering registered   (ii) The Purchaser agrees that it has had an opportunity to conduct its due diligence on the investment and in connection therewith: (a) obtain additional information concerning investment in the Securities, including without limitation, information concerning the Company and any other matters relating directly or indirectly to the purchase of the Securities by the Purchaser; (b) ask questions of, and receive answers from, the executives of the Company concerning the terms and conditions of investment in the Securities and to obtain such additional information as may have been necessary to verify the accuracy of any information that may have been provided to the Purchaser; and (c) acknowledges that the only information the Purchaser relied upon is information or documentation that was provided expressly by the Company to the Purchaser for such purposes. The Purchaser acknowledges that it has had information about the Company based on its investments in the Company and by reference to the SEC Filings other than the Registration Statement.   4     (iii) The Purchaser and/or Purchaser’s advisor acknowledges that it has received and reviewed the SEC Filings, including the summary of risks contained in the “Risk Factors” sections in such documents and Schedule B and certain matters regarding the use of proceeds set forth in Section 4.3 and had access to or been furnished with sufficient facts and information to evaluate an investment in the Company and a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Company and all such questions have been answered to the full satisfaction of the Purchaser. The Purchaser acknowledges that in addition to the risks summarized in Schedule B, there is a risk that the public offering contemplated by the Registration Statement will not be consummated, that the Company may abandon the Registration Statement for any reason, including without limitation, market conditions or any decision by the lead underwriter described therein, which decision is in the sole and absolute discretion of such underwriter. The Purchaser acknowledges it would purchase the securities to be issued by the Company under this Agreement even if the Company does not complete the public offering described in the Registration Statement.   (g) Solicitation. The Purchaser acknowledges that it did not become interested in the purchase of securities to be issued by the Company through any general solicitation or advertisement, including the Registration Statement. The Purchaser acknowledges that it has a substantive, preexisting personal investment relationship with the Company based on its ownership of Common Stock and several investments by the Purchaser. The Purchaser was solicited by the Company via direct solicitation by the Chief Executive Officer of the Company (the “CEO”), who has a personal relationship with the Purchaser, and a determination by the CEO that the Purchaser has the means and is likely to continue its investment interest in the Company. The Purchaser acknowledges that it was solicited by the Company for interest in the securities to be issued by the Company under this Agreement and that the Purchaser was not identified or contacted through the marketing of the public offering under the Registration Statement and the Purchaser did not independently contact the Company as a result of any solicitation by any broker dealer, including the lead underwriter specified in the Registration Statement.   Section 3.2 shall not modify, amend or affect the Purchaser’s right to rely on   ARTICLE IV   4.1 Transfer Restrictions.   securities laws. In connection with any transfer of any of the Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of the Purchaser, the Company may require the transferor transferor and reasonably acceptable to the Company, the form and substance of   5     (b) Legend on Share Certificates. The Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the certificates representing the Securities in the following form:   THIS SECURITY HAS NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.   (c) The legends set forth in Section 4.1(b) shall, to the fullest extent permitted, be removed (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of the Securities pursuant to Rule 144, (iii) if the Securities are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to the Securities interpretations and pronouncements issued by the staff of the SEC).   (d) The Purchaser agrees that it will sell any Securities only pursuant to either: (i) the registration requirements of the Securities Act, including any applicable prospectus delivery requirements; or (ii) an exemption therefrom, and that if the Securities are sold pursuant to any such effective registration statement, they will be sold in compliance with the plan of distribution set certificates representing the Securities set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.   4.2 Non-Public Information. Except with respect to the material terms and conditions of the transaction contemplated by the Transaction Documents, the behalf, will provide the Purchaser or its agents or counsel with any information prior thereto the Purchaser, agent, or counsel shall have entered into a written agreement with the Company regarding the confidentiality and use of such information or such Person is otherwise obligated to maintain the confidentiality of such information and not use such information in violation of applicable law. The Company understands and confirms that the Purchaser shall be relying on the foregoing covenant in evaluating and providing any information it receives in connection with its consideration of purchasing the Securities.   4.3 Use of Proceeds. The Company will use the proceeds from this transaction for its general corporate purposes.   4.4 Replacement of Certificates. If any certificate or instrument evidencing the Securities is mutilated, lost, stolen, or destroyed, the Company shall issue or satisfactory to the Company of such loss, theft, or destruction. The applicant issuance of such replacement Securities and may be required to provide an indemnity in favor of the Company.   6     ARTICLE V MISCELLANEOUS   5.1 Fees and Expenses. Except as expressly set forth in the Transaction 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.   5.2 Entire Agreement. The Transaction Documents contain the entire understanding of the parties with respect to the subject matter thereof 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.   5.3 Notices. All notices (including any consent required of any party to the Transaction Documents) given or permitted to be provided pursuant to the Transaction Documents shall be in writing and shall be mailed by certified mail, delivered by professional courier or hand, or transmitted via email. The Purchaser may change the address that notices should be delivered to it by delivering a notice with the corrected information to the Company. The Company may change the address that notices should be delivered to it by delivering a notice with the corrected information to the Purchaser then a party to this Agreement. In each case, such corrected information to be effective only upon delivery of such notice. Except as otherwise expressly provided in the Transaction Documents, each such notice shall be effective on the date three days after the date of mailing or, if delivered by hand or professional courier, or transmitted via email with delivery receipt (or acknowledgement or confirmation which may be by electronic means), on the date of delivery, provided, however, that notices to the Company will be effective upon receipt.   5.4 Amendments; Waivers. No provision of the Transaction Documents may be waived, modified, supplemented or amended except by means of a written agreement signed, in the case of an amendment, by the Company and the Purchaser subject to such waiver, modification, supplement or amendment. No waiver of any default with respect to any provision, condition or requirement of the Transaction Documents shall be deemed to be a continuing waiver in the future or a waiver of requirement thereof, nor shall any delay or omission of any party to exercise any right thereunder in any manner impair the exercise of any such right.   5.5 Headings. The headings in the Transaction Documents are for convenience only, do not constitute a part of the Transaction Documents and shall not be deemed to limit or affect any of the provisions thereof.   5.6 Successors and Assigns. The Transaction Documents shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign the Transaction Documents or any rights or obligations thereunder without the prior written consent of the Purchaser (other than by merger). The Purchaser may assign any or all of its rights under this Agreement to any Person; provided that such assignment is approved by the Company, which approval shall not be unreasonably withheld, delayed or conditioned and such transferee agrees in writing to be bound by the provisions of the Transaction Documents that apply to the “Purchaser” and such transferee is able and makes the representations and warranties to the Company provided under Section 3.2.   7     5.7 Third-Party Beneficiaries. The Transaction Documents are intended for the benefit of the parties thereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision thereof be enforced by, any other Person.   5.8 Governing Law. The Transaction Documents are to be construed in accordance with and governed by the laws of the State of New York, without giving effect to the conflict of laws principles thereof.   5.9 Attorney Fees. If one or more parties shall commence an action, suit, or proceeding to enforce any provision of the Transaction Documents, then the prevailing party or parties in such action, suit, or proceeding shall be reimbursed by the other party or parties to such action, suit, or proceeding for the reasonable attorneys’ fees and other costs and expenses incurred by the prevailing party or parties with the investigation, preparation, and prosecution of such action, suit, or proceeding.   the Closing and the delivery of the Securities for the applicable statute of limitations.   5.11 Counterparts and Execution. The Transaction Documents may be executed in one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by email delivery of a “.pdf” format data file, such such “.pdf” signature page was an original thereof.   5.12 Severability. If any term, provision, covenant or restriction of any Transaction Document 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 therein shall remain in full force and effect and shall in no way be affected, impaired, or invalidated, and the parties thereto 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 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the   5.14 Construction. The parties agree that each of them and/or their respective in the interpretation of the Transaction Documents or any amendments thereto.     8       Cardax, inc.         By:          Name:     Title:               [Name of Purchaser]         By:     Name:     Title:             SCHEDULE A   Check and Wire Transfer Instructions   [provided separately]         SCHEDULE B   Certain Additional Risk Factors   In addition to the risk factors summarized in the Company’s SEC Filings, you should consider the following:   An investment in the Securities involves a high degree of risk. You should carefully consider the risks summarized in the Company’s SEC Filings, together with all of the other information provided to you in this Agreement, before making an investment decision. If any of the following risks actually occur, our case, the trading price of our shares of Common Stock could decline, and you may “Forward-Looking Statements” included in our SEC Filings for a discussion of significance of such statements.   The terms of this transaction and the purchase price for the Securities were not independently valued and may not be indicative of the future price of Common Stock.   Our board of directors determined the terms and conditions of this transaction, including the purchase price of the Securities. The purchase price of the Securities was not necessarily determined to be equal to the market price of the Common Stock on the OTCQB or the fair value of the Company. If you purchase the Securities, you may not be able to sell any of the Securities at or above the purchase price. The trading price of the Common Stock will be determined by the marketplace and will be influenced by many factors outside of the Company’s control, prevailing interest rates, investor perceptions, securities analyst research reports and general industry, geopolitical, and economic conditions. Publicly traded stocks, including stocks of pharmaceutical and nutraceutical companies, often experience substantial market price volatility. These market fluctuations might not be related to the operating performance of particular companies whose shares are traded. Accordingly, we cannot assure you that if you purchase the Securities you will later be able to sell any of the Securities at or above the purchase price.   The Securities are “Restricted Securities” under the Securities Act and there is no assurance they will be registered.   The Securities will be restricted securities under United States federal and applicable state securities laws. The Securities will be restricted securities unless and until the Securities are registered. Restricted securities may not be transferred, sold or otherwise disposed of in the United States, except as permitted under United States federal and state securities laws, pursuant to registration or an exemption therefrom. You should be prepared to hold the Securities for an indefinite period.   The Securities may not be sold unless, at the time of such intended sale, there is a current registration statement covering the resale of the securities or there exists an exemption from registration under the Securities Act, and such securities have been registered, qualified, or deemed to be exempt under applicable securities or “blue sky” laws in the state of residence of the seller or in the state where sales are being affected.   If there is not an effective registration statement covering the resale of the Securities, you will be precluded from disposing of such shares unless such shares may become eligible to be disposed of under the exemptions provided by Rule 144 under the Securities Act without restriction. If the Securities are not registered for resale under the Securities Act, or exempt therefrom, and not registered or qualified under applicable securities or “blue sky” laws, or deemed exempt therefrom, the value of the Securities will be greatly reduced.   Insufficient Capital   There can be no assurance or guarantee that the Company will raise sufficient capital, through this transaction or otherwise, to meet the Company’s business objectives or fund its operations. The audited financial statements of the Company include a going concern qualification and the Company has significant liquidity issues, including that described in the SEC Filings. There can be no assurance that other obligations that are necessary for the Company will not be incurred or that the budgeted expenditures will not be subject to any material increase.           NEITHER THIS SECURITY NOR THE SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.   Principal Amount: $_______________ Issue Date: October 8, 2020 Purchase Price: $_______________     CONVERTIBLE PROMISSORY NOTE   FOR VALUE RECEIVED, Cardax, Inc., a Delaware corporation (the “Company”), hereby promises to pay to the order of _______________ (together with its successors and assigns, the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ on _______________ (the “Maturity Date”), unless extended by mutual written agreement of the parties, or such earlier date as required or permitted hereunder, and to pay interest to the Holder on the outstanding principal amount in accordance with the provisions hereof. Notwithstanding the foregoing, repayment of this Note may be amortized upon the Maturity Date in accordance with Section 4.2. This convertible promissory note (the “Note”) is issued pursuant to the terms of that certain Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and the Holder, and may be prepaid or converted into common stock of the Company, par value $0.001 per share (the “Common Stock”) as set forth herein. By acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement.     ARTICLE I. MANNER OF PAYMENT   1.1 Method of Payment. All payments hereunder shall be made in lawful money of the United States of America no later than 5:00 PM on the date on which such payment is due by check, certified check payable to the Holder, or by wire transfer of immediately available funds to the Holder’s account at a bank specified by the Holder in writing to the Company from time to time.   1.2 Business Day Convention. Whenever any amount expressed to be due by the terms of this Note is due on any day that is not a business day, the same shall instead be due on the next succeeding business day. As used in this Note, the term “business day” shall mean any day except any Saturday, any Sunday, any day that is a federal legal holiday in the United States, or any day on which or other governmental action to close.   ARTICLE II. INTEREST   2.1 Interest Rate. Except as otherwise provided herein, the outstanding principal amount of the Note shall bear interest at a rate (the “Interest Rate”) of _______________ (__%) per annum from the date hereof and shall continue on the outstanding principal amount of the Note until paid or converted in full in         2.2 Interest Payments. The Company shall pay interest in cash to the Holder (i) monthly in arrears, on or prior to the 10th calendar day of each month, beginning on the first such date after the Issue Date, (ii) on each Conversion Date (as to that principal amount then being converted, less any such interest amount then being converted), (iii) on each Prepayment Date (as to that principal amount then being paid), and (iv) on the Maturity Date (as to that principal amount then being paid, if any) (each such date, an “Interest Payment Date”).   2.3 Interest Calculations. Interest shall be calculated on the basis of a year of 365/366 days, as the case may be, and the actual number of days elapsed. Interest shall accrue on the Issue Date but shall not accrue on any Conversion Date (as to that principal amount then being converted), on any Prepayment Date (as to that principal amount then being paid), on the Maturity Date (as to that principal amount then being paid, if any), or on up to the first 10 calendar days of each month wherein an Amortization Payment is being made pursuant to Section 4.2 (as to that principal amount then being paid).   2.4 Default Interest. Upon an Event of Default (as defined in Section 6.1), the Interest Rate shall increase to twelve percent (12%) per annum from the date thereof until cured or waived.   2.5 Interest Rate Limitation. If at any time and for any reason whatsoever, the interest rate payable on the Note shall exceed the maximum rate of interest permitted to be charged by the Holder to the Company under applicable law, such interest rate shall be reduced automatically to the maximum rate of interest permitted to be charged under applicable law. That portion of each sum paid attributable to that portion of such interest rate that exceeds the maximum rate of interest permitted by applicable law shall be deemed a voluntary prepayment of principal.   ARTICLE III. CONVERSION   3.1 Method of Conversion. At any time while this Note is outstanding, this Note shall be convertible, in whole or in part, into shares (the “Conversion Shares”) of Common Stock at the Conversion Price (as defined below), at the option of the Holder, at any time and from time to time. The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Exhibit I (each, a “Notice of Conversion”), specifying therein the outstanding principal amount of this Note, plus at the Holder’s option, any accrued and unpaid interest thereon, to be converted and the date on which such conversion shall be effected (such date, a “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder.   3.2 Conversion Price. The conversion price (the “Conversion Price”) per share of Common Stock in effect on any Conversion Date shall be equal to $____, subject to adjustment as provided below.   (a) Adjustment Upon Stock Split. If at any time while this Note is outstanding, the Company: (i) subdivides outstanding shares of Common Stock into a larger number of shares, (ii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iii) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be equitably adjusted. Any adjustment made pursuant to this Section 3.2(a) shall become effective immediately after the effective date of the subdivision, combination, or re-classification.   3.3 Mechanics of Conversion.   (a) Conversion Shares Issuable Upon Conversion. The number of Conversion Shares obtained by dividing (x) the outstanding principal amount of this Note to be converted, plus any accrued and unpaid interest thereon to be converted, by (y) the Conversion Price.   2     (b) No Fractional Shares Upon Conversion. No fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share that the Holder would otherwise be entitled to upon such conversion, the Company shall at its election, either pay a cash adjustment in an amount equal to such fraction   (c) Delivery of Certificate Upon Conversion. On the Conversion Date, or promptly thereafter, the Company shall issue and deliver or cause to be issued and delivered a certificate or certificates representing the Conversion Shares.   (d) Surrender of Note Upon Conversion. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire outstanding principal amount of this Note, plus all accrued and unpaid interest thereon, is to be converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note and accrued and unpaid interest thereon, in an amount equal to the applicable conversion, and all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Conversion Shares, as provided herein. The Holder and the Company shall maintain records showing the principal and interest amount(s) converted and the date of such conversion(s). In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.   (e) Authorized Shares. The Company shall reserve from its authorized and this Note. The Company represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.   ARTICLE IV. REPAYMENT   4.1 Prepayment. Notwithstanding anything to the contrary contained in this Note, the Company may prepay the amounts outstanding hereunder pursuant to the following terms and conditions:   (a) At any time while this Note is outstanding, the Company shall have the right, exercisable on not less than five (5) trading days prior written notice (a “Prepayment Notice”) to the Holder, to prepay the Note (outstanding principal and accrued interest), in whole or in part, without penalty.   (b) Notwithstanding the Prepayment Notice, upon receipt of such notice and prior to the prepayment date (the “Prepayment Date”) specified by the Company in the Prepayment Notice, the Holder may elect to convert any outstanding portion of the Note, including any accrued interest, by submitting a Notice of Conversion to the Company as set forth in this Note.   4.2 Repayment Amortization Upon Maturity. If this Note, or any portion thereof, remains outstanding upon the Maturity Date, then repayment of the unpaid and unconverted principal amount of this Note, shall be amortized over the following thirty-six (36) months, with monthly payments (each, an “Amortization Payment”) to be made on or prior to the 10th calendar day of each month, beginning on the first such date after the Maturity Date. Until this Note is repaid or converted in full, the Holder shall continue to have all rights as a holder of this Note.   3     ARTICLE V. CERTAIN COVENANTS   5.1 Sale or Disposition of Assets. So long as the Company shall have any obligation under this Note, the Company shall not, without the Holder’s written consent, sell, lease, or otherwise dispose of all or substantially all of its assets outside the ordinary course of business unless the proceeds of any disposition of its assets shall be used to repay this Note.   5.2 Non-Circumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issuance or sale of securities, or of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.   ARTICLE VI. EVENTS OF DEFAULT   6.1 Events of Default. The occurrence of any of the following events shall   (a) Failure to Pay Principal or Interest. The Company fails to pay any outstanding portion of this Note when due and such non-payment continues for a period of fifteen (15) days.   (b) Failure to Deliver Conversion Shares. The Company fails to issue and deliver or cause to issue and deliver the Conversion Shares to the Holder for a period of fifteen (15) days from the Conversion Date, provided that, an Event of Default shall not occur under this Section 6.1(b) if the Company shall have delivered proper issuance instructions for the Conversion Shares to its stock transfer agent prior to such date.   (c) Breach of Covenants. The Company breaches any material covenant or other material term or condition contained in this Note or any other Transaction Documents and such breach continues for a period of fifteen (15) days.   (d) Breach of Representations or Warranties. Any representation or warranty of the Company made in this Note or any other Transaction Documents shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or any other Transaction Documents, and   (e) Bankruptcy. Bankruptcy, insolvency, reorganization, or liquidation proceedings, or other proceedings, voluntary or involuntary, for relief under or against the Company or any subsidiary of the Company; or the Company admits in writing its inability to pay its debts generally as they mature, provided that, any disclosure of the Company’s ability to continue as a “going concern” shall not be an admission that the Company cannot pay its debts as they become due; or the Company or any subsidiary of the Company shall make an assignment for the benefit of creditors or commence proceedings for its dissolution, or substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or any dissolution, liquidation, or winding up of Company or any substantial portion of its business.   4     (f) Change of Control. The occurrence after the date hereof of any of (a) an acquisition by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company, other than in connection with an underwritten public offering, (b) the Company consummates a merger or similar transaction, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, or (c) the Company sells or transfers all or substantially all of its assets and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a two year period of more than half of the members of the Board of Directors, if not approved by a majority of the Board of Directors, (e) David G. Watumull and David M. Watumull shall both have been terminated by the Company as Chief Executive Officer and Chief Operating Officer other than for cause, or (f) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (e) above   (g) Judgments. Any money judgment, writ, or similar process shall be entered or filed against the Company or any subsidiary of the Company or any of its property or other assets for more than $500,000, and shall remain unvacated, unbonded, or unstayed for a period of one-hundred eighty (180) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.   (h) Delisting of Common Stock. The Company shall fail to maintain the listing of the Common Stock on the OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being traded, and such delisting continues for a period of fifteen (15) days.   6.2 Remedies Upon Event of Default. Upon an Event of Default, interest on this Note shall accrue pursuant to Section 2.4, and the outstanding principal amount of this Note, plus accrued and unpaid interest, shall become, at the Holder’s election, immediately due and payable in cash. In lieu of cash payment, the Holder may elect to receive from time to time all or part of the outstanding principal amount of this Note, plus accrued and unpaid interest, in Conversion Shares. Such acceleration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.     5     IN WITNESS WHEREOF, Company has caused this Note to be signed in its name by its duly authorized officer as of the date first above written.     CARDAX, INC.       By:           Name:     Title:     6     EXHIBIT I NOTICE OF CONVERSION   The undersigned hereby elects to convert $_________________ principal amount of the Note (defined below) together with $________________ of accrued and unpaid interest thereto, totaling $_____________ into that number of shares of Common Stock of Cardax, Inc., a Delaware corporation (the “Company”), to be issued pursuant to the conversion of the Note as set forth below, according to the conditions of the convertible promissory note of the Company dated as of October 8, 2020 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. This Notice of Conversion is irrevocable unless otherwise agreed by the Company.   Delivery instructions:     [  ] The Company shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”), provided that such shares are eligible for deposit.   Name of DTC Prime Broker: _______________________________________________ DTC Participant Number: _________________________________________________ Account Number: _______________________________________________________     [  ] The undersigned hereby requests that the Company issue the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) and form specified immediately below or, if additional space is necessary, on an attachment hereto:   Name: _____________________________________________________________ Address: ___________________________________________________________ Form: [  ] Physical Certificate [  ] Book Entry   Date of Conversion:      Applicable Conversion Price:  $   Number of Shares of Common Stock to be Issued      Pursuant to Conversion of the Note:      Amount of Principal Balance Due Remaining      Under the Note after this Conversion:  $   Accrued and Unpaid Interest Remaining:  $           [Name of Holder]             By:       Name:     Date Title:               WARRANT NUMBER G _______________   CARDAX, INC.     NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.   THIS CERTIFIES THAT, for value received, _______________ (together with its successors and assigns, the “Holder”), commencing October 8, 2020 (the “Date of Issue”) is entitled to purchase, subject to the conditions set forth below, at any time and from time to time, in whole or in part, during the Exercise Period (as defined in Section 1.3), that number of fully paid and non-assessable shares (the “Shares”) of common stock, par value $0.001 per share (“Common Stock”), of Cardax, Inc., a Delaware corporation (the “Company”), that is not more than the Warrant Share Number (as defined in Section 1.1), subject to the further provisions of this warrant to purchase newly issued shares of Common Stock (the “Warrant”), at the Warrant Exercise Price (as defined in Section 1.2), subject to the further provisions of this Warrant.   1. EXERCISE OF WARRANT   The terms and conditions upon which this Warrant may be exercised, and the shares of Common Stock covered hereby which may be purchased hereunder, are as follows:   1.1. Warrant.   (a) The Company hereby issues to the Holder this Warrant.         (b) The number of Shares that the Holder is entitled to purchase under the terms and conditions of this Warrant (the “Warrant Share Number”) is equal to __________ Shares.   (c) For the purposes of this Agreement, the following terms shall have the respective meanings ascribed thereto in this Section 1.1(c):   (i) “Affiliate” shall have the meaning ascribed to such term under the Securities Act and the regulations promulgated thereunder.   (ii) “Business Day” shall mean any date that the banks and the securities markets are in New York, New York open for business for the conduct of business in the regular course on such date.   (iii) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.   (iv) “Person” shall mean any individual, trust or entity or governmental authority or agency.   1.2. The Warrant Exercise Price. The exercise price for the Warrant (the “Warrant Exercise Price”) shall be equal, per share, to $____, subject to adjustment as provided in Section 4:   1.3. Method of Exercise.   (a) The Holder of this Warrant may exercise, in whole or in part, the purchase rights evidenced by this Warrant during the period commencing on the Date of Issue of this Warrant and ending on October 8, 2025, unless extended by the Company in its sole discretion (the “Exercise Period”). Such exercise shall be effected by:   (i) the surrender of the Warrant, together with a duly executed copy of the form of subscription attached hereto (a “Notice of Exercise”), to the Secretary of the Company at its principal offices;   (ii) the payment to the Company, by certified check or bank draft payable to its order, of an amount equal to the aggregate Warrant Exercise Price for the number of Shares for which the purchase rights hereunder are being exercised; and   (iii) the delivery to the Company, if necessary, to assure compliance with federal and state securities laws, of an instrument executed by the Holder certifying that the Shares are being acquired for the sole account of the Holder and not with a view to any resale or distribution.   (b) Conditions to Exercise of the Warrant.   (i) Notwithstanding the provisions of any provision of this Warrant, including Section 1.3, the exercise of this Warrant is contingent upon the Company’s satisfaction that the issuance of the Shares for which this Warrant is being exercised is exempt from the requirements of the Securities Act and all applicable state securities laws or the Shares are duly registered under the Securities Act. The Holder of this Warrant agrees to execute any and all documents deemed necessary by the Company to effect the exercise of this Warrant.   2     (ii) Notwithstanding anything to the contrary contained herein, the number of Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (the “Beneficial Ownership”, does not exceed 4.99% of the total number of issued and Common Stock issuable upon such exercise) (the “Maximum Percentage”). For the avoidance of doubt, except as otherwise provided herein in connection with a transaction described in Section 4.3 (a “Fundamental Transaction”), this Warrant may not be exercised in whole or in part if the Holder’s Beneficial Ownership (as calculated herein) exceeds the Maximum Percentage prior to such exercise. For such purposes, “Beneficial Ownership” shall be determined in accordance with event of a Fundamental Transaction of this Warrant or under any other provision of Section 4. This restriction may not be waived except by the Holder providing a notice to the Company as provided herein. For any reason at any time, upon the written or oral request of the Holder, the Company shall promptly confirm in writing (which may be by electronic mail) to the Holder the number of shares of Common Stock then outstanding. To the extent that the limitation contained in this Section 1.3(b)(ii) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which a portion of this Warrant is exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be each Holder’s determination of whether this Warrant is case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination other than its obligation in this Section 1.3(b)(ii) above to, upon the Holder’s request, confirm in writing to the Holder the number of shares of Common Stock then outstanding. Notwithstanding any provision of this Section 1.3(b)(ii) to the contrary, the limitations on the exercise of this Warrant under this Section 1.3(b)(ii) shall not be applicable from and after the date that is 61 days after the date that the Holder provides written notice to the Company that the Holder elects to have Beneficial Ownership of the Company’s Common Stock in excess of the Maximum Percentage, in which case such Holder shall have the right to exercise this Warrant without the limitations of this Section 1.3(b)(ii); provided, that the limitations of this Section 1.3(b)(ii) shall again be applicable to any assignee of this Warrant until 61 days after such assignee provides such notice to the Company.   3     1.4. Issuance of Shares. In the event the purchase rights evidenced by this Warrant are exercised in whole or in part, one or more certificates for the purchased Shares shall be issued as soon as practicable thereafter to the Holder.   1.5. Partial Exercise. If this Warrant shall have been exercised only in part, then the Company shall, at the time of delivery of the certificate or certificates for the Shares purchased upon such exercise, also deliver to the Holder a new Warrant evidencing the remaining outstanding unexercised balance of Shares purchasable hereunder.   1.6. Cancellation. Notwithstanding anything in this Warrant to the contrary, this Warrant shall be cancelled, and shall not be exercisable, if it is not exercised before the expiration of the Exercise Period.   2. TRANSFER RESTRICTIONS   2.1. Transfer. This Warrant and the Shares issuable upon exercise hereof are “restricted securities” as such term is defined by the rules and regulations promulgated under the Securities Act. This Warrant and the Shares issuable upon exercise hereof may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of this Warrant or the Shares issuable upon exercise hereof, other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Holder, the Company may require the transferor 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 the transferred Warrant or 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 Warrant and the Agreement and shall have the rights and obligations of a Holder under this Warrant and the Agreement.   2.2. Legend.   (a) The Holder agrees to the imprinting of a legend on any of the Shares issuable upon exercise hereof in the following form:   ACCEPTABLE TO THE CORPORATION. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.   4     (b) Notwithstanding the foregoing, certificates evidencing this Warrant or the Shares issuable upon exercise hereof shall not contain any legend (including the legend set forth above), (i) while a registration statement covering the resale of this Warrant or such Shares issuable upon exercise hereof pursuant to Rule 144, (iii) if this Warrant or such Shares issuable upon exercise hereof are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to this Warrant or such Shares issuable upon exercise hereof and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under interpretations and pronouncements issued by the staff of the Commission).   2.3. Sale. The Holder agrees that the Holder will sell this Warrant or any Shares issuable upon exercise hereof only pursuant to either: (i) the prospectus delivery requirements; or (ii) an exemption therefrom, and that if this Warrant or any Shares issuable upon exercise hereof are sold pursuant to any such effective registration statement, they will be sold in compliance with the restrictive legend from certificates representing the Shares or this Warrant is predicated upon the Company’s reliance upon this understanding.   3. Fractional Shares   Notwithstanding that the number of Shares purchasable upon the exercise of this Warrant may have been adjusted pursuant to the terms hereof, the Company shall nonetheless not be required to issue fractions of Shares upon exercise of this Warrant or to distribute certificates that evidence fractional shares, provided that in lieu of any fraction shares, the Company shall make a cash payment to the Holder in an amount equal to the fair market value (as determined by the Board of Directors of the Company in its reasonable good faith) of such fractional share.   4. ANTIDILUTION PROVISIONS   4.1. Stock Splits and Combinations. If the Company shall at any time subdivide or combine its outstanding shares of Common Stock, this Warrant shall, after that subdivision or combination, evidence the right to purchase the number of shares of Common Stock that would have been issuable as a result of that change with respect to the shares of Common Stock which were purchasable under this Warrant immediately before that subdivision or combination. If the Company shall at any time subdivide the outstanding shares of Common Stock, the Warrant Exercise Price then in effect immediately before that subdivision shall be proportionately decreased, and, if the Company shall at any time combine the outstanding shares of Common Stock, the Warrant Exercise Price then in effect immediately before that combination shall be proportionately increased. Any adjustment under this section shall become effective at the close of business on the date the subdivision or combination becomes effective.   5     4.2. Reclassification, Exchange and Substitution. If the Common Stock issuable upon exercise of this Warrant shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares provided for above), the Holder of this Warrant shall, on its exercise, be entitled to purchase for the same aggregate consideration, in lieu of the Common Stock that the Holder would have been entitled to purchase but for such change, a number of shares of such other class or classes of stock equivalent to the number of shares of Common Stock that would have been subject to purchase by the Holder on exercise of this Warrant immediately before that change.   4.3. Reorganizations, Mergers, Consolidations or Sale of Assets. If at any time there shall be a capital reorganization of the Company’s Common Stock (other than a combination, reclassification, exchange, or subdivision of shares provided for elsewhere above) or merger or consolidation of the Company with or into another entity, or the sale of the Company’s properties and assets as, or substantially as, an entirety to any other person or entity, then, as a part of such reorganization, merger, consolidation or sale, lawful provision shall be made so that the Holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified in this Warrant and upon payment of the Warrant Exercise Price then in effect, the number of shares of Common Stock or other securities or property of the Company, or of the successor entity resulting from such merger or consolidation, to which a holder of the Common Stock deliverable upon exercise of this Warrant would have been entitled in such capital reorganization, merger, or consolidation or sale if this Warrant had been exercised immediately before that capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder of this Warrant after the reorganization, merger, consolidation, or sale to the end that the provisions of this Warrant (including adjustment of the Warrant Exercise Price then in effect and number of Shares purchasable upon exercise of this Warrant) shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. The Company shall, within thirty (30) days after making such adjustment, give written notice (by first class mail, postage prepaid) to the Holder of this Warrant at the address of the Holder shown on the Company’s books. That notice shall set forth, in reasonable detail, the event requiring the adjustment and the method by which the adjustment was calculated, and specify the Warrant Exercise Price then in effect after the adjustment and the increased or decreased number of Shares or the other shares or property purchasable upon exercise of this Warrant. When appropriate, that notice may be given in advance and include as part of the notice required under other provisions of this Warrant.   6     5. Reservation of Stock Issuable Upon Exercise   The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the exercise of this Warrant such number of its shares of Common Stock as shall from time to time be sufficient to effect the exercise of this Warrant and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the exercise of this Warrant, in addition to such other remedies as shall be available to the Holder of this Warrant, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but un-issued shares of Common Stock to such number of shares as shall be sufficient for such purposes.   6. RIGHTS PRIOR TO EXERCISE OF WARRANT   6.1. This Warrant does not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to receive dividends or other distributions, to exercise any preemptive rights, to vote, or to consent or to receive notice as a stockholder of the Company. If, however, at any time prior to the termination of this Warrant and prior to its exercise, any of the following events shall occur:   (a) the Company shall declare any dividend payable in any securities upon its shares of Common Stock or make any distribution (other than a regular cash dividend) to the Holders of its shares of Common Stock; or   (b) the Company shall offer to the holders of its shares of Common Stock any additional Warrant of Common Stock or securities convertible into or exchangeable for shares of Common Stock or any right to subscribe for or purchase any thereof; or   (c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, sale, transfer or lease of all or substantially all of its property, assets and business as an entirety) shall be proposed and action by the Company with respect thereto has been approved by the Company’s Board of Directors;   then in any one or more of said events the Company shall give notice in writing of such event to the Holder at the last address of the Holder as it shall appear on the Company’s records at least twenty (20) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividends, distribution, or subscription rights, or for the determination of stockholders entitled to vote on such proposed dissolution, liquidation or winding up. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to publish, mail or receive such notice or any defect therein or in the publication or mailing thereof shall not affect the validity of any action taken in connection with such dividend, distribution or subscription rights, or such proposed dissolution, liquidation or winding up. Each person in whose name any certificate for shares of Common Stock is to be issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which this instrument was surrendered and payment of the Warrant Exercise Price was made, irrespective of the date of delivery of such stock certificate, except that, if the date of such surrender and payment 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 of Common Stock at the close of business on the next succeeding date on which the stock transfer books are open.   7     7. SUCCESSORS AND ASSIGNS   The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the Holder hereof and their respective successors and permitted assigns.   8. LOSS OR MUTILATION   8.1. Upon receipt by the Company of satisfactory evidence of the ownership of and the loss, theft, destruction, or mutilation of any Warrant, and (i) in the case of loss, theft, or destruction, upon receipt by the Company of indemnity satisfactory to it, or (ii) in the case of mutilation, upon receipt of such Warrant and upon surrender and cancellation of such Warrant, the Company shall execute and deliver in lieu thereof a new Warrant representing the right to purchase an equal number of shares of Common Stock.   8.2. The Holder also acknowledges that each of the Shares issuable upon the due exercise hereof will be subject to any transfer restrictions in the Company’s Articles of Incorporation, including a right of first refusal to the Company, and the certificate or certificates evidencing the Shares will bear a legend to this effect.   9. TERMINATION DATE   This Warrant shall terminate upon the sooner of (a) the expiration of the Exercise Period; or (b) the exercise of all or any portion of this Warrant pursuant to the terms of Section 1 hereof.   10. GOVERNING LAW   This Warrant and any dispute, disagreement or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed or interpreted according to the internal laws of the State of New York without regard to conflicts of law.   11. HEADINGS   The headings and captions used in this Warrant are used only for convenience and are not to be considered in construing or interpreting this Warrant. All references in this Warrant to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference.   12. AMENDMENTS   The terms and conditions of this Warrant shall not be amended, modified or supplemented other than in accordance with a written amendment signed by the Holder and the Company that specifically provides for such amendment, modification or supplement.   8     13. NOTICES   All notices or other communications given or made hereunder shall be in writing and shall be mailed by certified mail, delivered by professional courier or hand, or transmitted via email or facsimile, to such party’s address as set forth in the Warrant Register, or such other address as the Holder or the Company shall notify the other in writing as above provided. Any notice sent in accordance with this section shall be effective on the date three days after the date of mailing or, if delivered by hand or professional courier, or transmitted via email or facsimile with delivery receipt (or acknowledgement or confirmation which may be by electronic means), on the date of delivery, provided, however, that notices to the Company will be effective upon receipt.   14. SEVERABILITY   If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Warrant and the balance of this Warrant shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.   15. WARRANT REGISTER AND OWNERSHIP   Each Warrant issued by the Company shall be numbered and shall be registered in a warrant register (the “Warrant Register”) as it is issued and transferred, which Warrant Register shall be maintained by the Company at its principal office or, at the Company’s election and expense, by a Warrant Agent or the Company’s transfer agent. The Company shall be entitled to treat the registered Holder of any Warrant on the Warrant Register as the owner in fact thereof and the Holder for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person, and shall not be affected by any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes. Subject to Section 10, a Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.   16. certain other provisions   16.1. Any reference to an action or event to occur on a specified date that is not a Business Day shall be a reference to the immediately following Business Day.   16.2. Any calculations of the number of Shares to be issued upon the exercise of this Warrant, in whole or in part, shall be made by the Company and, absent manifest error, such calculation shall be conclusive and binding.   [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]   9     In Witness Whereof, the parties have executed this Warrant as of the date first written above.     COMPANY       CARDAX, INC.         By:             Name:     Title:     TRANSFER AGENT AND REGISTRAR         By:       Authorized Signature           NOTICE OF WARRANT EXERCISE   To: Cardax, Inc. 2800 Woodlawn Drive, Suite 129 Honolulu, HI 96822   Gentlemen:   The undersigned, , hereby elects to purchase, pursuant to the provisions of the foregoing Warrant held by the undersigned, shares of the common stock (“Common Stock”) of Cardax, Inc. Payment of the purchase price of __________ per Share required under such Warrant accompanies this notice.   The undersigned hereby represents and warrants that the undersigned is acquiring such Common Stock for the account of the undersigned and not for resale or with a view to distribution of such Common Stock or any part hereof; that the undersigned is fully aware of the transfer restrictions affecting restricted securities under the pertinent securities laws and the undersigned understands that the shares purchased hereby are restricted securities and that the certificate or certificates evidencing the same will bear a legend to that effect.   By its delivery of this Notice of Warrant Exercise, the undersigned represents and warrants to the Company that (unless indicated below) in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 1.3(b)(ii) of this Warrant to which this notice relates.   If the number of shares of Common Stock purchased (and/or canceled) hereby is less than the number of shares of Common Stock covered by the Warrant, the undersigned requests that a new Warrant representing the number of shares of Common Stock not so purchased (or canceled) be issued and delivered as follows:   ISSUE TO:     _____________________________   (NAME OF HOLDER)       _____________________________   (ADDRESS, INCLUDING ZIP CODE)       __________________________________   (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)     DELIVER TO:         _____________________________   (NAME)         DATED: ____________, ____.   Signature:   _____________________________       Name:   _____________________________       Title:   _____________________________       Address:   _____________________________           _____________________________         ASSIGNMENT FORM     FOR VALUE RECEIVED, [_____] all of or [_____] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to   _______________________________________________ whose address is   _______________________________________________________________   _______________________________________________________________   Dated: ______________, _______   Holder’s Signature: _____________________________   Holder’s Address: _____________________________   Signature Guaranteed: ___________________________________________        
[LETTERHEAD OF MUTUALFIRST FINANCIAL, INC.] February 14, 2008 Mr. John Spitz, Staff Accountant United States Security and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re:MutualFirst Financial, Inc. Form 10-K for Fiscal Year Ended December 31, 2006 Mr. Spitz, MutualFirst Financial, Inc. received the following response from the SEC on a letter submitted on January 17, 2008. “We note your response to comment one from our letter dated January 8, 2008 in which you agree that you misclassified a loan sale transaction as operating activities instead of investing activities within your Consolidated Statement of Cash Flows.We also note that you have agreed to restate your Consolidated Statement of Cash Flows for the affected period in your upcoming Form 10-K.Please address the following: · Clearly state whether you have concluded that this misclassification is a correction of an error, as described by paragraph 2(h) of SFAS 154; · Provide us with your proposed disclosure(s) that will be presented in your upcoming Form 10-K.We refer you to paragraph 26 of SFAS 154; and · We continue to believe that this is a material misstatement of your Consolidated Statement of Cash Flows that requires you to file an Item 4.02 Form 8-K.Please tell us when you intend to file your 8-K.” SEC stated in its letter, “Clearly state whether you have concluded that this misclassification is a correction of an error.” MutualFirst Financial believes the misclassification was an error in the application of GAAP.The correction of the error will be made in the upcoming filing of Form 10-K. SEC stated in its letter, “Provide us with your proposed disclosure(s) that will be presented in your upcoming Form 10-K.” The 2006 consolidated financial statements of MutualFirst Financial, Inc. have been restated to correct a misclassification in the 2006 statement of cash flows.The misclassification involved the inclusion of proceeds from the sale of loans originally held for investment of approximately $23.4 millionin operating activities rather than its proper classification in investing activities. As Originally As Effect of Reported Adjusted Change Proceeds from sales of loans held for sale 49,746,168 26,303,525 (23,442,643) Net cash provided by operating activities 35,119,892 11,677,249 (23,442,643) Proceeds from sale of loans originally held for investment - 23,442,643 23,442,643 Net cash provided by (used in) investing activities (3,779,746) 19,662,897 23,442,643 SEC stated in its letter, “We continue to believe that this is a material misstatement of your Consolidated Statement of Cash Flows that will require you to file an Item 4.02 Form 8-K.Please tell us when you intend to file your 8-K.” MutualFirst Financial will file its 8-K in the time frame required and would appreciate review and confirmation from the SEC that we have satisfied all of the additional requirements. In connection with this response to the Staff’s comments, please also be advised that MutualFirst Financial, Inc acknowledges that: · It is responsible for the adequacy and accuracy of the disclosure in this filing; · Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and · it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. Thank you for your consideration on this matter. Sincerely, /s/ David W. Heeter David W Heeter President and Chief Executive Officer MutualFirst Financial, Inc.
Title: [Ontario] Born w/medical condition. Turned away from ER. Had cardiac arrest after being escorted out of hospital. Now in a coma. Question:My 17 year old nephew was born with a heart condition. He got really bad chest pain waiting for the bus. He called 911 and an ambulance came and rushed him into the ER. When the doctor saw how young my nephew was he said there was no way he could have heart problems. My nephew showed his medic alert bracelet and asked him to look up his name because he had been a patient at that hospital before. The doctor refused claiming my nephew was making it up to get attention (despite an erratic heart rate). He called security over the protest of a nurse. My nephew was threatened with arrest. The security guard also refused to escort him away so the manager/head of security came to do it. My nephew at this point decided to go rather than be arrested, telling the nurse "If I get arrested no one will help me. I'll leave and go to another hospital." He texted his parents to come get him and was escorted away. The security manager walked with him to the edge of the property. As the head of security turned to walk away my nephew collapsed. He was rushed back into the hospital a minute later when the security manager realized he wasn’t faking. He was in cardiac arrest. He was airlifted to another hospital where he had emergency surgery. I’m not sure why they didn’t do it there. His parents showed up to get him and they were sent to the other hospital. A different doctor managed to revive him but he has been in a coma since it happened and has not woken up. This was a month ago on May 2nd. While there were obviously questions about what happened we were so distraught over him we didn’t ask questions right away. The hospital gave a copy of the notes from the first hospital and as well as theirs to my nephew’s cardiologist. He alerted us to something of note: A note on the ER paperwork saying my nephew was “looking for attention” and had “nothing wrong”. It also says “no examination required” and “security called”. The notes from the paramedics note the erratic heart rate and medic alert bracelet. My niece went down there to ask questions (she is a former private investigator) and she was rebuffed by management but approached by the security guard who protested. He gave my niece a copy of his notes, as well as his manager’s notes from the incident. When we formally requested notes from the doctor/hospital we were given them with a page missing (the incriminating notes). The first hospital claimed they were lost. Obviously they screwed up and now my nephew may die. Are the notes and a statement from the security guard enough to pursue legal action? I know medical malpractice can be hard to prove. It’s not even about the money, we have government health insurance and his parents have insurance through work. It’s about holding the first hospital accountable and making that asshole doctor pay. Any advice is appreciated before we get a lawyer. Topic: Medicine and Malpractice Answer #1: No. Just present the lawyer with the facts. His parents need to consult a lawyer. Answer #2: Consult a lawyer ASAP. These cases are very fact specific, there's not much information this sub can provide. Answer #3: Thank-you to both of the posters who spoke of getting a lawyer. His parents are so distraught they can barely focus on sleeping and eating, much less legal matters. We are all doing our best to help them and are encouraging them to get a lawyer. The second hospital has been nothing but wonderful. It's only the first one we have issues with.Answer #4: Wow that's insane. You should contact the College of Physicians and Surgeons of Ontario (CPSO). They take these things very seriously. They've suspended medical licenses for much less than this. You should also look up that doctors name and medical license info on the [CPSO registry](http://www.cpso.on.ca/public-register/all-doctors-search). It will show any disciplinary action he's faced in the past.Answer #5: Jesus Christ, I hope your making this up. A doctor turning away someone with chest pain is awful.Answer #6: OP, I am so very sorry to hear this. No legal advice; just my best wishes to you, your nephew and his parents.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 6-K Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 under the Securities Exchange Act of 1934 For the month of March 2011 Commission File Number:333-170350 SYSWIN INC. 9/F Syswin Building No. 316 Nan Hu Zhong Yuan, Chaoyang District Beijing 100102 The People's Republic of China (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-FXForm 40-F Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. YesNoX *If ‘‘Yes’’ is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date:March 24, 2011 SYSWIN Inc. By: /s/Kai Li Name: Kai Li Title: Chief Financial Officer - 1 - Exhibit Index Exhibit 99.1 – Press Release - 2 -
  Exhibit 10.34   THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE "SECURITIES ACI"'), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF A WRITTEN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS.   GREENWAY TECHNOLOGIES, INC. Subordinated Convertible Promissory Note Dated: December 20, 2017 $166,667.00   For value received, Greenway Technologies, Inc., a Texas corporation (the "Company"), hereby promises to pay to the order of Tunstall Canyon Group, LLC, a Texas limited liability Company (together with its successors, representatives, and permitted assigns, the "Payee"), in accordance with the terms hereinafter provided, the principal amount of One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven and No/ 100 Dollars (S 166,667.00), together with interest from the date hereof (the "Issuance Date"), on the unpaid principal at the rate of4.50% per annum. [image_095.jpg][image_096.jpg]Interest shall be computed on the basis of a 360-day year of twelve 3D-day months and shall accrue commencing on the Issuance Date. Furthermore, upon the occurrence of an Event of Default (as defined below), then to the extent permitted by law, the Company will pay interest in cash to the Payee, payable on demand, on the outstanding principal balance of the Note from the date of the Event of Default until such Event of Default is cured at the maximum applicable legal rate per annum. All payments under or pursuant to this Note shall be made in United States Dollars in immediately available funds by wire transfer to the Payee's bank account, pursuant to instructions to be provided by the Payee to the Company. The outstanding principal balance of this Note, plus all accrued interest, shall be due and payable as follows: On December 20, 2018, the sum of $86,667.00, plus accrued interest. On December 20, 2019, the sum of $80,000.00, plus accrued interest. The Company reserves the right to prepay this Note (in whole or in part) prior to any maturity date with no prepayment penalty. Any such prepayment shall be applied against the principal due under this Note and shall be accompanied by the payment of accrued interest on the amount prepaid to the date of prepayment. Provided, however, notwithstanding anything herein contained to the contrary, the Payee, in its sole discretion, in whole or in part and, in lieu of requiring that the Company make a cash payment of principal due on this Note on a due date as specified above, may elect instead to convert a portion of this Note and receive shares of the common stock of the Company, par value SO.OOOI per share (the "Common Stock") at the rate of $0.08 per share for each one dollar of cash payment which may be then due hereunder (the "Conversion Price"). All payments of accrued interest shall be in cash. For example, if the Payee desires to receive the principal payment of $86,667.00 due on December 20, 2018, in shares of the Common Stock instead of cash, the Company shall issue to the Payee 1,083,333 shares of the Common Stock. If the Payee desires to receive the principal payment of $80,000.00 due on December 20, 2019, in shares of the Common Stock instead of cash, the Company shall issue to the Payee 1,000,000 shares of the Common Stock. If any payment obligation under this Note is not paid when due, the Company promises to pay all costs of collection, including reasonable attorney fees, whether or not a lawsuit is commenced as part of the collection process. If any of the following events of default (an "Event of Default") occurs, this Note and any other obligations of the Company to the Payee, shall become due immediately, without demand or notice:     * [image_097.jpg]The failure of the Company to pay the principal and any accrued interest when due; * [image_097.jpg]The liquidation or dissolution of the Company; * [image_097.jpg]The filing of bankruptcy proceedings involving the Company as a debtor; * [image_097.jpg]The application for the appointment of a receiver for the Company; * [image_097.jpg]The making of a general assignment for the benefit of the Company's creditors; * [image_097.jpg]The insolvency of the Company; * [image_097.jpg]A misrepresentation by the Company to the Payee for the purpose of obtaining or extending credit; or * [image_097.jpg]The sale of a material portion of the business or assets of the Company. [image_098.jpg][image_099.jpg][image_099.jpg][image_100.jpg][image_101.jpg] All payments due under this Note shall be subordinated and made junior, in all respects to the payment in full of all principal, all interest accrued thereon and all other amounts due on any indebtedness outstanding prior to the Issuance Date. Whenever any payment to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of Texas, such payment may be due on the next succeeding business day and such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date. This Note may be transferred, sold, pledged, hypothecated or otherwise granted as security by the Payee subject only to the express prior written consent of the Company which consent shall not be unreasonably withheld. No delay in enforcing any right of the Payee under this Note, or assignment by the Payee of this Note, or failure to accelerate the debt evidenced hereby by reason of default in the payment of an installment or the acceptance of a past-due installment shall be construed as a waiver of the right of the Payee to thereafter insist upon strict compliance with the terms of this Note without notice being given to Company. All rights of the Payee under this Note are cumulative and may be exercised concurrently or consecutively at the Payee's option. [image_102.jpg]Covenants of the Company. The Company covenants that, while this Note is convertible (a) it will reserve from its authorized and unissued shares of the Common Stock a sufficient number of shares of the Common Stock to provide for the delivery of the shares of the Common Stock pursuant to any conversion of this Note, and (b) that all shares of the Common Stock which may be issued upon any such conversion of this Note will be fully paid and non-assessable. 2.                 Protection Against Dilution. Etc. In any of the following events, occurring after the Issuance Date, appropriate adjustment shall be made in the number of shares of the Common Stock to be deliverable upon any conversion of this Note and the purchase price per share of the Common Stock to be paid, so as to maintain the proportionate interest of the Payee as of the Issuance Date: (a) recapitalization of the Company through a split-up or reverse split of the outstanding shares of the Common Stock into a greater or lesser number, as the case may be, or (b) declaration of a dividend on the shares of the Common Stock, payable in shares of the Common Stock or other securities of the Company convertible into shares of the Common Stock, or (c) any of the events described in Paragraph 4 hereof. 3.                 Merger. Etc. In case the Company, or any successor, shall be consolidated or merged with another Company, or substantially all of its assets shall be sold to another company in exchange for stock, cash or other property with the view to distributing such stock, cash or other property to its shareholders, each of the shares of the     Common Stock purchasable by this Note shall be replaced tor the purposes hereof by the securities of the Company or cash or property issuable or distributable in respect of one share of the Common Stock of the Company, or its successors, upon such consolidation, merger, or sale, and adequate provision to that effect shall be made at the time thereof. Provided, however, notwithstanding anything herein contained to the contrary, in the event that the terms of any such consolidation, merger or sale call for the distribution of any cash or property to the shareholders of the Company, no such cash or property shall be distributable to the Payee in connection with any unconverted portion of this Note, unless the Payee shall have converted this Note pursuant to the terms of Paragraph 6 hereof and all other terms of this Note. 4.                 Notice of Certain Events. Upon the happening of any event requiring an adjustment of the [image_103.jpg][image_104.jpg][image_105.jpg]Conversion Price, the Company shall forthwith give written notice thereof to the Payee stating the adjusted Conversion Price and the adjusted number of shares of the Common Stock purchasable upon the conversion hereof resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Board of Directors of the Company shall determine the computation made hereunder. In the case of (a) any consolidation, merger, or sale affecting the Company and calling for the payment of cash or the delivery of property to shareholders of the Company, or (b) any voluntary or involuntary dissolution, liquidation, or winding up of the Company shall at any time be proposed, the Company shall give at least 20 days' prior written notice thereof to the Payee stating the date on which such event is to take place and the date (which shall be at least 20 days after the giving of such notice) as of which the holders of record of shares of the Common Stock shall be entitled to participate in any such event. If the Payee does not elect to convert any part of this Note as a result of any such notice, the Payee shall have no right with respect to any portion of this Note which shall remain unconverted to participate in (x) any such cash or other property resulting from any such consolidation, merger or sale, or (y) any voluntary or involuntary dissolution, liquidation, or winding up of the Company.   5.                 Shareholders' Rights. Until a valid conversion of this Note, the Payee shall not be entitled to any rights of a shareholder with respect to the shares of the Common Stock covered by this Note and not so converted; but immediately upon a conversion of this Note as provided herein, the Payee shall be deemed a record holder of the shares of the Common Stock received as a result of any such conversion. 6.                 Manner of Conversion. In order to convert this Note, the Payee shall surrender this Note, duly endorsed or assigned to the Company or, in blank, at the office of the Company, accompanied by a written Form of Conversion attached hereto (the "Conversion Notice") that the Payee elects to convert this Note or, if less than the entire amount thereof is to be converted, the portion thereof to be converted. This Note shall be deemed to have been converted immediately prior to the close of business on the day of surrender of this Note for conversion in accordance with the foregoing provisions, and at such time the person or persons entitled to receive the shares of the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of the shares of the Common Stock at such time. As promptly as practicable on or after a conversion date, but in no event later than five business days, the Company shall issue and shall deliver to the Payee a certificate or certificates for the number of full shares of the Common Stock issuable upon such conversion. In case this Note is converted in part only, upon such conversion the Company shall execute and deliver to the Payee thereof, at the expense of the Company, a new Note, in the aggregate, in the number of shares of the Common Stock covered by the unconverted portion of this Note. 7.                 Limitation on Conversion. The Payee (including any successor, transferee or assignee) shall not have the right to convert any portion of this Note to the extent that after giving effect to such conversion, the Payee     (together with the Payee's affiliates) would beneficially own in excess of 9.99% (the "Maximum Percentage") of the number of shares of the Common Stock of the Company outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of the Common Stock beneficially owned by the Payee and its affiliates shall include the number of shares of the Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares Of the Common Stock which would be issuable upon (i) conversion of the remaining, non-converted portion of this Note beneficially owned by the Payee or any of its affiliates, and (ii) conversion of the unconverted or limitation, any other notes of the Company) subject to a limitation on conversion analogous to the limitation contained herein beneficially owned by the Payee or any of its affiliates. 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 the Common Stock, the Payee may rely on the number of outstanding shares of the Common Stock as reflected in (x) the Company's most recent Form 10-K, Form 10-Q or Form 8-K, as the case may be, (y) a more recent public announcement by the Company, or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of the Common Stock outstanding. For any reason at any time, during regular business hours of the Company and upon the written request of the Payee, the Company shall within two business days confirm in writing to the Payee the number of shares of the Common Stock then outstanding. In any case, the number of outstanding shares of the Common Stock shall be determined after giving effect to the conversion of securities of the Company, including this Note, by the Payee or its affiliates since the date as of which such number of outstanding shares of the Common Stock was reported. By written notice to the Company, the Payee may increase or decrease the Maximum Percentage to any other percentage specified in such notice; provided that (A) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (B) any such increase or decrease will apply only to the Payee and not to any other party.        [image_108.jpg]8. Representations and Covenants Of the Payee. The Payee represents and covenants that this Note has not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any other applicable securities law. This Note has been purchased for investment only and not with a view to distribution or resale, and may not be sold, pledged, hypothecated or otherwise transferred unless this Note or the shares of the Common Stock represented hereby are registered under the Securities Act, and any other applicable securities law, or the Company has received an opinion of counsel satisfactory to it that registration is not required. A legend in substantially the following form will be placed on any certificates or other documents evidencing the shares of the Common Stock to be issued upon any conversion of this Note:   PROMULGATED THEREUNDER.   Further, stop transfer instructions to the transfer agent of the shares of the Common Stock have been or will be placed with respect to the shares of the Common Stock so as to restrict the resale, pledge, hypothecation or other transfer thereof, subject to the further items hereof, including the provisions of the legend set forth in this paragraph. [image_107.jpg]       9.                 Fractional Shares. Upon the conversion of this Note, no fractions of shares of the Common Stock shall be issued. If any such fraction might exist, the number of shares of the Common Stock shall be rounded down to the nearest whole number of shares. 10.             Registration Obligation. The Company has not agreed to file and the Company does not anticipate the filing of a registration statement under the Securities Act to allow a public resale of this Note or the resale of any shares of the Common Stock issued upon the conversion of this Note. 11.              Loss. Theft. Destruction of Note. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of this Note and, in the case of any such loss, theft, or destruction, upon receipt of indemnity reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Note, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Note, a new Note of like tenor. 12.              Arbitration. Any controversy or claim arising out of or relating to this Note, or the breach, termination, or validity thereof, shall be settled by final and binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA Rules") in effect as of the effective Issuance Date. The American Arbitration Association shall be responsible for (a) appointing a sole arbitrator, and (b) administering the case in accordance with the AAA Rules. The situs of the arbitration shall be Fort Worth, Texas. Upon the application of either party to this Note, and whether or not an arbitration proceeding has yet been initiated, all courts having jurisdiction hereby are authorized to (x) issue and enforce in any lawful manner, such temporary restraining orders, preliminary injunctions and other interim measures of relief as may be necessary to prevent harm to a party's interest or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Note, and (y) enter and enforce in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interest or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Note. Any order or judgment rendered by the arbitrator may be entered and enforced by any court having competent jurisdiction. 13.              Benefit. All the terms and provisions of this Note shall be hereto, and their respective successors and permitted assigns. [image_109.jpg] 14 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (a) on the date they are delivered if delivered in person; (b) on the date initially received if delivered by facsimile transmission or email followed by registered or certified mail confirmation; (c) on the date delivered by an overnight courier service; or (d) on the third business day after it is mailed by registered or certified mail, return receipt requested with postage and Other fees prepaid, if to the Company addressed to Mr. D. Patrick Six at 8851 Camp Bowie West Boulevard, Suite 240, Fort Worth, Texas 761 16, telephone (817) 709-8567, and email patrick.six@gwtechinc.com; and if to the Payee addressed to Tunstall Canyon Group, LLC at 300 County Road 438, Eastland, Texas 76448, and email stanwoods219@gmail.com. Any party hereto may change its address upon 10 days'   15.              Construction. Words of any gender used in this Note shall be otherwise. In addition, the pronouns used in this Note shall be understood and construed to apply whether the party referred to is an individual, partnership, joint venture, corporation or an individual or individuals doing business under a firm or trade name, and the masculine, feminine and neuter pronouns shall each include the other and may be used interchangeably with the same meaning.       16.              Headings. The headings used in this Note are for convenience and reference only and in no way define, limit, simplify or describe the scope or intent of this Note, and in no way effect or constitute a part of this Note. 17.              Invalidity. In the event any one or more of the provisions contained in this Note shall, for any reason, be held to be invalid, illegal or shall not affect the other provisions of this Note. 18.              Law Governing. This Note shall be construed and governed by the laws of the State of Texas, and all obligations hereunder shall be deemed performable in Tarrant County, Texas.   [image_110.jpg] IN WITNESS WHEREOF, this Note has been issued on December 20, 2017.   GREENWAY TECHNOLOGIES, [NC. [image_005.gif]
Exhibit 10.18       [logo2.jpg]
Exhibit 10.32 EMPLOYMENT AGREEMENT      THIS AGREEMENT is made effective as of August 1, 2008 (the “Effective Date"), between HASTINGS ENTERTAINMENT, INC., a Texas corporation (the “Company"), and Kevin Ball, an individual (the “Executive"). WITNESSETH:      WHEREAS, the Company and the Executive desire to set forth the terms of their agreements relating to the employment of Executive by the Company; and      NOW THEREFORE, in consideration of the mutual promises herein contained, the Company and the Executive agree as follows: 1. Employment. The Company hereby employs the Executive and the Executive hereby accepts such employment subject to the terms and conditions contained in this Agreement. The Executive is engaged as an employee of the Company. Neither the Executive nor the Company intend to create a joint venture, partnership or other relationship that might impose a fiduciary obligation on the Executive or the Company in the performance of this Agreement, other than as an officer of the Company. 2. Executive’s Duties. The Executive is employed on a full-time basis. Throughout the term of this Agreement, the Executive will use the Executive’s best efforts and due diligence to assist the Company in the objective of achieving the most profitable operation of the Company and the Company’s affiliated entities consistent with developing and maintaining a quality business operation.   2.1   Specific Duties. During the term of this Agreement, the Executive will serve as Vice-President of Marketing and perform the duties of such office as set forth in the Bylaws of the Company. The Executive agrees to use the Executive’s best efforts to perform all of the services required to fully and faithfully execute the offices and positions to which the Executive is appointed and elected and such other services as may be reasonably directed by the Chief Executive Officer of the Company in accordance with this Agreement.     2.2   Modifications. The precise duties to be performed by the Executive may be extended or curtailed in the discretion of the Chief Executive Officer of the Company.     2.3   Responsibility. The Board of Directors of the Company retains ultimate responsibility to determine the duties of the Executive.     2.4   Rules and Regulations. From time to time, the Company may issue policies and procedures applicable to all its employees including the Executive. These policies and procedures include, but are not limited to, the Company’s Associate Handbook and Code of Conduct. The Executive agrees to comply with such policies and procedures, except to the extent such policies conflict Page 1 of 18         with a material term or condition contained within this Agreement. Such policies and procedures may be supplemented, modified, changed or adopted without notice in the sole discretion of the Company at any time. In the event of a conflict between such policies and procedures and this Agreement, this Agreement will control unless compliance with this Agreement will violate any law or regulation applicable to the Company or its affiliated entities. The Company will apply its existing and future policies and procedures in a lawful and evenhanded manner. 3. Other Activities. Except for activities approved by the Board of Directors, during the period of Executive’s employment, the Executive will not: (a) engage in activities which require such substantial services on the part of the Executive that the Executive is unable to perform the duties assigned to the Executive in accordance with this Agreement; (b) serve as an officer or director of any publicly held entity; or (c) directly or indirectly invest in, participate in or acquire an interest in any entity as defined in Section 8(a)(i)(a) or (b). The limitations in this Section 3 will not prohibit an investment by the Executive in publicly traded securities as allowed in Section 8(a)(i). The Executive is not restricted from maintaining or making investments, or engaging in other businesses, enterprises or civic, charitable or public service functions if such activities, investments, businesses or enterprises do not result in a violation of clauses (a) through (c) of this Section 3. 4. Executive’s Compensation. The Company agrees to compensate the Executive as follows:   4.1   Base Salary. A base salary (the “Base Salary"), in an annual rate of not less than ONE HUNDRED SEVENTY-THREE THOUSAND EIGHT HUNDRED SIXTY-TWO AND 47/100 ($173,862.47), will be paid to the Executive in installments consistent with the Company’s customary payroll practices, during the term of this Agreement.     4.2   Bonus. In addition to the Base Salary, the Executive will participate in the Corporate Officer Incentive Plan (“COIP”). Executive’s incentive target expressed as a percentage of Base Salary for the COIP initially shall be Twenty-Five percent (25%), proportionately reduced as to any pro-rated performance period during which Executive is employed.     4.3   Equity Compensation. In addition to the compensation set forth in Sections 4.1 and 4.2 of this Agreement, the Executive will be allowed to participate in grants of stock options, restricted stock or other equity related awards from the Company’s stock compensation plans put into effect from time to time, subject to the terms and conditions of such plans.     4.4   Benefits. The Company agrees to extend to the Executive retirement benefits, deferred compensation, reimbursement of reasonable expenditures for dues, travel and entertainment and any other benefits the Company provides to other executives or officers from time to time on the same general terms as such benefits are provided to such individuals. The Company will also provide the Executive the opportunity to apply for coverage under the Page 2 of 18         Company’s medical, life and disability plans, if any. If the Executive is accepted for coverage under such plans, the Company will provide such coverage on the same terms as is customarily provided by the Company to the plan participants as modified from time to time.   4.4.1   Vacation. The Executive will be entitled to take paid vacation (as approved) each calendar year during the term of this Agreement in accordance with Company policy, subject to proration for any portion of a calendar year under this Agreement. No additional compensation will be paid for failure to take vacation and no vacation may be carried forward from one calendar year to another.   4.5   Gross-Up Payment. In the event it is determined that any payment or distribution by the Company or the Company’s subsidiaries or affiliates 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 4.5) (“Parachute Payments”) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the “Code") or any interest or penalties related to such excise tax (collectively, the “Excise Tax"), and parachute payments exceed 110% of the Executive’s “280G parachute limit” (determined in accordance with Internal Revenue Code Section 280G) the Executive will be entitled to receive an additional payment (a “Gross-Up Payment”) from the Company. The Gross-Up Payment will be equal to the amount such that after payment by the Executive of all taxes (including the Excise Tax, income taxes, interest and penalties imposed with respect to such taxes) on the Gross-Up Payment, the Executive will retain an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payment. If the Parachute Payments to Executive are less than 110% of the 280G parachute limit, then the amount of Parachute Payments will instead be reduced so that they are $1 less than the 280G parachute limit. The Gross-Up Payment shall be paid to Executive no later than the last day of the year after the year in which the Executive remits the underlying taxes, penalties, and interest. If and to the extent Executive’s compensation must be reduced to avoid Section 4999 excise taxes, the annual bonus amount shall be reduced first, and if any additional amounts must be reduced then the annual salary amount shall be reduced.   4.5.1   Determination. Subject to the provisions of Section 4.5.2 all determinations required to be made under this Section 4.5 (including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized) will be made by a nationally recognized certified public accounting firm designated by the Executive (the “Accounting Firm"). The Accounting Firm will provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment of excise tax, interest and/or penalties on the Parachute, or such Page 3 of 18         earlier time as is reasonably requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a Change of Control (as hereinafter defined), the Executive will be entitled to appoint another nationally recognized accounting firm to make the determinations required under this Section (which accounting firm will then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm will be paid by the Company. Any Gross-Up Payment required to be paid under this Section 4.5 will be paid by the Company to the Executive within five (5) days of the receipt of the Accounting Firm’s determination, but no later than the last day of the year after the year in which the Executive remits the underlying taxes, penalties, and interest. Any determination by the Accounting Firm will be binding on the Company and the the Code at the time of initial determination by the Accounting Firm, the Gross-Up Payment made by the Company may be less than actually required (an “Underpayment") consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 4.5.2 below and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of the Underpayment that has occurred and any such Underpayment will be promptly paid by the Company to or for the benefit of the Executive. Any Underpayment will be reimbursed, to the extent possible, in the same calendar year in which it occurred.     4.5.2.   Contest of Claims. The executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification will be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and will apprise the Company of the nature of Executive will not pay such claim prior to the expiration of the thirty (30) day period following the date on which the Executive notifies the Company (or such claim is due). If the Company notifies the Executive in writing prior to the expiration of such thirty (30) day period that the Company desires to contest such claim, the Executive will: (a) provide to the Company any information reasonably requested by the Company relating to such claim; (b) take such action in connection with contesting such claim as the Company reasonably requests in writing including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (c) cooperate with the Company in good faith as necessary to effectively contest such claim; and (d) permit the Company to participate in any Page 4 of 18         proceedings relating to such claim. The Company will bear and pay directly connection with the contest of the claim and agrees to 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 protest (including payment of costs and expenses as provided hereunder). Without limitation on the foregoing provisions, the Company will control all proceedings related to such contested claim, may at its sole option 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. 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 reasonably determines. If the Company directs the Executive to pay a claim and sue for a refund, the Company will be required to advance the amount of such payment to the Executive on an interest-free basis and agrees to 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, provided 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 contested claim will be hereunder and the Executive will be entitled to settle or contest, as the case taxing authority.     4.5.3   Refunds. If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 4.5.2 the Executive becomes entitled to receive any refund with respect to such claim the Executive will (subject to the Company’s complying with the requirements of Section 4.5.2) 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 4.5.2, a determination is made that the Executive will 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 thirty (30) days after such determination then the advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to Page 5 of 18         the extent thereof, the amount of Gross-Up Payment required to be paid.   4.6   Compensation Review. The compensation of the Executive will be reviewed on a regular basis by the Board of Directors of the Company (or a Compensation Committee thereof) and shall be reviewed annually if the compensation of other executive officers of the Company is reviewed at such frequency. The compensation of the Executive prescribed in Section 4 of this Agreement (including benefits) may be increased at the discretion of the Board of Directors of the Company or the Compensation Committee. 5. Term. In the absence of an earlier termination as set forth in Section 6 below, this Agreement will extend for a term commencing on the Effective Date, and ending on December 31, 2009 and, subject to the separation from service rights of either Company or Executive, continuing automatically for successive twelve (12) month periods thereafter. Either Company or Executive may terminate this Agreement effective as of January 1st of any year beginning as of January 1, 2010 provided that written notice of such termination is given to the other party on or before ninety (90) days preceding such January 1st date of termination. However, unless the Company provides written notice of non-extension to the Executive on or before thirty days prior to the expiration date, the term and the expiration date will be automatically extended for one (1) additional year. The Executive may continue to be employed by the Company upon termination of this Agreement if mutually agreed in writing by Executive and Company. 6. Separation from Service. The Executive’s employment will continue in effect until the expiration of the term set forth in Section 5 of this Agreement unless an earlier separation from service occurs pursuant to this Section 6.   6.1   Separation from Service by Company. The Company will have the following rights to cause a separation from service between Employee and Company:   6.1.1   Separation from Service without Cause. The Company may cause a separation from service and Executive’s employment shall terminate without Cause at any time by the service of written notice of separation from service and termination to the Executive specifying an effective date of such separation and termination not sooner than ten (10) days after the date of such notice (the “Separation from Service Date"). In the event the Executive is separated and terminated without Cause (other than a CC Separation from Service under Section 6.3 of this Agreement), the Executive will receive as compensation: (i) for a period of 18 months his Base Salary (as in effect on the Separation from Service Date) plus bonus payable under COIP (based upon the incentive target percentage in effect on the Separation from Service Date and assuming Company performance at 100% of target); and (ii) any vacation pay accrued through the Separation from Service Date. The payment of such Page 6 of 18         amounts shall be made during the remaining term of the Agreement in installments consistent with the Company’s normal payroll practices (including proration of bonus and payment of bonus when normally paid by the Company) but, if on the Separation from Service Date, the Executive is a “specified employee” as defined in regulations under Section 409A of the Code, such payments, to the extent not exempt, will commence on the first payroll payment date which is more than six (6) months following the Separation from Service Date (except as otherwise required under 11.11 hereof) and the first payment shall include any amounts that would have otherwise been payable during the six month period.     6.1.2   Separation from Service for Cause. The Company may cause a separation from service, and Executive’s employment shall terminate, for Cause. For purposes of this Agreement, “Cause” means either of the following: (a) the engagement by the Executive in illegal conduct, gross misconduct or a clearly established material violation of the Company’s written policies and procedures; or (b) the failure of the Executive to perform substantially the Executive’s duties with the Company or its subsidiaries or affiliates (other than a failure resulting from incapacity due to physical or mental illness).      For purposes of Section 6.1.2(a) of this Agreement, “gross misconduct” means conduct evidencing a willful or wanton disregard for the legitimate business interests of the Company, deliberate violations of Company policy or flagrant disregard for standards of behavior the Company has a right to expect from one of its corporate officers, to the extent such policy or standards of behavior do not violate any law or regulation.      Any act, or failure to act, based on authority given pursuant to a resolution duly adopted by the Board of Directors based on the advice of counsel for the Company will be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. In the event a separation from service occurs for Cause, the Company will not have any obligation to provide any further payments or benefits to the Executive after the effective date of such separation from service, except for prorated bonus based on actual performance at the end of the performance period, and accrued vacation through date of separation from service, and any other amounts required by applicable law or policy.   6.2   Separation from Service by Executive. The Executive may voluntarily cause a separation from service with the Company by the service of written Page 7 of 18         notice of such separation from service to the Company specifying an effective date of such separation from service thirty (30) days after the date of such notice, during which time the Executive may use remaining accrued vacation days, or at the Company’s option, be paid for such days. In the event separation from service is undertaken by the Executive, neither the Company nor the Executive will have any further obligations hereunder, except for any obligations which expressly survive separation from service including, without limitation, any obligation of the Company to provide any further payments or benefits to the Executive after the effective date of such separation from service.     6.3   Separation from Service After Change in Control. If during the term of this Agreement there is a “Change of Control” and within twenty-four (24) months thereafter, notwithstanding any separation from service pursuant to Section 5, there is a CC Separation from Service (as hereafter defined), then the Executive will be entitled to a severance payment (in addition to any other rights and other amounts payable to the Executive or under Company plans in which Executive is a participant) payable in a lump sum in cash within 10 days following the CC Separation from Service in an amount equal to two times (2X) the sum of the following: (a) the Executive’s Base Salary for the last eighteen (18) calendar months ending immediately prior to the CC Separation from Service and bonus paid pursuant to Section 4.2 (based upon the incentive target percentage in effect on the Separation from Service Date and assuming Company performance at 100% of target); plus (b) any applicable Gross-Up Payment. If the foregoing amount is not paid within ten (10) days after the CC Separation from Service, the unpaid amount will bear interest at the per annum rate of 12%, but in no event higher than the highest rate allowed by applicable law. Notwithstanding the foregoing, if at the time of a CC Separation from Service, the Executive is a “specified employee” as defined in regulations under Section 409A of the Code, such payment, to the extent not exempt, will be made on the first day which is more than six months following the CC Separation from Service. In connection with any Change of Control, the Company shall obtain the assumption of this Agreement, without limitation or reduction, by any successor to the Company or any parent corporation of the Company. In addition, the vesting for stock options, SERP, and issued restricted stock shall be accelerated to the date of the CC Separation from Service.   6.3.1   Change of Control. For the purpose of this Agreement, a “Change of Control” means the occurrence of any of the following: (the “Exchange Act")) (a “Person"), other than John H. Marmaduke or his affiliate or by a party or entity acting for or by the direction of John Marmaduke (the “Exempt Persons"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i) the Page 8 of 18   then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting directors (the “Outstanding Company Voting Securities"). For purposes of this paragraph (a) the following acquisitions by a Person will not constitute a Change of Control: (i) any acquisition directly from the Company; (ii) any acquisition by the Company; (iii) any acquisition by any employee benefit plan controlled by the Company; or (iv) any acquisition by any corporation pursuant Section 6.3.1. (b) If, during any 12 consecutive month period during this Agreement, the individuals who, as of the date hereof, constitute the Board of Directors (the “Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors. Any individual becoming a director subsequent to the date is approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered a member of the Incumbent Board as of the date hereof, but any such individual whose initial assumption of office occurs election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board will not be deemed a member of the Incumbent Board as of the date hereof. (c) The consummation of a reorganization, merger, consolidation or sale or other “Business Combination"), unless following such Business Combination: (i) (a) the individuals and entities who were the beneficial owners, Combination (including without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in Page 9 of 18   Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities as the case may be,      (b) no Person (excluding any corporation resulting from such Business Combinations or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) other than one or more of the Exempt Persons beneficially owns, directly or indirectly, 40% or corporation resulting from such Business Combination of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and      (c) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the action of the Board, providing for such Business Combination, or      (d) A majority of the board of directors of the corporation resulting from such Business Combination are Incumbent Directors. (d) The approval by the shareholders of the Company of a complete liquidation or   6.3.2   Change of Control Separation from Service. The term “CC Separation from Service” means any of the following: (a) a separation from service is undertaken by the Company other than under Sections 6.1.2, 6.4 or 6.5; or (b) the Executive undertakes a separation from service as a result of a material adverse change in the Executive’s duties or title, a significant reduction in the Executive’s then current Base Salary that is not generally applicable to all or substantially all of the Company’s executives or a significant reduction in the Executive’s then current benefits as provided in Section 4; (c) a relocation of more than One Thousand (1,000) miles from the Executive’s then current place of employment being required by the Board of Directors; (d) the approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or (e) a default by the Company under this Agreement. Page 10 of 18     6.4   Incapacity of Executive. If the Executive suffers from a medically diagnosed physical or mental condition, which in the reasonable business judgment of the Company’s Board of Directors, prevents the Executive (in whole or in part) from performing the duties specified herein for a period of four (4) consecutive months, the Company may cause a separation from service, in which event, the Company will pay Executive his Base Salary and Bonus (computed at up to 100% of plan based on actual performance, but in no event more than 100% of plan regardless of actual performance) in effect on the date of notice of separation from service through the lesser of (i) the death of Executive; or (ii) the remaining term of this Agreement, but in any event through the Expiration Date, reduced by any disability payments received by Executive from any third party. The payment of such amounts shall be made during the remaining term of the Agreement in installments consistent with the Company’s normal payroll practices. It is the intent of the parties to hereby create a “bona fide disability plan provision” exempt from IRC 409A, but, if on the separation from service date, the Executive is a “specified employee” as defined in regulations under Section 409A of the Code, such payments, in and to the extent deemed covered by 409A, will commence on the first payroll payment date which is more than six months following the notice of separation from service date and the first payment shall include any amounts that would have otherwise been payable during the six (6) month period. Notwithstanding the foregoing, the amount payable hereunder will be reduced by any benefits payable under any disability plans provided by the Company under Section 4.4 of this Agreement. Nothing in this Section will be interpreted or applied so as to lessen the Executive’s rights under state or federal disability or medical leave laws.     6.5   Death of Executive. If the Executive dies during the term of this Agreement, it will be deemed that a separation from service occurred on the date of death and Executive’s employment will terminate without compensation to the Executive’s estate except: (a) the obligation to continue the Base Salary payments under Section 4.1 of this Agreement for twelve (12) months after the date of death of the Executive, and (b) the benefits described in Section 4.4 of this Agreement accrued through the date of death of the Executive, including a prorated portion of bonus paid pursuant to the provisions and goals of the COIP then in effect, based upon the incentive target percentage in effect and assuming performance at 100% of target.     6.6   Resignation Following Constructive Discharge. If at any time, except in connection with a separation from service otherwise pursuant to this Agreement, Executive is Constructively Discharged (as that term is defined in this Section 6) then Executive shall have the right, by written notice to Company within sixty (60) days of such Constructive Discharge, to undertake a separation from service hereunder, effective as of thirty (30) days after such notice. Executive shall in such event be entitled to the compensation and benefits as if such separation from service occurred pursuant to Section 6.1.1. Page 11 of 18   For purposes of this Agreement, Executive shall be “Constructively Discharged” upon the occurrence of any one of the following events: (a) Executive is demoted or removed from his position with the Company other than as a result of Executive’s appointment to a position of equal or superior scope and responsibility. (b) Executive’s targeted total compensation is reduced by more than 20% (other than across-the-board reductions similarly affecting all executive officers of Company). (c) Executive experiences a material adverse change of duties or responsibilities in his position. (d) Any material breach of this Agreement by the Company.   6.7   Effect of Separation from Service. A separation from service will terminate all obligations of the Executive to render services on behalf of the Company. The Executive will maintain the confidentiality of all information acquired by the Executive during the term of his Employment in accordance with Section 7 of this Agreement and the covenants set forth in Section 8 of this Agreement. Except as otherwise provided in this Section 6, no accrued bonus, severance pay or other form of compensation will be payable by the Company to the Executive by reason of the separation from service. In the event that payments are required to be made by the Company under this Section 6, the Executive will not be required to seek other employment as a means of mitigating the Company’s obligations hereunder resulting from separation from service and the Company’s obligations hereunder (including payment of severance benefits) will not be terminated, reduced, or modified as a result of the Executive’s earnings from other employment or self-employment. All keys, entry cards, credit cards, records, financial information, furniture, furnishings, equipment, supplies and other items relating to the Company will remain the property of the Company. The Executive will have the right to retain and remove all personal property and effects that are owned by the Executive and located in the offices of the Company, subject to inspection by the Company. All such personal items will be removed from such offices no later than ten (10) days after the effective date of separation from service, and the Company is hereby authorized to discard any items remaining and to reassign the Executive’s office space after such date. Prior to the effective date of termination, the Executive will cooperate with the Company to provide for the orderly separation from service of the Executive’s employment. 7. Confidentiality. The Executive recognizes that the nature of the Executive’s services are such that Executive will have access to information which constitutes trade secrets, is of a confidential nature, is of great value to the Company or is the foundation on which the business of the Company is predicated. The Executive agrees not to disclose to any person other than the Company’s employees or the Company’s legal counsel or other Page 12 of 18   parties authorized by the Company to receive confidential information (“Confidential Information") nor use for any purpose, other than the performance of this Agreement, any Confidential Information. Confidential Information includes data or material (regardless of form) which is: (a) a trade secret; (b) provided, disclosed or delivered to Executive by the Company, any officer, director, employee, agent, attorney, accountant, consultant, or other person or entity employed by the Company in any capacity, any customer, borrower or business associate of the Company or any public authority having jurisdiction over the Company of any business activity conducted by the Company; or (c) produced, developed, obtained or prepared by or on behalf of Executive or the Company (whether or not such information was developed in the performance of this Agreement) with respect to the Company or any assets oil and gas prospects, business activities, officers, directors, employees, borrowers or customers of the foregoing. However, Confidential Information will not include any information, data or material which at the time of disclosure or use was generally available to the public other than by a breach of this Agreement, was available to the party to whom disclosed on a non-confidential basis by disclosure or access provided by the Company or a third party, or was otherwise developed or obtained independently by the person to whom disclosed without a breach of this Agreement. On request by the Company, the Company will be entitled to a copy of any Confidential Information in the possession of the Executive. The provisions of this Section 7 will survive the termination, expiration or cancellation of Executive’s employment and shall continue indefinitely. The Executive will deliver to the Company all originals and copies of the documents or materials containing Confidential Information. For purposes of Sections 7, 8, and 9 of this Agreement, the Company expressly includes any of the Company’s subsidiaries or affiliates. 8.   Non-Competition. (a) Scope. During the effectiveness of this Agreement (the “Term"), Executive shall devote substantially of his business, time, attention and energies to the business and interests of Company, and except as otherwise provided herein, shall not be engaged (whether or not during normal business hours) in any other business or professional activity (whether or not such activity is pursued for gain, profit or other pecuniary advantage) without first obtaining the written consent of the Board of Directors of Company. During the Term of and for a period of eighteen (18) months after the expiration or termination of this Agreement, for any reason or for no reason at all, Employee shall not directly or indirectly: (i) Own, have any interest in or be, serve or act as an individual proprietor, partner, agent, stock holder, officer, employee, consultant, director, joint venturer, investor, lender, or in any other capacity whatsoever (other than as the holder of not more than one percent (1%) of the total outstanding stock of a publicly held company) of or with, or assist in any way, (a) any corporation, partnership, firm or business enterprise at least 20% of whose sales (in annual dollar volume) are books, music or video sales or rentals (whether such book, music or video [including games] is new or pre-owned) (individually or in the aggregate with all affiliates thereof) or which does business anywhere in the United States, or Page 13 of 18   (b) any of the following companies (individually or in the aggregate with all their affiliates) Wal-Mart Stores, Inc., Books-A-Million, Inc., GameStop Corp., Barnes & Noble, Inc., Borders Group, Inc., Target Corp., Best Buy Co. Inc., Circuit City Stores Inc., Blockbuster Inc., and Movie Gallery, Inc. (ii) Solicit or induce, or attempt to induce, any employee or independent contractor of Company or any other person who shall be in the service of Company to terminate his or her employment with or otherwise cease his or her relationship with Company; or (iii) Solicit, divert or take away, or attempt to solicit, divert or take away the business or patronage of any of the clients, customers (whether any such customer has done business once or more than once), suppliers or accounts, or prospective clients, customers or accounts, or suppliers to Company, but Executive shall not be prevented from doing business with such persons or entities. a. It is hereby expressly agreed that if any portion of this Section 7 or any of the covenants and provisions set forth in this Agreement regarding restrictions on competition, confidentiality or solicitation is held to be unreasonable, arbitrary, against public policy or otherwise unenforceable for any reason, then each such covenant or provision shall be considered divisible as to scope, time and geographical area, with each month of a specified period being deemed a separate period of time and each county within any geographical area being deemed a separate geographical area. The parties to this Agreement also expressly agree that notwithstanding their mutual expectation that the covenants and restrictions contained herein will be enforceable and enforced, a lesser scope, period of time or geographic area shall be enforced to the extent that the covenants contained herein may be unenforceable as written. 9. Proprietary Matters. The Executive expressly understands and agrees that any and all improvements, inventions, discoveries, processes or know-how that are generated or conceived by the Executive during the term of this Agreement, whether generated or conceived during the Executive’s regular working hours or otherwise, will be the sole and exclusive property of the Company. Whenever requested by the Company (either during the term of this Agreement or thereafter), the Executive will assign or execute any and all applications, assignments and/or other instruments and do all things which the Company deems necessary or appropriate in order to permit the Company to: (a) assign and convey or otherwise make available to the Company the sole and exclusive right, title, and interest in and to said improvements, inventions, discoveries, processes, know-how, applications, patents, copyrights, trade names or trademarks; or (b) apply for, obtain, maintain, enforce and defend patents, copyrights, trade names, or trademarks of the United States or of foreign countries for said improvements, inventions, discoveries, processes or know-how. However, the improvements, inventions, discoveries, processes or know-how generated or conceived by the Executive and referred to above (except as they may be included in the patents, copyrights or registered trade names or trademarks of the Company, or corporations, partnerships or other entities which may be affiliated with the Company) will not be exclusive property of the Company at any time after having been disclosed or revealed or have otherwise become available to the public or to a third party on a non-confidential basis other than by a breach of this Agreement, or after they have been independently developed or Page 14 of 18   discussed without a breach of this Agreement by a third party who has no obligation to the Company or the Company Entities. 10. Arbitration. The parties will attempt to promptly resolve any dispute or controversy arising out of or relating to this Agreement or separation of service of the Executive by the Company. Any negotiations pursuant to this Section 10 are confidential and will be treated as compromise and settlement negotiations for all purposes. If the parties are unable to reach a settlement amicably, the dispute will be submitted to binding arbitration before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association. The arbitrator will be instructed and empowered to take reasonable steps to expedite the arbitration and the arbitrator’s judgment will be final and binding upon the parties subject solely to challenge on the grounds of fraud or gross misconduct. The arbitration will be held in Potter County, Texas. Judgment upon any verdict in arbitration may be entered in any court of competent jurisdiction and the parties hereby consent to the jurisdiction of, and proper venue in, the federal and state courts located in Potter or Randall County, Texas. The Company will pay the costs and expenses of the arbitration including, without implied limitation, the fees for the arbitrators. Subject to the provisions of Section 11.8, Executive shall pay for the fees and expenses of his counsel, experts and any other advisors, unless otherwise determined by the arbitrator. Unless otherwise expressly set forth in this Agreement, the procedures specified in this Section 10 will be the sole and exclusive procedures for the resolution of disputes and controversies between the parties arising out of or relating to this Agreement. Notwithstanding the foregoing, a party may seek a preliminary injunction or other provisional judicial relief if in such party’s judgment such action is necessary to avoid irreparable damage or to preserve the status quo. 11. Miscellaneous. The parties further agree as follows:   11.1   Time. Time is of the essence of each provision of this agreement.     11.2   Notices. Any notice, payment, demand or communication required or permitted to be given by any provision of this Agreement will be in writing and will be deemed to have been given when received by personal delivery, by facsimile, by overnight courier, or by certified mail, postage and charges prepaid, directed to the following address or to such other or additional addresses as any party might designate by written notice to the other party:               To the Company:   Hastings Entertainment, Inc.         Attn: President         P. O. Box 35350 (79120)         3601 Plains Blvd.         Amarillo, TX 79102                         With a copy to:   Sprouse Shrader Smith, P.C.         Attn: Jeffrey G. Shrader         P. O. Box 15008 (79105)         701 S. Taylor, Suite 500         Amarillo, TX 79101 Page 15 of 18                 To the Executive:   Kevin Ball         Hastings Entertainment, Inc.           3601 Plains Blvd.         Amarillo, TX 79102   11.3   Assignment. Neither this Agreement nor any of the parties’ rights or obligations hereunder can be transferred or assigned without the prior written consent of the other parties to this Agreement.     11.4   Construction, Choice of Law & Choice of Forum. This Agreement is intended to be interpreted, construed and enforced in accordance with the laws of the state of Texas. Further, any claim or cause of action or judicial proceedings that arise under or relate to this Agreement must be brought in a court of the competent jurisdiction in and for Potter County, Texas which shall be the exclusive forum.     11.5   Severability. If any provision of this Agreement or the application thereof to any person or circumstances is determined, to any extent, to be invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which the same is held invalid or unenforceable, will not be affected thereby, and each term extent permitted by law.     11.6   Entire Agreement. Except as otherwise provided in this Agreement, this Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter herein contained, and no modification hereof will be effective unless made by a supplemental written agreement executed by all of the parties hereto.     11.7   Binding Effect. This Agreement will be binding on the parties and their respective successors, legal representatives and permitted assigns. In the event of a merger, consolidation, combination, dissolution or liquidation of the Company, the performance of this Agreement will be assumed by any entity which succeeds to or is transferred the business of the Company as a result thereof.     11.8   Attorney’s Fees, Costs, and Other Enforcement. If any party institutes an action, proceeding or arbitration against any other party relating to the provisions of this Agreement or any default hereunder, each Party will be responsible for paying their own legal fees and expenses, unless an award of fees by the arbitrator or court provides otherwise, including any costs of appeal, except if Executive is required to bring action or pursue legal remedies to enforce payment following CC Separation from Service provisions, Executive shall be entitled to recover all reasonable and necessary attorney’s fees incurred in such action, on a monthly basis, regardless of the outcome of such action. In addition, should the Company fail or refuse to Page 16 of 18   make payment of any amounts under the CC Separation from Service provisions, upon written request of the Executive, in addition to the payment of any other sums provided in this Agreement, interest at the prime rate published from time to time in the Wall Street Journal plus three (3) percentage points, compounded daily, on any amount remaining unpaid fifteen (15) days following receipt of such demand, until paid to Executive. If the timing of such reimbursement of fees and costs or payment of interest to Executive by Company would trigger tax liability under IRC Code 409A, the Company shall pay the Executive’s estimate of fees, costs, and interest by the deadline set out in the final IRC 409A regulations and Executive will be required to pay the amounts to Company if he loses, except under a CC Separation from Service situation, in which Executive shall be under no obligation to repay such amounts.   11.9   Supersession. This Agreement is the final, complete and exclusive expression of the agreement between the Company and the Executive and supersedes and replaces in all respects any prior oral or written employment agreements. On execution of this Agreement by the Company and the Executive, the relationship between the Company and the Executive after the effective date of this Agreement will be governed by the terms of this Agreement and not by any other agreements, oral or otherwise.     11.10   Non-Contravention. Executive represents and warrants to the Company that the execution and performance of this Agreement will not violate, constitute a default under, or otherwise give rights to any third party, pursuant to the terms of any Agreement to which Executive is a party.     11.11   Indemnity. EXECUTIVE AGREES TO INDEMNIFY AND HOLD HARMLESS THE COMPANY, ITS DIRECTORS, OFFICERS AND EMPLOYEES AND AGENTS (THE “INDEMNIFIED PARTIES”) AGAINST ANY LOSS, CLAIM, DAMAGE, LIABILITY OR EXPENSE, AS INCURRED, (“LOSS”) TO WHICH THE INDEMNIFIED PARTIES MAY BECOME SUBJECT OR INCUR, INSOFAR AS SUCH LOSS AS ARISES OUT OF OR IS BASED UPON ANY INACCURACY IN ANY REPRESENTATION OR WARRANTY GIVEN BY EMPLOYEE IN SECTION 11.10 OF THIS AGREEMENT AND TO REIMBURSE THE INDEMNIFIED PARTIES FOR ANY AND ALL EXPENSES (INCLUDING THE FEES AND DISBURSEMENTS OF COUNSEL CHOSEN BY THE INDEMNIFIED PARTIES) AS SUCH EXPENSES ARE REASONABLY INCURRED BY THE INDEMNIFIED PARTIES IN CONNECTION WITH INVESTIGATING, DEFENDING, SETTLING, COMPROMISING OR PAYING ANY SUCH LOSS.     11.12   Compliance with Section 409A of the Code. Payments to Executive that are covered by IRC 409A under this Agreement are intended to comply with Section 409A of the Internal Revenue Code and shall be construed and interpreted in accordance with such intent. To the extent any benefit paid under this Agreement shall be subject to Section 409A of the Code, such Page 17 of 18         benefit shall be paid in a manner that will comply with Section 409A, including any IRS 409A Guidance. Any provision of this Agreement that would cause the payment of any benefit to fail to satisfy Section 409A of the Code shall have no force and effect until amended to comply with Section 409A which amendment may be retroactive to the extent permitted by the IRS 409A Guidance.   11.13   Termination of Any Prior Employment Agreements. Any prior employment agreement or contract between Executive and Company is terminated as of the Effective Date.     11.14   Payments Due Upon Separation from Service Except for Disability or Death of Executive. All payments due Executive upon separation from service except for disability or death of Executive shall be due forty-five (45) days following separation from service, provided Executive has executed a general release in favor of the Company and all periods in which Executive may revoke such release have expired. The failure to provide such a general release shall result in a termination of the Company’s obligations to make any such payments hereunder. Any payments due as a result of Executive’s death or disability shall be made as otherwise provided herein or as soon as reasonably practicable.      IN WITNESS WHEREOF, the undersigned have executed this Agreement effective the Effective Date.             HASTINGS ENTERTAINMENT, INC.       By:   /s/ John H. Marmaduke       John H. Marmaduke        President (the “Company”)                        By:   /s/ Kevin Ball       Kevin Ball         (the “Executive”)      Page 18 of 18
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. Schedule 13G Under the Securities Exchange Act of 1934 (Amendment No.: 2 )* Name of issuer: Ford Motor Co Title of Class of Securities:Common Stock CUSIP Number:345370860 Date of Event Which Requires Filing of this Statement: December 31, 2016 Check the appropriate box to designate the rule pursuant to which this Schedule is filed: (X) Rule 13d-1(b) ( ) Rule 13d-1(c) ( ) Rule 13d-1(d) *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). (Continued on the following page(s)) 13G CUSIP No.:345370860 1.NAME OF REPORTING PERSON S.S.
Exhibit 10.20   SECOND AMENDED AND RESTATED LOAN AGREEMENT THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is entered into as of August 15, 2010 by and between FIRST NATIONAL BANK OF OMAHA, N.A., a national banking association ("First National") as a Lender, Administrative Agent and Collateral Agent for the Lenders, Bank Midwest, N.A., a national banking association (“Bank Midwest”) as a Lender, Crawford County Trust & Savings, a State banking association ("Crawford County") as a Lender, Quad City Bank & Trust Co., a State banking association ("Quad City") as a Lender, M & I Marshall & Ilsley Bank, a national banking association (“M & I”) as a Lender, Bankers Trust Company (“Bankers Trust”) as a Lender and the other Lenders a party hereto from time to time, and SUMMIT HOTEL PROPERTIES, LLC ("Summit Hotel"), a South Dakota limited liability company and SUMMIT HOSPITALITY V, LLC ("Summit Hospitality"), a South Dakota limited liability company.  First National, Bank Midwest, Crawford County, Quad City, M & I, Bankers Trust and the other lenders a party hereto from time to time may be hereinafter collectively referred to as the “Lenders” and individually as a "Lender".  Summit Hotel and Summit Hospitality may be collectively referred to hereinafter as the "Borrowers" and individually as a "Borrower".  The Administrative Agent and the Collateral Agent for the Lenders may be hereinafter collectively referred to as the "Agent".   WHEREAS, the Borrowers, the Agent, and certain of the Lenders are parties to a Loan Agreement, dated as of June 24, 2005, as amended (as so amended and as in effect prior to the date of the Current Credit Agreement defined below, the "Original Credit Agreement"), pursuant to which the Lenders party thereto made loans available to the Borrowers;   WHEREAS, the Original Credit Agreement was amended and restated by that certain First Amended and Restated Loan Agreement dated August 31, 2009 among Borrowers, the Agent and the Lenders (as amended, including by that certain First Amendment to First Amended and Restated Loan Agreement dated May 14, 2010, and as in effect prior to the date hereof, the "Current Credit Agreement"); WHEREAS, the Borrowers have requested that the Current Credit Agreement be amended and restated on the terms and conditions set forth herein;   WHEREAS, it is intended that the indebtedness of the Borrowers under this Agreement be a continuation of the indebtedness of the Borrowers under the Original Credit Agreement as amended by the Current Credit Agreement; and   WHEREAS, under the terms and conditions of and subject to the limitations contained in this Agreement, Lenders have approved financial accommodations in the maximum principal amount of $43,334,527.22 consisting of the Pool One Term Loans and Pool Two Term Loans defined in this Agreement.       contained in this Agreement and other good and valuable consideration, the follows: ARTICLE I Pool One Term Loans 1.1.           Definitions.  Certain capitalized terms not otherwise defined in the body of this Agreement shall have the meanings given to such terms in Exhibit A attached hereto and incorporated herein by reference.   1.2.           Pool One Term Loans.  Subject to the terms of this Agreement and the maximum amount available under the Pool One Loan Formula, Lenders severally agree to extend to Borrowers the following term loans (as they may be amended, modified, refinanced, replaced and/or restated from time to time, each a "Pool One Term Loan" and collectively the "Pool One Term Loans"): (a).           a term loan in the aggregate principal amount of $6,700,000.00 (the "Hyatt Place Pool One Term Loan"); (b).           a term loan in the aggregate principal amount of $6,375,000.00 (the "Holiday Inn Express Pool One Term Loan"); and (c).           a term loan in the aggregate principal amount of $5,850,000.00 (the "Staybridge Suites Pool One Term Loan").   1.3.           Pool One Term Notes.  Each of the Pool One Term Loans will be evidenced by an Amended and Restated Pool One Term Note executed and delivered by Borrowers to Agent as follows (collectively, the "Pool One Term Notes"):   (a).           The Hyatt Place Pool One Term Loan will be evidenced by an Amended and Restated Hyatt Place Pool One Term Note payable to the order of the Agent in the principal amount of $6,700,000.00 for the benefit of the Lenders in proportion of their respective Percentage in the Hyatt Place Pool One Term Loan.   (b).           The Holiday Inn Express Pool One Term Loan will be evidenced by an Amended and Restated Holiday Inn Express Pool One Term Note payable to the order of the Agent in the principal amount of $6,375,000.00 for the benefit of the Lenders in proportion of their respective Percentage in the Holiday Inn Express Pool One Term Loan.   (c).           The Staybridge Suites Pool One Term Loan will be evidenced by an Amended and Restated Staybridge Suites Pool One Term Note payable to the order of the Agent in the principal amount of $5,850,000.00 for the benefit of the Lenders in proportion of their respective Percentage in the Staybridge Suites Pool One Term Loan.   2     1.4.           Pool One Loan Formula.  In no event shall the aggregate outstanding principal amount of any Pool One Term Loan exceed 75% of the as is appraised value of the particular Hotel primarily securing such Pool One Term Loan.  As a condition to the closing of this Agreement, Borrowers will jointly and severally pay and apply to the Pool One Note being refinanced by the Holiday Inn Express Pool One Term Loan the sum of not less than $1,125,000.00 and to the Pool One Note being refinanced by the Staybridge Suites Pool One Term Loan the sum of not less than $350,000.00 in order to bring such Pool One Term Loans within the Pool One Loan Formula for such Pool One Term Loans.   1.5.           Interest.  The interest rate on the Pool One Term Loans is subject to change from time to time based on changes in an independent index which is the London Interbank Offered Rate for U.S. Dollar deposits published in The Wall Street Journal as the Three (3) Month LIBOR Rate (“LIBOR Rate”).  The LIBOR Rate will be adjusted and determined without notice to Borrowers as set forth herein, as of the date of the Pool One Term Notes and on the first (1st) day of each calendar month thereafter (“Interest Rate Change Date”) to the Three (3) Month LIBOR Rate which is published in The Wall Street Journal as the reported rate for the date that is two London Banking Days prior to each Interest Rate Change Date.  If the date of the Pool One Term Notes is any day other than the first London Banking Day of a month, the initial LIBOR Rate to be in effect until the beginning of the next succeeding month shall be that Three (3) Month LIBOR Rate in effect on the date that is two London Banking Days prior to the first day of the month in which the Pool One Term Notes are dated.  “London Banking Day” means any day other than a Saturday or Sunday, on which commercial banking institutions in London, England are generally open for business.  If for any reason the LIBOR Rate published by The Wall Street Journal is no longer available and/or Agent is unable to determine the LIBOR Rate for any Interest Rate Change Date, Agent may, in its sole discretion, select an alternate source to determine the LIBOR Rate and will provide notice to Borrowers and Lenders of the source selected.  The LIBOR Rate determined as set forth above shall be referred to herein as (the “Index”).  The Index is not necessarily the lowest rate charged by Lenders on their loans.  If the Index becomes unavailable during the term of the Pool One Term Loans, Agent may designate a substitute index after notifying Borrowers and Lenders.  Agent will tell Borrowers the current Index rate upon Borrowers' request.  The interest rate change will not occur more often than each month on the first (1st) day of each month.  Borrowers understand that Lenders may make loans based on other rates as well.  The Index currently is .37625% per annum. The interest rate to be applied to the unpaid principal balance of the each Pool One Term Loan will be calculated using a rate of 4% over the Index, adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 4.37625% per annum based on a year of 360 days.  Interest on the Pool One Term Loans is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.  All interest payable under the Pool One Term Loans is computed using this method.  NOTICE: Under no circumstances will the interest rate on the Pool One Term Loans be less than 5.5% per annum or more than the maximum rate allowed by applicable law.  The principal balance of the Pool One Term Loans will bear interest after maturity and after the occurrence and during the continuance of an Event of Default at a variable per annum rate equal to rate determined as above plus 4%, but not to exceed the maximum rate allowed by law.  Borrowers will jointly and severally pay interest monthly, in arrears, on the same dates that principal installments are due.  Accrued and unpaid interest must also be paid on the Pool One Term Loan Termination Date, whether by acceleration or otherwise.   3     1.6.           Repayment; Maturity.  The Pool One Term Loans will be paid as follows, with the monthly principal and interest installments, with principal installments calculated on a twenty (20) year amortization schedule:   (a).           The Hyatt Place Pool One Term Loan will be payable in equal monthly installments of principal and interest in the amount of $46,088.45 plus accrued and unpaid interest commencing on September 1, 2010 and continuing on the first day of each month thereafter until July 31, 2011, when the outstanding principal balance, together with accrued and unpaid interest, will be due and payable in full.   (b).           The Holiday Inn Express Pool One Term Loan will be payable in equal monthly installments of principal and interest in the amount of $43,853.82 plus accrued and unpaid interest commencing on September 1, 2010 and continuing on the first day of each month thereafter until July 31, 2011, when the outstanding principal balance, together with accrued and unpaid interest, will be due and payable in full.   (c).           The Staybridge Suites Pool One Term Loan will be payable in equal monthly installments of principal and interest in the amount of $40,241.41 plus payable in full. All payments due on the Pool One Term Loans under this Agreement and the other Loan Documents shall be made in immediately available funds to the Agent at its office described in the notice provision of this Agreement unless the Agent gives notice to the contrary.  Payments so received at or before 1:00 p.m. Omaha, Nebraska time on any Business Day shall be deemed to have been received by the Agent on that Business Day.  Payments received after 1:00 p.m. Omaha, Nebraska time on any Business Day shall be deemed to have been received on the next Business Day, and interest, if payable in respect of such payment, shall accrue thereon until such next Business Day.  Agent will remit to each Lender its Percentage of all payments of principal and interest on the Pool One Term Loans received by Agent no later than the next Business Day after the Agent is deemed to have received such payment.   1.7.           Prepayment.  Borrowers may prepay all or any Pool One Term Loan in full or in part at any time without penalty or premium.  Any partial prepayments will be applied by Agent to the monthly installments due on the partially prepaid Pool One Term Loan in the inverse order of their maturities.   1.8.           Fees.  In consideration for Lenders making the Loans available to Borrowers, Borrowers will jointly and severally pay to the Agent for the pro rata account of Lenders a commitment fee equal to $162,504.48 in full at the closing of this Agreement.  Each Lender will be entitled to a portion of such fee as follows:  (i) $32,500.90 payable to First National; (ii) $32,500.90 payable to M & I; (iii) $48,751.34 to Bank Midwest; (iv) $16,250.45 to Quad City; (v) $16,250.45 to Bankers Trust; and (vi) $16,250.45 to Crawford County.  In addition, Borrowers will jointly and severally pay Agent for the account only of Agent an annual agency fee equal to $23,656.25 payable at the closing of this Agreement on each anniversary date of this Agreement.   4     ARTICLE II Pool Two Term Loans 2.1.           Pool Two Term Loans.  Subject to the terms of this Agreement and the maximum amount available under the Pool Two Loan Formula, Lenders severally Two Term Loan" and collectively the "Pool Two Term Loans"): (a).           a term loan in the aggregate principal amount of $8,914,616.75 (the "Jackson Courtyard Pool Two Term Loan"); (b).           a term loan in the aggregate principal amount of $6,818,438.05 (the "Germantown Courtyard Pool Two Term Loan"); and (c).           a term loan in the aggregate principal amount of $8,676,472.42 (the "Hyatt Place Pool Two Term Loan"). 2.2.           Pool Two Term Notes.  Each of the Pool Two Term Loans will be evidenced by an Amended and Restated Pool Two Term Note executed and delivered by Borrowers to Agent as follows (collectively, the "Pool Two Term Notes"): (a).           The Jackson Courtyard Pool Two Term Loan will be evidenced by an Amended and Restated Jackson Courtyard Pool Two Term Note payable to the order of the Agent in the principal amount of $8,914,616.75 for the benefit of the Lenders in proportion of their respective Percentage in the Jackson Courtyard Pool Two Term Loan.   (b).           The Germantown Courtyard Pool Two Term Loan will be evidenced by an Amended and Restated Germantown Courtyard Pool Two Term Note payable to the order of the Agent in the principal amount of $6,818,438.05 for the benefit of the Lenders in proportion of their respective Percentage in the Germantown Courtyard Pool Two Term Loan. (c).           The Hyatt Place Pool Two Term Loan will be evidenced by an Amended and Restated Hyatt Place Pool Two Term Note payable to the order of the Agent in the principal amount of $8,676,472.42 for the benefit of the Lenders in proportion of their respective Percentage in the Hyatt Place Pool Two Term Loan.   5     2.3.           Pool Two Loan Formula.  In no event shall the aggregate outstanding principal amount of any Pool Two Term Loan exceed 65% of the as stabilized Appraised Value of the particular Hotel primarily securing such Pool Two Term Loan.   2.4.           Interest.  The interest rate on the Pool Two Term Loans is forth herein, as of the date of the Pool Two Term Notes and on the first (1st) Interest Rate Change Date.  If the date of the Pool Two Term Notes is any day to the first day of the month in which the Pool Two Term Notes are dated.  If for any reason the LIBOR Rate published by The Wall Street Journal is no longer available and/or Agent is unable to determine the LIBOR Rate for any Interest Rate Change Date, Agent may, in its sole discretion, select an alternate source to determine the LIBOR Rate and will provide notice to Borrowers and Lenders of the source selected.  The LIBOR Rate determined as set forth above shall be referred to herein as (the “Index”).  The Index is not necessarily the lowest rate charged by Lenders on their loans.  If the Index becomes unavailable during the term of the Pool Two Term Loans, Agent may designate a substitute index after notifying Borrowers and Lenders.  Agent will tell Borrowers the current Index rate upon Borrowers' request.  The interest rate change will not occur more often than each month on the first (1st) day of each month.  Borrowers understand that Lenders may make loans based on other rates as well.  The Index currently is .37625% per annum.  The interest rate to be applied to the unpaid principal balance of the each Pool Two Term Loan will be calculated using a rate of 4% over the Index, adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 4.37625% per annum based on a year of 360 days.  Interest on the Pool Two Term Loans is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.  All interest payable under the Pool Two Term Loans is computed using this method.  NOTICE: Under no circumstances will the interest rate on the Pool Two Term Loans be less than 5.25% per annum or more than the maximum rate allowed by applicable law.  The principal balance of the Pool Two Term Loans will bear interest after maturity and after the occurrence and during the continuance of an Event of Default at a variable per annum rate equal to rate determined as above plus 4%, but not to exceed the maximum rate allowed by law.  Borrowers will jointly and severally pay interest monthly, in arrears, on the same dates that principal installments are due.  Accrued and unpaid interest must also be paid on the maturity date of each Pool Two Term Loan, whether by acceleration or otherwise. 2.5.           Repayment; Maturity.  The Pool Two Term Loans will be paid as follows, with the monthly principal and interest installments with principal   6     (a).           The Jackson Courtyard Pool Two Term Loan will be payable in equal monthly installments of principal and interest in the amount of $60,052.00 plus the first day of each month thereafter until July 1, 2013, when the outstanding payable in full.   (b).           The Germantown Courtyard Pool Two Term Loan will be payable in equal monthly installments of principal and interest in the amount of $45,813.00 on the first day of each month thereafter until July 1, 2013, when the (c).           The Hyatt Place Pool Two Term Loan will be payable in equal monthly installments of principal and interest in the amount of $46,072.00 plus the first day of each month thereafter until February 1, 2014, when the All payments due on the Pool Two Term Loans under this Agreement and the other its Percentage of all payments of principal and interest on the Pool Two Term 2.6.           Prepayment.  Borrowers may prepay all or any Pool Two Term Loan partially prepaid Pool Two Term Loan in the inverse order of their maturities. ARTICLE III Collateral; Reserves Payment of Borrowers' obligations hereunder, under the Pool One Term Loans, Pool Two Term Loans, under any deposit account relationship and overdrafts with Agent, and under the Loan Documents shall be secured and/or supported by the following (hereinafter collectively referred to as the “Collateral”) until all such obligations are fully and finally paid and performed in full:   7     3.1.           Personal Property.  The Loans made pursuant to this Agreement and all other indebtedness arising hereunder or in connection herewith shall be collateralized and supported by a security interest, and each Borrower hereby grants to the Agent, a security interest in all of each Borrower's respective assets associated with or located at a Hotel encumbered with a mortgage or deed of trust referenced in Section 3.2 below, including, but not limited to, each Borrower's goods, equipment and inventory, now owned as well as any and all thereof that may hereafter be acquired by such Borrower, and in and to all cash and non-cash proceeds (including, without limitation, insurance proceeds), accessions, accessories and products thereof, and all of such Borrower's accounts receivable, general intangibles, payment intangibles, software, chattel paper (whether tangible or electronic), deposit accounts, documents, investment property and instruments now owned or hereafter arising or acquired and all cash and non-cash proceeds thereof.  Such security interest shall be further evidenced by those certain Second Amended and Restated Security Agreements (as amended, collectively, the "Security Agreement") executed and delivered by each Borrower to the Agent.  Each Borrower further agrees to authenticate to the Agent and hereby authorizes the Agent to file in all filing offices the Agent deems necessary, appropriate or desirable such financing statements, continuations, assignments or other instruments as may be requested by the Agent at any time and from time to time in order for the Agent to perfect the security interest in the aforementioned Collateral.   3.2.           Real Property.  The Loans made pursuant to this Agreement and all other indebtedness arising hereunder or in connection herewith shall be collateralized and supported by the mortgages or deeds of trust, as the case may be, listed in Schedule 3.2 attached hereto and incorporated herein by reference encumbering the Hotels described therein (as amended, collectively, the "Mortgage").  Borrowers will execute such amendments and instruments to the Mortgage as is required by Agent in order to create, attach and perfect Lenders' mortgage on the Hotels encumbered by the Mortgage. 3.3.           Other Documents.  Borrowers agree to furnish such information and to execute such other documents or undertake any other acts as may be reasonably necessary to attach, perfect and maintain the security interests and assignments contemplated by this Agreement, or as otherwise reasonably requested by the Agent from time to time. 3.4.           Maintenance and Capital Expenditure Reserve.  For each Reserve Hotel, each month the applicable Borrower which owns such Hotel will deposit, in a deposit account maintained with the Agent, an amount not less than three percent (3%) of the gross revenues for such Hotel for the prior month to be maintained as a cash reserve for maintenance and capital expenditures (the "Maintenance and Capital Expenditure Reserve").  Borrowers hereby grant the Agent a security interest in the Maintenance and Capital Expenditure Reserve and will execute such documents required by the Agent to create, grant, attach and perfect the Agent's Lien on such Maintenance and Capital Expenditures Reserve.  Borrowers will submit requests for reimbursement or invoices for payment of capital expenditures for Reserve Hotels, and the Agent will not unreasonably deny such requests.  Borrowers will be reimbursed from Maintenance and Capital Expenditure Reserve funds within ten (10) days of request. ARTICLE IV Representations and Warranties Each Borrower represents and warrants to Lenders (which representations and warranties will survive the delivery of the Pool One Term Notes and Pool Two Term Notes and shall continue so long as any sums remain outstanding under the Loans, this Agreement or any other Loan Document as follows:   8     4.1.           Standing.  Each Borrower is a limited liability company duly South Dakota.  Each Borrower is duly qualified and is in good standing in every other jurisdiction where such qualification and good standing is required in order to conduct business in such jurisdiction.  Each Borrower has the power and authority to own its property and to carry on its business. 4.2.           Authority.  Each Borrower has the full power and authority to execute and deliver this Agreement and the other Loan Documents, and the same constitute the binding and enforceable obligations of Borrowers in accordance with their terms.  No consent or approval of the members or manager of either Borrower or any other Person, creditor, governmental department, agency or body are required as a condition to the effectiveness and validity of the Loan Documents.  The execution of and performance by each Borrower of its obligations under the Loan Documents to which it is a party has been duly authorized by all appropriate and required limited liability company proceedings and action and will not violate, conflict with or contravene any provisions (i) of law or any regulation, order, writ, judgment, injunction, decree, permit, or license applicable to such Borrower or any of such Borrower's property, or (ii) of such Borrower's Articles of Organization, Operating Agreement or any members’ agreement or other governing or organizational agreement of such Borrower or such Borrower's members. 4.3.           Litigation.  There are no actions, suits, arbitration proceedings or other proceedings of any nature pending or, to the knowledge of either Borrower, threatened, or any basis therefor, against or affecting either Borrower or any Collateral at law or in equity, in any court or before any governmental department or agency or arbitrator or arbitration panel, which may 4.4.           Conflicting Agreements.  There are no provisions of any existing mortgage, indenture, deed of trust, trust deed, lease, contract or agreement of any nature binding on either Borrower or affecting the Collateral or either Borrower's other property, which would conflict with or in any way prevent the execution, delivery, or performance of the terms of this Agreement and/or the Loan Documents.  Neither Borrower is in default in any respect in the performance, observance or fulfillment of any obligation, covenant or condition contained in any agreement or instrument to which it is a party. 4.5.           Title and Liens.  Each Borrower has good, valid and marketable title of record to its real, mixed and personal property (including, without limitation, the property constituting Collateral), all of which is owned free and clear of all mortgages, Liens, pledges, charges, attachments and other security interests and encumbrances of any nature, except for the Permitted Liens or as otherwise provided for in this Agreement or disclosed to and approved by Lenders in writing.  In respect of leased property, the applicable Borrower has valid and enforceable leasehold interests therein.   9     4.6.           Taxes.  Each Borrower has filed all federal, state, local, and other tax and similar returns and has paid or provided for the payment of all taxes assessments and other governmental charges due thereunder through the date of this Agreement, including without limitation, all withholding, FICA and franchise taxes.  No claims or Liens for unpaid taxes which are due have been asserted, claimed or threatened against either Borrower. 4.7.           Financial Statements.  Borrowers' audited financial statements dated as of December 31, 2009 and internally-prepared interim financial statement dated June 30, 2010, copies of which have been furnished to Lenders, are complete and correct and fairly and accurately present the financial condition of each Borrower as of such date and the results of operations for the period covered by such statements.  Since June 30, 2010, there has been no Material Adverse Effect or change with respect to either Borrower.  Neither Borrower has any material liabilities, direct or contingent, except those disclosed in the foregoing financial statements or as otherwise disclosed to Lenders in writing.  No information, exhibit or report furnished by either Borrower to Lenders or the Agent in connection with the Loans, this Agreement or any other Loan Document contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statement contained therein incomplete or not materially misleading. 4.8.           Other.  All statements by either Borrower contained in any certificate, statement, document or other instrument or writing delivered by or on behalf of either Borrower at any time pursuant to this Agreement or the other Loan Documents shall constitute representations and warranties made by Borrowers hereunder.  No representation or warranty of either Borrower contained in this Agreement or any other Loan Document, and no statement contained in any certificate, schedule, list, financial statement or other instrument furnished to Lenders or the Agent by or on behalf of Borrowers contains, or will contain, any untrue statement of a material fact, or omits, or will omit, to state a misleading.  To the best of each Borrower's knowledge, all information material to the transactions contemplated in this Agreement has been expressly disclosed to Lenders in writing. 4.9.           Regulation U.  No part of the proceeds of the Loans will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or to reduce or retire any indebtedness incurred for any such purpose.  If requested by the Agent, Borrowers will furnish to the Agent a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U to the foregoing effect. 4.10.        ERISA. (a)           Definitions.  The following terms shall have the following definitions: (1)           "Consolidated Entity" shall mean any corporation or other entity which owns at least 50% of the voting or control rights or interest or other ownership interest in either Borrower directly or indirectly in any manner, or in which at least 50% of the voting stock or other ownership interest in such corporation or other entity is owned by either Borrower directly or indirectly in any manner.  If Borrowers have no Consolidated Entities, the provisions of this Agreement relating to Consolidated Entities shall be inapplicable without affecting the applicability of such provisions to Borrowers alone.   10     (2)           "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. (3)           "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (4)           "Pension Event" shall mean, with respect to any Pension Plan, the occurrence of:  (i) any prohibited transaction described in Section 406 of ERISA or in Section 4975 of the Internal Revenue Code; (ii) any Reportable Event; (iii) any complete or partial withdrawal, or proposed complete or partial withdrawal, of Borrowers or any Consolidated Entity from such Pension Plan; (iv) any complete or partial termination, or proposed complete or partial termination, of such Pension Plan; or (v) any accumulated funding deficiency (whether or not waived), as defined in Section 302 of ERISA or in Section 412 of (5)           "Pension Plan" shall mean any pension plan, as defined in Section 3(2) of ERISA, which is a multi-employer plan or a single employer plan, as defined in Section 4001 of ERISA, and subject to Title IV of ERISA and which is (i) a plan maintained by either Borrower or any Consolidated Entity for employees or former employees of either Borrower or of any Consolidated Entity, (ii) a plan to which either Borrower or any Consolidated Entity contributes or is required to contribute, (iii) a plan to which either Borrower or any Consolidated Entity was required to make contributions at any time during the five (5) calendar years preceding the date of this Agreement or (iv) any other plan with respect to which either Borrower or any Consolidated Entity has incurred or may incur liability, including, without limitation, contingent liability, under Title IV of ERISA either to such plan or to the Pension Benefit Guaranty Corporation.  For purposes of the definitions of the terms "Pension Event" and "Pension Plan", each Borrower shall include any trade or business (whether or not incorporated) which, together with such Borrower or any Consolidated Entity, is deemed to be a single employer within the meaning of Section 4001(b)(1) of ERISA. (6)           "Reportable Event" shall mean any event described in Section 4043(b) of ERISA or in regulations issued thereunder with regard to a Pension Plan. (b)           ERISA Representations and Warranties.  Each Borrower represents and warrants to Lenders that: (1)           No Pension Plan has been terminated, or partially terminated, or is insolvent, or in reorganization, nor have any proceedings been instituted to terminate or reorganize any  Pension Plan;   11     (2)           Neither Borrower nor any Consolidated Entity has withdrawn from any Pension Plan in a complete or partial withdrawal, nor has a condition occurred which, if continued, would result in a complete or partial withdrawal; (3)           Neither Borrower nor any Consolidated Entity has incurred any withdrawal liability, including, without limitation, contingent withdrawal liability, to any Pension Plan, pursuant to Title IV of ERISA; (4)           Neither Borrower nor any Consolidated Entity has incurred any liability to the Pension Benefit Guaranty Corporation other than for required insurance premiums which have been paid when due; (5)           No Reportable Event has occurred with regard to a Pension Plan; (6)           No Pension Plan or other "employee pension benefit plan", as defined in Section 3(2) of ERISA, to which either Borrower or any Consolidated Entity is a party has an accumulated funding deficiency (whether or not waived), as defined in Section 302 of ERISA or Section 412 of the Internal Revenue Code; (7)           The present value of all benefits vested under any such Pension Plan does not exceed the value of the assets of such Pension Plan allocable to such vested benefits; (8)           Each Pension Plan and each other employee benefit plan as defined in Section 3(2) of ERISA, to which either Borrower or any Consolidated Entity is a party has received a favorable determination by the Internal Revenue Service with respect to qualification under Section 401(a) of the Internal Revenue Code; (9)           Each Pension Plan and each other employee benefit plan as defined a party is in substantial compliance with ERISA, and no such plan or any administrator, trustee or fiduciary thereof has engaged in a prohibited transaction defined or described in Section 406 of ERISA or in Section 4975 of the Internal Revenue Code; and (10)           Neither Borrower nor any Consolidated Entity has incurred any liability or a trustee or trust established pursuant to Section 4049 of ERISA or to a trustee appointed pursuant to Section 4042(b) or (c) of ERISA. (c)           ERISA Indemnity.  In addition to any other transfer prohibitions set forth herein and in the other Loan Documents, and not in limitation thereof, neither Borrower shall assign, sell, pledge, encumber, transfer, hypothecate or otherwise dispose of its interest or rights in this Agreement or in the Collateral, or attempt to do any of the foregoing or suffer any of the foregoing, nor shall any shareholder or member of either Borrower assign, sell, pledge, encumber, transfer, hypothecate or otherwise dispose of any of its rights or interest in such Borrower, attempt to do any of the foregoing or suffer any of the foregoing, if such action would cause the Loans or the exercise of any of Lenders’ rights in connection therewith, to constitute a prohibited transaction under ERISA or the Internal Revenue Code or otherwise result in Lenders being deemed in violation of any applicable provision of ERISA.  Borrowers jointly and severally agree to indemnify and hold Lenders free and harmless from and against all loss, costs (including attorneys' fees and expenses), taxes, damages (including consequential damages), and expenses Lenders may suffer by reason of the investigation, defense and settlement of claims and in obtaining any prohibited transaction exemption under ERISA necessary or desirable in the Agent's sole judgment or by reason of a breach of the foregoing prohibitions.  The foregoing indemnification shall survive repayment of the Loans.   12     4.11.         Solvency.  Each Borrower is and, after consummation of the transactions contemplated by this Agreement will be, Solvent.  “Solvent” shall mean that, as of a particular date, (i) such Borrower is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business; (ii) such Borrower is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Borrower's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Borrower is engaged, (iii) the fair value of the property of such Borrower is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Borrower and (iv) the present fair salable value of the assets of such Borrower of such Borrower on its debts as they become absolute and matured.  In computing the amount of contingent liabilities at any time, it is intended that such 4.12.         Compliance With Law.  The business and operations of the Borrowers comply in all respects with all applicable federal, state, regional, county and local laws, including without limitation statutes, rules, regulations and ordinances relating to public health, safety or the environment or disposals to use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, its derivatives, thereunder, except where the failure to so comply (individually or in the aggregate) would not reasonably be expected to have a Material Adverse Effect. ARTICLE V Financial and Affirmative Covenants So long as this Agreement remains in effect, or as long as there is any principal or interest due under the Loans, unless the Required Lenders shall otherwise consent in writing, Borrowers will:   13     5.1.           Financial Covenants.  Borrowers shall maintain and comply with the following financial covenants: (a).           Debt Service Coverage Ratio.  Each Borrower shall maintain at all times, on a rolling four-quarter average (for each Borrower’s four most recent fiscal quarters then ended), a Debt Service Coverage Ratio of not less than 1.50:1.00.  The first quarterly calculation and measurement of the Debt Service Coverage Ratio shall be September, 2010. (b).           Total Debt.  The aggregate Total Debt outstanding at any one time of Borrowers, The Summit Group, Inc. and any other affiliates or subsidiaries of The Summit Group, Inc. and either Borrower shall not exceed $450,000,000.00. 5.2.           Books and Records; Inspections.  Maintain proper books and records and account for financial transactions in a manner consistent with the preparation of the financial statements referenced is Section 4.7, and permit the Agent's officers and/or authorized representatives or accountants to visit and inspect Borrowers' respective properties, examine their books and records, conduct audits of the Collateral and discuss their accounts and business with their respective officers, accountants and auditors, all at reasonable times upon reasonable notice.  Borrowers will cooperate in arranging for such inspections and audits.  Without the prior written consent of the Required Lenders, neither Borrower will change in any material way the accounting principles upon which the financial statements referenced in Section 4.7 were prepared and based except for changes made as a result of changes in or to generally accepted accounting principles. 5.3.           Financial Reporting.  Deliver to the Agent financial information in such form and detail and at such times as are satisfactory to the Agent, including, without limitation: (a)           Each Borrower's year end financial statements (to include, but not be limited to, balance sheet, income statement, and net worth reconciliation, each setting forth in comparative form figures for the preceding fiscal year of Borrowers), audited by a certified public accounting firm selected and approved by the Audit Committee of Summit Hotel as soon as available and in any event within one hundred twenty (120) days after the end of each of Borrower's respective fiscal years; (b)           Each Borrower's interim quarterly financial statements (to include its unaudited balance sheet as of the end of each such period and the related unaudited statements of income, and statement of changes in financial position for such period and the portion of the fiscal year through such date, setting forth in each case in comparative form the figures for the previous year) as soon as available, but in any event within twenty (20) days after the end of each quarter, signed and certified correct by the Chief Financial Officer or equivalent of Borrowers (subject to normal year-end adjustments); (c)           a quarterly certificate of the chief financial officer of each Borrower substantially in the form of Schedule 5.3(c) attached hereto and incorporated herein by reference, (i) demonstrating compliance with the financial covenants contained in Section 5.1 by calculation thereof as of the end of each such fiscal period, (ii) stating that no Event of Default exists, or if any Event of Default does exist, specifying the nature and extent thereof and what action such Borrower proposes to take with respect thereto and (iii) certifying that all of the representations and warranties made by such Borrower in this Agreement and/or in any other Loan Document are true and correct in all material respects on and as of such date as if made on and as of such date, within twenty-five (25) days after the end of each quarter; and   14     (d)           Such other financial information concerning Borrowers as the Agent may require from time to time. respects and shall be prepared in reasonable detail (consistent with the financial statements referred to in Subsection 4.7.) and applied consistently throughout the periods reflected therein. 5.4.           Payment of Debts, Taxes and Claims.  Promptly pay and discharge prior to delinquency all debts, accounts, liabilities, taxes, assessments and other governmental charges or levies imposed upon, or due from, either Borrower, as well as all claims of any kind (including claims for labor, materials and supplies) which, if unpaid, might by law become a lien or charge upon any of a Borrower's property, except that nothing herein contained shall be interpreted to require the payment of any such debt, account, liability, tax, assessment or charge so long as its validity is being contested in good faith by appropriate legal proceedings and against which, if requested by the Agent or required by generally accepted accounting principles, reserves satisfactory to and deposited with the Agent have been made therefor.  Any such reserves will constitute additional Collateral and Borrowers hereby grant the Agent a first priority security interest in such reserves.   5.5.           Insurance.  Each Borrower will purchase, pay for in advance, and at all times maintain insurance including but not limited to:  (i) fire, windstorm and other hazards, casualties and contingencies covered by the "all-risk" form of insurance; (ii) public liability; (iii) workers' compensation and (iv) property damage as is customarily maintained by similar businesses and/or as the Agent from time to time requires.  In addition, if a Hotel is located in flood hazard area, the applicable Borrower will obtain and maintain appropriate flood insurance as is acceptable to the Agent.  The amounts, limits, forms, deductibles, contents and issuer of said policies shall be subject to the Agent's reasonable approval.  The Agent, as Collateral Agent for Lenders, shall be named as an additional insured as its interest shall appear and each of said policies covering the Collateral shall contain a loss payable clause, and any proceeds of such insurance in excess of $100,000.00 shall be either (in the discretion of the Required Lenders) (i) payable to the Collateral Agent for application to the Loans and any other sums owing under this Agreement or any other Loan Document in a manner and priority to be determined by the Required Lenders in their sole discretion or (ii) if consented to by the Required Lenders, used for restoration or repair with such proceeds disbursed by the Agent in accordance with procedures established by the Agent.  All such insurance shall provide for noncancellation without at least thirty (30) days prior written notice to the Agent and shall contain provisions protecting the Collateral Agent's interests whether or not any acts by either Borrower or others should result in loss of coverage under such policies.  The originals, certified copies or certificates of such policies, and renewals evidencing the insurance required hereunder shall be delivered to the Agent, and such insurance shall be maintained in full force and effect at all times during the period of this Agreement and while any indebtedness under the Loans remains outstanding.   15     In the event either Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, then the Lenders, without waiving or releasing any obligation or default by Borrowers hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and action with respect thereto which the Required Lenders deem advisable.  All sums so disbursed by Lenders, including, without limitation, reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be part of Borrowers' obligations and indebtedness hereunder, secured by the Collateral and payable jointly and severally by Borrowers to the Agent on demand.  UNLESS BORROWERS PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED UNDER THIS AGREEMENT AND/OR ANY OTHER LOAN DOCUMENT, LENDERS MAY PURCHASE INSURANCE AT THE BORROWERS' JOINT AND SEVERAL EXPENSE TO PROTECT LENDERS’ INTEREST IN THE COLLATERAL.  THIS INSURANCE MAY, BUT NEED NOT, PROTECT BORROWERS' RESPECTIVE INTERESTS.  THE COVERAGE THAT LENDERS PURCHASE MAY NOT PAY ANY CLAIM THAT A BORROWER MAY MAKE OR ANY CLAIM THAT IS MADE AGAINST A BORROWER IN CONNECTION WITH THE COLLATERAL.  BORROWERS MAY LATER CANCEL ANY INSURANCE PURCHASED BY LENDERS, BUT ONLY AFTER PROVIDING EVIDENCE THAT BORROWERS HAVE EACH OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.  IF LENDERS PURCHASE INSURANCE FOR THE COLLATERAL, BORROWERS WILL BE JOINTLY AND SEVERALLY RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES LENDERS MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE.  THE COSTS OF THE INSURANCE MAY BE ADDED TO THE BORROWERS' OBLIGATIONS HEREUNDER AND SHALL BE SECURED BY THE COLLATERAL.  THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE BORROWERS MAY BE ABLE TO OBTAIN ON THEIR OWN. 5.6.           Property Maintenance.  Keep their respective properties in good repair, working order, and condition and from time to time make any needful and proper repairs, renewals, replacements, extensions, additions, and improvements thereto so that the business of Borrowers will be conducted at all times in accordance with prudent business management. 5.7.           Existence; Compliance With Laws.  Take or cause to be taken such action as from time to time may be necessary to preserve and maintain their respective existence in their jurisdiction of organization and qualify and remain qualified as a foreign entity in each jurisdiction in which such qualification is required and use due diligence to comply with all statutes, laws, codes, rules, regulations and orders applicable or pertaining to the business or property of Borrowers, or any part thereof, and with all other lawful government requirements relating to their respective business and property.  Each Borrower will continue to engage in the same lines of business in which it is presently engaged.     16   5.8.           Litigation; Adverse Events.  Promptly inform the Agent of the commencement of any action, suit, proceeding, arbitration, mediation or investigation against either Borrower, or the making of any counterclaim against either Borrower, which could be reasonably expected to have a Material Adverse Effect, and promptly inform the Agent of all Liens against any of either Borrower's property, other than Permitted Liens, which could be reasonably expected to have a Material Adverse Effect, and promptly advise the Agent in writing of any other condition, event or act which comes to either of their attention that could be reasonably expected to have a Material Adverse Effect or might materially prejudice Lenders’ rights under this Agreement or the Loan Documents. 5.9.           Notification.  Notify the Agent immediately if either of them becomes aware of the occurrence of any Event of Default (as defined under Article VII hereof) or of any fact, condition, or event that, only with the giving of notice or passage of time or both, would become an Event of Default, or if either of them becomes aware of a material adverse change in the business prospects, financial condition (including, without limitation, proceedings in bankruptcy, insolvency, reorganization, or the appointment of a receiver or trustee), or results of operations, or the failure of either Borrower to observe any of its undertakings under the Loan Documents.  Borrowers shall also notify the Agent in writing of any default under any other indenture, agreement, contract, lease or other instrument to which either Borrower is a party or under which either Borrower is obligated, and of any acceleration of the maturity of any material indebtedness of either Borrower which default or acceleration could be reasonably expected to have a Material Adverse Effect, and Borrowers shall take all steps necessary to remedy promptly any such default, to protect against any such adverse claim, to defend any such proceeding and to resolve all such controversies. 5.10.         Inspections.  Each Borrower shall allow the Agent, its employees, officers, agents and representatives, at reasonable intervals and during normal business hours, to inspect such Borrower's operations, books and records, financial books and records (including the right to make copies thereof) and to discuss such Borrower's affairs, finances and accounts with such Borrower's managers, principal officers and independent public accountants.  Each Borrower shall permit the Agent, and will cooperate with the Agent in arranging for, inspections at reasonable intervals of such Borrower's facilities and audits of the Collateral.  Each Borrower acknowledges that any reports and inspections conducted or generated by the Agent or its agents or representatives, shall be made for the sole benefit of Lenders and not for the benefit of Borrowers or any third party, and Lenders do not assume any liability, responsibility or obligation to Borrowers or any third party by reason of such inspections or reports.  The reasonable cost of any audits or inspections made by Lenders shall be paid or reimbursed jointly and severally by Borrowers. 5.11.         Conduct of Business.  Continue to engage in an efficient and economical manner in the business currently conducted by Borrowers on the date of this Agreement. 5.12.         Initial Public Offering.  Lenders acknowledge that Borrowers are in the process of completing an initial public offering to convert Borrowers into a real estate investment trust (the "Initial Public Offering").  Upon consummation of the Initial Public Offering the Borrower's obtaining the proceeds thereof, Borrower will, as a mandatory prepayment, repay in full the outstanding principal balance, along with accrued and unpaid interest and fees, on the Pool One Term Loans.   17     ARTICLE VI Negative Covenants principal or interest due under the Loans, this Agreement or any of the other Loan Documents, neither Borrower shall, without the prior written consent of the Required Lenders: 6.1.           Liens.  Create, incur, assume or suffer to exist any Lien or other encumbrance upon any of its respective personal properties or assets, whether now owned or hereafter acquired, except such security interests, mortgages, pledges, liens or other encumbrances (each, a "Permitted Lien): (a)           created or granted by such Borrower under or pursuant to this Agreement or the other Loan Documents; (b)           created or granted by such Borrower to Lenders under the Original Loan Agreement and/or Current Loan Agreement and securing indebtedness arising thereunder; (c)           securing debt allowed in Section 6.4 below incurred in the ordinary course of such Borrower's business, consistent with current practices; (d)           Liens for taxes, assessments or governmental charges or levies to the extent not delinquent or that are being diligently contested in good faith by appropriate proceedings and for which such Borrower has set aside adequate reserves in accordance with generally accepted accounting principles; (e)           cash pledges or deposits to secure (A) obligations under workmen’s compensation laws or similar legislation, (B) public or statutory obligations of such Borrower, (C) bids, trade contracts, surety and appeal bonds, performance bonds, letters of credit and other obligations of a similar nature incurred in or necessary to the ordinary course of such Borrower's business; (f)           Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens arising in the ordinary course of business securing obligations which are not overdue by more than 60 days or which have been fully bonded or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves have been set aside in accordance with generally accepted accounting principles; (g)           purchase money Liens or purchase money security interests upon or in property acquired or held by such Borrower 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 any such property to be subject to such Liens or security interests, or Liens or security interests existing on any such property at the time of acquisition, or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided that no such Lien or security interest shall extend to or cover any property other than the property being acquired and no such extension, renewal or replacement shall extend to or cover property not theretofore subject to the Lien or security interest being extended, renewed or replaced, and provided, further, that the aggregate principal amount of indebtedness at any one time outstanding secured by Liens permitted by this clause (g) shall not exceed $75,000.00 per Hotel;   18     (h)           easements, rights-of-way, zoning and other similar restrictions and encumbrances, which do not (individually or in the aggregate) materially detract from the use of the property to which they attach by Borrowers; (i)             liens disclosed in Schedule 4.5 attached to this Agreement and incorporated herein by reference; and (j)             mortgages or deeds of trust providing permanent financing on Borrowers' Hotels which are not Collateral for the Loans, and mortgages or deeds of trust encumbering Borrowers' raw land pursuant to that certain Amended and Restated Loan Agreement dated May 17, 2010 (the "Amended Fortress Loan Agreement") among Drawbridge Special Opportunities Fund LP, Fortress Credit Opportunities Fund I LP and Eton Park CLO Management 2 and Summit Hotel. 6.2.           Fundamental Changes.  Wind up, liquidate, or dissolve; reorganize, merge or consolidate with or into another entity, or sell, transfer, convey or lease all, substantially all or any material part of its property, to another Person other than sale of such Borrower's inventory in the ordinary course of business; sell or assign any accounts receivable; purchase or otherwise acquire all or substantially all of the assets of any corporation, partnership, limited liability company or other entity, or any shares or similar equity interest in any other entity if such entity is in a business unrelated to the business of such Borrower. 6.3.           Conduct of Business.  Materially alter the character in which it conducts its business or the nature of such business conducted at the date hereof. 6.4.           Debt.  Create, incur, assume or suffer to exist any direct or indirect indebtedness, except the following ("Permitted Debt"): (a)           Indebtedness under or pursuant to this Agreement or the other Loan Documents; (b)           Accounts payable to trade creditors for goods or services which are not aged more than the later of (i) ninety (90) days from the billing date, or (ii) ten (10) days from the due date, or (iii) the "special payment date" offered to such Borrower from time to time by a particular trade creditors, and current operating liabilities (other than for borrowed money) which are not more than thirty (30) days past due, in each case incurred in the ordinary course of business, as presently conducted, and paid within the specified time, unless contested in good faith and by appropriate proceedings;   19     (c)           Indebtedness to First National under that certain Second Amended and Restated Loan Agreement dated August 15, 2010, as such Second Amended and (d)           Indebtedness to the Lenders party to the Current Loan Agreement; (e)           Indebtedness under the Amended Fortress Loan Agreement in an amount not to exceed $99,700,000.00 (the "Fortress Debt"); and (f)           The indebtedness disclosed in Borrowers' or Borrowers parent's quarterly filings with the Securities Exchange Commission so long as such indebtedness does not exceed the Total Debt. 6.5.           Investments.  Acquire for investment purposes, investments that would not qualify as "customary and prudent investments", consistent with the current investment practices of such Borrower. 6.6.           Loans.  Directly or indirectly loan amounts to or guarantee or otherwise become contingently liable for the debts of any Person, including, but not limited to an affiliate (other than a wholly owned affiliate), subsidiary, parent of such Borrower, or any shareholder, officer or employee thereof; or of any officer, employee, manager or member of such Borrower or to any entity controlled by any such entity, officer, manager, member, shareholder or employee, provided, however, that Summit Hotel may make loans to Summit Hotel's employees in an amount not to exceed $50,000 in the aggregate at any time outstanding.   6.7.           Executive Management.  Unless the Required Lenders otherwise consent in writing, Kerry W. Boekelheide shall remain each Borrower's operations manager and the President of The Summit Group, Inc., and The Summit Group, Inc. shall be the property manager of each Hotel pursuant to each Borrower's Operating Agreement.   6.8           Transactions With Affiliates.  Enter into, or cause, suffer or permit to exist, any arrangement or contract with any of its affiliates or subsidiaries, in each case unless such arrangement or contract (i) is otherwise permitted by this Agreement, (ii) is in the ordinary course of business of such Borrower or such affiliate or subsidiary, as the case may be, and (iii) is on terms no less favorable to such Borrower or such affiliate or subsidiary than if such arrangement or contract had been negotiated in good faith on an arm’s-length basis with a Person that is not an affiliate or subsidiary of such Borrower.   6.9.           Refinance of Loans.  Neither Borrower shall refinance any Property where the principal amount of the debt exceeds seventy percent (70%) of the Appraised Value of such Property. ARTICLE VII Events of Default 7.1.           Events of Default.  The occurrence of any one or more of the following events shall constitute a default by Borrowers under this Agreement ("Event of Default"):   20     (a)           The non-payment, when due, whether by demand, acceleration or otherwise, of any principal and/or interest payment, fee, expense or other obligation for the payment of money under the Loans or under any other Loan Document and the same remains unpaid for a period of ten (10) days after written notice from the Agent to Borrowers of such failure; or (b)           A breach by either Borrower or the occurrence of an event of default under any loan agreement, promissory note, security agreement or other agreement, lease, contract or document to which such Borrower is a party or under which it is bound, including, but not limited to, the Fortress Debt and the indebtedness under the Loan Agreement referenced in Section 6.4(c) above, directly or contingently, beyond any applicable grace or notice and cure period unless such Borrower is contesting such failure in good faith through appropriate proceedings, and if requested by the Required Lenders or required by generally accepted accounting principles, such Borrower has bonded, reserved or otherwise provided for payment of such indebtedness; or   (c)           A breach by either Borrower in the performance or observance of any term, covenant or provision contained in Sections 5.1, 5.4, 5.5, 5.7, 5.9, 5.12, 6.1, 6.2, 6.3, 6.4, 6.7 or 6.9 of this Agreement and the same remains unperformed or is not cured within a period of ten (10) days after written (d)           A breach by either Borrower in the performance or observance of any agreement, term, covenant or condition contained in this Agreement (other than (a) or (c) above) or in the other Loan Documents and such failure shall not have been remedied within a period of thirty (30) days after written notice is given by the Agent to Borrowers; or (e)           Any information, representation or warranty made herein, in the Loan Documents or in any other writing furnished to Lenders in connection with the Loans, this Agreement or any other Loan Document both before and after the execution hereof, shall be or become incomplete, misleading or false in any material respect, or if any certificate, statement, representation, warranty or audit furnished by or on behalf of the Borrowers in connection with this Agreement or any other Loan Document, including those contained or in or attached to this Agreement or any other Loan Document, or as an inducement by the Borrowers to enter into, modify, extend, or renew this Agreement, shall prove to be false in any material respect, or if the Borrowers shall have omitted the listing of a substantial contingent or unliquidated liability or claim against either Borrower or, if on the date of execution of this Agreement there shall have been any materially adverse change in any of the facts disclosed by any such certificate, statement, representation, warranty or audit, which change shall not have been disclosed by the Borrowers to the Lenders  prior to the time of execution; or   21     (f)           Either Borrower shall (i) fail to pay any indebtedness for borrowed money, including but not limited to the Fortress Debt and the indebtedness under the Second Amended and Restated Loan Agreement with First National dated August 15, 2010 as such Second Amended and Restated Loan Agreement may be amended or restated, or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after any applicable grace or notice and cure period, unless such Borrower is contesting such failure in good faith through appropriate proceedings, and if requested by the Required Lenders or required by generally accepted accounting principles, such Borrower has bonded, reserved or otherwise provided for payment of such indebtedness; or (ii) fail to perform or observe any term, covenant, or condition on its part to be performed or observed under any agreement or instrument relating to any such indebtedness, when required to be performed or observed, if the effect of such failure is to permit the acceleration of the maturity of such indebtedness;   (g)           Either Borrower shall (i) generally not pay, or be unable to pay, or admit in writing its inability to pay its debts as such debts become due; or (ii) makes an assignment for the benefit of creditors, or petitions or applies to any tribunal for the appointment of a custodian, receiver, or trustee for it, any Collateral or for a substantial part of its assets; or (iii) commences any now or hereafter in effect; or (iv) has any such bankruptcy, reorganization, dissolution, composition or readjustment of debt petition or application filed or any such proceeding commenced against it which is not discharged within thirty (30) days; or (v) takes any action indicating consent to, approval of, or acquiescence in any such proceeding, or order for relief, or the appointment of a custodian, receiver, or trustee for all or any substantial part of its assets and properties; or (vi) suffers any judgment, writ of attachment, execution or similar process to be issued or levied against all or a substantial part of its property or assets which is not released, stayed or bonded within thirty (30) days and which would be reasonably expected to have a Material Adverse Effect; or (h)           This Agreement or any of the Loan Documents shall cease for any reason to be in full force and effect, or either Borrower shall so assert in writing, or the security interests created by the Loan Documents shall cease to be enforceable or shall not have the priority purported to be created thereby or either Borrower shall so assert in writing; or (i)           There shall occur the loss, theft, substantial damage to or destruction of any portion of the Collateral not fully covered by insurance, which by itself or with other such losses, thefts, damage or destruction of Collateral, has a Material Adverse Effect or there shall occur the exercise of the right of condemnation or eminent domain for any portion of the Collateral which by itself or with other such exercises of the right of condemnation or eminent domain has a Material Adverse Effect; or (j)           Either Borrower transfers, sells, assigns, or conveys all or such part of its assets or property which could be reasonably expected to have a Material Adverse Effect other than in the ordinary course of such Borrower’s business consistent with past practices without the prior written consent of the Required Lenders; or   22     (k)           Any license, permit or other approval required in the operation of either Borrower’s business is terminated, suspended or revoked for any reason or expires; or (l)           Borrowers fail to obtain all necessary corporate and limited liability company approvals, consents and actions required or necessary for the initiation and consummation of Borrowers Initial Public Offering on or before November 8, 2010; or (m)           Borrowers have not consummated and completed the Initial Public Offering, and obtained the proceeds thereof, on or before February 15, 2011. 7.2.           Remedies.  Upon the occurrence of an Event of Default beyond any applicable notice and cure period, the sums payable under the Loans (as well as any other indebtedness of either Borrower to Lenders) then outstanding, shall become forthwith due and payable in full, together with interest thereon.  The Agent may resort to any and all Collateral, security and to any remedy existing at law or in equity for the collection of all outstanding indebtedness and the enforcement of the covenants and provisions of the Loan Documents against the Borrowers.  The Agent’s resort to any remedy or Collateral shall not prevent the concurrent and/or subsequent employment of any joint or several remedy or claim against either Borrower.  The Agent may rescind any acceleration of the Loans without in any way waiving or affecting its right to accelerate the Loans in the future.  Acceptance of partial payment or partial performance shall not in any way affect or rescind any acceleration of the Loans made by the Agent.  Any collections or payments made after the Agent commences collection efforts shall, after payment of all expenses relating thereto, be applied (i) first to interest and principal on the Loans, and (ii) next to any indebtedness owing to the Agent under any cash management or deposit account relationships with the Borrower, in each case as described in clauses (i) above all shared by the Lenders ratably. 7.3.           Waiver.  Any waiver of an Event of Default by the Required Lenders shall not extend to or affect any subsequent Event of Default, whether it be the same Event of Default or not, or impair any right consequent thereon.  No failure or delay or discontinuance on the part of the Agent or the Lenders in exercising any power or right hereunder shall operate as a waiver right or power thereunder or be deemed an election of remedies or a waiver of any other right, power, privilege, option or remedy.  All remedies herein and by law afforded will be cumulative and will be available to the Agent and the Lenders until the debt of the Borrowers hereunder is fully and indefeasibly paid.   7.4.           Setoff.  In addition to any rights now or hereafter granted under any Pool One Note or Pool Two Note is hereby authorized by the Borrowers at any time or from time to time, without notice to the Borrowers or to any other Person, any such notice being hereby expressly waived, to set off and to matured or unmatured, but not including trust accounts, and in whatever currency denominated) relating or attributable to or associated with a Hotel and any other indebtedness at any time held or owing by the Lender or that subsequent holder to or for the credit or the account of either Borrower whether or not matured, against and on account of the obligations and liabilities of the Borrowers to that Lender or that subsequent holder under the Loan Documents, including, but not limited to, all claims of any nature of description arising out of or connected with the Loan Documents, irrespective of whether or not (a) that Lender or that subsequent holder shall have made any demand hereunder or (b) the principal of or the interest on the Loans and other amounts due hereunder shall have become due and payable pursuant to Section 7.2 and although unmatured.  The Agent agrees to notify Borrowers in writing after any such set-off and application made by Lenders; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.   23     ARTICLE VIII Conditions Precedent 8.1.           Conditions Precedent to Closing.  As a condition precedent to Closing, Borrowers shall have delivered to the Agent the following documents (collectively, the "Loan Documents"): (a)           This Agreement, the Pool One Term Notes and Pool Two Term Notes duly executed by the authorized manager(s) of Borrowers; (b)           The Security Agreement duly executed by authorized manager(s) of Borrowers; (c)           Amendments of the Mortgages in form and substance acceptable to Agent; (d)           A Secretary's Certificate or equivalent with certified copies of the Articles of Organization and Operating Agreement of each Borrower and an appropriate resolution or authority of each Borrower duly authorizing the execution and delivery of the Loan Documents and Borrowers' performance hereunder and thereunder; (e)           Each Borrower shall have delivered to the Agent a certificate of good standing dated not more than thirty (30) days prior to the date of this Agreement from the South Dakota Secretary of State; (f)           Any other documents, instruments and reports as the Agent shall reasonably request; and (g)           The payment by Borrowers of all the Agent's fees and expenses relating to the underwriting, approving, due diligence, documenting, securing, negotiating and closing the Loans, including, but not limited to, the payment of the Agent's reasonable attorneys’ fees and costs, appraisal fees, title fees and other fees, costs and expenses of Agent. ARTICLE IX Miscellaneous 9.1.           Amendments.  Any provision of this Agreement and/or the other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by (i) the Borrowers (ii) the Required Lenders, and (iii) the Agent; provided that:   24     (a)           no reduction in the rate of interest or fees on the Loans will be made without the written consent of each Lender; (b)           no postponement of the scheduled date of payment of the principal or interest amount of any Loan, or any fees payable hereunder, or reduction of the amount of, waiver or excuse of any such payment, will be made without the written consent of each Lender; (c)           no change any of the provisions of this Section or the percentage in the definition of the term “Required Lenders” or any other provision hereof hereunder, may be made without the written consent of each Lender; or (d)           no release of any Collateral for the Loans prior to the time the Loans are indefeasibly paid in full and the Lenders’ commitment to make Loans has terminated may be made without the written consent of each Lender. 9.2.           Expenses.  The Borrowers jointly and severally agree to pay the reasonable attorneys fees and disbursements of the Agent in connection with the preparation and execution of the Loan Documents, and any amendments, waivers or consents related thereto, whether or not the transactions contemplated herein are consummated, and all reasonable recording, filing, title insurance or other fees, costs and taxes incident to perfecting a Lien upon the Collateral.  The Borrowers further jointly and severally agree to pay the reasonable attorney's fees and disbursements of the Agent in connection with the enforcement of the Loan Documents and to indemnify each Lender and the Agent and any security trustee and their respective directors, officers and employees, against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor, whether or not the indemnified Person is a party thereto) which any of them may pay or incur arising out of or relating to any Loan Document or any of the transactions contemplated thereby or the direct or indirect application or proposed application of the proceeds of any Loan except as may arise from the gross negligence or willful misconduct of the party claiming indemnification.  The Borrowers upon demand by the Agent, at any time shall of such indemnified party.  Sums due by the Borrowers under this Section shall bear interest at the highest rate of interest provided for under this Agreement. 9.3.           Delay; Waiver.  Any waiver of an Event of Default by the Agent or Required Lenders shall not extend to or affect any subsequent default, whether it be the same Event of Default or not, nor impair any right consequent thereon.  No failure or delay on the part of the Agent in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any privilege.  No waiver of any provision of this Agreement or of any instrument executed hereunder or pursuant hereto or consent to any departure by Borrowers therefrom shall be effective unless the same shall be in writing, signed by an officer of the Agent and each Required Lender, and then only to the extent specified.  All rights and remedies of Lenders herein and by law afforded will be cumulative and will be available to Lenders until the indebtedness of Borrower under the Loan Documents is indefeasibly paid in full and no Commitments remain outstanding.   25     9.4.           Notices.  Any notice, request, authorization, approval or consent made hereunder shall be in writing and shall be personally delivered or sent by registered or certified mail, and shall be deemed given when delivered or postmarked and mailed postage prepaid to the following addresses or when sent by facsimile which confirms receipt to the following facsimile numbers:   If to the Agent:                                     First National Bank of Omaha 1620 Dodge Street Stop 1050 Omaha, Nebraska  68197 Attn:  Marc T. Wisdom Facsimile:  (402) 633-3519 With a copy to:                                    Stinson Morrison Hecker LLP 1299 Farnam Street Suite 1501 Omaha, Nebraska  68102 Attn:  James M. Pfeffer Facsimile:  (402) 829-8731 If to Borrowers:                                    Summit Hotel Properties, LLC 2701 South Minnesota Avenue Suite 6 Sioux Falls, South Dakota  57105 Attn:  Adam Wudel Facsimile:  (605) 362-9388 The Agent and Borrowers may designate a change of address by notice given in accordance with the provisions of this Subsection at least five (5) days before such change is to become effective. 9.5.           Transfer or Assignment.  This Agreement shall extend to and be binding upon the successors and assigns of the parties hereto; provided, however, that neither Borrower may assign or transfer its rights or obligations hereunder without the prior written consent of the Required Lenders, and any such assignment or transfer without such consent shall be void.  Lenders may assign their Commitments or sell participations in the Loans with the prior written consent of the Agent but without notice to Borrowers.  In addition, the any or all of any Lender's Pool One Term Notes and/or Pool Two Term Notes at the then outstanding principal balance along with accrued and unpaid interest on the applicable Pool One Term Note or Pool Two Term Note payable to such Lender.   26     9.6.           Construction of Agreement.  The titles and headings of the Subsections and paragraphs of this Agreement have been inserted for convenience of reference only and are not intended to summarize or otherwise describe the subject matter of such Subsections and paragraphs and shall not be given any   9.7.           Applicable Law; Waiver of Jury Trial.  This Agreement shall be Nebraska, exclusive of its choice of laws rules. Any legal action or proceeding with respect to this Agreement or any other Loan Document may be brought in the courts of the State of Nebraska in Douglas County, or of the United States for the District of Nebraska, and, by execution and delivery of this Agreement, Borrowers hereby irrevocably accept for themselves and in respect of their property, generally and unconditionally, the nonexclusive jurisdiction of such courts.  Borrowers further irrevocably consent to the service of process out of of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 8.4, such service to become effective three (3) days after such mailing.  Nothing herein shall affect the right of the Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against Borrowers in any other jurisdiction.  Borrowers hereby irrevocably waive any objection which they may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Loan Document brought in the courts referred to above and hereby further irrevocably waive and agree not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.  THE AGENT, LENDERS AND BORROWERS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.   9.8.           Sharing of Setoffs.  If any Lender shall, by exercising any right of setoff or otherwise, obtain payment in respect of any principal of or interest on any of the Loans resulting in such Lender receiving payment of a proportion of the aggregate amount of its Percentage and accrued interest thereon greater than its pro rata share thereof as provided in this Agreement, then the Lender receiving such greater proportion shall (A) notify the Agent of such fact, and (B) purchase (for cash at face value) participations in the Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with their respective Percentages, provided that, if any such price restored to the extent of such recovery, without interest.  Borrowers consent to the foregoing and agree, to the extent they may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against Borrowers rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of Borrowers in the amount of such participation.   27     9.9.           Entire Agreement.  The Loan Documents constitute the entire respect thereto are superseded hereby.  All of the terms of the other Loan Documents are incorporated in and made part of this Agreement by reference; provided, however, that to the extent of any direct conflict between this Agreement and such other Loan Documents, this Agreement shall prevail and govern. 9.10.         Execution in Counterparts; Faxes.  This Agreement may be executed in any number of counterparts, and by the different parties on different counterparts, each of which when executed shall be deemed an original but all such counterparts taken together shall constitute one and the same counterpart signature pages.   9.11.         Amended and Restated Credit Facility; Liens Unimpaired.  This Agreement amends, restates and replaces the Current Credit Agreement in its entirety.  It is the intention and understanding of the parties that (a) this Agreement shall act as a refinancing of the debt and other obligations evidenced by the Current Credit Agreement and that this Agreement shall not act as a novation of such debt and other obligations, (b) all Liens securing the obligations evidenced by the Current Credit Agreement shall remain in full force and effect and shall secure the Loans and all other obligations of the Borrowers to the Lenders now or hereafter evidenced by or incurred under this Agreement or any of the other Loan Documents, and (c) the priority of all Liens securing the obligations evidenced by the Current Credit Agreement (including, without limitation, all such Liens granted to or for the benefit of the Collateral Agent referred to in the Current Credit Agreement and/or any of the Lenders thereunder who are Lenders under this Agreement) shall not be impaired by the execution, delivery or performance of this Agreement or the other Loan Documents.  Without limiting the foregoing, the parties agree that all security documents pursuant to which the Agent (including, without limitation, the Collateral Agent referred to in the Current Credit Agreement) has been granted a Lien on any existing or future property of the Borrowers, and all other Loan Documents referred to in the Current Credit Agreement, shall in each case remain in full force and effect except as amended hereby or by any of the other Loan Documents referred to in this Agreement.   9.12.         Exclusion of Consequential and Special Damages.  Notwithstanding will be liable for, nor will any measure of damages against them include, under any theory of liability (whether legal, strict or equitable), any indirect, consequential, incidental, special or punitive damages or amounts for business interruption, loss of income, revenue, profits or savings arising out of or relating to their performance or non-performance under this Agreement or any Loan Document, and the Borrowers hereby waive any right to pursue or recover any of the foregoing damages.   9.13.         USA Patriot Act Notice.  Each Lender and the Agent (for itself and not on behalf of any Lender) hereby notifies the Borrowers that pursuant to the information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender or the Agent, as applicable, to identify the Borrowers in accordance with the Act.   28     ARTICLE X Agent 10.1        Authorization and Action.   (a)           The Lenders from time to time a party hereto hereby irrevocably appoint First National as the Agent and authorize the Agent to take such actions on their behalf and to exercise such powers as are delegated to the Agent by the reasonably incidental thereto.   (b)           The Agent shall have the same rights and powers in its capacity as a Lender as the other Lenders and may exercise the same as though it were not the Agent, and the Agent and the Agent's affiliates may accept deposits from, lend money to and generally engage in any kind of business with Borrowers or any of their subsidiaries or affiliate as if it were not the Agent hereunder. The term "Lender" as used in this Agreement and the other Loan Documents, unless the context otherwise clearly requires, includes the Agent in its individual capacity as a Lender.   (c)           The Agent shall not have any duties or obligations except those expressly set forth in this Agreement and the other Loan Documents.  Without limiting the generality of the foregoing, (i) the Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred and is continuing, (ii) the Agent shall not have any duty to take that the Agent is required to exercise in writing by the Required Lenders, and (iii) except as expressly set forth in the Loan Documents, the Agent shall not any information relating to Borrowers or any of Borrowers' subsidiaries or affiliates that is communicated to or obtained by the Agent or any of the Agent's affiliates in any capacity.  The Agent shall not be liable for any Required Lenders  or in the absence of the Agent's own gross negligence or willful misconduct.  The Agent will not be deemed to have knowledge of any Event of Default unless and until written notice thereof is given to the Agent by Borrowers or the other Lenders.  Upon the occurrence of an Event of Default, the Agent shall take such action with respect to the enforcement of the Liens on the Collateral under the Loan Documents and the preservation and protection thereof as it shall be directed to take by the Required Lenders, but unless and until the Required Lenders have given such direction the Agent shall take or refrain from taking such actions as it reasonably deems appropriate.  In no event, however, shall the Agent be required to take any action in violation of applicable law or of any provision of any Loan Document, and the Agent shall in satisfaction by the Lenders (other than the Agent in its capacity as a Lender) against any and all costs, expense, and liability which may be incurred by it by reason of taking or continuing to take any such action.  In all cases in which this Agreement and the other Loan Documents do not require the Agent to take certain actions, the Agent shall be fully justified in using its discretion in failing to take or in taking any action hereunder and thereunder.  The Agent will not be responsible for or have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with any Loan Document, (B) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (C) the performance or forth in any Loan Document, (D) the validity, enforceability, effectiveness or or (E) the satisfaction of any condition set forth in Article VIII or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Agent.   29     (d)           The Agent shall be entitled to rely upon, and shall not incur any and to have been signed or sent by the proper person.  The Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper person, and shall not incur any liability for relying thereon.  The Agent may consult with legal counsel (who may be counsel for Borrowers), independent accountants and other experts selected by it, and shall   (e)           The Agent may perform any and all its duties and exercise its rights and powers by or through one or more sub-agents appointed by the exercise its rights and powers through their respective affiliates and subsidiaries.  The exculpatory provisions of the preceding subsections of this Section 10.1 shall apply to any such sub-agent and to the affiliates and subsidiaries of the Agent and any such sub-agent, and shall apply to their respective activities in connection with the administration of the credit facilities provided for herein as well as activities as the Agent.   (f)           Subject to the appointment and acceptance of a successor Agent as provided in this subsection (f), the Agent may resign at any time as Agent by notifying the other Lenders and Borrowers.  Upon any such resignation, Lenders shall have the right to appoint a successor.  If no successor shall have been so appointed by the Lenders other than the Agent and such successor shall not have accepted such appointment within 30 days after the Agent gives notice of its resignation, then the Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a Lender or an affiliate of a Lender.  Upon the appointment of a successor Agent as the Agent hereunder, such successor shall succeed to and Agent, and such retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by Borrowers to a successor Agent shall Borrowers and such successor.  After the Agent’s resignation hereunder, the provisions of this Article shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective affiliates and subsidiaries in respect of any actions taken or omitted to be taken by any of them while it was acting as the Agent.   (g)           Each Lender acknowledges that it has independently and without reliance upon the Agent or First National and based on such documents and will, independently and without reliance upon First National or the Agent and agreement or any document furnished hereunder or thereunder.  It is the responsibility of each Lender to keep itself informed as the creditworthiness of the Borrowers and the value of the Collateral, and the Agent shall have no   30     (h)           Each Lender agrees to reimburse the Agent for all out-of-pocket costs and expenses suffered or incurred by the Agent or any security trustee in performing its duties under this Agreement and under the other Loan Documents or in the exercise of any right or power imposed or conferred upon the Agent hereby or thereby (except to the extent that such costs and expenses arise out of the Agent's or such security trustee's gross negligence or willful misconduct), to the extent that the Agent is not promptly reimbursed for the same by the Borrowers, or out of the Collateral, all such costs and expenses shall be borne by the Lenders ratably in accordance with their respective Percentages.   10.2.         Indemnification.  Each Lender other than the Agent agrees to indemnify the Agent (to the extent not reimbursed by Borrowers), ratably according to the respective Percentage of the Loans, from and against any and may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by the Agent under this Agreement or any other Loan Document, provided that each Lender shall not be liable for any portion of such costs, expenses or disbursements resulting from the Agent’s gross negligence or willful misconduct in connection with the Agent's acts or omissions with respect to this Agreement and the Loan Documents.  Without limitation of the foregoing, each Lender other than the Agent agrees to reimburse the Agent promptly upon fees) incurred by the Agent in connection with the preparation, execution, respect of rights or responsibilities under, this Agreement or any other Loan Document to the extent that the Agent is not reimbursed for such expenses by Borrowers. ARTICLE XI Yield Protection   11.1.         Yield Protection. (a)  Increased Costs.  If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation after the date hereof, 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) issued or made after the date hereof (any such introduction, change, guideline or request being referred to herein as a “Regulatory Change”), there shall be reasonably incurred any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Advances accruing interest at the LIBOR Rate, then Borrowers shall from time to time, upon demand by the Agent, jointly and severally pay to the Agent for the account of such Lenders, additional amounts sufficient to compensate such Lenders for such increased cost.  A certificate as to the amount of such increased cost and giving a reasonable explanation thereof, submitted to Borrowers shall constitute such demand and shall be conclusive and binding for all purposes, absent manifest error.   31     (b)             Capital. If any Lender determines that (i) as a result of a Regulatory Change, compliance with any law or regulation or any guideline or having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender, whether directly, or indirectly as a result of commitments of any corporation controlling such Lender (but without duplication), and (ii) the amount of such capital is increased by or based upon (A) the existence of such Lender’s commitment to lend hereunder, or (B) the participation in or issuance or maintenance of any Advance and (C) other similar such commitments, then, upon demand by such Lender, Borrowers shall immediately and jointly and severally pay to the Agent for the account of such Lender from time to time as specified by such Lender additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the transactions contemplated hereby.  A certificate as to such amounts and giving a reasonable explanation thereof (to the extent permitted by law), submitted to Borrowers and the Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error.   (c)           Notices.  Each Lender hereby agrees to use commercially reasonable efforts (including the giving of a notice in accordance with Section 9.4 above) to notify Borrowers of the occurrence of any event referred to in subsection (a) or (b) of this Section 11.1 promptly after becoming aware of the occurrence thereof.  The failure of either Lender to provide such notice or to make demand for payment under said subsection shall not constitute a waiver of such Lender’s rights hereunder.   (d)           Survival of Obligations.  Borrowers' obligations under this Section 11.1 shall survive the repayment of all other amounts owing to the Lenders and the Agent under the Loan Documents and the termination of the Loans.  If and to the extent that the obligations of Borrowers under this Section 11.1 are unenforceable for any reason, Borrowers agree to make the maximum contribution to the payment and satisfaction thereof which is permissible under applicable law.   11.2.         Taxes. (a) All payments by Borrowers hereunder and under the other Loan Documents shall be made free and clear of and without deduction for all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of any Lender, taxes imposed on its net income, and franchise taxes imposed on it by the jurisdiction under the laws of which such Lender is organized or any political subdivision thereof and, in the case of any 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 (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”).  If either Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any other Loan Document to any Lender, (i) the sum payable shall be increased as may be necessary so that after making all required this Section 11.2) such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.   32     (b)           In addition, each Borrower jointly and severally agrees to 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 under any other Loan Document or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as “Other Taxes”).   (c)           Each Borrower jointly and severally agrees to indemnify each Lender for the full amount of Taxes and Other Taxes (including any Taxes and any Other Taxes imposed by any jurisdiction on amounts payable under this Section 11.2) paid by such Lender and any liability (including penalties, interest and expenses, except for any penalties, interest and expenses caused by the gross negligence or willful misconduct of such Lender) 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 makes written demand therefor, which demand shall be accompanied by a statement providing an explanation of the facts and calculations that form the basis of such demand.   (d)           Within 30 days after the date of any payment of Taxes, Borrowers will furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof or, if a receipt is unavailable, such other evidence   (e)           Without prejudice to the survival of any other agreement of Borrowers hereunder, the agreements and joint and several obligations of Borrowers contained in this Section 11.2 shall survive the repayment of all other amounts owing to the Lenders and the Agent under the Loan Documents and the termination of the Loans.  If and to the extent that the obligations of Borrowers under this Section 11.2 are unenforceable for any reason, each Borrower agrees to make the maximum contribution to the payment and satisfaction thereof which is permissible under applicable law. A CREDIT AGREEMENT MUST BE IN WRITING TO BE ENFORCEABLE UNDER NEBRASKA LAW.  TO PROTECT YOU (BORROWER) AND US (LENDER) FROM ANY MISUNDERSTANDINGS OR DISAPPOINTMENTS, ANY CONTRACT, PROMISE, UNDERTAKING, OR OFFER TO FOREBEAR REPAYMENT OF MONEY OR TO MAKE ANY OTHER FINANCIAL ACCOMMODATION IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF CREDIT, OR ANY AMENDMENT OF, CANCELLATION OF, WAIVER OF, OR SUBSTITUTION FOR ANY OR ALL OF THE TERMS OR PROVISIONS OF ANY INSTRUMENT OR DOCUMENT EXECUTED IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF CREDIT, MUST BE IN WRITING TO BE EFFECTIVE.   33     by their duly authorized officers on the day and year first above written.   SUMMIT HOTEL PROPERTIES, LLC, a South Dakota limited liability company, by its Company Manager, THE SUMMIT GROUP, INC.               By: /s/ Kerry W. Boekelheide     Kerry W. Boekelheide, Chief Executive Officer   Date: 8/19/10         SUMMIT HOSPITALITY V, LLC, a South Dakota limited liability company, by its sole member, SUMMIT HOTEL PROPERTIES, LLC, by its Company Manager, SUMMIT GROUP, INC.               By:             34     FIRST NATIONAL BANK OF OMAHA, as a Lender and as Agent               By: /s/ Marc T. Wisdom   Title: Vice President     8/19/10       35       BANK MIDWEST, N.A., as a Lender               By: /s/ Andrew D. Cooper   Title: Vice President     36       CRAWFORD COUNTY TRUST & SAVINGS, as a Lender               By: /s/ Larry E. Andersen   Title: SVP     37       QUAD CITY BANK & TRUST COMPANY, as a Lender               By: /s/ Rebecca Skafidas   Title: Vice President   38       M & I MARSHALL & ILSLEY BANK, as a Lender               By: /s/ Mark Kockanski   Title: Vice President     39       BANKERS TRUST COMPANY, as a Lender               By: /s/Jonathon Doll   Title: Vice President   40   EXHIBIT A (Definitions) “Administrative Agent” means First National Bank of Omaha and its successors, assigns and replacements. “Appraised Value” means the “as stabilized” value of a Hotel, determined by appraisals of such Hotel obtained by Agent. "Agent" means the Administrative Agent and the Collateral Agent, collectively. “Audit Committee” means each Borrower’s respective Audit Committee established pursuant to such Borrower’s Operating Agreement, which Audit Committee shall contain independent members. commercial banks in Omaha, Nebraska or New York, New York are authorized or required to close or any day on which dealings between banks are not carried on in U.S. dollar deposits in London, England. “Collateral Agent” means First National Bank of Omaha and its successors, assigns and replacements. "Debt" means with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Debt of others secured by (or for which the holder of such Debt has an existing right, acquired by such Person, whether or not the Debt secured thereby has been assumed, (g) all guarantees by such Person of Debt of others, (h) all capital lease obligations (as determined in accordance with generally accepted accounting principles) of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances.  The Debt of any Person shall include the Debt of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Debt provide that such Person is not liable therefor.         “Debt Service Coverage Ratio” shall be calculated consistent with the principles used in the preparation of the financial statements referenced in Section 4.7 of this Agreement as EBITDA during the trailing four (4) quarters divided by principal and interest payments on the aggregate first mortgage term debt scheduled and paid during the trailing four (4) quarters.  Expenses of Borrowers funded with loan proceeds from the refinance of a Hotel(s) owned by a Borrower where such loan proceeds are used for repair and maintenance of such Hotel(s) shall be excluded from the determination of the Debt Service Coverage Ratio for such Borrower.   "EBITDA" means, for either Borrower for any period, the net income of such Borrower before provision for income taxes, interest expense (including implicit interest expense on capitalized leases), depreciation expense, amortization expense and non-recurring renovation/remodel expenses funded with the proceeds of a Loan or other non-operating sources and other non-cash expenses or charges, excluding (to the extent included):  (a) non-operating gains (including extraordinary or nonrecurring gains, gains from discontinuance of operations and gains arising from the sale of assets other than the sale of inventory in the ordinary course of such Borrower’s business) during the relevant period; and (b) similar non-operating losses during such period. “Hotel” means a limited service hotel owned by a Borrower securing the Loans. such asset. “Loans” means collectively, the Pool One Term Loans and the Pool Two Term Loans. liabilities, of either Borrower, (ii) the ability of either Borrower to perform any of its obligations under the Loan Documents to which it is a party, (iii) the rights and remedies of Lenders under any of the Loan Documents or (iv) the "Percentage" means, with respect to each Lender, the percentage set forth in the table below for each Lender:     2     LENDER PERCENTAGE     20% M & I 20% Bank Midwest 30% Quad City 10% Bankers Trust 10% Crawford County 10% Total 100% “Pool One Loan Formula” has the meaning given to such term in Section 1.4 of this Agreement. "Pool One Term Loan Termination Date" means the earliest to occur of (i) July 31, 2011 or (ii) the date the Pool One Term Loans are accelerated due to the occurrence and continuance of an Event of Default beyond any applicable grace or notice and cure period. "Pool Two Loan Formula" has the meaning given to such term in Section 2.3 of this Agreement. “Required Lenders” means Lenders holding fifty-one percent (51%) or more of the aggregate outstanding principal balance of the Loans at the relevant time. "Reserve Hotel" means each of the Staybridge Suites in Jackson, MS, the Courtyard by Marriott in Jackson, MS, the Courtyard by Marriott in Germantown, TN and the Hyatt Place in Atlanta, GA, each of which is encumbered by the Mortgage. "Total Debt" shall mean on the date of any determination thereof the aggregate of the Debt outstanding on the (i) Fortress Debt, plus (ii) any Debt of Borrowers, The Summit Group, Inc. and any affiliate or subsidiary of either Borrower or The Summit Group, Inc., to the extent of Borrowers ownership interest in such affiliate or subsidiary, secured by a mortgage, deed of trust or similar instrument on real property owned or leased by such Borrower, The Summit Group, Inc. or any such affiliate or subsidiary, including, without limitation, and Loan under this Agreement, the Current Loan Agreement or under the Loan Agreement with First National described in Section 6.4(c), plus (iii) any unsecured Debt owed by either Borrower, The Summit Group, Inc., or any affiliate or subsidiary of either Borrower or The Summit Group, Inc., to First National.   3     All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles, as in effect in the United States.  "Including” (and with correlative meaning “include”) means of this Agreement refers to all Sections and Subsections thereunder.  Any pronoun used herein shall be deemed to cover all genders.  Defined terms used in this Agreement may be set forth in this Exhibit or other Sections of this Agreement, and all such definitions defined in the singular shall have a corresponding meaning when used in the plural and vice versa.         4     SCHEDULE 3.2 (Mortgages) 1. Deed of Trust dated May 1, 2007 between Summit Hospitality and Agent recorded in the Office of the County Clerk of Dallas County, Texas deed of trust records as Instrument #20070161504, as amended by that certain Amendment To Deed of Trust dated May 1, 2008 between Summit Hospitality and Agent recorded in the Office of the County Clerk of Dallas County, Texas deed of trust records as Instrument #20080179195 and by that certain Second Amendment of Deed of Trust of even date with this Agreement, executed by Summit Hospitality in favor of the Agent in connection with the Hyatt Place Pool One Term Loan. 2. Instrument #20070161516, as amended by that certain Amendment To Deed of Trust #20080179224 and by that certain Second Amendment of Deed of Trust of even date connection with the Holiday Inn Express Pool One Term Loan. 3. Deed of Trust dated June 5, 2007 between Summit Hospitality and the Agent recorded in the real estate records of Madison County, Mississippi deed of trust records as Instrument #536152 in Book 2198 beginning at Page 0448, as amended by that certain First Amendment of Deed of Trust of even date with this Agreement, executed by Summit Hospitality in favor of the Agent in connection with the Staybridge Suites Pool One Term Loan. 4. Deed of Trust dated June 24, 2008 between Summit Hospitality and the Agent recorded in the real estate records of Hinds County, Mississippi deed of trust records as Instrument #1153230 in Book 6908 beginning at Page 507, as amended by Jackson Courtyard Pool Two Term Loan. 5. recorded in the real estate records of Shelby County, Tennessee records as Instrument #08106576 in the Office of the Register of Deeds of Shelby County, Tennessee, as amended by that certain First Amendment of Deed of Trust of even date with this Agreement, executed by Summit Hospitality in favor of the Agent in connection with the Germantown Courtyard Pool Two Term Loan.       6. Deed To Secure Debt dated April 10, 2006 between Summit Hotel and the Agent recorded April 13, 2006 in the Office of the Clerk of Superior Court, Fulton County, Georgia as Instrument #2006-0112083 in Book 42359 at Page 172, as amended by that certain Amendment To Deed To Secure Debt dated May 23, 2007 between Summit Hotel and the Agent recorded in the Office of the Clerk of Superior Court, Fulton County, Georgia as Instrument #2007-0157036 in Deed Book 45090 at Page 686, by that certain Amendment To Deed To Secure Debt dated June 23, 2008 between Summit Hotel and the Agent recorded in the Office of the Clerk of Superior Court, Fulton County, Georgia as Instrument #2008-0169132 in Deed Book 46986 at Page 609 and by that certain Third Amendment To Deed To Secure Debt dated of even date with this Agreement, executed and delivered by Hotel in favor of the Agent in connection with the Hyatt Place Pool Two Term Loan.   2     SCHEDULE 4.5 (Permitted Liens) None             SCHEDULE 5.3(c) (Compliance Certificate) COMPLIANCE CERTIFICATE The undersigned certifies that he/she currently is the ___________________ of Summit Hotel Properties, LLC and Summit Hospitality V, LLC (collectively, “Company”), each a South Dakota limited liability company, and that he/she has individually reviewed the provisions of the Second Amended and Restated Loan Agreement between Company, Agent and the Lenders a party thereto dated August ____, 2010 (as it may be amended from time to time, the “Loan Agreement”) and that a review of the activities of the Company since the most recent Compliance Certificate was delivered to Lenders has been made by him/her or under his/her supervision, with a view to determining whether Company has fulfilled all their respective obligations under the Loan Agreement, including, but not limited to, the Affirmative, Financial and Negative Covenants contained in the Loan Agreement.  Company hereby certifies to Lenders that Company has observed and performed each undertaking contained in the Loan Agreement and that no Event of Default has occurred or is existing under the Loan Agreement or any other Loan Document.  Set forth below are financial covenant measurements for the periods covered by this Compliance Certificate as required by the Loan Agreement.  Also attached hereto are all relevant facts in reasonable detail to evidence the computations of the financial covenants, which were computed in accordance with the terms of the Loan Agreement. For the period between _________________, 200__ and _________________, 200__. I.           Debt Service Coverage Ratio Company’s Debt Service Coverage Ratio as of the end of the period covered by Certificate: __________________________ Required Debt Service Coverage Ratio:1.5:1.0 Calculation of Debt Service Coverage Ratio: Earnings ______________________ before Interest _______________, Income taxes __________, Depreciation ___________, Amortization ___________ and Non-recurring renovation/remodel expenses funded with the proceeds of a Loan or other non-operating sources ___________________, divided by Principal and interest payments on the aggregate first mortgage term debt scheduled and paid during the trailing 4 quarters ______________ Equals _______________.       II.           Total Debt Covenant Total Debt outstanding as of the end of the period covered by this Certificate equals:  $______________ Required Total Debt:  Not in excess of $450,000,000.00. III.           Defaults The undersigned hereby certifies that the above reported information is correct, and that [     ]  No event of default has occurred; or [     ]  An event of default has occurred under the following circumstances:          (Insert detail or attach description) IV.           Maintenance and Capital Expenditure Reserve Gross Revenues for each Reserve Hotel as of the end of the period covered by this Certificate: Maintenance and Capital Expenditure Reserves deposited as of the end of the period covered by this Certificate for each Hotel: Required Maintenance and Capital Expenditure Reserves: 3% of gross revenues for each Hotel. By: ______________________________                                                                                     Date:  ___________________________ Title:  ______________________________       2  
DISTRIBUTION AGREEMENT This Agreement made as of , 2012 by andamong The First Western Funds Trust (the “Trust”), an Ohio business trust, First Western Capital Management Company, a Colorado Corporation ("Adviser"), and Ultimus Fund Distributors, LLC, an Ohio limited liability company (“Distributor”). WHEREAS, the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act"); and WHEREAS, the Advisor is an investment adviser registered under the Investment Advisors Act of 1940, as amended, and has been retained by the Trust to provide investment services to the Trust; WHEREAS, Distributor is a broker-dealer registered with the Securities and Exchange Commission and a member of FINRA; and WHEREAS, the Trust, Adviserand Distributor are desirous of entering into an agreement providing for the distribution by Distributor of shares of beneficial interest (the "Shares") of each series of shares of the Trust listed on Schedule A attached hereto (the "Series"), as such Schedule A may be amended from time to time; NOW, THEREFORE, in consideration of the premises and agreements of the parties contained herein, the parties agree as follows: 1. Appointment. The Trust hereby appoints Distributor as its exclusive agent for the distribution of the Shares, and Distributor hereby accepts such appointment under the terms of this Agreement.While this Agreement is in force, the Trust shall not sell any Shares except on the terms set forth in this Agreement.Notwithstanding any other provision hereof, the Trust may terminate, suspend or withdraw the offering of Shares whenever, in its sole discretion, it deems such action to be desirable. 2. Sale and Repurchase of Shares. (a) Distributor will have the right, as agent for the Trust, to enter into dealer agreements with responsible investment dealers, and to sell Shares to such investment dealers against orders therefor at the public offering price (as defined in subparagraph 2(d) hereof) stated in the Trust's effective Registration Statement on Form N-1A under the Act and the Securities Act of 1933, as amended, including the then current prospectus and statement of additional information (the "Registration Statement").Upon receipt of an order to purchase Shares from a dealer with whom Distributor has a dealer agreement, Distributor will promptly cause such order to be filled by the Trust.All dealer agreements shall be in such form as has been approved by the Trust. (b) Distributor will also have the right, as agent for the Trust, to sell such Shares to the public against orders therefor at the public offering price. (c) Distributor will also have the right to take, as agent for the Trust, all actions which, in Distributor's reasonable judgment, are necessary to carry into effect the distribution of the Shares. (d) The public offering price for the Shares of each Series shall be the respective net asset value of the Shares of that Series then in effect, plus any applicable sales charge determined in the manner set forth in the Registration Statement or as permitted by the Act and the rules and regulations of the Securities and Exchange Commission promulgated thereunder.In no event shall any applicable sales charge exceed the maximum sales charge permitted by the Rules of FINRA. (e) The net asset value of the Shares of each Series shall be determined in the manner provided in the Registration Statement, and when determined shall be applicable to transactions as provided for in the Registration Statement.The net asset value of the Shares of each Series shall be calculated by the Trust or by another entity on behalf of the Trust.Distributor shall have no duty to inquire into or liability for the accuracy of the net asset value per Share as calculated. (f) On every sale, the Trust shall receive the applicable net asset value of the Shares promptly, but in no event later than the third business day following the date on which Distributor shall have received an order for the purchase of the Shares. (g) Upon receipt of purchase instructions, Distributor will transmit such instructions to the Trust or its transfer agent for the issuance and registration of the Shares purchased. (h) Nothing in this Agreement shall prevent Distributor or any affiliated person (as defined in the Act) of Distributor from acting as distributor for any other person, firm or corporation (including other investment companies) or in any way limit or restrict Distributor or any such affiliated person from buying, selling or trading any securities for its or their own account or for the accounts of others from whom it or they may be acting; provided, however, that Distributor expressly represents that it will undertake no activities which, in its reasonable judgment, will adversely affect the performance of its obligations to the Trust under this Agreement. (i) Distributor, as agent of and for the account of the Trust, may repurchase the Shares at such prices and upon such terms and conditions as shall be specified in the Registration Statement. 3. Sale of Shares by the Trust. The Trust reserves the right to issue any Shares at any time directly to the holders of Shares ("Shareholders"), to sell Shares to its Shareholders or to other persons at not less than net asset value and to issue Shares in exchange for substantially all the assets of any corporation or trust or for the shares of any corporation or trust. 4. Basis of Sale of Shares. Distributor does not agree to sell any specific number of Shares.Distributor, as agent for the Trust, undertakes to sell Shares on a best efforts basis only against orders therefor. 5. Rules of FINRA, etc. (a) In providing services hereunder, Distributor will comply with the Rules of FINRA, the federal securities laws and the rules thereunder and the securities laws and regulations of each state and other jurisdiction in which it sells, directly or indirectly, any Shares. (b) Distributor will require each dealer with whom Distributor has a dealer agreement to conform to the applicable provisions hereof and the Registration Statement with respect to the public offering price of the Shares, and neither Distributor nor any such dealers shall withhold the placing of purchase orders so as to make a profit thereby. (c) Distributor agrees to furnish to the Trust sufficient copies of any agreements, plans or other materials it intends to use in connection with any sales of Shares in reasonably adequate time for the Trust to file and clear them with the proper authorities before they are put in use, and not to 2 use them until so filed and cleared.At the request of the Trust, Distributor will assume responsibility for the review and clearance of all advertisements and sales literature. (d) Distributor, at its own expense, will qualify as dealer or broker, or otherwise, under all applicable state or federal laws required in order that Shares may be sold in such States as may be mutually agreed upon by the parties. (e) Distributor shall not make, or permit any representative, broker or dealer to make, in connection with any sale or solicitation of a sale of the Shares, any representations concerning the Shares except those contained in the then current prospectus and statement of additional information covering the Shares and in printed information approved by the Trust as information supplemental to such prospectus and statement of additional information.Copies of the then effective prospectus and statement of additional information and any such printed supplemental information will be supplied by the Trust to Distributor in reasonable quantities upon request. 6. Records to be supplied by Trust. The Trust shall furnish to Distributor copies of all information, financial statements and other papers which Distributor may reasonably request for use in connection with the distribution of the Shares, and this shall include, but shall not be limited to, one certified copy, upon request by Distributor, of all financial statements prepared for the Trust by independent public accountants. 7. Fees and Expenses. For performing its services under this Agreement, Distributor will receive a fee from the Adviser in accordance with agreements between them as permitted by applicable laws, including the Act and rules and regulations promulgated thereunder.The fee is $6,000 per annum, and shall be paid on a monthly basis.The Adviser shall promptly reimburse Distributor for any expenses that are to be paid in accordance with the following paragraph. In the performance of its obligations under this Agreement, Distributor will pay only the costs incurred in qualifying as a broker or dealer under state and federal laws and in establishing and maintaining its relationships with the dealers selling the Shares.All other costs in connection with the offering of the Shares will be paid by the Trust or its investment adviser in accordance with agreements between them as permitted by applicable laws, including the Act and rules and regulations promulgated thereunder.These costs include, but are not limited to, licensing fees, filing fees (including FINRA), travel and such other expenses as may be incurred by Distributor on behalf of the Trust. Notwithstanding the foregoing, Distributor agrees that it shall not be entitled to receive any fee from the Trust or to be reimbursed by the Trust for any distribution or offering related costs unless and until the Trust has adopted a plan of distribution pursuant to Rule 12b-1 which permits the payment of such fee or the reimbursement of such costs. 8. Indemnification of Trust. Distributor agrees to indemnify and hold harmless the Trust and each person who has been, is, or may hereafter be a Trustee, officer, employee, shareholder or control person of the Trust against any loss, damage or expense (including the reasonable costs of investigation and reasonable attorneys’ fees) reasonably incurred by any of them in connection with any claim or in connection with any action, suit or proceeding to which any of them may be a party, which arises out of or is alleged to arise out 3 of or is based upon (i) any untrue statement or alleged untrue statement of a material fact, or the omission or alleged omission to state a material fact necessary to make the statements not misleading, on the part of Distributor or any agent or employee of Distributor or any other person for whose acts Distributor is responsible, unless such statement or omission was made in reliance upon written information furnished by the Trust; (ii) Distributor's failure to exercise reasonable care and diligence with respect to its services, if any, rendered in connection with investment, reinvestment, automatic withdrawal and other plans for Shares; and (iii) Distributor’s failure to comply with applicable laws and the Rules of FINRA.The Distributor will advance attorneys' fees or other expenses incurred by any such person in defending a proceeding, upon the undertaking by or on behalf of such person to repay the advance if it is ultimately determined that such person is not entitled to indemnification. The term "expenses" for purposes of this and the next paragraph includes amounts paid in satisfaction of judgments or in settlements which are made with Distributor's consent.The foregoing rights of indemnification shall be in addition to any other rights to which the Trust or each such person may be entitled as a matter of law. 9. Indemnification of Distributor. The Trust agrees to indemnify and hold harmless Distributor and each person who has been, is, or may hereafter be a director, officer, employee, shareholder or control person of Distributor against any loss, damage or expense (including the reasonable costs of investigation and reasonable attorneys’ fees) reasonably incurred by any of them in connection with the matters to which this Agreement relates, except a loss resulting from the failure of Distributor or any such other person to comply with applicable law or the terms of this Agreement, or from willful misfeasance, bad faith or gross negligence, including clerical errors and mechanical failures, on the part of any of such persons in the performance of Distributor's duties or from the reckless disregard by any of such persons of Distributor's obligations and duties under this Agreement, for all of which exceptions Distributor shall be liable to the Trust.The Trust will advance attorneys' fees or other expenses incurred by any such person in defending a proceeding, upon the undertaking by or on behalf of such person to repay the advance if it is ultimately determined that such person is not entitled to indemnification. In order that the indemnification provisions contained in this Paragraph 9 shall apply, it is understood that if in any case the Trust may be asked to indemnify Distributor or any other person or hold Distributor or any other person harmless, the Trust shall be fully and promptly advised of all pertinent facts concerning the situation in question, and it is further understood that Distributor will use all reasonable care to identify and notify the Trust promptly concerning any situation which presents or appears likely to present the probability of such a claim for indemnification against the Trust.The Trust shall have the option to defend Distributor and any such person against any claim which may be the subject of this indemnification, and in the event that the Trust so elects it will so notify Distributor, and neither Distributor nor any such person shall in such situation initiate further legal or other expenses for which it shall seek indemnification under this Paragraph 9.If the Trust elects to assume the defense of any such claim, the defense shall be conducted by counsel chosen by it and reasonably satisfactory to the indemnified party, whose approval shall not be unreasonably withheld, as long as the Trust is conducting a good faith and diligent defense. In the event that the Trust elects to assume the defense of any suit and retain counsel, the indemnified party shall bear the fees and expenses of any additional counsel retained by it.Distributor shall in no case confess any claim or make any compromise in any case in which the Trust will be asked to indemnify Distributor or any such person except with the Trust's written consent. Notwithstanding any other provision of this Agreement, Distributor shall be entitled to receive and act upon advice of counsel (who may be counsel for the Trust or its own counsel) and shall be without liability for any action reasonably taken or thing reasonably done pursuant to such advice, provided that such action is not in violation of applicable federal or state laws or regulations. 4 Representations of the Parties. (a) The Trust certifies to Distributor and Adviserthat:(1) as of the date of the execution of this Agreement, each Series that is in existence as of such date has an unlimited number of authorized shares, and (2) this Agreement has been duly authorized by the Trust and, when executed and delivered by the Trust, will constitute a legal, valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties. (b) Distributor represents and warrants that:(1) the various procedures and systems which Distributor has implemented with regard to safeguarding from loss or damage attributable to fire, theft, or any other cause the records and other data of the Trust and Distributor’s records, data, equipment, facilities and other property used in the performance of its obligations hereunder are adequate and that it will make such changes therein from time to time as are required for the secure performance of its obligations hereunder, and (2) this Agreement has been duly authorized by Distributor and, when executed and delivered by Distributor, will constitute a legal, valid and binding obligation of Distributor, enforceable against Distributor in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties. Termination and Amendment of this Agreement. This Agreement shall automatically terminate, without the payment of any penalty, in the event of its assignment by Distributor.This Agreement may be amended only if such amendment is approved (i) by Distributor, (ii) by Adviserand (iii) by the Board of Trustees of the Trust, including the approval of a majority of the Trustees of the Trust who are not interested persons of the Trust or of Distributor by vote cast in person at a meeting called for the purpose of voting on such approval. The Trust, the Adviseror Distributor may at any time terminate this Agreement on sixty (60) days' written notice delivered or mailed by registered mail, postage prepaid, to the other party. Effective Period of this Agreement. This Agreement shall take effect upon its execution and shall remain in full force and effect for an initial term of two (2) years from the date of its execution (unless terminated as set forth in Section 11), and shall continue in effect from year to year thereafter, subject to annual approval of such continuance by the Board of Trustees of the Trust, including the approval of a majority of the Trustees of the Trust who are not interested persons of the Trust or of Distributor by vote cast in person at a meeting called for the purpose of voting on such approval. Successor Investment Company. Unless this Agreement has been terminated in accordance with Paragraph 11, the terms and provisions of this Agreement shall become automatically applicable to any investment company which is a successor to the Trust as a result of reorganization, recapitalization or change of domicile. 5 Limitation of Liability. It is expressly agreed that the obligations of the Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but bind only the trust property of the Trust.The execution and delivery of this Agreement have been authorized by the Trustees of the Trust and signed by an officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of the Trust.If a matter relates only to a particular series of the Trust, that series shall be solely responsible for all liabilities in connection with such matter, and the Distributor agrees that resort shall be had solely to the assets of such series for the payment or performance thereof. Severability. In the event any provision of this Agreement is determined to be void or unenforceable, such determination shall not affect the remainder of this Agreement, which shall continue to be in force. Questions of Interpretation. (a) This Agreement shall be governed by the laws of the State of Ohio. (b) Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the Act shall be resolved by reference to such term or provision of the Act and to interpretation thereof, if any, by the United States courts or in the absence of any controlling decision of any such court, by rules, regulations or orders of the Securities and Exchange Commission issued pursuant to said Act.In addition, where the effect of a requirement of the Act, reflected in any provision of this Agreement is revised by rule, regulation or order of the Securities and Exchange Commission, such provision shall be deemed to incorporate the effect of such rule, regulation or order. Notices. Any notices under this Agreement shall be in writing, addressed and delivered or mailed postage paid to the other party, with a copy to the Trust’s counsel, at such address as such other party may designate for the receipt of such notice.Such notice will be effective upon receipt.Until further notice to the other party, it is agreed that the address of the Trust and the Adviserfor this purpose shall be 1900 Avenue of the Stars, Suite 900, Los Angeles, CA90067, Attn: ; and that the address of Distributor for this purpose shall be 225 Pictoria Drive, Suite 450, Cincinnati, Ohio 45246, Attn: Robert G. Dorsey. Execution This Agreement may be executed by one or more counterparts, each of which shall be deemed an original, but all of which together will constitute one in the same instrument. 6 IN WITNESS WHEREOF, the Trust and Distributor have each caused this Agreement to be signed in duplicate on their behalf, all as of the day and year first above written. ATTEST: THE FIRST WESTERN FUNDS TRUST By: Name: Its: President ATTEST: ULTIMUS FUND DISTRIBUTORS, LLC By: Name: Robert G. Dorsey Its: President 7 SCHEDULE A TO THE DISTRIBUTION AGREEMENT BETWEEN THE FIRST WESTERN FUNDS TRUST AND ULTIMUS FUND DISTRIBUTORS, LLC FUND PORTFOLIO First Western Fixed Income Fund 8
Name: Commission Regulation (EEC) No 1691/93 of 30 June 1993 fixing the difference in white sugar prices to be used in calculating the levy for processed fruit and vegetable products and for wine Type: Regulation Date Published: nan 1 . 7. 93 Official Journal of the European Communities No L 159/33 COMMISSION REGULATION (EEC) No 1691/93 of 30 June 1993 fixing the difference in white sugar prices to be used in calculating the levy for processed fruit and vegetable products and for wine each month of the quarter for which the difference is being determined and, secondly, the average of the cif prices for one kilogram of white sugar used in fixing the levies on white sugar, as calculated for a period compri ­ sing the first 15 days of the month preceding the quarter for which the difference is being determined and the two months immediately preceding that month ; whereas, pursuant to the abovementioned Regulations, this diffe ­ rence must be determined by the Commission for each quarter of the calendar year, THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, Having regard to Council Regulation (EEC) No 426/86 of 24 February 1986 on the common organization of the market in products processed from fruit and vegetables ('), as last amended by Regulation (EEC) No 1 569/92 (2), and in particular Article 10 (4) thereof, Having regard to Council Regulation (EEC) No 822/87 of 16 March 1987, on the common organization of the market in wine (3) as last amended by Regulation (EEC) No 1 566/93 (4), and in particular Article 55 (3) thereof, Whereas, in order that the Member States may determine the amount of the levy applicable in respect of the various added sugars to imports of the products listed in Annex III to Regulation (EEC) No 426/86 and of the products falling within CN codes 2009 60 11 , 2009 60 71 , 2009 60 79 and 2204 30 99 which are listed in Article 1 (2) (a) of Regulation (EEC) No 822/87, it is necessary in accordance with Article 10 (3) of Regulation (EEC) No 426/86 and Article 55 (2) of Regulation (EEC) No 822/87 to determine the difference between, firstly, the average of the threshold prices for one kilogram of white sugar for HAS ADOPTED THIS REGULATION : Article 1 For the period 1 July to 30 September 1993 the difference referred to in Article 10 (3) of Regulation (EEC) No 426/86 and in Article 55 (2) of Regulation (EEC) No 822/87 is fixed at ECU 0,4320 . Article 2 This Regulation shall enter into force on 1 July 1993 . This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 30 June 1993 . For the Commission Rene STEICHEN Member of the Commission (') OJ No L 49, 27. 2. 1986, p. 1 . 0 OJ No L 166, 20 . 6. 1992, p. 5 . (3) OJ No L 84, 27. 3 . 1987, p. 1 . (4) OJ No L 154, 25 . 6. 1993, p. 39 .
EXHIBIT 10.1 STOCK PURCHASE AGREEMENT         This STOCK PURCHASE AGREEMENT is dated as of the 31st day of March, 2005 (the “Effective Date”) by and between STAAR Surgical Company, a Delaware corporation with its principal office at 1911 Walker Avenue, Monrovia, California 91016 (the “Company”), and the several purchasers identified in the attached Exhibit A (individually, a “Purchaser” and collectively, the         WHEREAS, the Company desires to issue and sell to the Purchasers an aggregate of approximately 4,100,000 shares (the “Shares”) of the authorized but unissued shares of common stock, $.01 par value per share, of the Company (the “Common Stock”); and         WHEREAS, the Purchasers, severally, wish to purchase the Shares on the terms and subject to the conditions set forth in this Agreement.         NOW THEREFORE, in consideration of the mutual agreements, representations, warranties and covenants herein contained, the parties hereto agree as follows: > 1.          Definitions. As used in this Agreement, the following terms shall > have the following respective meanings: > > > (a)     “Affiliate” of a party means any corporation or other business > > entity controlled by, controlling or under common control with such party. > > For this purpose “control” shall mean direct or indirect beneficial > > ownership of fifty percent (50%) or more of the voting or income interest in > > such corporation or other business entity. > > > > (b)     “Agreement” means this Stock Purchase Agreement. > > > > (c)     “Business Day” means any day other than a Saturday, Sunday or U.S. > > federal holiday. > > > > (d)     “Closing” has the meaning set forth in Section 2.2 of this > > Agreement. > > > > (e)     “Closing Date” means the date of the Closing. > > > > (f)     “Exchange Act” means the Securities Exchange Act of 1934, as > > amended, and all of the rules and regulations promulgated thereunder. > > > > (g)     “Registration Rights Agreement” shall mean that certain Registration > > Rights Agreement, dated as of the date hereof, among the Company and the > > Purchasers. > > > > (h)     “Operative Agreements” shall mean the Registration Rights Agreement > > together with this Agreement. > > > > (i)     “Majority Purchasers” shall mean Purchasers which, at any given > > time, hold greater than fifty percent (50%) of the voting power of the > > outstanding Shares that have not been resold pursuant to an effective > > registration statement under the Securities Act or Rule 144 under the > > Securities Act. > > (j)     “SEC” shall mean the Securities and Exchange Commission. > > > > (k)     “Securities Act” shall mean the Securities Act of 1933, as amended, > > and all of the rules and regulations promulgated thereunder. > > 2.          Purchase and Sale of Shares. > > > 2.1     Purchase and Sale. Subject to and upon the terms and conditions set > > forth in this Agreement, the Company agrees to issue and sell to each > > Purchaser, and each Purchaser, severally, hereby agrees to purchase from the > > Company, at the Closing, the number of shares of Common Stock set forth > > opposite the name of such Purchaser under the heading “Number of Shares to > > be Purchased” on Exhibit A hereto, at a purchase price of $ 3.50 per share. > > The total purchase price payable by each Purchaser for the number of shares > > of Common Stock that such Purchaser is hereby agreeing to purchase is set > > forth opposite the name of such Purchaser under the heading “Purchase Price” > > on Exhibit A hereto. The aggregate purchase price payable by the Purchasers > > to the Company for all of the Shares shall be $14,350,000. > > > > 2.2      Closing. The closing of the transactions contemplated under this > > Agreement (the “Closing”) shall take place at the offices of Sheppard, > > Mullin, Richter & Hampton LLP on the second Business Day after the Company > > shall have given written notice (the “Closing Notice”) to the Purchasers > > that all of the conditions precedent set forth in Section 5.1 have been > > satisfied in full or at such other location, date and time as may be agreed > > upon between the Purchasers and the Company. At the Closing, the Company > > shall deliver to each Purchaser a single stock certificate, registered in > > the name of such Purchaser, representing the number of shares of Common > > Stock purchased by such Purchaser, against payment of the purchase price > > therefor by wire transfer of immediately available funds to such account or > > accounts as the Company shall designate in writing. > > 3.          Representations and Warranties of the Company. The Company hereby > represents and warrants to each of the Purchasers as follows: > > > 3.1      Incorporation. The Company is a corporation duly organized, validly > > existing and in good standing under the laws of the State of Delaware and is > > qualified to do business in each jurisdiction in which the character of its > > properties or the nature of its business requires such qualification, except > > where the failure to so qualify would not have a material adverse effect > > upon the Company. The Company does not have any material subsidiaries other > > than those identified in the SEC Documents (as defined below). Except for > > short-term investments and investments that are not material to the Company, > > the Company does not own any shares of stock or any other equity or > > long-term debt securities of any corporation or have any equity interest in > > any firm, partnership, limited liability company, joint venture, association > > or other entity except as set forth in the SEC Documents. Complete and > > correct copies of the certificate of incorporation and bylaws of the Company > > as in effect on the Effective Date have been filed by the Company with the > > Commission. The Company has all requisite corporate power and authority to > > carry on its business as now conducted. > > 3.2      Capitalization. The authorized capital stock of the Company > > consists of (i) 30,000,000 shares of Common Stock, of which approximately > > 20,689,638 shares are outstanding on the date hereof and (ii) 20,000,000 > > shares of preferred stock, of which no shares are outstanding on the date > > hereof. Except for options to purchase Common Stock issued to employees and > > consultants of the Company, there are no existing options, warrants, calls, > > preemptive (or similar) rights, subscriptions or other rights, agreements, > > arrangements or commitments of any character obligating the Company to > > issue, transfer or sell, or cause to be issued, transferred or sold, any > > shares of the capital stock of the Company or other equity interests in the > > Company or any securities convertible into or exchangeable for such shares > > of capital stock or other equity interests, and there are no outstanding > > contractual obligations of the Company to repurchase, redeem or otherwise > > acquire any shares of its capital stock or other equity interests. > > > > 3.3      Authorization. All corporate action on the part of the Company, its > > officers, directors and stockholders necessary for the authorization, > > execution, delivery and performance of this Agreement and the Registration > > Rights Agreement and the consummation of the transactions contemplated > > herein and therein has been taken. When executed and delivered by the > > Company, each of this Agreement and the Registration Rights Agreement shall > > constitute the legal, valid and binding obligation of the Company, > > enforceable against the Company in accordance with its terms, except as such > > may be limited by bankruptcy, insolvency, reorganization or other laws > > affecting creditors’ rights generally and by general equitable principles. > > The Company has all requisite corporate power to enter into this Agreement > > and the Registration Rights Agreement and to carry out and perform its > > obligations under the terms of this Agreement, and the Registration Rights > > Agreement. > > > > 3.4      Valid Issuance of the Shares. The Shares being purchased by the > > Purchasers hereunder will, upon issuance pursuant to the terms hereof, be > > duly authorized and validly issued, fully paid and nonassessable. No > > preemptive rights or other rights to subscribe for or purchase the Company’s > > capital stock exist with respect to the issuance and sale of the Shares by > > the Company pursuant to this Agreement. Except as disclosed in the SEC > > Documents, no stockholder of the Company has any right (which has not been > > waived or has not expired by reason of lapse of time) following the > > notification of the Company’s intent to file the registration statement to > > be filed by the Company pursuant to Registration Rights Agreement (the > > “Registration Statement”) to require the Company to register the sale of any > > shares owned by such stockholder under the Securities Act in the > > Registration Statement. As of the Effective Date, no further approval or > > authority of the stockholders or the Board of Directors of the Company shall > > be required for the issuance and sale of the Shares by the Company, or the > > filing of the Registration Statement by the Company, as contemplated herein. > > > > 3.5      Financial Statements. The Company has furnished to each Purchaser > > its audited Statements of Income, Stockholders’ Equity and Cash Flows for > > the fiscal year ended December 31, 2004 and its audited Balance Sheet as of > > December 31, 2004. All such financial statements are hereinafter referred to > > collectively as the “Financial Statements.” The Financial Statements have > > been prepared in accordance with generally accepted accounting principles > > applied on a consistent basis during the periods involved, and fairly > > present, in all material respects, the financial position of the Company and > > the results of its operations as of the date and for the periods indicated > > thereon. Since December 31, 2004, to the Company’s knowledge, there has been > > no material adverse change (actual or threatened) in the assets, liabilities > > (contingent or other), affairs, operations, prospects or condition > > (financial or other) of the Company, except as may be disclosed in the > > Company’s Annual Report on Form 10-K for the fiscal year ended December 31, > > 2004, a copy of which has been presented to the Purchasers (the “10-K”). > > 3.6      SEC Documents.   The Company has furnished to each Purchaser, a > > true and complete copy of the Company’s Annual Report on Form 10-K for the > > year ended December 31, 2004, and any other statement, report, registration > > statement (other than registration statements on Form S-8) or definitive > > proxy statement filed by the Company with the SEC during the period > > commencing January 1, 2005 and ending on the date hereof. The Company will, > > promptly upon the filing thereof, also furnish to each Purchaser all > > statements, reports (including, without limitation, Annual Reports on > > Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K), > > registration statements and definitive proxy statements filed by the Company > > with the SEC during the period commencing on the date hereof and ending on > > the Closing Date (all such materials required to be furnished to each > > Purchaser pursuant to this sentence or pursuant to the next preceding > > sentence of this Section 3.6 being called, collectively, the “SEC > > Documents”). As of their respective filing dates, the SEC Documents complied > > or will comply in all material respects with the requirements of the > > Exchange Act or the Securities Act, as applicable, and none of the SEC > > Documents contained or will contain any untrue statement of a material fact > > or omitted or will omit to state a material fact required to be stated > > therein or necessary in order to make the statements made therein, in light > > of the circumstances under which they were made, not misleading, as of their > > respective filing dates, except to the extent corrected by a subsequently > > filed SEC Document. > > > > 3.7      Consents. All consents, approvals, orders and authorizations > > required on the part of the Company in connection with the execution, > > delivery or performance of this Agreement and the Registration Rights > > Agreement and the consummation of the transactions contemplated herein and > > therein have been obtained and will be effective as of the Closing Date. > > > > 3.8      No Conflict. The execution and delivery of this Agreement and the > > Registration Rights Agreement by the Company and the consummation of the > > transactions contemplated hereby and thereby will not conflict with or > > result in any violation of or default (with or without notice or lapse of > > time, or both) under, or give rise to a right of termination, cancellation > > or acceleration of any obligation or to a loss of a material benefit under > > (i) any provision of the Certificate of Incorporation or By-laws of the > > Company or (ii) any agreement filed as an exhibit to the 10-K, or any > > instrument, permit, franchise, license, judgment, order, statute, law, > > ordinance, rule or regulations, applicable to the Company or its respective > > properties or assets. > > > > 3.9      Brokers or Finders. Except for Pacific Growth Equities, LLC (the > > “Placement Agent”), the Company has not dealt with any broker or finder in > > connection with the transactions contemplated by this Agreement, and, except > > for certain fees and expenses payable by the Company to the Placement Agent, > > the Company has not incurred, and shall not incur, directly or indirectly, > > any liability for any brokerage or finders’ fees or agents commissions or > > any similar charges in connection with this Agreement or any transaction > > contemplated hereby. > > > > 3.10      Nasdaq National Market. The Common Stock is listed on the Nasdaq > > National Market, and there are no proceedings to revoke or suspend such > > listing. > > 3.11      Absence of Litigation. Except as disclosed in the SEC Documents, > > there is no action, suit or proceeding or, to the Company’s knowledge, any > > investigation, pending, or to the Company’s knowledge, threatened by or > > before any governmental body against the Company and in which an unfavorable > > outcome, ruling or finding in any said matter, or for all matters taken as a > > whole, might have a material adverse effect on the Company. The foregoing > > includes, without limitation, any such action, suit, proceeding or > > investigation that questions this Agreement or the Registration Rights > > Agreement or the right of the Company to execute, deliver and perform under > > same. > > 4.          Representations and Warranties of the Purchasers. Each Purchaser > severally for itself, and not jointly with the other Purchasers, represents > and warrants to the Company as follows: > > > 4.1      Authorization. All action on the part of such Purchaser and, if > > applicable, its officers, directors and shareholders necessary for the > > authorization, execution, delivery and performance of this Agreement and the > > Registration Rights Agreement and the consummation of the transactions > > contemplated herein and therein has been taken. When executed and delivered, > > each of this Agreement and the Registration Rights Agreement will constitute > > the legal, valid and binding obligation of such Purchaser, enforceable > > against such Purchaser in accordance with its terms, except as such may be > > limited by bankruptcy, insolvency, reorganization or other laws affecting > > creditors’ rights generally and by general equitable principles. Such > > Purchaser has all requisite corporate power to enter into each of this > > Agreement and the Registration Rights Agreement and to carry out and perform > > its obligations under the terms of this Agreement and the Registration > > Rights Agreement. Such Purchaser has the knowledge and experience in > > financial and business matters as to be capable of evaluating the merits and > > risks of an investment in the Shares and has the ability to bear the > > economic risks of an investment in the Shares for an indefinite period of > > time. The Purchaser acknowledges that the Placement Agent has made no > > representations or warranties regarding the Company; the Purchaser agrees > > that neither the Placement Agent nor any of its controlling persons, > > affiliates, directors, officers, employees or consultants shall have any > > liability to the Purchaser or any person asserting claims on behalf of or in > > right of the Purchaser for any losses, claims, damages, liabilities or > > expenses arising out of or relating to this Agreement or the Purchaser’s > > purchase of Shares. > > > > 4.2      Purchase Entirely for Own Account. Such Purchaser is acquiring the > > Shares being purchased by it hereunder for investment, for its own account, > > and not for resale or with a view to distribution thereof in violation of > > the Securities Act. Such Purchaser has not entered into an agreement or > > understanding with any other party to resell or distribute such shares. > > > > 4.3      Investor Status; Etc. Such Purchaser certifies and represents to > > the Company that at the time such Purchaser acquires any of the Shares, such > > Purchaser will be an “Accredited Investor” as defined in Rule 501 of > > Regulation D promulgated under the Securities Act and was not organized for > > the purpose of acquiring the Shares. Such Purchaser’s financial condition is > > such that it is able to bear the risk of holding the Shares for an > > indefinite period of time and the risk of loss of its entire investment. > > Such Purchaser has been afforded the opportunity to ask questions of and > > receive answers from the management of the Company concerning this > > investment and has sufficient knowledge and experience in investing in > > companies similar to the Company in terms of the Company’s stage of > > development so as to be able to evaluate the risks and merits of its > > investment in the Company. > > 4.4      Confidential Information. Each Purchaser understands that any > > information provided to such Purchaser by the Company is strictly > > confidential and proprietary to the Company and has been prepared from the > > Company’s publicly available documents and other information and is being > > submitted to the Purchaser solely for such Purchaser’s confidential use in > > connection with its investment decision regarding the Shares. Such Purchaser > > agrees to use such information for the sole purpose of evaluating a possible > > investment in the Shares and such Purchaser hereby acknowledges that it is > > prohibited from reproducing or distributing such information, the Operative > > Agreements, or any other offering materials, in whole or in part, or > > divulging or discussing any of their contents except for use internally and > > by its legal counsel and except as required by law or legal process. > > Further, such Purchaser understands that the existence and nature of all > > conversations and presentations, if any, regarding the Company and this > > offering must be kept strictly confidential until such time as the Company > > makes public announcement of the sale of Shares. Such Purchaser understands > > that the federal securities laws impose restrictions on trading based on > > information regarding this offering. In addition, such Purchaser hereby > > acknowledges that unauthorized public disclosure of information regarding > > this offering may cause the Company to violate Regulation FD. > > > > 4.5      Shares Not Registered. Such Purchaser understands that the Shares > > have not been registered under the Securities Act, by reason of their > > issuance by the Company in a transaction exempt from the registration > > requirements of the Securities Act, and that the Shares must continue to be > > held by such Purchaser unless a subsequent disposition thereof is registered > > under the Securities Act or is exempt from such registration. The Purchaser > > understands that the exemptions from registration afforded by Rule 144 (the > > provisions of which are known to it) promulgated under the Securities Act > > depend on the satisfaction of various conditions, and that, if applicable, > > Rule 144 may afford the basis for sales only in limited amounts. > > > > 4.6      No Conflict. The execution and delivery of this Agreement and the > > Registration Rights Agreement by such Purchaser and the consummation of the > > result in any violation of or default by such Purchaser (with or without > > notice or lapse of time, or both) under, or give rise to a right of > > termination, cancellation or acceleration of any obligation or to a loss of > > a material benefit under (i) any provision of the organizational documents > > of such Purchaser or (ii) any agreement or instrument, permit, franchise, > > license, judgment, order, statute, law, ordinance, rule or regulations, > > applicable to such Purchaser or its respective properties or assets. > > > > 4.7      Brokers. Such Purchaser has not retained, utilized or been > > represented by any broker or finder in connection with the transactions > > contemplated by this Agreement. > > > > 4.8      Consents. All consents, approvals, orders and authorizations > > required on the part of such Purchaser in connection with the execution, > > delivery or performance of this Agreement and the consummation of the > > transactions contemplated herein have been obtained and are effective as of > > the Closing Date. > > 4.9      No Intent to Effect a Change of Control. Such Purchaser has no > > present intent to consummate a “change of control” of the Company, as such > > term is understood in Rule 13d of the Exchange Act. > > > > 4.10      No General Solicitation. Such Purchaser was not offered or sold > > the Shares, directly or indirectly, by means of any form of general > > solicitation or general advertisement, including the following: (i) any > > advertisement, article, notice or other communication published in any > > newspaper, magazine or similar medium or broadcast over television, radio, > > the internet or by telephone or (ii) any seminar or other meeting whose > > attendees had been invited by general solicitation or general advertising. > > 5.      Conditions Precedent. > > > 5.1      Conditions to the Obligation of the Purchasers to Consummate the > > Closing. The obligation of each Purchaser to consummate the Closing and to > > purchase and pay for the Shares being purchased by it pursuant to this > > Agreement is subject to the satisfaction of the following conditions > > precedent: > > > > > (a)     The representations and warranties contained herein of the Company > > > shall be true and correct on and as of the Closing Date with the same > > > force and effect as though made on and as of the Closing Date (it being > > > understood and agreed by each Purchaser that, in the case of any > > > representation and warranty of the Company contained herein which is not > > > hereinabove qualified by application thereto of a materiality standard, > > > such representation and warranty need be true and correct only in all > > > material respects in order to satisfy as to such representation or > > > warranty the condition precedent set forth in the foregoing provisions of > > > this Section 5.1(a)). > > > > > > (b)     The Registration Rights Agreement shall have been executed and > > > delivered by the Company. > > > > > > (c)     The Company shall not have been adversely affected in any material > > > way prior to the Closing Date; and the Company shall have performed all > > > obligations and conditions herein required to be performed or observed by > > > the Company on or prior to the Closing Date. > > > > > > (d)     No proceeding challenging this Agreement or the transactions > > > contemplated hereby, or seeking to prohibit, alter, prevent or materially > > > delay the Closing, shall have been instituted before any court, arbitrator > > > or governmental body, agency or official and shall be pending. > > > > > > (e)     The purchase of and payment for the Shares by the Purchasers shall > > > not be prohibited by any law or governmental order or regulation. All > > > necessary consents, approvals, licenses, permits, orders and > > > authorizations of, or registrations, declarations and filings with, any > > > governmental or administrative agency or of any other person with respect > > > to any of the transactions contemplated hereby shall have been duly > > > obtained or made and shall be in full force and effect. > > > > > > (f)     All instruments and corporate proceedings in connection with the > > > transactions contemplated by this Agreement to be consummated at the > > > Closing shall be satisfactory in form and substance to such Purchaser, the > > > Purchasers shall have received an opinion of legal counsel to the Company > > > substantially in the form of Exhibit B attached hereto, and such Purchaser > > > shall have received copies (executed or certified, as may be appropriate) > > > of all documents which such Purchaser may have reasonably requested in > > > connection with such transactions. > > 5.2      Conditions to the Obligation of the Company to Consummate the > > Closing. The obligation of the Company to consummate the Closing and to > > issue and sell to each of the Purchasers the Shares to be purchased by it at > > the Closing is subject to the satisfaction of the following conditions > > precedent: > > > > > (a)     The representations and warranties contained herein of such > > > Purchaser shall be true and correct on and as of the Closing Date with the > > > same force and effect as though made on and as of the Closing Date (it > > > being understood and agreed by the Company that, in the case of any > > > representation and warranty of each Purchaser contained herein which is > > > not hereinabove qualified by application thereto of a materiality > > > standard, such representation and warranty need be true and correct only > > > in all material respects in order to satisfy as to such representation or > > > this Section 5.2(a)). > > > > > > delivered by each Purchaser. > > > > > > (c)     The Purchasers shall have performed all obligations and conditions > > > herein required to be performed or observed by the Purchasers on or prior > > > to the Closing Date. > > > > > > > > > (e)     The sale of the Shares by the Company shall not be prohibited by > > > any law or governmental order or regulation. All necessary consents, > > > approvals, licenses, permits, orders and authorizations of, or > > > registrations, declarations and filings with, any governmental or > > > administrative agency or of any other person with respect to any of the > > > transactions contemplated hereby shall have been duly obtained or made and > > > shall be in full force and effect. > > > > > > (f)     Each of the Purchasers shall have executed and delivered to the > > > Company a Purchaser’s Questionnaire, in the form attached hereto as > > > Exhibit C, pursuant to which each such Purchaser shall provide information > > > necessary to confirm each such Purchaser’s status as an “accredited > > > investor” (as such term is defined in Rule 501 promulgated under the > > > Securities Act) and to enable the Company to comply with the Registration > > > Rights Agreement. > > > > > > (g)     Each of the other Purchasers shall have purchased, in accordance > > > with this Agreement, the number of shares of Common Stock set forth > > > opposite its name under the heading “Number of Shares to be Purchased” on > > > Exhibit A hereto. > > > > > > (h)     All instruments and corporate proceedings in connection with the > > > Closing shall be satisfactory in form and substance to the Company, and > > > the Company shall have received counterpart originals, or certified or > > > other copies of all documents, including without limitation records of > > > corporate or other proceedings, which it may have reasonably requested in > > > connection therewith. > 6.      Transfer, Legends. > > > 6.1      Securities Law Transfer Restrictions. > > > > > (a)     Each Purchaser understands that, except as provided in the > > > Registration Rights Agreement, the Shares have not been registered under > > > the Securities Act or any state securities laws, and each purchaser agrees > > > that it will not sell, offer to sell, solicit offers to buy, dispose of, > > > loan, pledge or grant any right with respect to (collectively, a > > > “Disposition”), the Shares nor will such Purchaser engage in any hedging > > > or other transaction which is designed to or could be reasonably expected > > > to lead to or result in a Disposition of Shares by such Purchaser or any > > > other person or entity unless (a) the Shares are registered under the > > > Securities Act, or (b) such Purchaser shall have delivered to the Company > > > an opinion of counsel in form, substance and scope reasonably acceptable > > > to the Company, to the effect that registration is not required under the > > > Securities Act or any applicable state securities law due to the > > > applicability of an exemption therefrom. In that connection, such > > > Purchaser is aware of Rule 144 under the Securities Act and the > > > restrictions imposed thereby. Such Purchaser acknowledges and agrees that > > > no sales of the Shares may be made under the Registration Statement and > > > that the Shares are not transferable on the books of the Company unless > > > the certificate submitted to the transfer agent evidencing the Shares is > > > accompanied by a separate Purchaser’s Certificate of Subsequent Sale: > > > (i) in the form of Appendix I hereto; (ii) executed by an officer of, or > > > other authorized person designated by, the Purchaser; and (iii) to the > > > effect that (A) the shares have been sold in accordance with the > > > Registration Statement, the Securities Act and any applicable state > > > securities or blue sky laws, and (B) the requirement of delivering a > > > current prospectus has been satisfied. Such prohibited hedging or other > > > transactions would include, without limitation, effecting any short sale > > > or having in effect any short position (whether or not such sale or > > > position is against the box and regardless of when such position was > > > entered into) or any purchase, sale or grant of any right (including, > > > without limitation, any put or call option) with respect to the Shares or > > > with respect to any security (other than a broad-based market basket or > > > index) that includes, relates to or derives any significant part of its > > > value from the Common Stock of the Company. > > > > > > (b)     Each Purchaser acknowledges that no action has been or will be > > > taken in any jurisdiction outside the United States by the Company or the > > > Placement Agent that would permit an offering of the Shares, or possession > > > or distribution of offering materials in connection with the issue of > > > Shares, in any jurisdiction outside of the United States where action for > > > that purpose is required. Each Purchaser outside the United States will > > > comply with all applicable laws and regulations in each foreign > > > jurisdiction in which it purchases, offers, sells or delivers Shares or > > > has in its possession or distributes any offering material, in all cases > > > at its own expense. The Placement Agent is not authorized to make any > > > representation or use any information in connection with the issue, > > > placement, purchase and sale of the Shares. > > > (c)     Each Purchaser hereby covenants with the Company not to make any > > > sale of the Shares without complying with the provisions of the Operative > > > Agreements and with all applicable securities laws and regulations, and > > > such Purchaser acknowledges that the certificates evidencing the Shares > > > will be imprinted with a legend that prohibits their transference except > > > in accordance therewith. Each Purchaser acknowledges that there may > > > occasionally be times when the Company, based on the advice of its > > > counsel, determines that it must suspend the Registration Statement, until > > > such time as an amendment to the Registration Statement has been filed by > > > the Company and declared effective by the Commission or until the Company > > > has amended or supplemented such Prospectus. > > > > 6.2      Legends. > > > > > (a)     Each certificate representing any of the Shares shall be endorsed > > > with the legends set forth below, and each Purchaser covenants that, > > > except to the extent such restrictions are waived by the Company, it shall > > > not transfer the shares represented by any such certificate without > > > complying with the restrictions on transfer described in this Agreement > > > and the legends endorsed on such certificate: > > > > > >   “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED > > > UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, > > > PLEDGED TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN > > > EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN > > > AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT AND, IF REQUESTED BY > > > THE COMPANY, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY > > > SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM SAID > > > ACT.” > > > > > > > > > (b)     After the earlier of (i) the effectiveness of the Registration > > > Statement and receipt by the Company of a Purchaser’s written confirmation > > > that such Shares will not be disposed of except in compliance with the > > > prospectus delivery requirements of the Securities Act or (ii) Rule 144(k) > > > under the Securities Act becoming available to a Purchaser, the Company > > > shall, upon such Purchaser’s written request, promptly cause certificates > > > evidencing the Purchaser’s Shares to be replaced with certificates that do > > > not bear such restrictive legends. When the Company is required to cause > > > unlegended certificates to replace previously issued legended > > > certificates, if unlegended certificates are not delivered to a Purchaser > > > within three (3) Business Days following submission by that Purchaser of > > > legended certificate(s) to the Company’s transfer agent together with a > > > representation letter in customary form, the Company shall be liable to > > > the Purchaser for liquidated damages in an amount equal to 1% of the > > > aggregate purchase price of the Securities evidenced by such > > > certificate(s) for each thirty (30) day period or portion thereof (on a > > > pro rata basis following the first such thirty (30) day period) beyond > > > such three (3) Business Day period that the unlegended certificates have > > > not been so delivered. The Company’s obligation to issue unlegended > > > certificates pursuant to this Paragraph 6.2(b) shall be excused if (i) the > > > SEC promulgates any rule or interpretation expressly prohibiting removal > > > of legends in such circumstances; (ii) the SEC or other regulatory > > > authority instructs the Company or its transfer agent not to remove such > > > legends, or (iii) the SEC makes it a condition to the effectiveness of the > > > Registration Statement that the Company continue to keep such legends in > > > place. > > > (c)     Notwithstanding the removal of legends as provided in > > > Paragraph 6(b), until a Purchaser’s Shares are sold pursuant to the > > > Registration Statement or Rule 144(k) becomes available to the Purchaser, > > > the Purchaser shall continue to hold such shares in the form of a > > > definitive stock certificate and shall not hold the shares in street name > > > or in book-entry form with a securities depository. > > 7.        Termination; Liabilities Consequent Thereon. > > > 7.1      Termination. This Agreement may be terminated and the transactions > > contemplated hereunder abandoned at any time prior to the Closing only as > > follows: > > > > > (a)     by the Purchasers, upon notice to the Company if the conditions > > > set forth in Section 5.1 shall not have been satisfied on or prior to > > > April 7, 2005; or > > > > > > (b)     by the Company, upon notice to the Purchasers if the conditions > > > set forth in Section 5.2 shall not have been satisfied on or prior to > > > > > > (c)     at any time by mutual agreement of the Company and the Purchasers; > > > or > > > > > > (d)     by the Purchasers, if there has been any breach of any > > > representation or warranty or any material breach of any covenant of the > > > Company contained herein and the same has not been cured within 15 days > > > after notice thereof (it being understood and agreed by each Purchaser > > > that, in the case of any representation or warranty of the Company > > > contained herein which is not hereinabove qualified by application thereto > > > of a materiality standard, such representation or warranty will be deemed > > > to have been breached for purposes of this Section 7.1(d) only if such > > > representation or warranty was not true and correct in all material > > > respects at the time such representation or warranty was made by the > > > Company); or > > > > > > (e)     by the Company, if there has been any breach of any > > > representation, warranty or any material breach of any covenant of any > > > Purchaser contained herein and the same has not been cured within 15 days > > > after notice thereof (it being understood and agreed by the Company that, > > > in the case of any representation and warranty of the Purchaser contained > > > herein which is not hereinabove qualified by application thereto of a > > > materiality standard, such representation or warranty will be deemed to > > > have been breached for purposes of this Section 7.1(e) only if such > > > respects at the time such representation or warranty was made by such > > > Purchaser). > > > > 7.2      Liabilities Upon Termination. Any termination pursuant to this > > Section 7 shall be without liability on the part of any party, unless such > > termination is the result of a material breach of this Agreement by a party > > to this Agreement in which case such breaching party shall remain liable for > > such breach notwithstanding any termination of this Agreement. > 8.          Miscellaneous Provisions. > > > 8.1      Public Statements or Releases. None of the parties to this > > Agreement shall make, issue, or release any announcement, whether to the > > public generally, or to any of its suppliers or customers, with respect to > > this Agreement or the transactions provided for herein, or make any > > statement or acknowledgment of the existence of, or reveal the status of, > > this Agreement or the transactions provided for herein, without the prior > > consent of the other parties, which shall not be unreasonably withheld or > > delayed, provided, that nothing in this Section 8.1 shall prevent any of the > > parties hereto from making such public announcements as it may consider > > necessary in order to satisfy its legal obligations, but to the extent not > > inconsistent with such obligations, it shall provide the other parties with > > an opportunity to review and comment on any proposed public announcement > > before it is made. > > > > 8.2      Further Assurances. Each party agrees to cooperate fully with the > > other party and to execute such further instruments, documents and > > agreements and to give such further written assurances, as may be reasonably > > requested by the other party to better evidence and reflect the transactions > > described herein and contemplated hereby, and to carry into effect the > > intents and purposes of this Agreement. > > > > 8.3      Rights Cumulative. Each and all of the various rights, powers and > > remedies of the parties shall be considered to be cumulative with and in > > addition to any other rights, powers and remedies which such parties may > > have at law or in equity in the event of the breach of any of the terms of > > this Agreement. The exercise or partial exercise of any right, power or > > remedy shall neither constitute the exclusive election thereof nor the > > waiver of any other right, power or remedy available to such party. > > > > 8.4      Pronouns. All pronouns or any variation thereof shall be deemed to > > refer to the masculine, feminine or neuter, singular or plural, as the > > identity of the person, persons, entity or entities may require. > > > > 8.5      Notices. > > > > (a)     Any notices, reports or other correspondence (hereinafter > > > collectively referred to as “correspondence”) required or permitted to be > > > given hereunder shall be sent by postage prepaid first class mail, courier > > > or telecopy or delivered by hand to the party to whom such correspondence > > > is required or permitted to be given hereunder. The date of giving any > > > notice shall be the date of its actual receipt. > > > (b)     All correspondence to the Company shall be addressed as follows: > > > > > > > STAAR Surgical Company > > > > 1911 Walker Avenue Monrovia, California 91016 > > > > Attention:        John Bily > > > > Chief Financial Officer > > > > Facsimile:         (626) 303-0895 > > > > > >         with a copy to: > > > > > > > Sheppard Mullin Richter & Hampton LLP > > > > 333 South Hope Street, 48th Floor > > > > Los Angeles, California 90071-1448 > > > > Attention:        Peter M. Menard, Esq. > > > > Facsimile:        (213) 620-1398 > > > > > > (c)     All correspondence to any Purchaser shall be sent to such > > > Purchaser at the address set forth in Exhibit A. > > > > > > (d)     Any entity may change the address to which correspondence to it is > > > to be addressed by notification as provided for herein. > > > 8.6      Captions. The captions and paragraph headings of this Agreement are > > solely for the convenience of reference and shall not affect its > > interpretation. > > > > 8.7      Severability. Should any part or provision of this Agreement be > > held unenforceable or in conflict with the applicable laws or regulations of > > any jurisdiction, the invalid or unenforceable part or provisions shall be > > replaced with a provision which accomplishes, to the extent possible, the > > original business purpose of such part or provision in a valid and > > enforceable manner, and the remainder of this Agreement shall remain binding > > upon the parties hereto. > > > > 8.8      Governing Law; Injunctive Relief. > > > > > (a)     This Agreement shall be governed by and construed in accordance > > > with the internal and substantive laws of the State of California and > > > without regard to any conflicts of laws concepts which would apply the > > > substantive law of some other jurisdiction. > > > > > > (b)     Each of the parties hereto acknowledges and agrees that damages > > > will not be an adequate remedy for any material breach or violation of > > > this Agreement if such material breach or violation would cause immediate > > > and irreparable harm (an “Irreparable Breach”). Accordingly, in the event > > > of a threatened or ongoing Irreparable Breach, each party hereto shall be > > > entitled to seek, equitable relief of a kind appropriate in light of the > > > nature of the ongoing or threatened Irreparable Breach, which relief may > > > include, without limitation, specific performance or injunctive relief; > > > provided, however, that if the party bringing such action is unsuccessful > > > in obtaining the relief sought, the moving party shall pay the non-moving > > > party’s reasonable costs, including attorney’s fees, incurred in > > > connection with defending such action. Such remedies shall not be the > > > parties’ exclusive remedies, but shall be in addition to all other > > > remedies provided in this Agreement. > > > > 8.9      Amendments. This Agreement may not be amended or modified except > > pursuant to an instrument in writing signed by the Company and the Majority > > Purchasers. > > > > 8.10      Waiver. No waiver of any term, provision or condition of this > > Agreement, whether by conduct or otherwise, in any one or more instances, > > shall be deemed to be, or be construed as, a further or continuing waiver of > > any such term, provision or condition or as a waiver of any other term, > > provision or condition of this Agreement. > > > > 8.11      Expenses. Each party will bear its own costs and expenses in > > connection with this Agreement. > > > > 8.12      Assignment. The rights and obligations of the parties hereto shall > > inure to the benefit of and shall be binding upon the authorized successors > > and permitted assigns of each party. Neither party may assign its rights or > > obligations under this Agreement or designate another person (i) to perform > > all or part of its obligations under this Agreement or (ii) to have all or > > part of its rights and benefits under this Agreement, in each case without > > the prior written consent of the other party, provided, however, that a > > Purchaser may assign its rights hereunder with respect to any Shares > > transferred to a “Qualified Holder” pursuant to and in compliance with > > Section 13 of the Registration Rights Agreement, and may designate such > > Qualified Holder to perform the duties of the Purchaser hereunder with > > respect to such transferred Shares; provided further that irrespective of > > such transfer and designation the Purchaser shall remain obligated hereunder > > with respect to all of such Purchaser’s purchased Shares. In the event of > > any assignment in accordance with the terms of this Agreement, the assignee > > shall specifically assume and be bound by the provisions of the Agreement by > > executing and agreeing to an assumption agreement reasonably acceptable to > > the other party. > > > > 8.13      Survival. The respective representations and warranties given by > > the parties hereto, and the other covenants and agreements contained herein, > > shall survive the Closing Date and the consummation of the transactions > > contemplated herein for a period of two years, without regard to any > > investigation made by any party. > > > > 8.14      Entire Agreement. This Agreement constitutes the entire agreement > > between the parties hereto respecting the subject matter hereof and > > supersedes all prior agreements, negotiations, understandings, > > representations and statements respecting the subject matter hereof, whether > > written or oral. No modification, alteration, waiver or change in any of the > > terms of this Agreement shall be valid or binding upon the parties hereto > > unless made in writing and duly executed by the Company and the Majority > > Purchasers.         IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement as of the day and year first above written. STAAR SURGICAL COMPANY BY: /s/ John Bily Name: John Bily, Title: Chief Financial Offficer THE PURCHASER’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED EVEN DATE HEREWITH SHALL CONSTITUTE THE PURCHASER’S SIGNATURE TO THIS STOCK PURCHASE AGREEMENT. Exhibit A PURCHASERS Number of Shares Purchaser to be Purchased Purchase Price Alpha US Sub Fund V, LLC 43,668 $152,838.00 Andesite Life Sciences, LP 73,940 $258,790.00 Andesite Life Sciences I, LP 23,815 $83,352.50 Andesite Life Sciences II, LP 17,245 $60,357.50 Andover Capital Partners, LP 148,800 $520,800.00 Andover Capital Offshore Partners, Ltd. 91,200 $319,200.00 Broadwood Partners, LP 246,000 $861,000.00 Cameron QTIP Trust 20,000 $70,000.00 Cameron Survivors Trust 10,000 $35,000.00 Chad Dunn 15,000 $52,500.00 Craig Drill Capital, LP 160,000 $560,000.00 East Hudson Inc. (BVI) 28,300 $99,050.00 Ivy MA Holdings 3, LLC 160,420 $561,470.00 Lubomir Skrobak 80,000 $280,000.00 Paul Rogan 15,000 $52,500.00 President Street Fund, LP 50,000 $175,000.00 Promed Offshore Fund Ltd. 10,084 $35,294.00 Promed Offshore Fund II, Ltd. 211,368 $739,788.00 Promed Partners, LP 62,493 $218,725.50 Promed Partners II, LP 16,055 $56,192.50 Seamark Fund, LP 100,000 $350,000.00 SF Capital Partners, Ltd. 650,000 $2,275,000.00 SLST Co. Corp 20,000 $70,000.00 Special Situations Cayman Fund, LP 215,000 $752,500.00 Special Situations Fund III, LP 755,000 $2,642,500.00 Special Situations Private Equity Fund, LP 289,000 $1,011,500.00 Symmetry Capital Offshore Fund Ltd. 68,947 $241,314.50 Symmetry Capital Partners LP 28,411 $99,438.50 Symmetry Capital Qualified Partners LP 180,118 $630,413.00 Symmetry Parallax Partners LP 18,436 $64,526.00 The Conus Fund, LP 92,300 $323,050.00 The Conus Fund Offshore Limited 29,400 $102,900.00 The Conus Fund (QP), LP 50,000 $175,000.00 Ursus Capital, LP 81,000 $283,500.00 Ursus Offshore Ltd. 29,000 $101,500.00 Willis and Daphne Stephens 10,000 $35,000.00 Exhibit B April ___, 2005 Purchasers of Common Stock of STAAR Surgical Company Listed on Exhibit A to the Stock Purchase Agreement   Re: Stock Purchase Agreement dated as of March 31, 2005 among STAAR Surgical Company and the Purchasers Listed on Exhibit A thereto Ladies and Gentlemen:         We have acted as special counsel for STAAR Surgical Company, a Delaware corporation (the “Company”), in connection with the sale by the Company to you of __________ shares of the Company’s Common Stock (the “Shares”) pursuant to the Stock Purchase Agreement (the “Purchase Agreement”) dated as of March 31, 2005 among the Company and the persons listed on Exhibit A attached thereto (the “Purchasers”). Unless defined herein, capitalized terms have the meanings given them in the Purchase Agreement. The Purchase Agreement and the Registration Rights Agreement, as defined therein, are referred to herein as the “Agreements.”         As to matters of fact, in the absence of actual knowledge to the contrary, we are relying upon the representations and warranties of all parties contained in the Agreements and the Certificate of the Company and Certificate of the Chief Financial Officer attached hereto (“Opinion Certificates”) and upon certificates and statements of government officials, all without independent verification. In addition, we examined originals or copies of documents, corporate records and other writings that we consider relevant for the purposes of this opinion. In such examination, we assumed that the signatures on documents and instruments examined by us are authentic, that each is complete and what it purports to be, that all documents and instruments submitted to us as copies or facsimiles conform with the originals, and that the documents and instruments submitted to us have not been amended or modified since the date submitted.         In our examination of documents, we further assumed (i) that each person or entity entering into such documents (other than the Company in connection with the Agreements) had the power, legal competence and capacity to enter into and perform all of such party’s obligations thereunder, (ii) the due authorization, execution and delivery by each party (other than the due authorization, execution and delivery of the Agreements by the Company), (iii) the enforceability and binding nature of the obligations of the parties to such documents (other than as to the enforceability against, and the binding nature upon, the Company of the Agreements), (iv) that there is no fact or circumstance relating to any party that might prevent the Purchasers from enforcing any of the rights provided for in the Agreements, (v) performance on or before the Closing by all parties of their obligations under the Agreements to be performed on or before the Closing and (vi) no action has been taken or event occurred which amends, revokes, terminates or renders invalid any of the documents, records, consents or resolutions which we have reviewed since the date of the certificates we relied upon in rendering this opinion. We also assumed that there are no extrinsic agreements or understandings among the parties to the Agreements or Contracts (as defined below) that would modify or interpret the terms of the Agreements or Contracts expressly identified on Schedule A hereto or the respective rights or obligations of the parties thereunder.         As used in this opinion, the expression “to our knowledge” or “known to us” with reference to matters of fact refers to the current actual knowledge of any attorney within the firm who has participated in the transactions covered by this opinion. Except to the extent expressly set forth herein we have not undertaken any independent investigation to determine the accuracy or completeness of such statement (including without limitation any examination of any documents in our files or otherwise made available to us by the Company), and no inference as to the accuracy or completeness of such statement should be drawn from our representation of the Company or our rendering the opinions set forth below.         Based upon and subject to the foregoing and the qualifications and limitations set forth below, and except as set forth in the Agreements, it is our opinion that:     (a)        The Company is a corporation duly incorporated, validly existing corporate power and authority necessary to own and lease its properties and to conduct its business as described in the SEC Documents, except as would not have a material adverse effect upon the Company and its Subsidiaries taken as a whole. The Company is qualified to do business as a foreign corporation in the state of California.     (b)        The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Agreements.     (c)        The Agreements have been duly authorized by all necessary corporate action on the part of the Company.     (d)        The Agreements constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. Each of the Agreements has been duly executed and delivered by the Company.     (e)        The Shares to be issued on the date hereof, when issued in compliance with the provisions of the Purchase Agreement, including without limitation payment in full of the consideration therefor, will be duly authorized, validly issued, fully paid and nonassessable.     (f)        The execution, delivery and performance of the Agreements by the Company and the consummation of the transactions contemplated thereby have not resulted in and will not result in (i) a violation of the Company’s Certificate of Incorporation or Bylaws, (ii) a material violation of the Delaware General Corporation Law or any United States Federal statute, rule or regulation that we have, in the exercise of customary professional diligence, recognized as applicable to the Company, (iii) a violation of any judgment, order or decree specifically identified in the SEC Documents, or (iv) a default by the Company or any of its subsidiaries under any of the contracts expressly identified on Schedule A hereto (the “Contracts”), except as would not have a material adverse effect upon the Company and its subsidiaries taken as a whole. >     (g)        No consent, approval or authorization of or designation, > declaration or filing with, any United States federal, Delaware corporate or > California governmental authority on the part of the Company is required in > connection with the valid execution, delivery and performance of the > Agreements, or the offer, sale or issuance of the Shares, other than such as > have been made or obtained, and except for compliance with the Blue Sky laws > and federal securities laws applicable to the offering of the Shares. > >     (h)        Based in part upon the representations made in the Agreements > and made by Pacific Growth Equities, LLC in its engagement letter with the > Company, the offer, sale and issuance of the Shares to be issued in conformity > with the terms of the Agreements constitute transactions exempt from the > registration requirements of Section 5 of the Securities Act.         In addition, to our knowledge, except as disclosed in the SEC Documents, there is no action, suit, proceeding or investigation pending or threatened against the Company that (i) questions the validity of the Agreements or the right of the Company to enter into the Agreements or (ii) if determined adversely, would be likely to result in a material adverse change in the financial condition or business of the Company and its subsidiaries taken as a whole. Please note that we have not conducted a docket search in any jurisdiction with respect to litigation that may be pending against the Company nor have we undertaken any other inquiry whatsoever.         In rendering the opinion set forth in paragraph (a) above as to the good standing of the Company and as to its qualification to do business in California, we relied exclusively on certificates of public officials.         With regard to the opinion set forth in paragraph (d) above regarding enforceability, we note that whenever an opinion herein states that an agreement is a “valid and binding obligation” of a party “enforceable in accordance with its terms,” such statement shall mean that, subject to the qualifications and limitations set forth herein, (i) an effective contract has been formed under California law, (ii) the entire agreement is not invalid by reason of a specific statutory prohibition or the public policy of the State of California, (iii) contractual defenses to the entire agreement are not available and (iv) some remedy is available if a party to the agreement does not materially comply with its terms. This does not imply that any particular type of remedy is available.         Our opinion set forth in paragraph (d) is further qualified by, and subject to, and we render no opinion with respect to, the following: > >     1.        The effect of bankruptcy, insolvency, reorganization, > > moratorium and other similar laws relating to or affecting the relief of > > debtors or the rights and remedies of creditors generally, including without > > limitation the effect of statutory or other law regarding fraudulent > > transfers, preferential transfers and distributions and equitable > > subordination; > > > >     2.        Limitations imposed by general principles of equity upon the > > availability of equitable remedies for the enforcement of provisions of the > > Agreements, whether considered in a proceeding at law or in equity, and by > > the effect of judicial decisions holding that certain provisions are > > unenforceable when their enforcement would violate the implied covenant of > > good faith and fair dealing, or would be commercially unreasonable, or where > > their breach is not material; > > > >     3.        The effect of Section 1670.5 of the California Civil Code or > > any other California law, United States federal or Delaware law or equitable > > principle which provides that a court may refuse to enforce, or may limit > > the application of, a contract or any clause thereof which the court finds > > to have been unconscionable at the time it was made or contrary to public > > policy; > > > >     4.        The enforceability of provisions of the Agreements expressly, > > or by implication, waiving or relinquishing broadly or vaguely stated rights > > or unknown future rights or defenses, or waiving defenses to obligations or > > rights granted by law (whether substantive or procedural) or waiving rights > > to damages, or the benefits of statutory, regulatory or constitutional > > rights, unless and to the extent the statute, regulation or constitution > > explicitly permits the waiver of such rights; > > > >     5.        The enforceability of any provision of any Agreement > > purporting to (a) waive rights to trial by jury, service of process or > > objections to venue or jurisdiction in connection with any litigation > > arising out of or pertaining to the Agreements, (b) exclude conflict of law > > principles under California law, (c) establish particular courts as the > > forum for the adjudication of any controversy relating to the Agreements, > > (d) establish the laws of any particular state or jurisdiction for the > > adjudication of any controversy relating to the Agreements, (e) establish > > evidentiary standards or make determinations conclusive or (f) provide for > > arbitration of disputes; > > > >     6.        The effect of judicial decisions, which may permit the > > introduction of extrinsic evidence to modify the terms or the interpretation > > of the Agreements; > > > >     7.        The enforceability of any provisions of the Agreements > > providing that (a) rights or remedies are or are not exclusive, (b) rights > > or remedies may be exercised without notice, (c) every right or remedy is > > cumulative and may be exercised in addition to or with any other right or > > remedy, (d) the election of a particular remedy or remedies does not > > preclude recourse to one or more other remedies, (e) liquidated damages are > > to be paid upon the breach of any Agreements or (f) the failure to exercise, > > or any delay in exercising, rights or remedies available under the > > Agreements will not operate as a waiver of any such right or remedy; > >     8.        The enforceability of any attorneys’ fees, severability, > > reimbursement, indemnification or contribution provisions; > > > >     9.        Any provision of the Agreements requiring written amendments > > or waivers insofar as it suggests that oral or other modifications, > > amendments or waivers could not be effectively agreed upon by the parties or > > that the doctrine of promissory estoppel might not apply. We note that a > > requirement that provisions of the Agreements may only be amended or waived > > in writing may not be binding or enforceable if an oral agreement has been > > created modifying such provision or an implied agreement by trade practice > > or course of conduct has given rise to an amendment or waiver; and > > > >     10.        The validity, binding effect or enforceability of the > > Agreements to the extent that an arbitrator’s decision may be contrary to > > the law or the facts and not subject to reversal.         In rendering the opinion set forth in paragraph (f) above relating to the Contracts, we have assumed that the governing law (exclusive of California laws relating to conflicts of laws) of each such Contract is California. We have not, however, reviewed the covenants in the Contracts that contain financial ratios and other similar financial restrictions, and no opinion is provided with respect thereto. We also do not express any opinion on parol evidence bearing on interpretation or construction of such Contracts or on any oral modifications to such Contracts made by the parties thereto. violations of United States federal or Delaware corporate laws, rules or regulations applicable to the Company, we have not conducted any investigation into the types of businesses and activities in which the Company engages or the manner in which the Company conducts its businesses. We have not conducted any special investigation of laws, statutes, rules or regulations and our investigation of and our opinion is limited to such laws, rules or regulations that in our experience are typically applicable to a transaction of the nature contemplated by the Agreements. We have assumed that no party to the Agreements will in the future take any discretionary action (including a decision not to act permitted by the Agreements) that would cause the performance of the Agreements to violate the Delaware General Corporate Law or any California or federal statute, rule or regulation; constitute a violation or breach of or default under any of the Contracts, or require an order, consent, permit or approval to be obtained from a California or federal government authority.         In rendering the opinion set forth in paragraphs (g) and (h) regarding securities exemptions, we have assumed the accuracy of, and have relied upon, the Company’s representations to us that the Company has made no offer to sell the Shares by means of any general solicitation or publication of any advertisement therefor.         In addition to the foregoing, the opinions expressed above are subject to the following limitations, exceptions, qualifications and assumptions: > >     1.        We express no opinion as to compliance with any federal or > > state antitrust statutes, rules or regulations, including without limitation > > the Hart-Scott-Rodino Antitrust Improvements Act of 1976. > > > >     2.        We assumed (a) the accuracy and completeness of the > > representations and warranties of the Purchasers set forth in the Agreements > > and (b) the validity of any wire transfers, drafts or checks tendered by the > > Purchasers. > > > >     3.        We express no opinion as to compliance with applicable > > antifraud statutes, rules or regulations of applicable state and federal > > laws concerning the issuance or sale of securities, including without > > limitation the accuracy and completeness of the information provided by the > > Company to the Purchasers in connection with the offer and sale of the > > Shares. > > > >     4.        We express no opinion as to whether the members of the > > Company’s Board of Directors have complied with their fiduciary duties in > > connection with the authorization and performance of the Agreements. > > > >     5.        We assumed that the actions of the Company and its officers, > > directors and stockholders comply with the provisions of Section 144 of the > > General Corporation Law of the State of Delaware. > > > >     6.        We express no opinion as to matters governed by any laws other > > than the laws of the State of California, the corporate law of the State of > > Delaware or the federal law of the United States of America. We express no > > opinion as to the laws of any other jurisdiction nor as to the statutes, > > administrative decisions, rules, regulations or requirements of any county, > > municipality, subdivision or local authority of any jurisdiction. We express > > no opinion as to whether the laws of any jurisdiction are applicable to the > > Agreements or the transactions contemplated thereby. > > > >     7.        We express no opinion as to matters governed by federal and > > state laws and regulations governing: usury; securities (except with respect > > to the transactions contemplated by the Agreements); broker-dealers, > > investment companies, and investment advisers; insurance; labor, employment > > (including, but not limited to, the Americans with Disabilities Act) and > > pension and employee benefits; antitrust and unfair competition; escheat; > > health and safety, environmental protection and hazardous substances; > > taxation; or patents, copyrights, trademarks, trade names and other > > intellectual property rights.         This Opinion is qualified to the extent, and is rendered and delivered on the express condition and assumption, that no counsel for the addressee has expressed or reached opinions which are contrary to the opinions set forth in this letter.         This opinion is rendered as of the date first written above solely for your benefit in connection with the Purchase Agreement and may not be relied on by, nor may copies be delivered to, any other person without our prior written consent. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company. We assume no obligation to inform you of any facts, circumstances, events or changes in the law that may hereafter be brought to our attention that may alter, affect or modify the opinions expressed herein. > > > > > > > > > Very truly yours, SCHEDULE A CONTRACTS 1. Managing Director’s Contract of Employment dated June 22, 1993 and the Supplementary Agreement dated November 25, 1997, between Domilens and Guenther Roepstorff. 2. Employment Agreement dated as of December 19, 2000 by and between the Company and David Bailey. 3. Employment Agreement dated January 3, 2002 between the Company and John Bily. 4. Assignment Agreement of the Share Capital of Domilens Vertrieb fuer medizinische Produkte GmbH dated January 3, 2003, between STAAR Surgical AG and Guenther Roepstorff. 5. Patent License Agreement dated May 24, 1995 between Eye Microsurgery Intersectoral Research and Technology Complex and STAAR Surgical AG, a Swiss corporation. 6. Patent License Agreement dated January 1, 1996 between Eye Microsurgery corporation. 7. Stockholders Rights Plan dated effective as of April 20, 1995 between the Company and American Stock Transfer & Trust Company, a New York corporation. 8. Amendment No. 1 to Stockholders’ Rights Plan, dated April 21, 2003. 9. Indenture of Lease dated October 20, 1983 by and between Dale E. Turner and Francis R. Turner and the Company for the property located at 1911 Walker Avenue, Monrovia, California 91016. 10. Sixth Lease Addition to Indenture of Lease dated October 13, 2003, by and between the Company and Turner Trust UTD Dale E. Turner March 28, 1984. 11. Indenture of Lease dated September 1, 1993 between the Company and FKT Associates, as amended. 12. Second Amendment to Indenture of Lease dated September 21, 1998, between the Company and FKT Associates. 13. Third Amendment to Indenture of Lease dated October 13, 2003, by and between the Company and FKT Associates. 14. Standard Industrial/Commercial Multi-Tenant Lease dated April 5, 2000 by and between Kilroy Realty, L.P., a Delaware limited partnership, Kilroy Realty Corporation, a Maryland Corporation, General Partner and the Company, as amended. 15. Amendment No. 1 to Standard Industrial/Commercial Multi-Tenant Lease dated January 3, 2003, by and between the Company and California Rosen. 16. Promissory Note dated June 16, 1999 from Peter J. Utrata, M.D. to the Company. 17. Stock Pledge Agreement dated as of June 16, 1999 by and between Peter J. Utrata, M.D., an individual, and the Company. 18. Promissory Note dated June 2, 2000 from Peter J. Utrata to the Company. 19. Stock Pledge Agreement dated as of June 2, 2000 by and between Peter J. 20. Forbearance Agreement dated July 22, 2004, between the Company and Peter J. Utrata, M.D (including second mortgage). 21. Promissory Note dated March 29, 2002, from Pollet & Richardson to the Company. 22. Security Agreement dated March 29, 2002 between the Company and Pollet & Richardson. 23. Credit Agreement dated January 13, 2003 between Postbank and Domilens GmbH. 24. Joint Venture Agreement dated May 23, 1988 by and among the Company, Canon, Inc. and Canon Sales Co. 25. Settlement agreement dated September 28, 2001 by and among the Company, Canon, Inc., Canon Sales Co. and Canon STAAR Company, Inc. 26. Technical Assistance and License Agreement dated September 6, 1988 between the Company and Canon STAAR Company, Inc. 27. Form of Stock Purchase Agreement between the Company and certain investors dated as of June 11, 2003. 28. Employment Agreement dated May 5, 2004, between the ConceptVision Australia Pty Limited ACN 006 391 928 and Philip Butler Stoney. 29. Employment Agreement dated May 5, 2004, between the ConceptVision Australia Pty Limited ACN 006 391 928 and Robert William Mitchell. 30. Assignment Agreement of the Share Capital of ConceptVision Australia Pty Limited ACN 006 391 928, dated May 5, 2004, between the Company and Philip Butler Stoney and Robert William Mitchell. 31. Addendum to the Assignment Agreement of the Share Capital of ConceptVision Australia Pty Limited ACN 006 391 928, dated May 5, 2004, between the Company and Philip Butler Stoney and Robert William Mitchell. 32. Stock Purchase Agreement between the Company and the Purchasers listed on Exhibit A thereto, dated as of June 4, 2004. 33. Registration Rights Agreement between the Company and the Investors listed on Exhibit A thereto, dated as of June 4, 2004. 34. Master Credit Agreement dated August 2, 2004, between STAAR Surgical AG and UBS AG. 35. Offer of Employment dated July 12, 2002, from the Company to Nick Curtis. 36. Amendment to the Offer of Employment dated February 14, 2003, from the Company to Nick Curtis. 37. Employment Agreement dated March 18, 2005, between the Company and Tom Paul. 38. Employment Agreement dated March 18, 2005, between the Company and James Farnworth. APPENDIX I COMPANY PURCHASER’S CERTIFICATE OF SUBSEQUENT SALE Attention: STAAR Surgical Company Chief Financial Officer        The undersigned, [an officer of, or other person duly authorized by] ______________________________________ [fill in official name of individual or institution] hereby certifies that he/she [said institution] is the Purchaser of the Shares evidenced by the attached certificate, and as such, sold such shares on ________________ in accordance with [date] Registration Statement number ______________ [fill in the number of or otherwise identify Registration Statement] and the requirement of delivering a current prospectus by the Company has been complied with in connection with such sale. Print or Type: Name of Purchaser (Individual or Institution):              ______________________ Name of Individual Representing Purchaser (If an institution):                             ______________________ Title of Individual Representing Purchaser Signature by: Individual Purchaser Or Individual Representing Purchaser:                                        ______________________
Exhibit 10 (19) AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT   as of July 15, 2009 WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent 1133 Avenue of the Americas Ladies and Gentlemen: Wachovia Bank, National Association, 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 (individually, each a “Lender” and, collectively, “Lenders”) and American Biltrite Inc., a Delaware corporation (“ABI”), Ideal Tape Co., Inc., a Delaware corporation (“Ideal Tape”), K&M Associates L.P., a Rhode Island limited partnership (“K&M”; together with ABI and Ideal Tape, the “US Borrowers”), American Biltrite (Canada) Ltd., a Canadian corporation (“Canadian Borrower”; together with US Borrowers, the “Borrowers”), 425 Dexter Associates, L.P., a Rhode Island limited partnership (“Dexter”), Ocean State Jewelry, Inc., a Rhode Island corporation (“Ocean State”), Majestic Jewelry, Inc., a Delaware corporation (“Majestic”), American Biltrite Far East, Inc., a Delaware corporation (“Far East”; together with Dexter, Ocean State and Majestic, the “US Guarantors”) have entered into certain financing arrangements pursuant to which Agent and Lenders may make loans and advances and provide other financial accommodations to Borrowers as set forth in the Loan and Security Agreement, dated as of June 30, 2009, by and among Agent, Lenders, Borrowers and Guarantors (as amended, the “Loan Agreement”) and the agreements, documents and instruments at any time executed and/or delivered in connection therewith or related thereto (all of the foregoing together with this Amendment No. 1 to Loan and Security Agreement (“Amendment”), as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”).   Borrowers have requested that Agent and Lenders agree to amend the Loan Agreement as set forth herein, and Agent and Lenders have agreed to accommodate Borrowers’ request.  The parties hereto wish to enter into this Amendment to evidence and effectuate such amendments and certain other agreements relating thereto, in each case subject to the terms and conditions and to the extent set forth herein.   All capitalized terms used herein shall have the meanings assigned thereto in the Loan Agreement and the other Financing Agreements, unless otherwise defined herein.         In consideration of the premises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby   1.           Amendments to Loan Agreement.   (a)          Letters of Credit.  Effective as of  June 30, 2009, the definition of “Letters of Credit” set forth in Section 1.112 of the Loan Agreement is hereby amended and restated in its entirety as follows:   “1.112  “Letters of Credit” shall mean all letters of credit denominated in US Dollars or Canadian Dollars (whether documentary or stand-by and whether for the purchase of inventory, equipment or otherwise) and banker’s acceptances issued with respect to drafts presented under letters of credit (whether for the purchase of inventory, equipment or otherwise), in each case issued by an Issuing Bank for the account of any Borrower pursuant to this Agreement, and all amendments, renewals, extensions or replacements thereof and including, but not limited to, the Existing Letters of Credit.  The term “banker’s acceptance” as used herein shall refer to a time draft that is an order issued by the beneficiary of a letter of credit as the drawer of the time draft instructing the issuer of the letter of credit as the drawee to pay the amount specified in the time draft that has been accepted by a bank.”   (b)           Wachovia.  Effective as of  June 30, 2009, the definition of “Wachovia” set forth in Section 1.176 of the Loan Agreement is hereby amended   “1.176  “Wachovia” shall mean Wachovia Bank, National Association, a national banking association, in its individual capacity, and its successors and assigns.”   (c)           Conditions Precedent.  The amendment set forth in this Amendment shall not be effective until the receipt by Agent of an original (or faxed or electronic copy) of this Amendment, duly authorized and executed by Borrowers and confirmed by Guarantors.   2.           Effect of this Amendment.  Except as modified 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 of conflict between the terms of this Amendment and the other Financing Agreements, the terms of this Amendment shall control.  The Loan Agreement and this Amendment shall be read and construed as one agreement.   3.           Further Assurances.  The parties hereto shall execute and deliver such additional documents and take such additional action as may be necessary or desirable to effectuate the provisions and purposes of this Amendment.     2   4.           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 New York (without giving effect to principles of conflict of laws).   5.           Binding Effect.  This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.   counterparts, but all of such counterparts shall together constitute but one and the same agreement.  In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart thereof signed by     3   U.S. BORROWERS   CANADIAN BORROWER           AMERICAN BILTRITE INC.   AMERICAN BILTRITE (CANADA) LTD.           By: /s/ Richard G. Marcus   By:           Title: President   Title: President           IDEAL TAPE CO., INC.                 By:                 Title: President                 K&M ASSOCIATES L.P.                 By:  AIMPAR, Inc., its General Partner                 By:                 Title: President                           [SIGNATURES CONTINUED ON NEXT PAGE]         [Signature Page Amendment No.1 ABI]             [SIGNATURES CONTINUED FROM PREVIOUS PAGE]     U.S. GUARANTORS     425 DEXTER ASSOCIATES, L.P.         By:     Title: President         OCEAN STATE JEWELRY, INC.     By:     Title: President         AMERICAN BILTRITE FAR EAST, INC.     By:     Title: President         MAJESTIC JEWELRY, INC.     By:     Title: President                               ACCEPTED AND AGREED:     AGENT:         By: /s/ Mark J. Breier     Title: Managing Director     ISSUING BANK:         By:     Title: Managing Director         LENDERS:         By:     Title: Managing Director         WACHOVIA CAPITAL FINANCE CORPORATION (CANADA)     By: /s/ Laurence S. Forte     Title: Managing Director        
Exhibit CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the accompanying Quarterly Report On Form 10-Q/A of Mod Hospitality, Inc. f/k/a PSPP Holdings, Inc. (the "Company") for the quarter ending September 30, 2008, I, Frederic S. Richardson, Chief Executive Officer of the Company hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that: 1.Such Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2008, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2.The information contained in such Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2008, fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: November 19, 2008 By: /s/ FREDERIC S. RICHARDSON Frederic S. Richardson Chief Executive Officer (Principal Executive
Title: [MN] I am an online sex worker my ex boyfriend doxxed me after getting jealous of seeing me with another guy. Everybody is urging me to go to the police but is this actually illegal Question:I posted a picture holding another guys penis, my ex boyfriend saw it on my subreddit and began messaging me, he then proceeded to dox me encouraging people to come meet up with me. https://imgur.com/a/Icdqp this is our whole conversation he also texted me an hour later "have fun covering up your shit 😂😂😂😂". Everybody I've talked to says I should talk to the police but I don't even know if what he has done is illegal, and I'm afraid the police will think I'm overreacting or that they won't take me seriously. Answer #1: Doxxing isn't illegal on its own, however encouraging someone to injure or stalking someone you doxxed is. If I were in your shoes I would change my number and set up a new email address. Police wise, I'm kind of leery. Not because they can't help, but because I'm concerned they may decide to go after you as well for the sex work. Answer #2: Looked through the texts. Revealing your real name isn't illegal. Nor did it look like he was encouraging others to harass you.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ Quarterly Report pursuant to Section13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended March 31, 2017 or ☐ Transition report pursuant to Section13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from to Commission File Number No.333-183118 FIRST PRIORITY FINANCIAL CORP. Pennsylvania 20-8420347 (State or other jurisdiction of incorporation) (I.R.S. Employer
Exhibit 10.8 DEMAND PROMISSORY NOTE $20,000.00 October 12, 2010   The undersigned, ACQUIRED SALES CORP. (“Borrower”), a Nevada corporation, for value received, hereby acknowledges that on the date hereof, Borrower borrowed from ROBERTI JACOBS FAMILY TRUST U/A/D 11-11-99  (“Lender”) the principal sum of TWENTY THOUSAND DOLLARS ($20,000.00) (the “Principal Sum”). Borrower promises to pay to the order of Lender, at 31 N. Suffolk Lane, Lake Forest, Illinois 60045 (or at such other place as may be designated by the holder hereof to Borrower from time to time), the Principal Sum, together with interest thereon as hereinafter provided, immediately ON DEMAND given by Lender to Borrower at any time, without the need for any advance notice of any kind. The Principal Sum shall bear interest on the initial principal sum borrowed of $20,000 commencing on and as of the date hereof, to and including the date the Principal Sum is repaid in full, at a rate of ten percent (10%) per annum (the “Interest Rate”). Borrower shall pay all interest accrued but not yet paid on this loan immediately ON DEMAND given by Lender to Borrower at any time, without the need for any advance notice of any kind. If Lender has not made such demand on Borrower, then Borrower shall pay all interest accrued but not yet paid on this loan on the last day of each calendar month following the date hereof. This Demand Promissory Note may be voluntarily prepaid by Borrower without any penalty or premium, in whole or in part, at any time or times. Any prepayment shall be applied first against any accrued and unpaid interest and then against the Principal Sum. All or any portion of the Principal Amount not paid by Borrower to Lender immediately ON DEMAND given by Lender to Borrower at any time, and all or any interest accrued on the Principal Sum but not paid by Borrower to Lender immediately ON DEMAND given by Lender to Borrower at any time or not paid by Borrower to Lender on the last day of each calendar month following the date hereof in the absence of such a demand, shall bear a default rate of interest, commencing on and as of the date of such default to and including the date the such defaulted amount is repaid in full, at a rate equal to fifteen percent (15%) per annum, compounded daily. Notwithstanding anything elsewhere contained herein to the contrary, the rate of interest payable hereunder shall in no event exceed the maximum lawful rate which may be charged under applicable law. Borrower represents and warrants to the holder hereof that the amounts borrowed under this Demand Promissory Note have been and will be used for business purposes. Borrower hereby waives diligence, presentment, demand, protest and notice of every kind whatsoever. The failure of the holder hereof to exercise any of his rights hereunder in any particular instance shall not constitute a waiver of the same or of any other right in that or any subsequent instance. The holder hereof shall not, by any act of omission or commission, be deemed to waive any of her or his rights or remedies hereunder or in connection herewith unless such waiver shall be in writing and signed by the holder hereof, and then only to the extent specifically set forth therein. A waiver of one event shall not be construed as continuing or as a bar to or a waiver of such right or remedy of or on a subsequent event. This Demand Promissory Note is made under and governed by, and shall be construed and enforced in accordance with, the laws of the State of Illinois without regard to conflict of laws principles. This Demand Promissory Note shall be binding upon the successors of Borrower. In addition to the Principal Sum and interest thereon as hereinabove provided, Borrower promises to pay the holder hereof all reasonable attorneys fees, court costs and expenses paid or incurred by the holder hereof in connection with the collection of this Demand Promissory Note.   ACQUIRED SALES CORP.                     By: /s/ Roger S. Greene       Roger S. Greene, Director       Pursuant to a resolution of the Board of Directors of       Acquired Sales Corp. adopted on March 31, 2010          
Exhibit 10.2   FEDERAL DEPOSIT INSURANCE CORPORATION   WASHINGTON, D.C.     )   In the Matter of )     )     ) CONSENT ORDER TENNESSEE COMMERCE BANK )   FRANKLIN, TENNESSEE ) FDIC-11-196b   )     )   (Insured State Nonmember Bank) )     )     The Federal Deposit Insurance Corporation (“FDIC”) is the appropriate Federal banking agency for Tennessee Commerce Bank, Franklin, Tennessee (“Bank”), under 12 U.S.C. § 1813(q).   The Bank, by and through its duly elected and acting board of directors (“Board”), has executed a “STIPULATION TO THE ISSUANCE OF A CONSENT ORDER” (“STIPULATION”), dated May 24, 2011, that is accepted by the FDIC. With the STIPULATION, the Bank has consented, without admitting or denying any charges of unsafe or unsound banking practices and violations of law or regulation relating to level of problem assets, earnings performance, capital protection, concentration of credits, funds management practices, liquidity, funds management practices, and interest rate risk, to the issuance of this CONSENT ORDER (“ORDER”) by the FDIC.   Having determined that the requirements for issuance of an order under 12 U.S.C. § 1818(b) have been satisfied, the FDIC hereby orders that:   1   COMPLIANCE COMMITTEE NON-EMPLOYEE DIRECTORS REQUIRED   1.             Within 30 days after the effective date of this ORDER, the Bank’s Board shall establish a committee of the Bank’s board of directors charged with the responsibility of ensuring that the Bank complies with the provisions of this ORDER. At least a majority of the members of such committee shall be directors not employed in any capacity by the Bank other than as a director. The committee shall report monthly to the full Bank’s Board, and a copy of the report and any discussion relating to the report or the ORDER shall be noted in the meeting minutes of the Bank’s Board. The establishment of this subcommittee shall not diminish the responsibility or liability of the entire Bank’s Board to ensure compliance with the provisions of this ORDER.   RESTRICTION ON ADVANCES TO CLASSIFIED BORROWERS   2.             (a)           While this ORDER is in effect, the Bank shall not extend, directly or indirectly, any additional credit to or for the benefit of any borrower whose existing credit has been classified Loss by the FDIC or the Tennessee Department of Financial Institutions (“State”) as the result of its examination of the Bank, either in whole or in part, and is uncollected, or to any borrower who is already obligated in any manner to the Bank on any extension of credit, including any portion thereof, that has been charged off the books of the Bank and remains uncollected. The requirements of this paragraph shall not prohibit the Bank from renewing credit already extended to a borrower after full collection, in cash, of interest due from the borrower.   (b)            While this ORDER is in effect, the Bank shall not extend, directly or indirectly, any additional credit to or for the benefit of any borrower whose extension of credit is classified Doubtful and/or Substandard by the FDIC or the State as the result of its examination   2   of the Bank, either in whole or in part, and is uncollected, unless the Bank’s Board has signed a detailed written statement giving reasons why failure to extend such credit would be detrimental to the best interests of the Bank. The statement shall be placed in the appropriate loan file and included in the minutes of the applicable Bank’s Board meeting.   CLASSIFIED ASSETS - CHARGE-OFF AND PLAN FOR REDUCTION   3.             (a)           Within 30 days after the effective date of this ORDER, the Bank shall, to the extent that it has not previously done so, eliminate from its books, by charge-off or collection, all assets or portions of assets classified Loss by the FDIC or the State as a result of its examination of the Bank as of August 2, 2010, and subsequent examinations. Elimination or reduction of these assets through proceeds of loans made by the Bank shall not be considered “collection” for the purpose of this paragraph.   (b)           Within 60 days after the effective date of this ORDER, the Bank shall submit a written plan to the Regional Director of the FDIC’s Dallas Regional Office (“Regional Director”) and the Commissioner of the Tennessee Department of Financial Institutions (“Commissioner”) to reduce the remaining assets classified Doubtful and Substandard as of August 2, 2010. The plan shall address each asset so classified with a balance of $2,000,000 or greater and provide the following:   (1)                                  The name under which the asset is carried on the books of the Bank;   (2)                                  Type of asset;   (3)                                  Actions to be taken in order to reduce the classified asset; and   (4)                                  Time frames for accomplishing the proposed actions.   3   The plan shall also include, at a minimum:   (1)                                  A review of the financial position of each such borrower, including the source of repayment, repayment ability, and alternate repayment sources; and   (2)                                  An evaluation of the available collateral for each such credit, including possible actions to improve the Bank’s collateral position.   In addition, the Bank’s plan shall contain a schedule detailing the projected reduction of total classified assets on a quarterly basis. Further, the plan shall contain a provision requiring the submission of monthly progress reports to the Bank’s Board and a provision mandating a review by the Bank’s Board.   (c)           For purposes of the plan, the reduction of adversely classified assets shall be detailed using quarterly targets expressed as a percentage of the Bank’s Tier 1 Capital plus the Bank’s Allowance for Loan and Lease Losses (“ALLL”) and may be accomplished by:   (1)                                  Charge-off;   (2)                                  Collection;   (3)                                  Sufficient improvement in the quality of adversely classified assets so as to warrant removing any adverse classification, as verified by the FDIC or the State; or   (4)                                  Increase in the Bank’s Tier 1 Capital.   (d)           While this ORDER is in effect, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified Loss as determined at any future examination conducted by the FDIC or the State.   4   REDUCTION OF DELINQUENCIES   4.             (a)           Within 90 days after the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director and the Commissioner for review and comment a written plan for the reduction and collection of delinquent loans. Such plan shall include, but not be limited to, provisions which:   (1)                                  Prohibit the extension of credit for the payment of interest;   (2)                                  Delineate areas of responsibility for implementing and monitoring the Bank’s collection policies;   (3)                                  Establish specific collection procedures to be instituted at various stages of a borrower’s delinquency;   (4)                                  Establish dollar levels to which the Bank shall reduce delinquencies; and   (5)                                  Provide for the submission of monthly written progress reports to the Bank’s Board for review and notation in the meeting minutes of the Bank’s Board.   (b)           For purposes of the plan, “reduce” means to:     (2)                                  Collect; or   (3)                                  Demonstrate sufficient improvement in the quality of adversely delinquent assets so as to warrant any adverse classification.   5   LOAN POLICY   5.             (a)           Within 90 days after the effective date of this ORDER, and annually thereafter, the Bank’s Board shall review the Bank’s loan policy and procedures for effectiveness and based upon this review, shall make all necessary revisions to the policy in order to strengthen the Bank’s lending procedures and abate additional loan deterioration. The revised written loan policy shall be submitted to the Regional Director and the Commissioner for review and comment upon its completion.   (b)           The initial revisions to the Bank’s loan policy required by this paragraph, at a minimum, shall include provisions:   (1)                                  Designating the Bank’s normal trade area;   (2)                                  Establishing review and monitoring procedures to ensure that all lending personnel are adhering to established lending procedures and that the directorate is receiving timely and fully documented reports on loan activity, including any deviations from established policy;   (3)                                  Requiring that all extensions of credit originated or renewed by the Bank be supported by current credit information and collateral documentation, including lien searches and the perfection of security interests; have a defined and stated purpose; and have a predetermined and realistic repayment source and schedule. Credit information and collateral documentation shall include current financial information, profit and loss statements or copies of tax   6   returns, and cash flow projections, and shall be maintained throughout the term of the loan;   (4)                                  Requiring loan committee review and monitoring of the status of repayment and collection of overdue and maturing loans, as well as all loans classified “Substandard” in the Report of Examination;   (5)                                  Requiring the establishment and maintenance of a loan grading system and internal loan watch list;   (6)                                  Requiring a written plan to lessen the risk position in each line of credit identified as a problem credit on the Bank’s internal loan watch list;   (7)                                  Prohibiting the capitalization of interest or loan-related expenses unless the Bank’s Board or loan committee formally approves such extensions of credit as being in the best interest of the Bank and provides detailed written support of its position in the Bank’s Board or loan committee minutes;   (8)                                  Requiring that extensions of credit to any of the Bank’s executive officers, directors, or principal shareholders, or to any related interest of such person, be thoroughly reviewed for compliance with all provisions of Regulation O, 12 C.F.R. Part 215 and Section 337.3 of the FDIC’s Rules and Regulations, 12 C.F.R. § 337.3.   (9)                                  Requiring prior written approval by the Bank’s Board or loan committee for any extension of credit, renewal, or disbursement in   7   an amount which, when aggregated with all other extensions of credit to that person and related interests of that person, exceeds $2,000,000. For the purpose of this paragraph “Related Interest” is defined as in Section 215.2(n) of Regulation O, 12 C.F.R. § 215.2(n);   (10)                            Requiring a nonaccrual policy in accordance with the Federal Financial Institutions Examination Council’s Instructions for the Consolidated Reports of Condition and Income;   (11)                            Requiring accurate reporting of past due loans to the Bank’s Board or loan committee on at least a monthly basis;   (12)                            Addressing concentrations of credit and diversification of risk, including goals for portfolio mix, establishment of limits within loan and other asset categories, and development of a tracking and monitoring system for the economic and financial condition of specific geographic locations, industries, and groups of borrowers;   (13)                            Requiring guidelines and review of out-of-territory and/or out-of-trade area loans which, at a minimum, shall include complete credit documentation, approval by a majority of the Bank’s Board or loan committee prior to disbursement of funds, and a detailed written explanation of why such a loan is in the best interest of the Bank;   (14)                            Establishing standards for extending unsecured credit;   (15)                            Incorporating collateral valuation requirements, including:   8   a.                                       Maximum loan-to-collateral-value limitations;   b.                                      A requirement that the valuation be completed prior to a commitment to lend funds;   c.                                       A requirement for periodic updating of valuations; and   d.                                      A requirement that the source of valuations be documented in Bank records;   (16)                            Establishing standards for initiating collection efforts;   (17)                            Establishing guidelines for timely recognition of loss through charge-off;   (18)                            Prohibiting the extension of a maturity date, advancement of additional credit or renewal of a loan to a borrower whose obligations to the Bank exceeded $500,000 and were classified “Substandard,” “Doubtful,” or “Loss,” whether in whole or in part, as of August 2, 2010, or by the FDIC or the State in a subsequent report of examination, without the full collection in cash of accrued and unpaid interest, unless the loans are well secured and/or are supported by current and complete financial information, and the renewal or extension has first been approved in writing by a majority of the Bank’s Board;   (19)                            Establishing officer lending limits and limitations on the aggregate level of credit in excess of $250,000 to any one borrower which can be granted without the prior approval of the Bank’s Board;   9   (20)                            Requiring that collateral appraisals be completed prior to the making of secured extensions of credit, and that periodic collateral valuations be performed for all secured loans listed on the Bank’s internal watch list, criticized in any internal or outside audit report of the Bank, or criticized in any Report of Examination of the Bank by the FDIC or the State;   (21)                            Prohibiting the issuance of standby letters of credit unless the letters of credit are well secured and/or are supported by current and complete financial information;   (22)                            Establishing limitations on the maximum volume of loans in relation to total assets; and   (23)                            Establishing review and monitoring procedures to ensure compliance with FDIC’s regulation on appraisals pursuant to Part 323 of the FDIC’s Rules and Regulations, 12 C.F.R. Part 323.   The adequacy of the policy will be reviewed at future examinations or visitations of the Bank.   SPECIAL MENTION LOANS   6.             Within 120 days after the effective date of this ORDER, the Bank shall correct all deficiencies in the loans listed for Special Mention in the Report of Examination as of August 2, 2010. To the extent any such deficiencies are not correctable, the Bank will address these deficiencies to prevent their continuation.   10   ALLOWANCE FOR LOAN AND LEASE LOSSES   7.             (a)           Within 30 days after the effective date of this ORDER, the Bank shall maintain an adequate ALLL. The ALLL should be funded and calculated in accordance with generally accepted accounting standards and ALLL supervisory guidance. Prior to the end of each calendar quarter, the Bank’s Board shall review the adequacy of the Bank’s ALLL. Such reviews shall include, at a minimum, the Bank’s loan loss experience, an estimate of potential loss exposure in the portfolio, trends of delinquent and nonaccrual loans and prevailing and prospective economic conditions. The minutes of the Bank’s Board meetings at which such reviews are undertaken shall include complete details of the reviews and the resulting recommended increases in the ALLL.   (b)           The Bank must use Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Numbers 450 and 310 (formerly Statements Numbers 5 and 114 respectively) for determining the Bank’s ALLL reserve adequacy. Provisions for loan losses must be based on the inherent risk in the Bank’s loan portfolio. The directorate must document with written reasons any decision not to require provisions for loan losses in the Board’s minutes.   MANAGEMENT — BOARD SUPERVISION   8.             Within 30 days after the effective date of this ORDER, the Bank’s Board shall increase its participation in the affairs of the Bank by assuming full responsibility for the approval of the Bank’s policies and objectives and for the supervision of the Bank’s management, including all the Bank’s activities. The Board’s participation in the Bank’s affairs shall include, at a minimum, monthly meetings in which the following areas shall be reviewed   11   and approved by the Board: reports of income and expenses; new, overdue, renewed, insider, charged-off, delinquent, nonaccrued, and recovered loans; investment activities; operating policies; and individual committee actions. The Bank’s Board minutes shall document the Board’s reviews and approvals, including the names of any dissenting directors.   MANAGEMENT   9.             (a)           The Bank shall have and retain qualified management. Each member of management shall possess qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of management personnel shall be evaluated on their ability to:   (1)                                  Comply with the requirements of the ORDER;   (2)                                  Operate the Bank in a safe and sound manner;   (3)                                  Comply with applicable laws and regulations; and   (4)                                  Restore all aspects of the Bank to a safe and sound condition, including improve the Bank’s asset quality, capital adequacy, earnings, management effectiveness, liquidity, and its sensitivity to market risk.   (b)           While this ORDER is in effect, the Bank shall notify the Regional Director and the Commissioner in writing of any changes in management. For the purposes of this provision, “management” includes any position at the senior vice president level or above and specifically includes members of the Board. The notification must include the name(s) and background(s) of any replacement personnel and must be provided 45 days prior to the individual(s) assuming the new position(s).   12   BUDGET AND PROFIT PLAN   10.           (a)           Within 60 days after the effective date of this Commissioner for review and comment a written profit plan and a realistic, comprehensive budget for all categories of income and expense for calendar years 2011 and 2012. The plan required by this paragraph shall contain formal goals and strategies, be consistent with sound banking practices, reduce discretionary expenses, improve the Bank’s overall earnings and net interest income, and shall contain a description of the operating assumptions that form the basis for major projected income and expense components.   (b)           The written profit plan shall address, at a minimum:   (1)                                  An analysis of the Bank’s pricing structure; and   (2)                                  A recommendation for reducing the Bank’s cost of funds.   (c)           Within 30 days after the end of each calendar quarter following completion of the profit plan and budget required by this paragraph, the Bank’s Board shall evaluate the Bank’s actual performance in relation to the written profit plan and budget, record the results of the evaluation, and note any actions taken by the Bank in the minutes of the Board meeting when such evaluation is undertaken.   (d)           A written profit plan and budget shall be prepared for each calendar year for which this ORDER is in effect and shall be submitted to the Regional Director and the Commissioner for review and comment within 30 days after the end of each year. Within 30 days after receipt of all such comments from the Regional Director and the Commissioner, and after adoption of any recommended changes, the Bank shall approve the written profit plan and   13   budget, which approval shall be recorded in the minutes of a Board meeting. Thereafter, the Bank shall implement and follow the plan.   STRATEGIC PLAN   11.           (a)           Within 90 days after the effective date of this ORDER, the Bank shall prepare and adopt a comprehensive strategic plan. The strategic plan required by this paragraph shall contain an assessment of the Bank’s current financial condition and market area, and a description of the operating assumptions that form the basis for major projected income and expense components.   (b)           The written strategic plan shall address, at a minimum:   (1)           Strategies for pricing policies and asset/liability management;   (2)                                  Plans for sustaining adequate liquidity, including back-up lines of credit to meet any unanticipated deposit withdrawals;   (3)           Goals for reducing problem loans;   (4)                                  Plans for attracting and retaining qualified individuals to fill vacancies in the lending and accounting functions;   (5)                                  Financial goals, including pro forma statements for asset growth, capital adequacy, and earnings; and   (6)           Formulation of a mission statement and the development of a strategy to carry out that mission.   (c)           Following the effective date of this Agreement, the Bank’s Board shall evaluate the Bank’s performance in relation to the strategic plan required by this paragraph and   14   record the results of the evaluation, and any actions taken by the Bank, in the minutes of the Bank’s Board meeting at which such evaluation is undertaken.   (d)           The strategic plan required by this ORDER shall be revised and submitted to the Regional Director and the Commissioner for review and comment 30 days after the end of each calendar year for which this ORDER is in effect. Within 30 days after receipt of all such comments from the Regional Director and the Commissioner, and after consideration of all such comments, the Bank shall approve the revised plan, which approval shall be recorded in the minutes of the Bank’s Board meeting. Thereafter, the Bank shall implement the revised plan.   GROWTH PLAN   12.           While this ORDER is in effect, the Bank shall not increase its Total Assets by more than 5 percent during any consecutive 12-month period without providing, at least 30 days prior to its implementation, a growth plan to the Regional Director and the Commissioner. Such growth plan, at a minimum, shall include the funding source to support the projected growth, as well as the anticipated use of funds. This growth plan shall not be implemented without the prior written consent of the Regional Director and the Commissioner. In no event shall the Bank increase its Total Assets by more than 5 percent annually.   VOLATILE LIABILITIES   13.           (a)           Upon the effective date of this ORDER, and so long as this ORDER is in effect, the Bank must seek approval of the Regional Director and the Commissioner any time the Bank plans to increase its use of volatile liabilities. For purposes of this ORDER, volatile liabilities include deposit funds solicited via a third-party rate service of any kind; and brokered   15   deposits, as that term is defined by section 337.6(a)(2) of the FDIC’s Rules and Regulations; and as may be amended. The notification shall indicate how the funds are to be utilized, with specific reference to credit quality of investments/loans and the effect on the Bank’s funds position and asset/liability matching. The notification shall also be submitted to the Regional Director and the Commissioner no less than 60 days prior to the anticipated date of implementation. Within 30 days after receipt of any comments from the Regional Director and the Commissioner, and after consideration of all such comments, the Bank shall approve the revised plan, which approval shall be recorded in the Bank’s Board minutes. Thereafter, the Bank shall implement and fully comply with the plan.   (b)           Within 90 days after the effective date of this ORDER, the Bank shall develop and submit a written plan to the Regional Director and the Commissioner for systematically reducing and monitoring the Bank’s reliance on volatile liabilities. At a minimum, the plan shall include: time frames for reductions of each volatile liability to a specific dollar amount; specific action plans for achieving those targets; and a schedule projecting on a quarterly basis the expected volume of volatile liabilities. Within 30 days after receipt of any comments from the Regional Director and the Commissioner, and after consideration of all such comments, the Bank shall approve the written plan, which approval shall be recorded in the Bank’s Board minutes. Thereafter, the Bank shall implement and fully comply with the plan.   LIQUIDITY/ASSET/LIABILITY MANAGEMENT   14.           (a)           Within 30 days after the effective date of this ORDER, the Bank shall develop and submit to the Regional Director and the Commissioner for review and comment a written plan addressing liquidity, the Bank’s relationship of volatile liabilities to temporary   16   investments, and asset/liability management. Annually thereafter, while this ORDER is in effect, the Bank shall review this plan for adequacy and, based upon such review, shall make necessary revisions to the plan to strengthen funds management procedures and maintain adequate provisions to meet the Bank’s liquidity needs. The initial plan shall include, at a minimum, provisions:   (1)           Establishing the Bank’s ratios of total loans to total assets and total loans to deposits. The requirements of this paragraph shall not be construed as standards for future operations, and the Bank’s total loans to total assets and total loans to total deposits ratio shall be monitored on a monthly basis and maintained at a level consistent with safe and sound banking practices;   (2)           Establishing a reasonable range for its net non-core funding ratio as computed in the Uniform Bank Performance Report;   (3)           Identifying the source and use of borrowed and/or volatile funds;   (4)           Establishing lines of credit at correspondent banks, including the Federal Reserve Bank of Atlanta, that would allow the Bank to borrow funds to meet depositor demands if the Bank’s other provisions for liquidity proved to be inadequate;   (5)           Requiring the retention of securities and/or other identified categories of investments that can be liquidated within one day in amounts sufficient (as a percentage of the Bank’s total assets) to ensure the maintenance of the Bank’s liquidity posture at a level consistent with short- and long-term liquidity objectives;   17   (6)           Establishing a minimum liquidity ratio and defining how the ratio is to be calculated;   (7)           Establishing contingency plans by identifying alternative courses of action designed to meet the Bank’s liquidity needs;   (8)           Addressing the use of borrowings (i.e., seasonal credit needs, match funding mortgage loans, etc.) and providing for reasonable maturities commensurate with the use of the borrowed funds; addressing concentration of funding sources; and addressing pricing and collateral requirements with specific allowable funding channels (i.e., brokered deposits, internet deposits, Fed funds purchased and other correspondent borrowings); and   (9)           Establishing procedures for managing the Bank’s sensitivity to interest rate risk which comply with the Joint Agency Statement of Policy on Interest Rate Risk (June 26, 1996), and the Supervisory Policy Statement on Investment Securities and End-user Derivative Activities (April 23, 1998).   (b)           Within 30 days after the receipt of all such comments from the Regional Director and the Commissioner, and after revising the plan as necessary, the Bank shall adopt the plan, which adoption shall be recorded in the minutes of a Bank Board meeting. Thereafter, the Bank shall implement the plan.   18   CORRECTION OF VIOLATIONS   15.           (a)           Within 90 days after the effective date of this ORDER, the Bank shall eliminate and/or correct all apparent violations of law and regulation set forth in the Report of Examination.   (b)           Within 30 days after the effective date of this ORDER, the Bank shall implement procedures to ensure future compliance with all applicable laws and regulations.   (c)           Within 30 days after the effective date of this ORDER, the Bank shall address any contraventions of policy noted in the Report of Examination.   MANAGEMENT CLAUSE — STAFFING STUDY   16.           (a)           Within 60 days after the effective date of this ORDER, the Bank shall retain a bank consultant acceptable to the Regional Director and the Commissioner. The consultant shall develop a written analysis and assessment of the Bank’s management and staffing needs (“Management Plan”).   (b)           The Bank shall provide the Regional Director and the Commissioner with a copy of the proposed engagement letter or contract with the consultant for review before it is executed. The contract or engagement letter, at a minimum, should include:   (1)                                  A description of the work to be performed under the contract or engagement letter;   (2)                                  The responsibilities of the consultant;   (3)                                  An identification of the professional standards covering the work to be performed;   19   (4)                                  Identification of the specific procedures to be used when carrying out the work to be performed;   (5)                                  The qualifications of the employee(s) who are to perform the work;   (6)                                  The time frame for completion of the work;   (7)                                  Any restrictions on the use of the reported findings; and   (8)                                  A provision for unrestricted examiner access to work papers.   (c)             The Management Plan shall be developed within 90 days after the effective date of this ORDER. The Management Plan shall include, at a minimum:   (1)                                  Identification of both the type and number of officer positions needed to properly manage and supervise the affairs of the Bank;   (2)                                  Identification and establishment of such Bank committees as are needed to provide guidance and oversight to active management;   (3)                                  Evaluation of all Bank officers and staff members to determine whether these individuals possess the ability, experience and other qualifications required to perform present and anticipated duties, including adherence to the Bank’s established policies and practices, and restoration and maintenance of the Bank in a safe and sound condition; and   (4)                                  A plan to recruit and hire any additional or replacement personnel with the requisite ability, experience and other qualifications to fill those officer or staff member positions identified in the Management Plan.   20   (d)             The Management Plan shall be submitted to the Regional Director and the Commissioner for review and comment upon its completion. Within 30 days from the receipt of any comments from the Regional Director and the Commissioner, and after the adoption of any recommended changes, the Bank shall approve the Management Plan and record its approval in the minutes of the Board meeting. Thereafter, the Bank, its directors, officers, and employees shall implement and follow the Management Plan and/or any subsequent modification.   CAPITAL INCREASE AND MAINTENANCE   17.           (a)           No later than December 31, 2011, the Bank shall achieve and maintain its Tier 1 Leverage Capital ratio equal to or greater than 8.5 percent of the Bank’s Average Total Assets; shall maintain its Tier 1 Risk-Based Capital ratio equal to or greater than 10 percent of the Bank’s Total Risk-Weighted Assets; and shall maintain its Total Risk-Based Capital ratio equal to or greater than 11.5 percent of the Bank’s Total Risk Weighted Assets. Any increase in the Bank’s Tier 1 Capital necessary to meet the capital ratios required by this ORDER may be accomplished by:   (1)                                  The sale of securities in the form of common stock; or   (2)                                  The direct contribution of cash subsequent to August 2, 2010, by the directors and shareholders of the Bank by the Bank’s holding company; or   (3)                                  Receipt of an income tax refund or the capitalization subsequent to August 2, 2010, of a bona fide tax refund certified as being accurate by a certified public accounting firm; or   21   (4)                                  Any other method approved by the Regional Director and the Commissioner.   (b)             If any such capital ratios are less than the percentages required by this ORDER, as determined as of the date of any Report of Condition and Income or at an examination by the FDIC or the State, the Bank shall, within 30 days after receipt of a written notice of the capital deficiency from the Regional Director and the Commissioner, present to the Regional Director and the Commissioner a plan to increase the Bank’s Tier 1 Capital or to take other measures to bring all the capital ratios to the percentages required by this ORDER. After the Regional Director and the Commissioner respond to the plan, the Bank’s Board shall adopt the plan, including any modifications or amendments requested by the Regional Director and the Commissioner. The Capital Plan must include a contingency plan (“Contingency Plan”) that shall include a plan to sell or merge the Bank in the event that the Bank (i) fails to maintain the minimum capital ratios required by the ORDER, (ii) fails to submit an acceptable Capital Plan or (iii) fails to implement or adhere to a Capital Plan to which no written objection was provided by the Regional Director and the Commissioner. The Bank shall be required to implement the Contingency Plan only upon written notice from the Regional Director and the Commissioner.   (c)             Thereafter, the Bank shall immediately initiate measures detailed in the plan, to the extent such measures have not previously been initiated, to increase the Bank’s Tier 1 Capital by an amount sufficient to bring all the capital ratios to the percentages required by this ORDER within 30 days after the Regional Director and the Commissioner respond to the plan.   (d)             If all or part of the increase in Tier 1 Capital required by this ORDER is to be accomplished by the sale of new securities issued by the Bank, the Bank’s Board shall adopt   22   and implement a plan for the sale of such additional securities, including soliciting proxies and the voting of any shares or proxies owned or controlled by them in favor of the plan. Should the implementation of the plan involve a public distribution of the Bank’s securities (including a distribution limited only to the Bank’s existing shareholders), the Bank shall prepare offering materials fully describing the securities being offered, including an accurate description of the financial condition of the Bank and the circumstances giving rise to the offering, and any other material disclosures necessary to comply with Federal securities laws. Prior to the implementation of the plan, and in any event, not less than 20 days prior to the dissemination of such materials, the plan and any materials used in the sale of the securities shall be submitted to the FDIC, Accounting and Securities Disclosure Section, Washington, D.C. 20429, for review. Any changes requested to be made in the plan or the materials by the FDIC shall be made prior to their dissemination. If the increase in Tier 1 Capital is to be provided by the sale of non-cumulative perpetual preferred stock, then all terms and conditions of the issue shall be presented to the Regional Director and the Commissioner for prior approval.   (e)             In complying with the provisions of this ORDER and until such time as any such public offering is terminated, the Bank shall provide to any subscriber and/or purchaser of the Bank’s securities written notice of any planned or existing development or other change which is materially different from the information reflected in any offering materials used in connection with the sale of the Bank’s securities. The written notice required by this paragraph shall be furnished within 10 days after the date such material development or change was planned or occurred, whichever is earlier, and shall be furnished to every purchaser and/or subscriber who received or was tendered the information contained in the Bank’s original offering materials.   23   (f)              In addition, the Bank shall comply with the FDIC’s Statement of Policy on Risk-Based Capital found in Appendix A to Part 325 of the FDIC’s Rules and Regulations, 12 C.F.R. Part 325, App. A.   (g)             For purposes of this ORDER, all terms relating to capital shall be calculated according to the methodology set forth in Part 325 of the FDIC’s Rules and Regulations, C.F.R. Part 325.   DIVIDEND RESTRICTION   18.             As of the effective date of this ORDER, the Bank shall not declare or pay any cash dividend without the prior written consent of the Regional Director and the Commissioner.   NEW BUSINESS LINE RESTRICTION   19.             As of the effective date of this ORDER, the Bank shall not enter into any new line of business without the prior written consent of the Regional   SHAREHOLDER NOTIFICATION   20.             After the effective date of this ORDER, the Bank shall send a copy of this ORDER, or otherwise furnish a description of this ORDER, to its shareholder (1) in conjunction with the Bank’s next shareholder communication, and also (2) in conjunction with its notice or proxy statement preceding the Bank’s next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, statement, or notice shall be sent to the FDIC Accounting and Securities Disclosure Section, Washington, D.C. 20429, for review at least 20 days prior to dissemination   24   to shareholders. Any changes requested by the FDIC shall be made prior to dissemination of the description, communication, notice, or statement.   PROGRESS REPORTS   21.             Within 30 days after the end of the first calendar quarter following the effective date of this ORDER, and within 30 days after the end of each successive calendar quarter, the Bank shall furnish written progress reports to the Regional Director and the Commissioner detailing the form and manner of any actions taken to secure compliance with this ORDER and the results thereof. Such reports may be discontinued when the corrections required by the ORDER have been accomplished and the Regional Director has released the Bank in writing from making additional reports.   The provisions of this ORDER shall not bar, stop, or otherwise prevent the FDIC or any other federal or state agency or department from taking any other action against the Bank or any of the Bank’s current or former institution-affiliated parties.   This ORDER shall be effective on the date of issuance.   The provisions of this ORDER shall be binding upon the Bank, its institution-affiliated parties, and any successors and assigns thereof.   25   The provisions of this ORDER shall remain effective and enforceable except to the extent that and until such time as any provision has been modified, terminated, suspended, or set aside by the FDIC.   Issued pursuant to delegated authority this 25th day of May 2011.       /s/ Kristie K. Elmquist   Kristie K. Elmquist   Acting Regional Director   Dallas Region   Division of Risk Management Supervision   Federal Deposit Insurance Corporation   26
Name: 2004/518/EC:Council Decision of 14 June 2004 on the principles, priorities, and conditions contained in the European Partnership with the former Yugoslav Republic of Macedonia Type: Decision Subject Matter: Europe; cooperation policy; European construction; economic conditions Date Published: 2004-06-23 23.6.2004 EN Official Journal of the European Union L 222/20 COUNCIL DECISION of 14 June 2004 on the principles, priorities, and conditions contained in the European Partnership with the former Yugoslav Republic of Macedonia (2004/518/EC) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 533/2004 of 22 March 2004 on the establishment of European partnerships in the framework of the stabilisation and association process (1) and in particular to Article 2 thereof, Having regard to the proposal from the Commission, Whereas: (1) The Thessaloniki European Council of 19 and 20 June 2003 endorsed the Thessaloniki Agenda for the western Balkans: moving towards European integration where the drawing-up of European partnerships is mentioned as one of the means to intensify the stabilisation and association process. (2) Regulation (EC) No 533/2004 sets out that the Council is to decide, by a qualified majority and following a proposal from the Commission, on the principles, priorities and conditions to be contained in the European Partnerships, as well as any subsequent adjustments. It also states that the follow-up of the implementation of the European partnerships will be ensured through the mechanisms established under the stabilisation and association process, notably the Annual Reports. (3) The 2004 Commission's Annual Report presents an analysis of the former Yugoslav Republic of Macedonia's preparations for further integration into the European Union and identifies a number of priority areas for further work. (4) In order to prepare for further integration into the European Union, the former Yugoslav Republic of Macedonia should develop a plan with a timetable and details in terms of measures the former Yugoslav Republic of Macedonia intends to take to this end, HAS DECIDED AS FOLLOWS: Article 1 In accordance with Article 1 of Regulation (EC) No 533/2004, the principles, priorities and conditions in the European Partnership with the former Yugoslav Republic of Macedonia are set out in the Annex hereto, which forms an integral part of this Decision. Article 2 The implementation of the European Partnership shall be examined through the mechanisms established under the stabilisation and association process. Article 3 This Decision shall take effect on the third day following its publication in the Official Journal of the European Union. Done at Luxembourg, 14 June 2004. For the Council The President B. COWEN (1) OJ L 86, 24.3.2004, p. 1. ANNEX 1. INTRODUCTION The Thessaloniki Agenda identifies ways and means of intensifying the stabilisation and association process, inter alia, through the introduction of European partnerships. Based on the Commission's Annual Report, the purpose of the European Partnership with the former Yugoslav Republic of Macedonia is to identify priorities for action in order to support efforts to move closer to the European Union within a coherent framework. The priorities are adapted to the former Yugoslav Republic of Macedonia's specific needs and stage of preparation and will be updated as necessary. The European Partnership also provides guidance for financial assistance to the former Yugoslav Republic of Macedonia. It is expected that the former Yugoslav Republic of Macedonia will adopt a plan including a timetable and details in terms of how they intend to address the European Partnership priorities. The plan should also indicate ways to pursue the Thessaloniki Agenda, the priorities on fighting organised crime and corruption identified at the 2002 London Conference and at the Ministerial meeting held in Brussels on 28 November 2003 in the framework of the EU western Balkans Forum and the measures presented by each of the western Balkan countries at the meeting of 5 November 2003 in Belgrade as a follow-up to the Ohrid Conference on integrated border management. 2. PRINCIPLES The stabilisation and association process remains the framework for the European course of the Western Balkan countries, all the way to their future accession. The main priorities identified for the former Yugoslav Republic of Macedonia relate to its capacity to meet the criteria set by the Copenhagen Council of 1993 and the conditions set for the stabilisation and association process, notably the conditions defined by the Council in its conclusions of 29 April 1997 and 21 and 22 June 1999, the content of the final declaration of the Zagreb Summit of 24 November 2000 and the Thessaloniki Agenda. 3. PRIORITIES The Commission's Annual Report assesses progress made and notes areas where the country needs to increase its efforts. The priorities listed in this European Partnership have been selected on the basis that it is realistic to expect that the former Yugoslav Republic of Macedonia can complete them or take them substantially forward over the next years. A distinction is made between short term priorities, which are expected to be accomplished within one to two years, and medium term priorities, which are expected to be accomplished within three to four years. The European Partnership indicates the main priority areas for the former Yugoslav Republic of Macedonia's preparations for further integration into the European Union, based on the analysis in the 2004 Annual Report. It should be recalled that where legislation is concerned, incorporation of the EU acquis into legislation is not in itself sufficient; it will also be necessary to prepare for its full implementation. 3.1. SHORT TERM Political situation Democracy and rule of law Ensure the functioning of State institutions in all the territory. Implement the Ohrid Framework Agreement ” Implement the legislation already adopted to implement the Framework Agreement (FA). Adopt remaining legislation required by the FA, in particular adopt and implement the Laws on the Territorial Organisation, Municipal Finance and the City of Skopje. Achieve rapid progress in the implementation of the decentralisation process to allow proper local elections as scheduled, in particular strengthening the municipalities capacity in financial management and management of transferred competences and assets through training, consultancy and provision of equipment. In parallel, strengthen administrative capacities to supervise and facilitate the decentralisation process, including at central level, in particular of the Ministry of Local Self-Government and of the Ministry of Finance in relation to fiscal decentralisation as well as the line ministries in their own areas of competence. Ensure that appropriate budgetary resources are allocated in order to ensure a smooth transfer of competencies. Adopt a medium term strategic plan for equitable representation of minorities, including adequate budgetary means, and ensure speedy implementation. Take further measures to ensure the implementation of the FA provisions on the use of language and on community symbols. Improve the monitoring and evaluation capacity of the central government. Enhance efforts to revitalise former crisis areas. Improve the functioning of the public administration ” Implement fully the Law on Civil Servants. Further develop the Agency for Civil Servants. Develop appropriate strategic planning and related allocation of resources in all Ministries and at Governmental level. Implement the Strategic Development Plan of the General Secretariat. Complete ongoing functional analyses in all public bodies and take measures to implement their recommendations, taking into account the decentralisation process. Improve administrative transparency and adopt a law on public access to information. Reform the administrative procedures and administrative disputes laws in order to strengthen the enforcement of citizens' rights. Implement fully the 2003 Law on the Ombudsman and complete the reform of the Ombudsman's office. Ensure that the Ombudsman's recommendations are followed up. Encourage the development of civil society including social partners' organisations and their active participation in the decision making processes. Strengthen the judicial system ” Prepare a comprehensive reform of the Judiciary. Review the current system of selection, appointment and promotion of judges and prosecutors with a view to ensuring political independence, irremovability of judges and career development based upon merit. Prepare necessary constitutional and legislative amendments to guarantee the independence of the body in charge of their selection and career development. Simplify court procedures. Improve the enforcement of the courts' decisions. Introduce alternative dispute resolution mechanisms including arbitration and mediation in criminal matters. Ensure the appropriate enforcement of property rights and court rulings in the area of civil law. Strengthen the institutional capacity to train judges and prosecutors and prepare the setting up of a national school for magistrates. Provide for adequate initial and vocational training schemes. Improve the fight against corruption ” Implement the strategy for the fight against corruption. Increase institutional capacity to investigate and prosecute corruption. Improve coordination and ensure cooperation between the law enforcement agencies and the State Commission on the Prevention of Corruption. Improve exchange of intelligence on corruption related cases between the services in charge of identifying, investigating and prosecuting established cases. Strengthen and implement the rules applying to officials' declaration of assets, conflict of interest, transparency in public procurement and internal and external control of the administration. Adopt appropriate legislation on financing of political parties. Human rights and the protection of minorities Improve the respect of human rights by law enforcement bodies ” Ensure full compliance with the European Convention on Human Rights, the Convention for the Prevention of Torture and Inhuman and Degrading Treatment or Punishment and other relevant international conventions. Implement the Code of Ethics and ensure that irregularities are prosecuted. Deal with previous mistreatment cases through appropriate prosecutions. Upgrade internal controls and enforcement of professional standards in all law enforcement agencies and judiciary and prison administrations. Respect pre-trial detention rules. Promote police, judges, prosecutors and other law enforcement bodies awareness of their obligations in terms of human rights, and ensure that they implement them in accordance with international requirements. Promote freedom of expression and media ” Review the legal framework for broadcasting to prevent political interference. Take concrete steps to ensure the independence of media regulatory bodies. Review the legislation on defamation to reflect European standards and the jurisprudence of the European Court of Human Rights. Ensure respect of minority rights ” Ensure that the process of establishing a third State university in Tetovo is completed in a way that creates synergy with the South East European University and provides for academic standards in line with the Bologna declaration. Regional cooperation and international cooperation Promote regional cooperation ” Comply with the stabilisation and association process requirements and Thessaloniki commitments in terms of regional cooperation. Ensure implementation of all regional free trade agreements. Pursue the conclusion of agreements with neighbouring countries, including on cross border cooperation as regards the fight against organised crime, trafficking and smuggling, judicial cooperation, border management, environment and energy, and ensure their effective implementation. Ensure proper implementation of the Stabilisation and Association Agreement (SAA) in the field of regional cooperation ” Conclude negotiations with Croatia on the bilateral convention on regional cooperation. Adopt an appropriate legal framework on cooperation with the International Criminal Tribunal for the former Yugoslavia. Implement international agreements concluded by the former Yugoslav Republic of Macedonia ” Guarantee the respect of commitments undertaken by the former Yugoslav Republic of Macedonia in the framework of its relations with the EU. Economic situation Free market economy and structural reforms Sustain macroeconomic stability ” Maintain a stable macroeconomic framework in the context of the International Monetary Fund programme. Conclude an agreement on a follow-up programme. Pursue economic reforms ” Introduce comprehensive market oriented reforms aimed at reducing the role of the State in the economy, and establish a level playing field for all economic actors allowing them to operate in a stable and predictable environment. Clarify and enforce property rights, including in the context of privatisation. Improve the business environment ” Adopt and implement an improved legal framework on company law. Upgrade the efficiency of the administrative and judicial system and streamline the efficiency of bankruptcy procedures. Develop a programme to simplify and reduce licensing procedures and improve the transparency of all administrative procedures impacting on enterprises. Employment policy ” Develop and implement a comprehensive strategy to promote employment and reduce unemployment, in particular with regard to vocational training and labour market reforms, involving all relevant actors in all ethnic communities. Respect core labour standards and ensure their effective enforcement (including freedom of association and right to collective bargaining, non-discrimination in employment and occupation). Management of public finances Improve public finance management ” Implement fiscal decentralisation. Implement the wage decompression of civil service salary structure. Strengthen internal control and audit capacity in the Ministry of Finance and broaden controls applied to the public administration as a whole. Review the Law on State Audit to align it to EU standards and strengthen the State Audit Office as an independent State institution with an independent budget. Exert greater control and supervision of expenditure of extra-budgetary funds. Establish an effective Treasury Bill and Bond market. EU Standards Internal Market and Trade Implement properly the Protocol on the adaptation of the SAA to take account of EU enlargement Movement of goods ” Make further progress on adopting European technical norms and standards. Implement the 2002 legislation on standards certification, metrology and conformity assessment, including the adoption of secondary legislation and the strengthening of administrative capacity to ensure enforcement. Progress with regard to the utilisation of the Combined Nomenclature. Financial services ” Improve prudential regulatory framework and supervision of this sector. Personal data protection ” Amend the legislation on protection of personal data in line with EU standards and set up an independent authority charged with the supervision of its implementation. Customs ” Achieve significant results in the fight against fraud, smuggling and trafficking. Further strengthen the customs administration and ensure its proper functioning in order to reach EU standards. Carry forward the reform process and ensure the proper implementation of the Strategic Plan 2004 to 2008. In particular, ensure the proper operation of the new Professional Standards Unit and prosecute corruption cases within the customs Service. Strengthen administrative cooperation in the customs sector. Strengthen the services involved in the implementation of trade agreements and in particular with regard to the control of preferential rules of origin. Taxation ” Start reviewing the present tax legislation and the administrative procedures in order to ensure effective and non-discriminatory enforcement of tax legislation. Eliminate the present different excise duty rates for tobacco products based on the origin of the goods (domestic or imported). Proceed with the ongoing reform of the tax administration, and in particular strengthen its capacity at local level for collection and control of the tax due. Address the problem of the increasing level of VAT refund arrears. Commit to the principles of the Code of Conduct for business taxation and ensure that new tax measures are in conformity with these principles. Competition and State aid ” Adopt legislation against the restriction of competition. Entrust the competition authority with efficient means to directly enforce the law and impose sanctions. Promote transparency and basic enforcement of State aid principles. Promote competition policy by fostering liberalisation, improving public procurement practices, ensuring a pro-competitive approach to privatisation. Adopt secondary legislation on state aid and strengthen the administrative capacity to implement the legal framework. Public procurement ” Improve the current legal framework on public procurement in line with the EU acquis and set up an Agency for Public Procurement able to ensure the implementation of the legal framework. Intellectual, industrial and commercial property rights ” Adopt secondary legislation relating to the Law on Industrial Property and implement the law. Continue improvement of legislation copyright and related rights. Sectoral policies Industry and SMEs ” Adopt the restructuring and conversion programme for the steel industry in line with the competition related EU acquis to create efficient and competitive firms. Implement the principles of the European Charter for Small Enterprises and implement targets set for 2004. Improve access of small and medium-sized enterprises to financial and non-financial services. Continue preparation of a national guarantee fund. Energy ” Develop the newly-established Energy Regulatory Commission in order to meet EU guidelines and avoid a monopolistic situation emerging in the energy sector. Amend the Energy Law establishing the transmission system operator and addressing the public service obligations. Pursue reforms (privatisation) in the electricity sector. Telecommunication ” Ensure that the electronic communications sector is liberalised effectively including the strengthening of regulatory bodies and the adoption of suitable laws and policies for the sector. Environment ” Adopt laws on environment, waste management, water management, protection of natural resources and air quality in line with EU standards. Develop a national strategy for sustainable development, in line with the acquis, including a comprehensive plan for the implementation of the recommendations set out in the conclusions of the United Nations World Summit on Sustainable Development in Johannesburg 2002. Cooperation in justice and home affairs Border management ” As a follow up to the Ohrid regional Conference on border security and management in May 2003, implement the short term measures which were adopted by the Government and presented at the meeting of JHA ministers within the framework of the EU-Western Balkans Forum on 28 November 2003. Implement the Integrated Border Management Strategy adopted in December 2003 in cooperation between the agencies concerned. Strengthen the coordination between the Ministry of Interior and the Ministry of Defence to facilitate the transfer of competences on border control to the border police, and ensure the institutional development of border police service. Migration and asylum policies ” Implement the 2003 Law on Asylum. Establish an independent and transparent appeal and review panel for asylum seekers. Adopt appropriate by-laws for the implementation and development of reception policies and facilities. Revise the migration legislation, in particular review the legislation related to legal and illegal immigration and trafficking in human beings. Establish a common strategy to fight illegal immigration and the trafficking of human beings, integrating the regional dimension. Adopt a new Law on Foreigners. Police ” Ensure that the police services, in particular the special police forces, behave according to international standards and practices. Clarify the respective roles of the Ministry of Interior and the Ministry of Defence in crisis management situations in line with EU practices. Adopt and implement an Action Plan for the reform of the police, taking into consideration equitable representation at all levels, and plan the necessary resources for its implementation. Take urgent measures to reform human resources management. Improve cooperation with the Judiciary. Enhance training capacities and ensure the proper functioning of the Police Academy, including the proper allocation of budgetary resources. Reduce corruption and irregular behaviour within police ranks. Promote cooperation with Interpol and other international law enforcement organisation, in particular through improved consultation of their databases. Organised crime, trafficking, drugs, money laundering and terrorism ” Implement the action oriented measures that have been adopted by the Government and presented at the EU-western Balkans JHA ministerial meeting of 28 November 2003. Complete the ratification of the 2002 UN Convention on Organised Crime and its related protocols on small arms, trafficking in human beings and smuggling of migrants, and ensure implementation. Enhance coordination between law-enforcement bodies involved in fighting organised crime. Enhance intelligence and risk analysis and set up a central criminal intelligence unit, working in cooperation with all law enforcement agencies. Adopt the legislative changes needed to allow for the use of special investigative means. Develop witness protection programmes. Increase capacity to fight against drug trafficking. Develop a national drugs strategy in line with the EU Drugs Strategy and Action Plan on Drugs. Clarify the respective roles of the Directorate against Money Laundering (DML) and of the Financial Police and upgrade the DML to the level of a financial intelligence unit in line with EU standards. Take the necessary steps to prepare for the conclusion of an agreement with Europol. Increase international cooperation and implement relevant international conventions on terrorism. Improve cooperation and exchange of information between police and intelligence services within the State and with other States. Prevent the financing and preparation of acts of terrorism. 3.2. MEDIUM TERM Political situation Democracy and the rule of law Implement the FA ” Implement the strategic plan for equitable representation of minorities. Ensure the proper functioning of the decentralised levels of government. Sustain efforts in revitalising former crisis areas. Further improve the functioning of the administration ” Further promote independence of the administration, transparency in recruitment procedures and career development based on merit, professionalism and equitable representation of all communities. Pursue the reform of the public administration, in particular in view of the outcome of the functional analysis. Further develop the capacity of Ministries to perform a range of common functions needed to support the coordinating role for the General Secretariat and other central agencies (policy development, strategic planning, financial management, personnel management, information technology). Ensure that the sectors in the administration responsible for the implementation of the SAA provisions are duly equipped to carry out their duties. Further encourage the development of civil society including social partners organisations and their participation in the decision making process. Further strengthen the judicial system ” Implement a comprehensive reform of the judicial system, including the necessary changes in the Constitution and in the legal framework, and strengthen the overall capacity of the judicial system. Ensure the effective functioning of the National School for Magistrates. Enhance training on EU legislation, cross border cooperation in criminal matters and practices. Decrease the backlog of cases in all courts. Ensure provision of appropriate equipment and well trained and specialised administrative staff with the appropriate status. Ensure sufficient budgetary resources to guarantee access to justice and legal aid. Increase salaries. Further improve the fight against corruption and organised crime ” Achieve significant, tangible results in the fight against corruption, at all levels, through adequate legislation and the proper implementation of the national programme against corruption. Facilitate the placement of liaison officers, seconded by EU Member States in the relevant State bodies involved in the fight against organised crime. Provide six-monthly reports to the EU on tangible results achieved in the judicial pursuit of organised crime related activities under the terms of the United Nations Convention on transnational organised crime, known as the Palermo Convention. Human rights and the protection of minorities Ensure the respect of human rights by law enforcement bodies ” Ensure that the police, judges, prosecutors and other law enforcement bodies are fully aware of their obligations and that they are implemented. Ensure that human dignity is respected in detention centres and prisons. Further promote freedom of expression and media ” Ensure that the laws in the media sector are in line with the EU standards and are properly implemented. Further promote the principle of non-discrimination and equal representation ” Foster employment opportunities for all ethnic communities and facilitate access to education. Promote higher education for minorities and ensure that higher education in Albanian respects EU standards as defined in the Bologna declaration. Regional and International Cooperation Further promote regional cooperation ” Maintain a constructive and balanced regional policy which promotes dialogue, stability, good neighbourhood and cooperation. Implement the Memorandum of Understanding of the South East Europe (SEE) Core Regional Transport Network. Implement the commitments undertaken in the framework of the 2003 Athens Memorandum of Understanding on the Regional Energy Market in SEE, and prepare for the establishment of the Integrated Regional Energy Market. Implement international agreements concluded by the former Yugoslav Republic of Macedonia ” Fully implement international agreements and conventions ratified by the former Yugoslav Republic of Macedonia, in particular conventions in the fields of justice and home affairs, human and minority rights and trade. Economic situation Free Market Economy and Structural Reforms Ensure sustainability of economic reforms Further improve the business environment ” Ensure effective implementation of main international and EU standards on company law, accounting and auditing. Further upgrade the efficiency of the administrative and judicial system, fully implement the programme to simplify and reduce licensing procedures and further improve the transparency of all administrative procedures impacting on enterprises. Ensure the enforcement of creditors' rights within a transparent legal framework and through reforming the cadastre. Promote the implementation of a code on corporate governance. Employment and social policy ” Develop a social policy to promote social cohesion, effective social protection systems, improve social standards and address poverty and social exclusion. Further develop an employment policy, involving all relevant actors. Management of public finances Further improve public finances and their management ” Enhance public internal and external financial control. Remove the main obstacles for the development of the second pillar of the pension system, in particular the financing of the transition from a solidarity system to a mandatory accumulation system. Fraud ” Establish effective procedures for the detection, treatment and follow-up of cases of (suspected) fraud and other irregularities affecting national and international funds. EU standards Internal market and trade Movement of goods ” Reinforce the Government's capacity to implement the SAA, in particular through developing internal expertise to assess whether draft legislation is in line with the EU acquis. Financial services ” Ensure effective implementation of independent and well trained supervisory authorities in accordance with internationally recognised standards. Personal data protection ” Continue institutional strengthening of the data protection authority in line with EU standards and practices. Customs ” Further strengthen the customs administration and ensure its proper functioning in order to reach EU standards. Implement the Strategic Plan 2004 to 2008. Taxation ” Continue strengthening the tax administration, in particular tax collection and control, and ensure its proper functioning in order to reach EU standards. Develop an audit strategy and adequate IT systems. Competition and State aid ” Implement the legislation against the restriction of competition. Further strengthen the competition authority by giving the power to enforce the law and pronounce sanctions. Further promote transparency in State aid. Public procurement ” Achieve fully operational public procurement structures which ensure the conduct of public procurement procedures in full accordance with the law and SAA principles. Intellectual property rights ” Ensure the implementation of the legislation on intellectual and industrial property. Sectoral Policies Industry and SMEs ” Implement the restructuring and conversion programme for the steel industry. Complete the implementation of the strategy for the implementation of the European Charter for Small Enterprises. Promote SMEs' access to credit facilities. Further develop experience of non-financial SME support mechanisms (i.e. clusters and technology parks). Implement the FIAS action plan on reduction of barriers to investment. Telecommunication ” Transpose and implement the new EU framework for electronic communications. Agriculture ” Adopt and implement structural reforms in the field of agriculture. Adopt and implement comprehensive reform including border and internal inspection services and practices regarding plant and animal health, policy analysis, sector information systems and statistics and coordination functions for existing public- and private-sector institutions and services. Environment ” Further approximate legislation with EU standards. Implement the legislation adopted. Improve environmental monitoring and further build administrative capacity. Integrate environmental concerns in various policies, in particular through developing environmental impact assessments in line with EU standards. Cooperation in Justice and Home Affairs Border management ” Complete the implementation of the Integrated Border Management Strategy in cooperation between the competent agencies. Migration and Asylum policies ” Strengthen the development of national asylum structures in line with international and European standards to enable them to provide appropriate protection and assistance to asylum seekers and refugees. Implement the strategy to fight illegal immigration and trafficking of human beings. Police ” Complete the implementation of the reform of the police. Enhance training to fight new forms of criminality, including computer and trans-border crime. Further improve police information systems. Organised crime, trafficking, drugs, and money laundering ” Achieve significant results in the fight against organised criminality. Ensure the implementation of the UN instruments against organised crime. Further improve the State's capacity to prevent and combat crime, through coordination between law enforcement agencies and with the judiciary, increased analytical capacity to deal with criminal intelligence and further training in new forms of criminality. Decrease the number of illicit small arms and light weapons. Ensure the full operation of the financial intelligence unit in line with EU standards. Implement the national drugs strategy. Reinforce the fight against economic and financial crime (including money-laundering and counterfeiting of currencies) and fraud as well as improve the related national legislation. 4. PROGRAMMING Community assistance under the stabilisation and association process to the western Balkan countries will be provided by the relevant financial instruments, and in particular by Council Regulation (EC) No 2666/2000 of 5 December 2000 on assistance for Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the former Yugoslav Republic of Macedonia (1); accordingly, this Decision will have no financial implications. In addition the former Yugoslav Republic of Macedonia will have access to funding from multi-country and horizontal programmes. The Commission is working with the European Investment Bank and the International Financial Institutions, in particular the European Bank for Reconstruction and Development and the World Bank, with a view to facilitate the co-financing of projects relating to the stabilisation and association process. 5. CONDITIONALITY Community assistance under the Stabilisation and Association process to the western Balkan countries is conditional on further progress in satisfying the Copenhagen political criteria. Failure to respect these general conditions could lead the Council to take appropriate measures on the basis of Article 5 of Regulation (EC) No 2666/2000. Community assistance shall also be subject to the conditions defined by the Council in its Conclusions of 29 April 1997, in particular as regards the recipient's undertaking to carry out democratic, economic and institutional reforms, taking into account the priorities set out in this European Partnership. 6. MONITORING The follow-up of the European Partnership is ensured through the framework of the mechanisms established under the stabilisation and association process, notably the Annual Report on the stabilisation and association process. (1) OJ L 306, 7.12.2000, p. 1. Regulation as amended by Regulation (EC) No 2415/2001 (OJ L 327, 12.12.2001, p. 3).
Title: Roommates are moving out but we're all on the lease? Question:I'm a student in St. Louis living in an apartment with two roommates. We are all three on the lease cosigned with our parents. The lease is from June through May. We had a fight and my roommates wish to move out. Our university has provided them with temporary housing while this gets settled. I received a letter today explaining that the three of us are jointly and severally liable for the full payment. I have paid my rent this month and am not sure if either of them has. Up until now we had been splitting equally. Can someone explain exactly what the legal language means and what I can expect with respect to payment? Will I be forced to cover their obligation? Topic: Landlord Tenant Housing Answer #1: The roommates moving out are still required to meet their obligation. If you have to foot their portion of the rent to keep a roof over your head, you can sue them for their unpaid portion.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 2011 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ­­­­­ to Commission File Number: 000-31797 CRYSTAL ROCK HOLDINGS, INC. (Exact name of registrant as specified in Its charter) Delaware 03-0366218 (State or other jurisdiction ofincorporation or organization) (I.R.S. Employer Identification No.) 1050 Buckingham St., Watertown, CT (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (860) 945-0661 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes XNo Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule405 of RegulationS-T during the preceding 12months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company X_ (Do not check if smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X_ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares outstanding at Class June 8, 2011 Common Stock, $.001 Par Value 1 CRYSTAL ROCK HOLDINGS, INC. AND SUBSIDIARY Table of Contents Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Condensed Consolidated Balance Sheets as of April 30, 2011 and October 31, 2010 3 Condensed Consolidated Statements of Income for the Three and Six Months Ended April 30, 2011 and 2010 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended April 30, 2011 and 2010 5 Notes to Condensed Consolidated Financial Statements 6-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results ofOperations. 14–20 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 20 Item 4. Controls and Procedures. 20 PART II - OTHER INFORMATION Item 1. Legal Proceedings. 21 Item 1A. Risk Factors. 21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 21 Item 3. Defaults Upon Senior Securities. 21 Item 4. [Reserved.] Item 5. Other Information. 21 Item 6. Exhibits. 21 SIGNATURE 22 2 CRYSTAL ROCK HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS April 30, October 31, (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ $ Accounts receivable - net Inventories Current portion of deferred tax asset Other current assets TOTAL CURRENT ASSETS PROPERTY AND EQUIPMENT - net OTHER ASSETS: Goodwill Other intangible assets - net Other assets TOTAL OTHER ASSETS TOTAL ASSETS $ $ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long term debt $ $ Accounts payable Accrued expenses Current portion of customer deposits Current portion of unrealized loss on derivatives TOTAL CURRENT LIABILITIES Long term debt, less current portion Deferred tax liability Subordinated debt Customer deposits Long term portion of unrealized loss on derivatives TOTAL LIABILITIES COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock - $.001 par value, 50,000,000 authorized shares. 21,960,229 issued and 21,388,681 outstanding shares as of April 30, 2011 and October 31, 2010 Additional paid in capital Treasury stock, at cost, 571,548 shares as of April 30, 2011 and October 31, 2010 ) ) Accumulated deficit ) ) Accumulated other comprehensive loss, net of tax ) ) TOTAL STOCKHOLDERS' EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ $ See the notes to the condensed consolidated financial statements. 3 CRYSTAL ROCK HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three months ended April 30, Six months ended April 30, (unaudited) (unaudited) NET SALES $ COST OF GOODS SOLD GROSS PROFIT OPERATING EXPENSES: Selling, general and administrative expenses Advertising expenses Amortization Loss (gain) on disposal of property and equipment ) TOTAL OPERATING EXPENSES INCOME FROM OPERATIONS OTHER EXPENSE: Interest expense (Gain) on derivatives ) - ) - TOTAL OTHER EXPENSE, NET INCOME BEFORE INCOME TAX EXPENSE INCOME TAX EXPENSE NET INCOME $ NET INCOME PER SHARE - BASIC $ NET INCOME PER SHARE - DILUTED $ WEIGHTED AVERAGE SHARES USED IN COMPUTATION - BASIC WEIGHTED AVERAGE SHARES USED IN COMPUTATION - DILUTED See the notes to the condensed consolidated financial statements. 4 CRYSTAL ROCK HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended April 30, (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ $ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Provision for bad debts on accounts receivable Provision for bad debts on notes receivable - Amortization Non cash interest expense Gain on derivatives ) - (Gain) loss on disposal of property and equipment ) Changes in assets and liabilities: Accounts receivable ) ) Inventories ) Other current assets ) ) Other assets - Accounts payable ) ) Accrued expenses ) ) Customer deposits ) ) NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ) ) Proceeds from sale of property and equipment Cash used for acquisitions ) ) Cash used for purchase of trademark ) - NET CASH USED IN INVESTING ACTIVITIES ) ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on debt ) ) Payments of debt issuance costs - ) Proceeds from sale of common stock - NET CASH USED IN FINANCING ACTIVITIES ) ) NET DECREASE IN CASH AND CASH EQUIVALENTS ) ) CASH AND CASH EQUIVALENTS - beginning of period CASH AND CASH EQUIVALENTS- end of period $ $ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for interest $ $ Cash paid for income taxes $ $ NON-CASH FINANCING AND INVESTING ACTIVITIES: Reduction in notes payable for acquisition $ $ - Notes payable issued in acquisitions $ $ See the notes to the condensed consolidated financial statements. 5 CRYSTAL ROCK HOLDINGS, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the condensed consolidated financial position, results of operations, and cash flows for the periods presented.The results have been determined on the basis of generally accepted accounting principles and practices of the United States of America (“GAAP”), applied consistently with the Annual Report on Form 10-K of Crystal Rock Holdings, Inc. (the “Company”) for the year ended October 31, 2010. Certain information and footnote disclosures normally included in audited consolidated financial statements presented in accordance with GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended October 31, 2010.The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The financial statements herewith reflect the consolidated operations and financial condition of Crystal Rock Holdings, Inc. and its wholly owned subsidiary Crystal Rock LLC. 2. GOODWILL AND OTHER INTANGIBLE ASSETS Major components of intangible assets at April 30, 2011 and October 31, 2010 consisted of: April 30, 2011 October 31, 2010 Gross CarryingAmount Accumulated Amortization Wgt. Avg. Amort. Years Gross CarryingAmount Accumulated Amortization Wgt. Avg. Amort. Years Amortized Intangible Assets: Covenants Not to Compete $ Customer Lists Other Identifiable Intangibles Total $ Amortization expense for the three month periods ending April 30, 2011 and 2010 was $269,623 and $275,491, and for the six month periods ending the same time was $550,990 and $549,423, respectively.There were no changes in the carrying amount of goodwill for the six month period ending April 30, 2011. 6 3. DEBT The Company and its subsidiary have a Credit Agreement (the “Agreement”) with Bank of America to provide a senior financing facility consisting of term debt and a revolving line of credit.Under the Agreement, Bank of America is the Company’s sole lender. The Agreement has a total loan capacity of $20,500,000 and obligates the Company to a $15,500,000 term note and access to a $5,000,000 revolving line of credit. The term note is to refinance its previous senior term debt and acquisition line of credit. The revolving line of credit can be used for the purchase of fixed assets, to fund acquisitions, to collateralize letters of credit, and for operating capital.There was no balance on the line of credit but it collateralized a letter of credit of $1,531,000 as of April 30, 2011.Consequently, as of that date, there was $3,469,000 available to borrow from the revolving line of credit. There was $13,286,000 outstanding on the term note as of April 30, 2011. The Agreement amortizes the term note over a five year period with 59 equal monthly principal installments of $184,500, commencing May 5, 2010, and a final payment of $4,614,500 due at the end of five years. The revolving line of credit matures in three years from the commencement of the Agreement.The Company is subject to various restrictive covenants under the agreement, and is prohibited from entering into other debt agreements without the bank’s consent. The Agreement also prohibits the Company from paying dividends without the prior consent of the bank. Under the Agreement, interest is paid at a rate of one-month LIBOR plus a margin based on the achievement of a specified leverage ratio.As of April 30, 2011, the margin was 1.50% for the term note and 1.25% for the revolving line of credit. The Company is required to fix the interest rate on 75% of the outstanding balance of the term note and accomplishes this by entering into interest rate swap agreements. As of April 30, 2011, the Company had $3,322,000 of the term debt subject to variable interest rates.The one-month LIBOR was .24% resulting in total variable interest rates of 1.74% and 1.49%, for the term note and the revolving line of credit, respectively, as of April 30, 2011. The Agreement requires the Company to be in compliance with certain financial covenants at the end of each fiscal quarter.The covenants include senior debt service coverage as defined of greater than 1.25 to 1, total debt service coverage as defined of greater than 1 to 1, and senior debt to EBITDA of greater than 2.50 to 1.As of April 30, 2011, the Company was in compliance with these covenants and terms of the Agreement. In addition to the senior debt, the Company has subordinated debt owed to Henry, Peter and Jack Baker in the aggregate principal amount of $13,000,000 that is due October 5, 2015.The interest rate on each of these notes is 12% per annum. In November 2010, The Company made an acquisition that resulted in the issuance of a $150,000 note to the seller. The note was paid in full in February 2011. 7 4. INVENTORIES Inventories consisted of the following at: April 30, October 31, Finished Goods $ $ Raw Materials Total Inventories $ $ Finished goods inventory consists of products that the Company sells including, but not limited to, coffee, cups, soft drinks, snack foods, and office supplies.Raw material inventory consists primarily of bottle caps.The amount of raw and bottled water on hand does not represent a material amount of inventory.The Company estimates that value as of April 30, 2011 and October 31, 2010 to be $60,000 and $56,000, respectively.This value includes the cost of allocated overhead.Bottles are accounted for as fixed assets. 5. ON-BALANCE SHEET DERIVATIVE INSTRUMENTS AND HEDGIN ACTIVITIES Derivative Financial Instruments The Company has stand-alone derivative financial instruments in the form of interest rate swap agreements, which derive their value from underlying interest rates. These transactions involve both credit and market risk.The notional amount is an amount on which calculations, payments, and the value of the derivative are based.The notional amount does not represent direct credit exposure.Direct credit exposure is limited to the net difference between the calculated amount to be received and paid, if any. Such difference, which represents the fair value of the derivative instrument, is reflected on the Company’s balance sheet as an unrealized gain or loss on derivatives. The Company is exposed to credit-related losses in the event of nonperformance by the counterparties to these agreements.The Company controls the credit risk of its financial contracts through credit approvals, limits and monitoring procedures, and currently has no reason to believe that any counterparties will fail to fulfill their obligations. 8 Risk Management Policies - Hedging Instruments The Company uses long-term variable rate debt as a source of funds for use in the Company’s general business purposes.These debt obligations expose the Company to variability in interest payments due to changes in interest rates.If interest rates increase, interest expense increases.Conversely, if interest rates decrease, interest expense decreases.Under the terms of its Credit Agreement with Bank of America, the Company is required to fix the interest rate on 75% of the outstanding balance of its term note. To meet this objective, management enters into interest rate swap agreements whereby the Company receives variable interest rate payments and makes fixed interest rate payments on a portion of its debt. On October 5, 2007, the Company entered into an interest rate hedge swap agreement (old swap) in conjunction with an amendment to its credit facility with Bank of America.The intent of the instrument was to fix the interest rate on 75% of the outstanding balance on the term loan (the swapped amount) with Bank of America as required by the facility.The old swap fixed the interest rate for the swapped amount related to the previous facility at 4.87% and matures in January 2014. In conjunction with its Credit Agreement with Bank of America, on April 5, 2010, the Company entered into an interest rate swap agreement (offsetting swap) to offset the old swap for which it receives 1.40% of the scheduled balance of the old term loan. The offsetting swap effectively removed any exposure to change in the fair value of the old swap and set a fixed net payment schedule based on the scheduled balance of the old term loan until January 2014 when both swaps mature.In addition, the Company entered into a swap agreement (new swap) to fix the interest rate of 75% of the outstanding balance of the term note at 3.26% (2.01% plus the applicable margin, 1.25%).The term note matures in May 2015 and new swap matures in April 2013. As of April 30, 2011, the total notional amount of the new swap agreement was $9,965,000. On that date, the variable rate on the remaining 25% of the term note ($3,321,000) was 1.74%. At April 30, 2011 and October 31, 2010, the net unrealized loss relating to interest rate swaps was recorded in current and long term liabilities.The current portion is the valuation of the hedged instrument over the next twelve months while the balance of the unrealized loss makes up the long term portion.For the effective portion of the hedges, which is the new swap, changes in the fair value of interest rate swaps designated as hedging instruments to mitigate the variability of cash flows associated with long-term debt are reported in other comprehensive income or loss net of tax effects.The new swap was effective for the quarter and six months ending April 30, 2011 but was entered into in the second quarter of fiscal year 2010. The old swap, which had the credit agreement with Bank America underlying at the time, was effective during the quarter and six months ending April 30, 2010 through April 5, 2010. The amounts relating to the old swap previously reflected in accumulated other comprehensive income are amortized to earnings over the remaining term of the undesignated cash flow hedge.In fiscal year 2011, payments on the old swap, and receipt of income on the offsetting swap, are reported as gain or loss on derivatives and an adjustment to other comprehensive income or loss net of tax effects. The table below details the adjustments to other comprehensive income, on a before-tax and net-of tax basis, for the three months ended April 30, 2011 and 2010. Before-Tax Tax Benefit (Expense) Net-of-Tax Three Months Ended April 30, 2010 Loss on interest rate swap $ ) $ $ ) Amortization of loss on derivative undesignated as cash flow hedge ) Reclassification adjustment for loss in income ) Net unrealized loss $ ) $ $
United States Securities and Exchange Commission Washington, D.C.20549 FORM 10-Q þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2012 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . 001-35067 Commission File Number SWISHER HYGIENE INC. (Exact Name Of Registrant as Specified in Its Charter) Delaware 27-3819646 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 4725 Piedmont Row Drive, Suite400 Charlotte, North Carolina (Address of Principal Executive Offices) (Zip Code) (704) 364-7707 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YesoNo þ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes þ No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Check one: Larger Accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes oNo þ Number of shares outstanding of each of the registrant's classes of Common Stock at March 4, 2013: 175,157,404 shares of Common Stock, $0.001 par value per share. SWISHER HYGIENE INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012 TABLE OF CONTENTS Page PART I.FINANCIAL INFORMATION ITEM 1. Financial Statements 1 Condensed Consolidated Balance Sheets (Unaudited) at March 31, 2012 and December 31, 2011 1 Condensed Consolidated Statements of Operations and ComprehensiveLoss (Unaudited) for the Three Months Ended March 31, 2012 and 2011 2 Condensed Consolidated Statement of Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 2012 3 Condensed Consolidated Statements of Cash Flows (Unaudited)for the Three Months Ended March 31, 2012 and 2011 4 Notes to Condensed Consolidated Financial Statements(Unaudited) 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 28 ITEM 4. Controls and Procedures 29 PART II.OTHER INFORMATION ITEM 1. Legal Proceedings 31 ITEM 1A. Risk Factors 32 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 32 ITEM 6. Exhibits 33 i Tables of Contents PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SWISHER HYGIENE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data) March 31, December 31, ASSETS Current assets Cash and cash equivalents $ $ Accounts receivable (net of allowance for doubtful accounts of $2,392 at March31, 2012 and $2,185 at December31, 2011) Inventory Assets of discontinued operations Other assets Total current assets Property and equipment, net Goodwill Other intangibles, net Deferred income tax assets Other noncurrent assets Total assets $ $ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ $ Long-term debt and obligations due within one year Advance from shareholder Liabilities of discontinued operations Total current liabilities Long-term debt and obligations Other long-term liabilities Total noncurrent liabilities Commitments and contingencies (Note 15) Stockholders' equity Swisher Hygiene Inc. stockholders’ equity Preferred stock, par value $0.001, authorized 10,000,000 shares; no shares issued and outstanding at March 31, 2012 and December 31, 2011 - - Common stock, par value $0.001, authorized 600,000,000 shares; 174,840,387 and 174,810,082 shares issued and outstanding at March31, 2012 and December31, 2011, respectively Additional paid-in capital Accumulated deficit ) ) Accumulated other comprehensive loss ) ) Total Swisher Hygiene Inc. stockholders’ equity Non-controlling interest 22 22 Total stockholders' equity Total liabilities and stockholders' equity $ $ See Notes to Condensed Consolidated Financial Statements 1 Tables of Contents SWISHER HYGIENE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (In thousands, except share and per share data) Three Months Ended March 31, Revenue Products $ $ Services Franchise and other Total revenue Costs and expenses Cost of sales Route expenses Selling, general, and administrative expenses Acquisition and merger expenses Depreciation and amortization Total costs and expenses Loss from continuing operations ) ) Other expense, net ) ) Net loss from continuing operations before income taxes ) ) Income tax (expense) benefit ) Net loss from continuing operations ) ) Loss from discontinued operations, net of tax (1 ) ) Net loss ) ) Comprehensive loss Foreign currency translation adjustment (4 ) Comprehensive loss $ ) $ ) Loss per share from continuing operations Basic and diluted $ ) $ ) Weighted-average common shares used in the computation of loss per share Basic and diluted See Notes to Condensed Consolidated Financial Statements 2 Tables of Contents SWISHER HYGIENE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (In thousands, except share data) Accumulated Swisher Additional Other Hygiene Inc. Non- Total Common Stock Paid-in Accumulated Comprehensive Stockholders' Controlling Stockholders' Shares Amount Capital Deficit Loss Equity Interest Equity Balance at December 31, 2011 $ $ $ ) $ ) $ $ 22 $ Shares issued for non-controlling interest 0 37 - - 37 - 37 Conversion of convertible promissory note payable 0 37 - - 37 - 37 Stock based compensation - Issuance of common stock under stock based payment plans 0 0 - Foreign currency translation adjustment - (4
Exhibit 10.1 AMENDED AND RESTATED COMPENSATION PROTECTION AGREEMENT THIS AMENDED AND RESTATED COMPENSATION PROTECTION AGREEMENT (the “Agreement”) is entered into as of January 1, 2017 (the “Effective Date”) by and among CDW Corporation, a Delaware corporation (the “Company”), CDW LLC, an Illinois limited liability company and wholly owned subsidiary of the Company (“CDW LLC”), and Thomas E. Richards (the “Executive”). WHEREAS, CDW LLC and the Executive previously entered into that certain Amended and Restated Compensation Protection Agreement dated January 1, 2014 (the “Previous Agreement”); and WHEREAS, the Company, CDW LLC and the Executive desire to amend and restate in its entirety the Previous Agreement and to extend the term thereof. For and in consideration of the premises and the mutual covenants and agreements herein contained, the Company, CDW LLC and the Executive hereby agree as follows: respective meanings set forth below: (a) “Accrued Obligations” means, as of the Date of Termination, the sum of (i) the Executive’s base salary through the Date of Termination to the extent not theretofore paid, (ii) the amount of any bonus, annual incentive compensation, deferred compensation and other cash compensation accrued by the Executive as of the Date of Termination to the extent not theretofore paid and (iii) any vacation pay, expense reimbursements and other cash entitlements accrued by the Executive as of the Date of Termination to the extent not theretofore paid. For the purpose of this Section 1(a), amounts shall be deemed to accrue ratably over the period during which they are earned, but no discretionary compensation shall be deemed earned or accrued until it is specifically approved by the Board or the Compensation Committee in accordance with the applicable plan, program or policy. (b) “Affiliate” shall mean any corporation or other entity (i) in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities of such corporation or other entity entitled to vote generally in the election of directors or (ii) which has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors. (d) “Cause” shall mean one or more of the following: (i) the Executive’s refusal (after written notice and reasonable opportunity to cure) to perform duties properly assigned which are consistent with the scope and nature of his/her position, or (ii) the Executive’s commission of an act materially and demonstrably detrimental to the financial condition and/or goodwill of the Company or any of its subsidiaries, which act constitutes gross negligence or willful misconduct in the performance of duties to the Company or any of its subsidiaries, or (iii) the Executive’s commission of any theft, fraud, act of dishonesty or breach of trust resulting in or intended to result in material personal gain or enrichment of the Executive at the direct or indirect expense of the Company or any of its subsidiaries, or (iv) the Executive’s conviction of, or plea of guilty or nolo contendere to, a felony, (v) a material violation of any restrictive covenant with respect to non-competition, non-solicitation, confidentiality or protection of trade secrets (or similar provision regarding intellectual property) by which the Executive is bound under any agreement between the Executive and the Company and its subsidiaries or (vi) a material and willful violation of the Company’s written policies or of the Executive’s statutory or common law duty of loyalty to the Company or its Affiliates that in either case is materially injurious to the Company, monetarily or otherwise. No act or failure to act will be considered “willful” (x) unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company or (y) if it is done, or omitted to be done, in reliance on the informed advice of the Company’s outside counsel or independent accountants or at the express direction of the Board. (e) “Change in Control” means the occurrence of any one of the following events: (i) During any twenty-four (24) month period, individuals who, as of the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the beginning of such period whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; (ii) Any “person” (as such term is defined in the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any subsidiary; (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary; (C) by any underwriter temporarily holding securities pursuant to an offering of such securities; (D) pursuant to a Non-Qualifying Transaction, as defined in paragraph (iii), or (E) by any person of Company Voting Securities from the Company, if a majority of the Incumbent Board approves in advance the acquisition of beneficial ownership of 35% or more of Company Voting Securities by such person;   2 (iii) The consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its subsidiaries that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 50% of the total voting power of (1) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (2) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination; (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 35% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or (iv) The stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or the consummation of a sale of all or substantially all of the Company’s assets. solely because any person acquires beneficial ownership of more than 35% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur. (f) “Company” means CDW Corporation, a Delaware corporation, and its successors and assigns; provided, however, that in the event of the consummation of a transaction initiated by the Company involving the formation of a direct or indirect holding company of the Company for any internal legal or business purpose in which the holders of the outstanding voting securities of the Company become the holders of the outstanding voting securities of such holding company in substantially the same proportions, all references to the “Company” herein shall be deemed to be references to the new holding company.   3 (g) “Compensation Committee” means the Compensation Committee of the Board, or if no such committee has been appointed, the Board. (h) “Date of Termination” means (i) the date of the Executive’s separation from service, within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or (ii) if the Executive’s employment by the Company terminates by reason of death, the date of death of the Executive. (i) “Exchange Act” means the Securities Exchange Act of 1934, as amended. (j) “Good Reason” shall mean, without the written consent of the Executive, any one or more of the following: (i) the Company reduces the amount of the Executive’s base salary or cash bonus opportunity (it being understood that the Board shall have discretion to set the Company’s and the Executive’s personal performance targets to which the cash bonus will be tied), (ii) the Company adversely changes the Executive’s reporting responsibilities, titles or office as in effect as of the date hereof or reduces his/her position, authority, duties, responsibilities or, after a Change in Control, his/her status, in a manner that is materially inconsistent with the positions, authority, duties, responsibilities or, after a Change in Control, status, which the Executive then holds, (iii) any successor to the Company in any merger, consolidation or transfer of assets, as described in Section 13, does not expressly assume any material obligation of the Company to the Executive under any agreement or plan pursuant to which the Executive receives benefits or rights, or (iv) the Company changes the Executive’s place of work to a location more than fifty (50) miles from the Executive’s present place of work, provided, however, that the occurrence of any such condition shall not constitute Good Reason unless (A) the Executive provides written notice to the Company of the existence of such condition not later than 60 days after the Executive knows or reasonably should know of the existence of such condition, (B) the Company shall have failed to remedy such condition within 30 days after receipt of such notice and (C) the Executive resigns due to the existence of such condition within 60 days after the expiration of the remedial period described in clause (B) hereof. (k) “Noncompetition Agreement” means the Noncompetition Agreement in the form of Exhibit A. (l) “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. (m) “Potential Change in Control” means any of the following events: (i) the commencement by any person of a tender or exchange offer or a proxy contest that could ultimately result in a Change in Control;   4 (ii) the execution of a letter of intent, agreement in principle or definitive agreement by the Company that could ultimately result in a Change in Control; (iii) the public announcement by any person of such person’s intent to take or consider taking actions which, if consummated, could result in a Change in Control; (iv) the Board is aware that any person has taken steps reasonably calculated to effect a Change in Control; or (v) the adoption by the Board of a resolution to the effect that a Potential Change in Control has occurred. (n) “Qualifying Termination” means termination of the Executive’s employment (1) by reason of the discharge of the Executive by the Company other than (A) for Cause, (B) the Executive’s death or (C) the Executive’s absence from the Executive’s duties with the Company on a full-time basis for at least 180 consecutive days as a result of the Executive’s incapacity due to physical or mental illness, or (2) by reason of the resignation of the Executive for Good Reason. (o) “Severance Period” means the period commencing on the Date of Termination and ending on the second anniversary of the Date of Termination. (p) “Termination Year Bonus” means the annual incentive bonus which would have been earned by the Executive under the Company’s Senior Management Incentive Plan or any comparable successor plan if the Executive had remained employed by the Company for the full fiscal year in which the Date of Termination occurs or such later date as may be required for the Executive to be entitled to receipt of the bonus. 2. Position. Effective as of the Effective Date, Executive shall continue to be employed by the Company as its Chief Executive Officer, reporting to the Board, and shall continue to be nominated to the Board. 3. Base Salary. Executive’s base salary will be reviewed annually by the Compensation Committee of the Board or the full Board as part of Executive’s annual performance review. 4. Bonus Target. Executive’s annual bonus target under the Company’s Senior Management Incentive Plan (or any successor bonus plan) for the period commencing on the Effective Date and continuing through December 31, 2017 shall be 150% of his annual base salary. Thereafter, Executive’s annual bonus target will be reviewed annually by the Compensation Committee of the Board or the full Board as part of Executive’s annual performance review. 5. Medical Plan Access. (a) In the event Executive’s employment with the Company terminates for any reason other than a termination by the Company for Cause, each of Executive and Executive’s spouse will have continued access to participate in the Company’s medical plan until   5 such time as an event described in Section 5(b) occurs, with the full cost for such plan access (currently equivalent to the applicable COBRA premiums, but subject to change), including any applicable taxes, to be paid by Executive. The additional medical plan access described herein will not apply until after the expiration of any benefit continuation period applicable under the Agreement and the exhaustion of the full COBRA continuation coverage period. (b) The medical plan access set forth in this Section 5 will cease on the last day of the month of the earliest to occur of the following: (i) each of the Executive and the Executive’s spouse become eligible for Medicare (or a successor thereto); (ii) Executive becomes eligible to participate in a subsequent employer’s medical plan; (iii) Executive’s material violation of any agreement between Executive and the Company (or its parent or subsidiary companies) with respect to noncompetition, nonsolicitation, confidentiality or protection of trade secrets; (iv) Executive ceases to timely pay premiums after notice and a 30 day cure period; (v) Executive expressly waives coverage in writing; (vi) the Company no longer offers a medical plan to any of its coworkers; or (vii) the Company cannot offer the medical plan access set forth in this Section 5 due to a change in applicable law. 6. Other Benefits. (a) Executive shall accrue vacation at the rate of five weeks per year. (b) Executive shall be eligible for short-term disability and long-term disability coverage and short-term disability will be paid at a rate of 70% for up to 13 weeks. 7. Payments Upon a Qualifying Termination. (a) In the event of a Qualifying Termination, and provided the Executive executes and has not revoked a general release agreement substantially in the form of Exhibit B hereto (the “Release Agreement”) within sixty (60) days after the Date of Termination, the Company shall provide to the Executive, in consideration of the general release set forth in Section 2 of the Release Agreement, the obligations of the Executive contained in the Noncompetition Agreement and other good and valuable consideration, the following benefits: (i) Payment of an amount equal to (A) the Termination Year Bonus multiplied by a fraction, the numerator of which is the number of days of the fiscal year in which the Date of Termination occurs during which the Executive was employed by the Company and the denominator of which is 365, less (B) any amounts previously paid to the Executive in respect of such Termination Year Bonus during such fiscal year, such amount to be payable on the same basis and at the same time as if the Executive’s employment with the Company had continued (or at such other time as required by Section 14 hereof); (ii) Continuation during the Severance Period (or at such other time as required by Section 14 hereof) in accordance with the Company’s regular payroll practices of salary replacement amounts equal to the Executive’s highest annual base salary from the Company and its Affiliates in effect during the 12-month period prior to the Date of Termination;   6 (iii) Payment of an aggregate bonus replacement amount equal to two hundred percent (200%) of the Executive’s Termination Year Bonus, such aggregate amount to be payable in two equal installments, the first of which shall be made on the first anniversary of the Date of Termination and the second of which shall be made on the second anniversary of the Date of Termination; provided, however, that if the Termination Year Bonus is not calculable at the time a payment is required to be made pursuant to this Section 7(a)(iii), such payment shall be made within thirty (30) days after the Termination Year Bonus is so calculated (or at such other time as required by Section 14 hereof); provided that if the Date of Termination occurs after a Change in Control, such aggregate bonus replacement amount shall instead be equal to two hundred percent (200%) of the average of the annual incentive bonuses paid or payable to Executive for each of the three fiscal years ending immediately prior to the date of the Change in Control (or, if Executive was employed for fewer than three fiscal years prior to such Change in Control, two hundred percent (200%) of the average of the annual incentive bonuses paid or payable to Executive for each such year of employment); (iv) Continuation, for the Severance Period, of medical, dental, disability, accident, life and similar insurance coverage on terms comparable to those which would have been provided if the Executive’s employment with the Company had continued for that time, with the payment for such insurance coverage to be made on the same basis as if the Executive’s employment with the Company had continued for that time, and subject to any withholding of applicable taxes with respect to such continued coverage; provided, however, that the Company’s obligation to provide each such type of insurance coverage shall cease as of the date that the Executive becomes eligible for such type of insurance coverage under a plan or agreement of a subsequent employer. The Executive shall be obligated to notify the Company of the Executive’s eligibility for insurance coverage under a plan or agreement of a subsequent employer on or before the date that such eligibility commences. If the Company determines that it is not reasonably practicable to provide a type of comparable insurance coverage required by this Section 7(a)(iv) for reasons other than cost, the Company shall reimburse the Executive for the amount necessary for the Executive to acquire comparable coverage, with such reimbursement, subject to applicable tax withholding, to be made no later than 90 days following the Company’s receipt of appropriate documentation from the Executive, but in no event later than end of the calendar year following the calendar year in which the expense was incurred. The Company’s obligation to make any such reimbursements for expenses not already incurred by the Executive shall cease at such time as the Executive becomes eligible under a plan or agreement of a subsequent employer for the type of insurance coverage for which the Executive is being compensated; and (v) Outplacement services for a period of two years after the Date of Termination with a firm selected by the Company, to commence within a reasonable time following the Date of Termination. Payments pursuant to this Section 7(a)(v) shall not exceed $20,000 in the aggregate for such two (2) year period and shall be made directly to such outplacement firm upon submission of proper documentation to the Company. (b) If the employment of the Executive is terminated by the Company, the Company shall pay the Executive all Accrued Obligations within 15 days following the Date of   7 Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation or annual incentive compensation shall be determined and paid in accordance with the terms of the relevant plan as applicable to the Executive. (c) If the Executive breaches any of the covenants in the Noncompetition Agreement, including any noncompetition, nonsolicitation or confidentiality covenants contained therein, (i) the Executive’s entitlement to the payments and benefits set forth in Section 7(a) shall be null and void, (ii) all rights to receive or continue to receive severance payments and benefits shall thereupon cease and (iii) the Executive shall immediately repay to the Company all amounts theretofore paid to, and the value of all benefits theretofore received by, the Executive pursuant to Section 7(a). The foregoing shall not limit any other rights or remedies the Company may have existing in its favor, including injunctive relief. 8. Nonqualifying Termination of Employment. If the employment of the Executive shall terminate for any reason other than a Qualifying Termination, then the Company shall pay to the Executive all Accrued Obligations (including, in the case of death or disability, prorated annual incentive bonus (based on the target bonus under the Company’s Senior Management Incentive Plan or any successor plan for the fiscal year in which the Executive’s termination of employment occurs), through and including the effective date of the Executive’s termination of employment in a lump sum within thirty (30) days after the Date of Termination (or at such other time as required by Section 14 hereof); provided, however, that any portion of the Accrued Obligations that consists of bonus, deferred compensation or annual incentive compensation shall be determined and paid in accordance with the terms of the relevant plan as applicable to the Executive. In addition, if the Executive’s employment is terminated by retirement under a retirement plan of the Company or by resignation of the Executive other than for Good Reason, the Executive may, in the discretion of the Compensation Committee, be awarded a pro rata cash bonus for the year in which the Date of Termination occurs. 9. Section 280G. (a) To the extent that any payment or distribution to or for the benefit of the Executive pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any of its affiliated companies, any person whose actions result in a change of ownership or effective control covered by Section 280G(b)(2) of the Code or any person affiliated with the Company or such person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Payments”) would be subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of the Code, then the Company shall reduce the payments to the amount that is (after taking into account federal, state, local and social security taxes at the maximum marginal rates, including any excise taxes imposed by Section 4999 of the Code) one dollar less than the amount of the Payments that would subject the Executive to the Excise Tax (the “Safe Harbor Cap”) if, and only if, such reduction would result in Executive receiving a higher net after-tax amount. Unless Executive shall have given prior written notice specifying a different order to the Company to effectuate the Safe Harbor Cap, the Payments to be reduced hereunder will be determined in a manner which has the least economic cost to Executive and, to the extent the economic cost is equivalent, will be reduced in the inverse order of when the Payment would have been made to Executive until the reduction specified herein is achieved. Executive’s right to specify the order of reduction of   8 the Payments shall apply only to the extent that it does not directly or indirectly alter the time or method of payment of any amount that is deferred compensation subject to (and not exempt from) Section 409A. (b) All determinations required to be made under this Section 9, including whether and when the Safe Harbor Cap is required and the amount of the reduction of the Payments pursuant to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determination, shall be made by a public accounting firm or other nationally recognized consulting firm with expertise in Section 280G of the Code that is retained by the Company as of the date immediately prior to the Change in Control (the “Calculating Firm”) which shall within fifteen (15) business days of the receipt of notice from the Company or the Company (collectively, the “Determination”). In the event that the Calculating Firm is serving as accountant, auditor or consultant for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting or consulting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Calculating Firm hereunder). All fees and expenses of the Calculating Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Calculating Firm in connection with the performance of the services hereunder. The Determination by the Calculating Firm shall be binding upon the Company and Executive. The Company shall bear and pay directly all costs and expenses incurred in connection with any contests or disputes with the Internal Revenue Service relating to the Excise Tax, and Executive shall cooperate, to the extent his or her reasonable out-of pocket expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any such contests or disputes. 10. Withholding Taxes. The Company may withhold from all payments due to the Executive (or the Executive’s beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. The Company may also reduce the amounts otherwise payable pursuant to Section 7(a) hereof to satisfy the Executive’s required contributions for the insurance coverage being provided hereunder. 11. Termination and Amendment of Agreement. (a) This Agreement shall be effective as of the Effective Date and shall expire on the third anniversary of the Effective Date, provided that not later than nine months prior to the expiration of the term of this Agreement, the Company and the Executive shall review and discuss in good faith whether or not to renew, amend or replace the Agreement. If a Potential Change in Control occurs during the term of the Agreement, then in no event shall the Agreement expire earlier than the date such Potential Change in Control terminates without resulting in a Change in Control, and if a Change in Control occurs during the term of the Agreement, then in no event shall the Agreement expire earlier than the 24-month anniversary of such Change in Control. Notwithstanding the foregoing, any expiration or termination of this Agreement shall not retroactively impair or otherwise adversely affect the rights of the Executive which have arisen prior to the date of such expiration.   9 (b) No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver is agreed to in writing and signed by the Executive and by a duly authorized officer of the Company; provided, however, that the Company may amend the Agreement in a manner that is beneficial to the interests of the Executive without the Executive’s written consent. 12. Scope of Agreement. Nothing in this Agreement shall be deemed to entitle the Executive to continued employment with the Company or its subsidiaries or any of their respective Affiliates. Any amount paid pursuant to Section 7 shall be paid in lieu of any other amount of severance relating to salary, incentive compensation or other bonus continuation to be received by the Executive from the Company or its Affiliates upon termination of employment of the Executive under any employment, employee benefit or severance plan or agreement, policy or similar arrangement of the Company or its Affiliates in effect as of the date hereof; provided, however, that nothing in this Section 12 shall affect the Executive’s rights with respect to any equity ownership interest in the Company. If the Company or any of its Affiliates are obligated by law to pay severance pay, notice pay or other similar benefits, or if the Company or any of its Affiliates are obligated by law to provide advance notice of separation (“Notice Period”), then the payments made pursuant to Section 7 shall be reduced by the amount of any such severance, notice pay or other similar benefits, as applicable, and by the amount of any severance pay, notice pay or other similar benefits received during any Notice Period. 13. Successors; Binding Agreement. (a) This Agreement shall not be terminated by any merger or consolidation of the Company whereby the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred. In the event of the consummation of a transaction initiated by the Company involving the formation of a direct or indirect holding company of the Company for any internal legal or business purpose in which the holders of the outstanding voting securities of the Company become the holders of the outstanding voting securities of such holding company in substantially the same proportions, the provisions of this Agreement shall be binding upon such holding company. (b) The Company agrees that concurrently with any merger, consolidation or transfer of assets referred to in Section 13(a), it will cause any successor or transferee unconditionally to assume, by written instrument delivered to the Executive (or the Executive’s beneficiary or estate), all of the obligations of the Company hereunder. Failure of the Company to obtain such assumption prior to the effectiveness of any such merger, consolidation or transfer of assets shall be a breach of this Agreement and, if such merger, consolidation or transfer of assets is a “change in control event” within the meaning of Section 409A of the Code, shall entitle the Executive to compensation and other benefits from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive’s employment were terminated by reason of a Qualifying Termination. For purposes of implementing the foregoing, the date on which any such merger, consolidation or transfer becomes effective shall be deemed the Date of Termination.   10 (c) This Agreement shall inure to the benefit of and be enforceable by the successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amounts would be payable to the Executive hereunder had the Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by the Executive to receive such amounts or, if no person is so appointed, to the Executive’s estate. 14. Section 409A Compliance. This Agreement shall be interpreted and construed in a manner that avoids the imposition of additional taxes and penalties under Section 409A of the Code (“409A Penalties”), and all payments under the Agreement are subject to the terms of the policy established by the Company pursuant to Section 409A of the Code. In the event the terms of this Agreement would subject the Executive to 409A Penalties, the Company and the Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible, without adversely affecting the intended benefits hereunder. Notwithstanding any other provision in this Agreement, if on the Date of Termination (a) the Company is a publicly traded corporation and (b) the Executive is a “specified employee,” as defined in Section 409A of the Code, then to the extent any amount payable under this Agreement constitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A of the Code, that under the terms of this Agreement would be payable prior to the six-month anniversary of the Date of Termination, such payment shall be delayed until the earlier to occur of (i) the six-month anniversary of the Date of Termination or (ii) the date of the Executive’s death. 15. Notices. (a) For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed (i) if to the Executive, to the home address of the Executive on the most current Company records and if to the Company, to CDW Corporation, 200 North Milwaukee Avenue, Vernon Hills, IL 60061, attention General Counsel, or (ii) to such other address as either party may have furnished to the other in (b) A written notice of the Executive’s Date of Termination by the Company or the Executive, as the case may be, to the other, shall (i) indicate the specific provision in this Agreement applicable to such termination, if any, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for the application of such provision to the termination of the Executive’s employment and (iii) specify the termination date (which date shall be not less than 30 days after the giving of such notice, unless the Company determines, in its sole discretion, that Executive’s Date of Termination shall be less than 30 days following a written notice provided by the Executive). The failure by the Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.   11 16. Full Settlement; Resolution of Disputes. (a) The Company’s obligation to make any payments provided for in Section 7 of this Agreement and otherwise to perform its obligations thereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others, except as provided in Section 7(c) or Section 18. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under the provisions of Section 7 of this Agreement and employment, except as provided in Section 7(c). (b) Any dispute or controversy between the Company and the Executive arising out of or relating to this Agreement or the breach of this Agreement shall be settled by arbitration administered by the American Arbitration Association (“AAA”) in accordance with its Commercial Arbitration Rules then in effect, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Any arbitration shall be held before a single arbitrator who shall be selected by the mutual agreement of the Company and the Executive, unless the parties are unable to agree to an arbitrator, in which case the arbitrator will be selected under the procedures of the AAA. In connection with the appointment of an arbitrator, the AAA will give the parties a list of no less than 15 potential arbitrators to strike and number in order of preference in accordance with AAA procedures. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, either party may, without inconsistency with this arbitration provision, apply to any court otherwise having jurisdiction over such dispute or controversy and seek interim provisional, injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Company and the Executive. The Company and the Executive acknowledge that this Agreement evidences a transaction involving interstate commerce. Notwithstanding any choice of law provision included in this Agreement, the United States Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. The arbitration proceeding shall be conducted in Chicago, Illinois or such other location to which the parties may agree. The Company shall pay the costs of any arbitrator appointed hereunder. (c) If a claim or dispute arises after a Change in Control concerning the rights of the Executive under this Agreement, regardless of the party by whom such claim or dispute is initiated, the Company shall 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 Executive, in connection with the bringing, prosecuting, defending, litigating, negotiating, or settling such claim or dispute; provided that if the Executive does not prevail on at least one material claim in connection with such claim or dispute, the Executive’s right to such payments shall cease and the Executive shall be required to return any amounts advanced by the Company pursuant to this Section 16(c). For purposes of complying with the requirements of Section 409A of the Code, (i) the right of the Executive to reimbursement pursuant to this Section 16(c) shall apply until the tenth anniversary of the Date of Termination, (ii) the amount of expenses eligible for reimbursement during a calendar year shall not affect the expenses eligible for   12 reimbursement in any other calendar year, (iii) the reimbursement of an expense must be paid to the Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit. 17. Employment with Affiliates. Employment with the Company for purposes of this Agreement shall include employment with any Affiliate of the Company. 18. Clawback Policy. Notwithstanding anything to the contrary herein, all incentive compensation paid to the Executive in connection with the Executive’s employment with the Company shall be subject to forfeiture, recovery by Company or other action pursuant to any clawback or recoupment policy which the Company may adopt from time to time to the extent the Board determines in good faith that the adoption and maintenance of such policy is necessary to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or is otherwise required by applicable law. 19. Governing Law; Validity. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Illinois without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which other provisions shall remain in full force and effect. 20. Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original and both of which together shall 21. Joint and Several Obligation. Each of the Company and CDW LLC shall be jointly and severally liable for the payments and obligations provided to Executive under this Agreement. 22. Miscellaneous. No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by the Executive and by a duly authorized officer of the Company and CDW LLC. This Agreement constitutes the entire agreement among the parties hereto on the subject manner hereof, and shall supersede all other agreements or arrangements relating to the subject manner hereof. No waiver by any party hereto at any time prior or subsequent time. Failure by the Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. Except as otherwise expressly set forth in this Agreement or in any agreement with respect to any equity ownership interest in the Company owned by the Executive, the rights of, and benefits payable to, the Executive, the Executive’s estate or the Executive’s beneficiaries pursuant to this Agreement are in addition to any rights against, or   13 benefits payable by, third parties (i.e. Persons other than the Company or any of its Affiliates), to the Executive, the Executive’s estate or the Executive’s beneficiaries under any other employee benefit plan or program of the Company.   14 IN WITNESS WHEREOF, the Company and CDW LLC have caused this Agreement to be executed by a duly authorized officer and the Executive has executed this Agreement as of the date hereof.   CDW CORPORATION By:   /s/ Christine A. Leahy   Christine A. Leahy, Senior Vice President – International, Chief Legal Officer and Corporate Secretary CDW LLC By:     and Corporate Secretary EXECUTIVE /s/ Thomas E. Richards Thomas E. Richards Signature Page to Amended & Restated Compensation Protection Agreement
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-524 The Dreyfus/Laurel Funds Trust (Exact name of Registrant as specified in charter) c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 (Address of principal executive offices) (Zip code) Michael A. Rosenberg, Esq. 200 Park Avenue New York, New York 10166 (Name and address of agent for service) Registrant's telephone number, including area code: (212) 922-6000 Date of fiscal year end: 12/31 Date of reporting period: 6/30/2010 The following N-CSR relates only to the series of the Registrant listed below, and does not affect the other series of the Registrant, which have different fiscal year ends and, therefore, different N-CSR reporting requirements. Separate N-CSR Forms will be filed for those series, as appropriate. Dreyfus Core Value Fund Dreyfus High Yield Fund FORM N-CSR Item 1. Reports to Stockholders. Dreyfus High Yield Fund SEMIANNUAL REPORT June 30, 2010 Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes. The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Contents THE FUND 2 A Letter from the Chairman and CEO 3 Discussion of Fund Performance 6 Understanding Your Fund’s Expenses 6 Comparing Your Fund’s Expenses With Those of Other Funds 7 Statement of Investments 17 Statement of Assets and Liabilities 18 Statement of Operations 19 Statement of Changes in Net Assets 21 Financial Highlights 25 Notes to Financial Statements 38 Information About the Review and Approval of the Fund’s Investment Management Agreement FOR MORE INFORMATION Back Cover Dreyfus High Yield Fund The Fund A LETTER FROM THE CHAIRMAN AND CEO Dear Shareholder: We are pleased to present this semiannual report for Dreyfus High Yield Fund, covering the six-month period from January 1, 2010, through June 30, 2010. After posting solid gains over the first quarter of 2010, the financial markets encountered renewed volatility in the second quarter, which caused some of the bond market’s higher yielding sectors to erase their previous gains and end the reporting period lower than where they began. Conversely, traditional safe havens such as U.S.Treasury securities gained value as investors became more risk-averse. The second-quarter swoon occurred despite continued U.S. economic growth, as manufacturing activity improved and unemployment began to moderate in a recovery that has so far proved sustainable but milder than historical averages. Indeed, many of the headlines that spooked investors emanated from overseas markets, including a sovereign debt crisis in Europe. Despite recent headlines about the current state of the U.S. economy, we still believe that it is unlikely that we’ll encounter a “double-dip” recession. Instead, we expect current financial strains to ease and the domestic economy to expand at a moderate pace over the second half of the year. However, we currently see a number of downside risks that could result in volatility over the short term, which is why we still believe that a long-term investment focus with an emphasis on higher quality bonds may be advisable for many investors. As always, your financial advisor can help you assess both the risks and opportunities provided by the financial markets in this investment climate. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow. Thank you for your continued confidence and support. Jonathan R. Baum Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2010 2 DISCUSSION OF FUND PERFORMANCE For the period of January 1, 2010, through June 30, 2010, as provided by Karen Bater, Portfolio Manager Fund and Market Performance Overview For the six-month period ended June 30, 2010, Dreyfus High Yield Fund’s Class A shares produced a total return of 1.66%, Class B shares returned 1.41%, Class C shares returned 1.28% and Class I shares returned 1.63%. 1 In comparison, the BofA Merrill Lynch U.S. High Yield Master II Constrained Index (the “Index”), the fund’s benchmark, achieved a total return of 4.74% over the same period. 2 After rallying early in the reporting period, high yield bonds fell sharply in May and June when new developments caused investors to question the strength and sustainability of the global economic recovery. The fund produced lower returns than its benchmark, primarily due to overweighted exposure to “triple-C” rated bonds and underweighted positions in the better-quality tiers of the high yield spectrum. The Fund’s Investment Approach The fund seeks to maximize total return, consisting of capital appreciation and current income. At least 80% of the fund’s assets are invested in fixed-income securities that are rated below investment grade (“high yield” or “junk” bonds) or are the unrated equivalent as determined by Dreyfus. Individual issues are selected based on careful credit analysis.We thoroughly analyze the business, management and financial strength of each of the companies whose bonds we buy, then project each issuer’s ability to repay its debt. Renewed Uncertainty Derailed a Bond Market Rally U.S. and global economic recoveries persisted during the first quarter of 2010 as manufacturing activity increased, housing prices appeared to bottom and the domestic labor market showed early evidence of modest improvement. The U.S. economic rebound was sparked, in part, by historically low short-term interest rates from the Federal Reserve Board and a massive stimulus program adopted by the federal government. Improving economic conditions helped lift the prices of The Fund 3 DISCUSSION OF FUND PERFORMANCE (continued) higher yielding fixed-income securities, including high yield corporate bonds. In contrast, U.S. government securities lagged market averages as investors favored riskier investments. However, investor sentiment changed sharply in the second quarter of 2010, when a number of new developments brought the economic recovery into question. A sovereign debt crisis roiled Europe when Greece found itself unable to finance a heavy debt load, requiring intervention from the International Monetary Fund and the European Union. Meanwhile, surging property values in China kindled local inflation fears, and investors grew concerned that higher short-term interest rates and other remedial measures might constrain growth in Asia.The United States also encountered greater economic uncertainty when retail sales, employment and housing data sent mixed signals regarding the strength and sustainability of the economic recovery. As a result of these economic setbacks, higher yielding sectors of the U.S. bond market lost value, giving back many of the reporting period’s previous gains, and traditionally defensive U.S. government securities generally rallied. High yield bonds had led the bond market rally early in the year and ranked among the more severe decliners during the market correction in May and June. Constructive Investment Posture Dampened Results In the midst of the economic recovery, we had positioned the fund to participate fully in the bond market rally through an emphasis on securities that historically have tended to be more sensitive than average to changing economic conditions. Consequently, we generally favored high yield bonds with relatively generous coupons and lower credit ratings, including those in the triple-C rating tier. Conversely, the fund held underweighted exposure to high yield bonds with single-B and double-B ratings. This relatively constructive investment posture enhanced the fund’s relative performance early in the reporting period, but it proved detrimental during the May/June reversal. The fund also invested a relatively larger portion of its assets in investment-grade corporate bonds than the benchmark, but these higher-quality securities were not sufficient to offset weakness among lower-rated high yield credits. The fund’s constructive investment posture reflected an emphasis on relatively economically sensitive industry groups, including media, 4 technology and telecommunications services companies. Conversely, the fund held underweighted exposure to the energy, building products, leisure and chemicals industry groups, which we regarded as richly valued. In addition, one of the fund’s holdings, telecommunications service provider Sorenson Communications, suffered when the Federal Communications Commission reduced rates for a service that enables hearing-impaired callers to place and receive telephone calls through sign language interpreters. Positioned for a Mild Recovery Although we are concerned regarding recent economic and market setbacks, we believe a return to recession is unlikely. In addition, high yield bonds have reached more attractive valuations, default rates have been declining and an active new-issue market has provided ample financing to high yield companies. Therefore, we have maintained the fund’s relatively constructive positioning, focusing on growth opportunities in industry groups that have demonstrated an ability to grow their revenues, generate free cash flow and provide reasonable asset protection. July 15, 2010 Bond funds are subject generally to interest rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines. High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity. 1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charges imposed on redemptions in the case of Class B and Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price, yield and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Return figure provided for Class I shares reflects the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an agreement in effect through September 30, 2010, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, the fund’s Class I return would have been lower. 2 SOURCE: LIPPER INC. — Reflects reinvestment of dividends and, where applicable, capital gain distributions.The BofA Merrill Lynch U.S. HighYield Master II Constrained Index is an unmanaged performance benchmark composed of U.S. dollar-denominated domestic andYankee bonds rated below investment grade with at least $100 million par amount outstanding and at least one year remaining to maturity. Bonds are capitalization-weighted.Total allocations to an issuer are capped at 2%.The index does not reflect fees and expenses to which the fund is subject. The Fund 5 UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited) As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser. Review your fund’s expenses The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus High Yield Fund from January 1, 2010 to June 30, 2010. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses. Expenses and Value of a $1,000 Investment assuming actual returns for the six months ended June 30, 2010 Class A Class B Class C Class I Expenses paid per $1,000 † $ 4.75 $ 7.24 $ 8.48 $ 3.50 Ending value (after expenses) $1,016.60 $1,014.10 $1,012.80 $1,016.30 COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited) Using the SEC’s method to compare expenses The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period. Expenses and Value of a $1,000 Investment assuming a hypothetical 5% annualized return for the six months ended June 30, 2010 Class A Class B Class C Class I Expenses paid per $1,000 † $ 4.76 $ 7.25 $ 8.50 $ 3.51 Ending value (after expenses) $1,020.08 $1,017.60 $1,016.36 $1,021.32 † Expenses are equal to the fund’s annualized expense ratio of .95% for Class A, 1.45% for Class B, 1.70% for Class C and .70% for Class I, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 6 STATEMENT OF INVESTMENTS June 30, 2010 (Unaudited) Coupon Maturity Principal Bonds and Notes—96.0% Rate (%) Date Amount ($) Value ($) Automotive—4.5% Ford Motor Credit, Sr. Unscd. Notes 8.00 12/15/16 2,805,000 2,871,947 Ford Motor Credit, Sr. Unscd. Notes 8.70 10/1/14 8,580,000 8,949,849 Ford Motor, Sr. Unscd. Debs 6.50 8/1/18 730,000 a 675,250 Ford Motor, Sr. Unscd. Notes 7.45 7/16/31 7,485,000 a 6,792,637 Goodyear Tire & Rubber, Sr. Unscd. Notes 10.50 5/15/16 3,460,000 3,780,050 Lear, Gtd. Bonds 7.88 3/15/18 1,760,000 1,773,200 Lear, Gtd. Notes 8.13 3/15/20 1,575,000 1,586,812 Motors Liquidation, Sr. Unscd. Notes 8.38 7/15/33 7,605,000 a,b 2,471,625 Navistar International, Gtd. Notes 8.25 11/1/21 4,595,000 4,686,900 TRW Automotive, Gtd. Notes 7.25 3/15/17 4,240,000 c 4,134,000 United Components, Gtd. Notes 9.38 6/15/13 1,268,000 1,280,680 Cable/Satellite TV—3.5% CCH II Capital, Gtd. Notes 13.50 11/30/16 18,924,136 22,141,239 Cequel Communications Holdings I, Sr. Unscd. Notes 8.63 11/15/17 2,375,000 c 2,377,969 Dish DBS, Gtd. Notes 7.88 9/1/19 1,675,000 1,750,375 Insight Communications, Sr. Notes 9.38 7/15/18 4,100,000 c 4,100,000 Capital Goods—1.4% Leucadia National, Sr. Unscd. Notes 7.13 3/15/17 2,545,000 2,468,650 RBS Global and Rexnord, Gtd. Notes 8.50 5/1/18 5,395,000 c 5,260,125 The Fund 7 STATEMENT OF INVESTMENTS (Unaudited) (continued) Coupon Maturity Principal Bonds and Notes (continued) Rate (%) Date Amount ($) Value ($) Capital Goods (continued) Wireco WorldGroup, Sr. Unscd. Notes 9.50 5/15/17 4,415,000 c 4,326,700 Chemicals—1.0% Huntsman International, Gtd. Notes 7.88 11/15/14 915,000 887,550 Huntsman International, Gtd. Notes 8.63 3/15/20 2,990,000 c 2,773,225 Ineos Finance, Sr. Scd. Notes 9.00 5/15/15 1,600,000 c 1,604,000 Invista, Sr. Unscd. Notes 9.25 5/1/12 1,945,000 c 1,979,038 LBI Escrow, Sr. Scd. Notes 8.00 11/1/17 1,420,000 c 1,466,150 Consumer Products—1.0% Reddy Ice, Sr. Scd. Notes 11.25 3/15/15 8,215,000 a,c Containers—3.1% AEP Industries, Sr. Unscd. Notes 7.88 3/15/13 8,321,000 8,237,790 BWAY Holding, Gtd. Notes 10.00 6/15/18 2,380,000 c 2,493,050 Plastipak Holdings, Sr. Notes 10.63 8/15/19 2,435,000 c 2,715,025 Reynolds Group Issuer, Sr. Notes 8.50 5/15/18 9,445,000 c 9,315,131 Solo Cup, Sr. Scd. Notes 10.50 11/1/13 3,545,000 3,682,369 Energy—4.0% American Petroleum Tankers, Sr. Scd. Notes 10.25 5/1/15 2,395,000 c 2,412,962 Aquilex Holdings, Sr. Notes 11.13 12/15/16 4,245,000 c 4,266,225 Chesapeake Energy, Gtd. Notes 9.50 2/15/15 6,135,000 6,809,850 Cie Generale de Geophysique-Veritas, Gtd. Notes 9.50 5/15/16 2,635,000 2,687,700 8 Coupon Maturity Principal Bonds and Notes (continued) Rate (%) Date Amount ($) Value ($) Energy (continued) Ferrellgas Partners, Sr. Unscd. Notes 8.63 6/15/20 3,550,000 3,567,750 Ferrellgas Partners, Sr. Unscd. Notes 9.13 10/1/17 3,025,000 c 3,168,687 McJunkin Red Man, Sr. Scd. Notes 9.50 12/15/16 7,905,000 a,c 7,707,375 Petrohawk Energy, Gtd. Notes 10.50 8/1/14 2,180,000 2,354,400 Sabine Pass LNG, Sr. Scd. Notes 7.50 11/30/16 2,385,000 1,997,437 Finance—9.0% Ally Financial, Gtd. Notes 8.00 11/1/31 16,010,000 14,849,275 Ally Financial, Gtd. Notes 8.30 2/12/15 1,955,000 c 1,984,325 BAC Capital Trust XIV, Gtd. Notes 5.63 9/29/49 11,750,000 d 8,019,375 Citigroup Capital XXI, Gtd. Bonds 8.30 12/21/77 11,891,000 d 11,640,552 Developers Diversified Realty, Sr. Unscd. Notes 9.63 3/15/16 3,425,000 3,720,115 HUB International Holdings, Sr. Sub. Notes 10.25 6/15/15 10,376,000 c 9,571,860 Icahn Enterprises Finance, Gtd. Notes 8.00 1/15/18 9,350,000 a,c 9,116,250 International Lease Finance, Sr. Unscd. Notes 8.63 9/15/15 9,421,000 c 8,949,950 iPayment, Gtd. Notes 9.75 5/15/14 6,010,000 5,499,150 USI Holdings, Sr. Sub. Notes 9.75 5/15/15 4,475,000 c 4,128,187 Food, Beverage & Tobacco—1.6% Bolthouse Farms, Bank Notes 9.50 7/25/16 6,300,000 e 6,307,875 Dean Foods, Gtd. Notes 7.00 6/1/16 4,844,000 4,553,360 The Fund 9 STATEMENT OF INVESTMENTS (Unaudited) (continued) Coupon Maturity Principal Bonds and Notes (continued) Rate (%) Date Amount ($) Value ($) Food, Beverage & Tobacco (continued) Michael Foods, Sr. Notes 9.75 7/15/18 2,665,000 c 2,751,612 Gaming—6.4% Ameristar Casinos, Gtd. Notes 9.25 6/1/14 3,395,000 3,573,237 Boyd Gaming, Sr. Sub. Notes 6.75 4/15/14 1,425,000 a 1,254,000 Boyd Gaming, Sr. Sub. Notes 7.13 2/1/16 4,385,000 a 3,628,588 Harrahs Operating Co., Sr. Scd. Notes 10.00 12/15/18 2,080,000 a 1,716,000 Isle of Capri Casinos, Gtd. Notes 7.00 3/1/14 5,517,000 a 4,992,885 MGM Mirage, Gtd. Notes 4.25 4/15/15 2,300,000 c 1,831,375 MGM Mirage, Gtd. Notes 6.75 4/1/13 3,115,000 2,795,712 MGM Mirage, Gtd. Notes 7.50 6/1/16 10,590,000 a 8,392,575 MGM Mirage, Sr. Unscd. Notes 11.38 3/1/18 17,585,000 a,c 16,617,825 Penn National Gaming, Sr. Sub. Notes 8.75 8/15/19 4,115,000 4,248,738 Pokagon Gaming Authority, Sr. Notes 10.38 6/15/14 4,288,000 c 4,459,520 Shingle Springs Tribal Gaming Authority, Sr. Notes 9.38 6/15/15 2,795,000 c 2,229,012 Health Care—6.5% American Renal Holdings, Sr. Scd. Notes 8.38 5/15/18 530,000 c 527,350 Bausch & Lomb, Sr. Unscd. Notes 9.88 11/1/15 8,445,000 8,719,463 Biomet, Gtd. Notes 11.63 10/15/17 30,930,000 33,636,375 Capella Healthcare, Gtd. Notes 9.25 7/1/17 2,020,000 c 2,045,250 10 Coupon Maturity Principal Bonds and Notes (continued) Rate (%) Date Amount ($) Value ($) Health Care (continued) Inverness Medical Innovations, Sr. Unscd. Notes 7.88 2/1/16 3,240,000 3,183,300 Inverness Medical Innovations, Gtd. Notes 9.00 5/15/16 5,940,000 5,969,700 Radiation Therapy Services, Sr. Sub. Notes 9.88 4/15/17 2,210,000 c 2,132,650 Media—12.0% Allbritton Communications, Sr. Unscd. Notes 8.00 5/15/18 5,830,000 c 5,800,850 Clear Channel Communications, Sr. Unscd. Notes 4.90 5/15/15 8,375,000 4,396,875 Clear Channel Communications, Sr. Unscd. Notes 5.00 3/15/12 4,726,000 a 4,052,545 Clear Channel Communications, Sr. Unscd. Notes 5.50 9/15/14 20,639,000 a 11,454,645 Clear Channel Communications, Sr. Unscd. Notes 5.50 12/15/16 9,188,000 4,456,180 Clear Channel Communications, Sr. Unscd. Notes 5.75 1/15/13 11,368,000 a 8,753,360 Clear Channel Communications, Sr. Unscd. Debs 6.88 6/15/18 3,880,000 1,901,200 Clear Channel Communications, Gtd. Notes 10.75 8/1/16 3,330,000 a 2,355,975 Gray Television, Sr. Scd. Notes 10.50 6/29/15 12,900,000 a,c 12,577,500 LBI Media, Sr. Sub. Notes 8.50 8/1/17 9,807,000 c 8,458,538 LIN Television, Gtd. Notes, Ser. B 6.50 5/15/13 4,635,000 4,472,775 Nexstar Broadcasting, Gtd. Notes 0.50 1/15/14 722,089 c 646,270 Nexstar Broadcasting, Gtd. Notes 7.00 1/15/14 201,000 179,895 Nexstar Finance Holdings, Sr. Discount Notes 11.38 4/1/13 1,348,032 d 1,317,702 Nexstar/Mission Broadcasting, Sr. Scd. Notes 8.88 4/15/17 780,000 c 787,800 The Fund 11 STATEMENT OF INVESTMENTS (Unaudited) (continued) Coupon Maturity Principal Bonds and Notes (continued) Rate (%) Date Amount ($) Value ($) Media (continued) Quebecor Media, Sr. Unscd. Notes 7.75 3/15/16 3,275,000 3,225,875 Quebecor Media, Sr. Unscd. Notes 7.75 3/15/16 8,325,000 8,200,125 Salem Communications, Sr. Scd. Notes 9.63 12/15/16 4,713,000 a 4,877,955 Sinclair Broadcast Group, Gtd. Notes 8.00 3/15/12 11,929,000 a 11,675,509 Sinclair Television Group, Sr. Scd. Notes 9.25 11/1/17 3,885,000 c 3,943,275 Metals Mining—2.6% Drummond, Sr. Unscd. Notes 7.38 2/15/16 4,705,000 4,446,225 Murray Energy, Gtd. Notes 10.25 10/15/15 3,750,000 c 3,750,000 Severstal Columbus, Sr. Scd. Notes 10.25 2/15/18 13,700,000 c 14,213,750 Paper—3.0% Abitibi-Consolidated of Canada, Sr. Scd. Notes 13.75 4/1/11 2,182,582 b,c 2,318,994 Newpage, Sr. Scd. Notes 11.38 12/31/14 17,034,000 a 15,543,525 Smurfit Kappa Funding, Sr. Sub. Notes 7.75 4/1/15 2,115,000 2,099,138 Verso Paper Holdings, Gtd. Notes, Ser. B 11.38 8/1/16 4,500,000 a 3,858,750 Verso Paper Holdings, Sr. Scd. Notes 11.50 7/1/14 1,875,000 a 2,029,688 Printing & Publishing—1.0% Cenveo, Sr. Scd. Notes 8.88 2/1/18 8,120,000 a 7,835,800 Cenveo, Gtd. Notes 10.50 8/15/16 650,000 a,c 664,625 12 Coupon Maturity Principal Bonds and Notes (continued) Rate (%) Date Amount ($) Value ($) Retail—2.7% Hillman Group, Gtd. Notes 10.88 6/1/18 3,960,000 c 4,098,600 Neiman Marcus Group, Gtd. Notes 10.38 10/15/15 12,881,000 a 13,170,822 QVC, Sr. Scd. Notes 7.13 4/15/17 1,900,000 c 1,871,500 QVC, Sr. Scd. Notes 7.50 10/1/19 3,160,000 c 3,120,500 Susser Holdings and Finance, Gtd. Notes 8.50 5/15/16 1,050,000 c 1,055,250 Retail-Food & Drug—2.4% Rite Aid, Gtd. Notes 9.50 6/15/17 8,625,000 a 6,878,438 Rite Aid, Sr. Scd. Notes 10.38 7/15/16 8,680,000 a 8,799,350 Stater Brothers Holdings, Gtd. Notes 7.75 4/15/15 4,695,000 4,706,737 Services—3.5% Aramark, Gtd. Notes 8.50 2/1/15 3,250,000 3,298,750 Dyncorp International, Sr. Unscd. Notes 10.38 7/1/17 3,110,000 c 3,102,225 Garda World Security, Sr. Unscd. Notes 9.75 3/15/17 4,485,000 c 4,574,700 General Maritime, Gtd. Notes 12.00 11/15/17 8,200,000 c 8,405,000 Marquette Transportation Finance, Sr. Scd. Notes 10.88 1/15/17 6,565,000 c 6,466,525 Navios Maritime Holdings, Sr. Scd. Notes 8.88 11/1/17 2,005,000 a,c 2,030,063 Ultrapetrol Bahamas, First Mortgage Notes 9.00 11/24/14 1,817,000 1,762,490 WCA Waste, Gtd. Notes 9.25 6/15/14 1,075,000 1,079,031 The Fund 13 STATEMENT OF INVESTMENTS (Unaudited) (continued) Coupon Maturity Principal Bonds and Notes (continued) Rate (%) Date Amount ($) Value ($) Technology—9.2% Alion Science and Technology, Sr. Scd. Notes 12.00 11/1/14 1,393,015 c 1,399,980 Ceridian, Gtd. Notes 11.25 11/15/15 19,028,000 d 17,267,910 Ceridian, Gtd. Notes 12.25 11/15/15 16,461,490 a 14,897,648 First Data, Gtd. Notes 9.88 9/24/15 2,565,000 1,936,575 First Data, Gtd. Notes 9.88 9/24/15 4,550,000 a 3,480,750 Sorenson Communications, Sr. Scd. Notes 10.50 2/1/15 21,725,000 a,c 13,795,375 Sungard Data Systems, Gtd. Notes 10.25 8/15/15 22,167,000 a 22,998,263 Sungard Data Systems, Gtd. Notes 10.63 5/15/15 3,460,000 3,715,175 Telecommunications—13.8% Digicel Group, Sr. Unscd. Notes 8.88 1/15/15 22,285,000 c 21,895,013 Digicel Group, Sr. Unscd. Notes 9.13 1/15/15 3,542,457 c 3,493,748 Digicel Group, Sr. Notes 10.50 4/15/18 1,408,000 a,c 1,459,040 Digicel, Sr. Unscd. Notes 12.00 4/1/14 1,700,000 c 1,908,250 Intelsat Bermuda, Gtd. Notes 11.25 2/4/17 26,575,000 d 27,040,062 Intelsat Jackson Holdings, Gtd. Notes 11.25 6/15/16 12,735,000 13,626,450 Telesat Canada, Sr. Unscd. Notes 11.00 11/1/15 6,790,000 7,367,150 Telesat Canada, Sr. Sub. Notes 12.50 11/1/17 2,415,000 2,716,875 Wind Acquisition Finance, Scd. Notes 11.75 7/15/17 8,830,000 c 9,094,900 Wind Acquisition Finance, Scd. Bonds 12.00 12/1/15 1,100,000 c,d 1,144,000 14 Coupon Maturity Principal Bonds and Notes (continued) Rate (%) Date Amount ($) Value ($) Telecommunications (continued) Wind Acquisition Holdings, Sr. Scd. Notes 12.25 7/15/17 32,115,000 a,c 29,385,225 Utilities—3.8% AES, Sr. Unscd. Notes 8.00 10/15/17 5,325,000 5,404,875 AES, Sr. Unscd. Notes 9.75 4/15/16 3,765,000 c 4,066,200 Dynegy Holdings, Sr. Unscd. Notes 8.38 5/1/16 5,235,000 a 4,168,369 Energy Future Holdings, Gtd. Notes 10.88 11/1/17 4,725,000 a,d 3,520,125 North American Energy Alliance, Sr. Scd. Notes 10.88 6/1/16 2,935,000 c 3,037,725 NRG Energy, Gtd. Notes 7.38 1/15/17 8,465,000 8,401,513 RRI Energy, Sr. Unscd. Notes 7.63 6/15/14 4,165,000 a 4,123,350 Total Bonds and Notes (cost $819,174,854) Preferred Stocks—.1% Shares Value ($) Media Spanish Broadcasting System, Ser. B, Cum. $26.875 (cost $1,598,517) 1,523 f Common Stocks—.3% Cable/Satellite TV—.2% Charter Communications, Cl. A 55,002 g Media—.1% LIN TV, Cl. A 180,000 g Total Common Stocks (cost $1,860,749) The Fund 15 STATEMENT OF INVESTMENTS (Unaudited) (continued) Other Investment—2.1% Shares Value ($) Registered Investment Company; Dreyfus Institutional Preferred Plus Money Market Fund (cost $18,203,000) 18,203,000 h Investment of Cash Collateral for Securities Loaned—16.1% Registered Investment Company; Dreyfus Institutional Cash Advantage Fund (cost $138,868,515) 138,868,515 h Total Investments (cost $979,705,635) 114.6% Liabilities, Less Cash and Receivables (14.6%) Net Assets 100.0% a Security, or portion thereof, on loan. At June 30, 2010, the total market value of the fund’s securities on loan is $131,403,757 and the total market value of the collateral held by the fund is $139,066,113, consisting of cash collateral of $138,868,515 and U.S. Government and agencies securities valued at $197,598. b Non-income producing—security in default. c Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2010, these securities had a total market value of $313,512,774 or 36.3% of net assets. d Variable rate security—interest rate subject to periodic change. e The valuation of this security has been determined in good faith by management under the direction of the Board of Directors. At June 30, 2010, the value of this security amounted to $ 6,307,875 or 0.7% of net assets. f Illiquid security.The valuation of this security has been determined in good faith by management under the direction of the Board of Directors.At June 30, 2010, the value of this security amounted to $ 1,065,752 or 0.1% of net assets g Non-income producing security. h Investment in affiliated money market mutual fund. Portfolio Summary (Unaudited) † Value (%) Value (%) Corporate Bonds 96.0 Preferred Stocks .1 Money Market Investments 18.2 Common Stocks .3 † Based on net assets. See notes to financial statements. 16 STATEMENT OF ASSETS AND LIABILITIES June 30, 2010 (Unaudited) Cost Value Assets ($): Investments in securities—See Statement of Investments (including securities on loan, valued at $131,403,757)—Note 1(c): Unaffiliated issuers 822,634,120 833,142,682 Affiliated issuers 157,071,515 157,071,515 Cash 164,108 Cash denominated in foreign currencies 49 43 Dividends and interest receivable 20,986,721 Receivable for shares of Beneficial Interest subscribed 886,716 Receivable for investment securities sold 461,680 Liabilities ($): Due to The Dreyfus Corporation and affiliates—Note 3(b) 670,698 Liability for securities on loan—Note 1(c) 138,868,515 Payable for investment securities purchased 7,211,068 Payable for shares of Beneficial Interest redeemed 2,189,089 Net Assets ($) Composition of Net Assets ($): Paid-in capital 1,148,572,335 Accumulated distributions in excess of investment income—net (2,391,732) Accumulated net realized gain (loss) on investments (292,915,064) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions 10,508,556 Net Assets ($) Net Asset Value Per Share Class A Class B Class C Class I Net Assets ($) 323,195,607 13,574,191 118,924,478 408,079,819 Shares Outstanding 51,644,492 2,168,248 18,997,253 65,159,594 Net Asset Value Per Share ($) See notes to financial statements. The Fund 17 STATEMENT OF OPERATIONS Six Months Ended June 30, 2010 (Unaudited) Investment Income ($): Income: Interest 46,171,105 Income from securities lending—Note 1(c) 339,634 Dividends: Unaffiliated issuers 40,917 Affiliated issuers 9,358 Total Income Expenses: Management fee—Note 3(a) 3,137,119 Distribution and service fees—Note 3(b) 1,110,875 Trustees’ fees—Note 3(a) 34,994 Loan commitment fees—Note 2 12,186 Interest expense—Note 2 153 Total Expenses Less—Trustees’ fees reimbursed by the Manager—Note 3(a) (34,994) Net Expenses Investment Income—Net Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): Net realized gain (loss) on investments and foreign currency transactions 20,519,959 Net realized gain (loss) on forward foreign currency exchange contracts 31,046 Net Realized Gain (Loss) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (48,561,893) Net unrealized appreciation (depreciation) on forward foreign currency exchange contracts (2,968) Net Unrealized Appreciation (Depreciation) Net Realized and Unrealized Gain (Loss) on Investments Net Increase in Net Assets Resulting from Operations See notes to financial statements. 18 STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2010 Year Ended (Unaudited) December 31, 2009 Operations ($): Investment income—net 42,300,681 66,290,493 Net realized gain (loss) on investments 20,551,005 (6,401,619) Net unrealized appreciation (depreciation) on investments (48,564,861) 181,196,172 Net Increase (Decrease) in Net Assets Resulting from Operations Dividends to Shareholders from ($): Investment income—net: Class A Shares (17,824,154) (29,894,758) Class B Shares (852,786) (2,849,188) Class C Shares (5,856,163) (8,775,809) Class I Shares (21,580,635) (27,846,038) Total Dividends Beneficial Interest Transactions ($): Net proceeds from shares sold: Class A Shares 53,580,312 286,678,813 Class B Shares 239,602 1,476,907 Class C Shares 8,944,905 44,838,158 Class I Shares 89,129,488 232,223,371 Net assets received in connection with reorganization—Note 1 — 129,672,713 Dividends reinvested: Class A Shares 14,451,212 22,562,646 Class B Shares 628,070 1,872,480 Class C Shares 3,596,200 5,010,735 Class I Shares 6,677,725 6,001,284 Cost of shares redeemed: Class A Shares (93,793,847) (198,188,481) Class B Shares (9,217,249) (31,665,643) Class C Shares (14,973,961) (19,316,179) Class I Shares (72,910,209) (98,684,961) Increase (Decrease) in Net Assets from Beneficial Interest Transactions Total Increase (Decrease) in Net Assets Net Assets ($): Beginning of Period 909,248,760 355,047,664 End of Period Undistributed (distributions in excess of) investment income—net (2,391,732) 1,421,325 The Fund 19 STATEMENT OF CHANGES IN NET ASSETS (continued) Six Months Ended June 30, 2010 Year Ended (Unaudited) December 31, 2009 Capital Share Transactions: Class A a Shares sold 8,309,633 51,207,569 Shares issued in connection with reorganization—Note 1 — 10,690,947 Shares issued for dividends reinvested 2,251,800 3,780,546 Shares redeemed (14,600,823) (33,630,114) Net Increase (Decrease) in Shares Outstanding Class B a Shares sold 37,160 257,820 Shares issued in connection with reorganization—Note 1 — 4,883,654 Shares issued for dividends reinvested 97,770 320,812 Shares redeemed (1,426,420) (5,472,399) Net Increase (Decrease) in Shares Outstanding Class C Shares sold 1,384,553 7,842,855 Shares issued in connection with reorganization—Note 1 — 7,195,044 Shares issued for dividends reinvested 560,613 837,067 Shares redeemed (2,339,028) (3,270,669) Net Increase (Decrease) in Shares Outstanding Class I Shares sold 13,813,375 39,340,054 Shares issued in connection with reorganization—Note 1 — 1,748,575 Shares issued for dividends reinvested 1,041,599 998,987 Shares redeemed (11,386,824) (16,641,631) Net Increase (Decrease) in Shares Outstanding a During the period ended June 30, 2010, 483,540 Class B shares representing $3,129,888, were automatically converted to 483,688 Class A shares and during the period ended December 31, 2009, 2,061,607 Class B shares representing $12,009,537 were automatically converted to 2,063,045 Class A shares. See notes to financial statements. 20 FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements. Six Months Ended June 30, 2010 Year Ended December 31, Class A Shares (Unaudited) 2009 2008 2007 2006 2005 Per Share Data ($): Net asset value, beginning of period 6.48 5.06 6.92 7.33 7.24 7.65 Investment Operations: Investment income—net a .30 .54 .50 .49 .49 .51 Net realized and unrealized gain (loss) on investments (.19) 1.43 (1.82) (.37) .14 (.36) Total from Investment Operations .11 1.97 (1.32) .12 .63 .15 Distributions: Dividends from investment income—net (.33) (.55) (.54) (.53) (.54) (.56) Net asset value, end of period 6.26 6.48 5.06 6.92 7.33 7.24 Total Return (%) b 1.66 c 40.43 (20.17) 2.03 8.66 2.22 Ratios/Supplemental Data (%): Ratio of total expenses to average net assets .96 d .96 .96 .96 .95 .95 Ratio of net expenses to average net assets .95 d .95 .95 .95 .95 .95 Ratio of net investment income to average net assets 9.41 d 8.86 7.89 6.78 6.76 6.93 Portfolio Turnover Rate 39.19 c 77.94 48.85 50.65 29.98 40.57 Net Assets, end of period ($ x 1,000) 323,196 360,921 119,560 169,453 202,098 236,421 a Based on average shares outstanding at each month end. b Exclusive of sales charge. c Not annualized. d Annualized. See notes to financial statements. The Fund 21 FINANCIAL HIGHLIGHTS (continued) Six Months Ended June 30, 2010 Year Ended December 31, Class B Shares (Unaudited) 2009 2008 2007 2006 2005 Per Share Data ($): Net asset value, beginning of period 6.48 5.06 6.93 7.34 7.24 7.65 Investment Operations: Investment income—net a .27 .49 .46 .45 .45 .46 Net realized and unrealized gain (loss) on investments (.18) 1.45 (1.82) (.37) .16 (.35) Total from Investment Operations .09 1.94 (1.36) .08 .61 .11 Distributions: Dividends from investment income—net (.31) (.52) (.51) (.49) (.51) (.52) Net asset value, end of period 6.26 6.48 5.06 6.93 7.34 7.24 Total Return (%) b 1.41 c 39.78 (20.69) 1.53 8.12 1.73 Ratios/Supplemental Data (%): Ratio of total expenses to average net assets 1.46 d 1.46 1.46 1.46 1.45 1.45 Ratio of net expenses to average net assets 1.45 d 1.45 1.45 1.45 1.45 1.45 Ratio of net investment income to average net assets 8.61 d 8.35 7.31 6.24 6.25 6.36 Portfolio Turnover Rate 39.19 c 77.94 48.85 50.65 29.98 40.57 Net Assets, end of period ($ x 1,000) 13,574 22,434 17,568 39,892 67,834 96,334 a Based on average shares outstanding at each month end. b Exclusive of sales charge. c Not annualized. d Annualized. See notes to financial statements. 22 Six Months Ended June 30, 2010 Year Ended December 31, Class C Shares (Unaudited) 2009 2008 2007 2006 2005 Per Share Data ($): Net asset value, beginning of period 6.48 5.06 6.93 7.34 7.24 7.65 Investment Operations: Investment income—net a .28 .50 .45 .43 .43 .45 Net realized and unrealized gain (loss) on investments (.20) 1.42 (1.83) (.36) .16 (.36) Total from Investment Operations .08 1.92 (1.38) .07 .59 .09 Distributions: Dividends from investment income—net (.30) (.50) (.49) (.48) (.49) (.50) Net asset value, end of period 6.26 6.48 5.06 6.93 7.34 7.24 Total Return (%) b 1.28 c 39.41 (20.89) 1.28 7.85 1.48 Ratios/Supplemental Data (%): Ratio of total expenses to average net assets 1.71 d 1.71 1.71 1.71 1.70 1.70 Ratio of net expenses to average net assets 1.70 d 1.70 1.70 1.70 1.70 1.70 Ratio of net investment income to average net assets 8.70 d 8.15 7.12 6.02 6.01 6.14 Portfolio Turnover Rate 39.19 c 77.94 48.85 50.65 29.98 40.57 Net Assets, end of period ($ x 1,000) 118,924 125,724 34,374 53,294 65,728 74,770 a Based on average shares outstanding at each month end. b Exclusive of sales charge. c Not annualized. d Annualized. See notes to financial statements. The Fund 23 FINANCIAL HIGHLIGHTS (continued) Six Months Ended June 30, 2010 Year Ended December 31, Class I Shares (Unaudited) 2009 2008 2007 a 2006 2005 Per Share Data ($): Net asset value, beginning of period 6.49 5.06 6.92 7.33 7.24 7.65 Investment Operations: Investment income—net b .31 .54 .51 .52 .51 .53 Net realized and unrealized gain (loss) on investments (.20) 1.45 (1.82) (.38) .14 (.36) Total from Investment Operations .11 1.99 (1.31) .14 .65 .17 Distributions: Dividends from investment income—net (.34) (.56) (.55) (.55) (.56) (.58) Net asset value, end of period 6.26 6.49 5.06 6.92 7.33 7.24 Total Return (%) 1.63 c 40.99 (20.06) 2.29 8.92 2.34 Ratios/Supplemental Data (%): Ratio of total expenses to average net assets .71 d .71 .72 .71 .70 .70 Ratio of net expenses to average net assets .70 d .70 .69 .70 .70 .70 Ratio of net investment income to average net assets 9.72 d 9.20 9.43 7.01 7.01 7.18 Portfolio Turnover Rate 39.19 c 77.94 48.85 50.65 29.98 40.57 Net Assets, end of period ($ x 1,000) 408,080 400,170 183,546 17,368 18,059 18,595 a Effective June 1, 2007, Class R shares were redesignated as Class I shares. b Based on average shares outstanding at each month end. c Not annualized. d Annualized. See notes to financial statements. 24 NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1—Significant Accounting Policies: Dreyfus High Yield Fund (the “fund”) is a separate diversified series of The Dreyfus/Laurel FundsTrust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund.The fund’s investment objective seeks to maximize total return, consisting of capital appreciation and current income.The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. As of the close of business on January 8, 2009, pursuant to an Agreement and Plan of Reorganization previously approved by the fund’s Board of Trustees,all of the assets,subject to the liabilities,of Dreyfus High Income Fund (“High Income”) were transferred to the fund in exchange for corresponding class of shares of Beneficial Interest of the fund of equal value. The purpose of the transaction was to combine two funds with comparable investment objectives and strategies. Shareholders of Class A, Class B,Class C and Class I shares of High Income received Class A,Class B, Class C and Class I shares of the fund, respectively, in each case in an amount equal to the aggregate net asset value of their investment in High Income at the time of the exchange.The exchange ratio for Class A,Class B, Class C and Class I shares are 1.96, 1.96, 1.95 and 1.96, respectively. The net asset value of the fund’s shares on the close of business January 8, 2009, after the reorganization was $5.29 for Class A, $5.29 for Class B, $5.29 for Class C and $5.29 for Class I shares, and a total of 10,690,947 Class A shares, 4,883,654 Class B shares, 7,195,044 Class C shares and 1,748,575 Class I shares were issued to shareholders of High Income in the exchange. The exchange was a tax-free event to the High Income shareholders. For financial reporting purposes, assets received and shares issued by the fund were recorded at fair value; however, the cost basis of investments received from High Income was carried forward to align ongoing reporting of the fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes. The Fund 25 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) The net assets and net unrealized (depreciation) immediately before the acquisition were as follows: Unrealized (Depreciation) ($) Net Assets ($) Dreyfus High Income Fund— Target Fund (23,749,040) 129,672,713 Dreyfus High Yield Fund— Acquiring Fund (81,332,832) 382,765,045 Total MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of shares of Beneficial Interest in each of the following classes of shares: Class A, Class B, Class C and Class I. Class A, Class B and Class C shares are sold primarily to retail investors through financial intermediaries and bear a distribution fee and/or shareholder services fee. Class A shares are sold with a front-end sales charge, while Class B and Class C shares are subject to a contingent deferred sales charge (“CDSC”). Class B shares automatically convert to Class A shares after six years.The fund does not offer Class B shares, except in connection with dividend reinvestment and permitted exchanges of Class B shares. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus), acting on behalf of customers having a qualified trust or investment account or relationship at such institution, and bear no distribution or services fees. Class I shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class and the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis. 26 The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities.Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities excluding short-term investments (other than U.S.Treasury Bills), and forward foreign currency exchange contracts (“forward contracts”) are valued each business day by an independent pricing service (the “Service”) approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are valued as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Restricted securities, as well as securities or other assets for which recent market quotations are not readily available and are not valued by a pricing service approved by the Board of Trustees, or are determined by the fund not to reflect accurately fair value, are valued at fair value as determined in good faith under the direction of the Board of Trustees. The factors that may be considered when fair valuing a security include fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold and public trading in similar securities of the issuer or comparable issuers. Short-term investments, excluding U.S.Treasury Bills, are car- The Fund 27 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) ried at amortized cost, which approximates value. Registered investment companies that are not traded on an exchange are valued at their net asset value. Investments in equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward contracts are valued at the forward rate. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods. Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below: Level 1 —unadjusted quoted prices in active markets for identical investments. Level 2 —other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.). Level 3 —significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 28 The following is a summary of the inputs used as of June 30, 2010 in valuing the fund’s investments: Level 2—Other Level 3— Level 1— Significant Significant Unadjusted Observable Unobservable Quoted Prices Inputs Inputs Total Assets ($) Investments in Securities: Corporate Bonds † — 829,161,559 — Equity Securities— Domestic † 2,915,371 — 1,065,752 Mutual Funds 157,071,515 — — † See Statement of Investments for industry classification. The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value: Investments in Preferred Stock ($) Balance as of 12/31/2009 1,523 Realized gain (loss) — Change in unrealized appreciation (depreciation) 1,064,229 Net purchases (sales) — Transfers in and/or out of Level 3 — Balance as of 6/30/2010 1,065,752 In January 2010, FASB issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about FairValue Measurements”. The portions of ASU No. 2010-06 which require reporting entities to prepare new disclosures surrounding amounts and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements as well as inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3 have been adopted by the fund.The remaining portion of ASU No. 2010-06 requires reporting entities to make new disclosures about information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of activity in Level 3 The Fund 29 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) fair value measurements.These new and revised disclosures are required to be implemented for fiscal years beginning after December 15, 2010. Management is currently evaluating the impact that the adoption of this remaining portion of ASU No. 2010-06 may have on the fund’s financial statement disclosures. (b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on investments are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis. Pursuant to a securities lending agreement withThe Bank of NewYork Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral 30 is either in the form of cash, which can be invested in certain money market mutual funds managed by the Manager, U.S. Government and Agency securities or letters of credit.The fund is entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction.Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner. During the period ended June 30, 2010,The Bank of New York Mellon earned $182,880 from lending portfolio securities, pursuant to the securities lending agreement. (d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” in the Act. The fund may invest in shares of certain affiliated investment companies also advised or managed by Dreyfus. Investments in affiliated investment companies for the period ended June 30, 2010 were as follows: (e) Concentration of Risk: The fund invests primarily in debt securities. Failure of an issuer of the debt securities to make timely interest or principal payments, or a decline or the perception of a decline in the credit quality of a debt security, can cause the debt security’s price to fall, potentially lowering the fund’s share price. High yield (“junk”) The Fund 31 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) bonds involve greater credit risk, including the risk of default, than investment grade bonds, and are considered predominantly speculative with respect to the issuer’s continuing ability to make principal and interest payments. In addition, the value of debt securities may decline due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment. They may also decline because of factors that affect a particular industry. (f) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. (g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. As of and during the period ended June 30, 2010, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties. Each of the tax years in the three-year period ended December 31, 2009 remains subject to examination by the Internal Revenue Service and state taxing authorities. 32 The fund has an unused capital loss carryover of $309,880,382 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2009. If not applied, $138,776,715 of the carryover expires in fiscal 2010, $72,493,638 expires in fiscal 2011, $1,917,623 expires in fiscal 2012, $11,766,163 expires in fiscal 2013, $2,406,483 expires in fiscal 2014, $16,497,195 expires in fiscal 2015, $42,229,566 expires in fiscal 2016 and $23,792,999 expires in fiscal 2017. Based on certain provisions in the Code, various limitations regarding the future utilization of these carryforwards, brought forward as a result of the fund’s merger with the following funds may apply: HighYield Total Fund, BNY Hamilton High Yield Fund and Dreyfus High Income Fund. It is possible that the fund will not be able to utilize most of its capital loss carryover prior to its expiration date. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2009 was as follows: ordinary income $69,365,793. The tax character of current year distributions will be determined at the end of the current fiscal year. NOTE 2—Bank Lines of Credit: The fund participates with other Dreyfus-managed funds in a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. The average amount of borrowings outstanding under the Facilities during the period ended June 30, 2010, was approximately $22,200 with a related weighted average annualized interest rate of 1.40%. The Fund 33 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) NOTE 3—Investment Management Fee and Other Transactions with Affiliates: (a) Pursuant to an investment management agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .70% of the value of the fund’s average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, shareholder service fees, fees and expenses of non-interested Trustees (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund’s allocable portion of fees and expenses of the non-interested Trustees (including counsel fees). Effective January 1, 2010, each Trustee who is not an “interested person” of the Trust (as defined in the Act) received $60,000 per annum, plus $7,000 per joint Board meeting of the Trust, The Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free Municipal Funds, Dreyfus Investment Funds and Dreyfus Funds, Inc. (collectively, the “Board Group Open-end Funds”) attended, $2,500 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $2,000 for Board meetings and separate committee meetings attended that are conducted by telephone.The Board Group Open-end Funds also reimburse each Trustee who is not an “interested person” of the Trust (as defined in the Act) for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). Effective January 1, 2010, the Chair of each of the Board’s committees, unless the Chair also serves as Chair of the Board, receives $1,350 per applicable committee meeting. In the event that there is an in-person joint committee meeting or a joint telephone 34 meeting of the Board Group Open-end Funds and Dreyfus HighYield Strategies Fund, the $2,500 or $2,000 fee, as applicable, is allocated between the Board Group Open-end Funds and Dreyfus High Yield Strategies Fund. The Trust’s portion of these fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Trust directly to the non-interested Trustees, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Trustees. The Manager has contractually agreed, until September 30, 2010, to waive receipt of its fees and/or assume the expenses of Class I shares of the fund so that the annual operating expenses (excluding taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed .81% of the value of the fund’s average daily net assets. No expense reimbursement was required pursuant to the agreement for the period ended June 30, 2010. During the period ended June 30, 2010, the Distributor retained $15,460 from commissions earned on sales of the fund’s Class A shares and $12,387 and $15,344 from CDSCs on redemptions of the fund’s Class B and Class C shares, respectively. (b) Under separate Distribution Plans (the “Plans”) adopted pursuant to Rule 12b-1 under the Act, Class A shares pay annually up to .25% of the value of the average daily net assets to compensate the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of Class A shares. Class B and Class C shares pay the Distributor for distributing their shares at an aggregate annual rate of .50% and .75% of the value of the average daily net assets of Class B and Class C shares, respectively. Class B and Class C shares are also subject to a Service Plan adopted pursuant to Rule 12b-1 (the “Service Plan”), under which Class B and Class C shares pay the Distributor for providing certain services to the holders of their shares a fee at the annual rate of .25% of the value of the average daily net assets of Class B and Class The Fund 35 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) C shares. During the period ended June 30, 2010, Class A, Class B and Class C shares were charged $432,590, $43,280 and $460,024, respectively, pursuant to their respective Plans. During the period ended June 30, 2010, Class B and Class C shares were charged $21,640 and $153,341, respectively, pursuant to the Service Plan. Under its terms, the Plans and Service Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plans or Service Plan. The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $497,592, Rule 12b-1 distribution plan fees $145,806 and service plan fees $27,300. NOTE 4—Securities Transactions: The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities and forward contracts, during the period ended June 30, 2010, amounted to $342,005,063 and $352,281,597, respectively. The provisions of ASC Topic 815 “Derivatives and Hedging” require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. The disclosure requirements distinguish between derivatives, which are accounted for as “hedges” and those that do not qualify for hedge accounting. Because investment companies value their derivatives at fair value and recognize changes in fair value through the Statement of Operations, they do not qualify for such accounting. Accordingly, even though a fund’s investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of this disclosure. 36 Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract increases between those dates. Any realized gain or loss which occurred during the period is reflected in the Statement of Operations.The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is typically limited to the unrealized gain on each open contract. At June 30, 2010, there were no forward contracts outstanding. At June 30, 2010, accumulated net unrealized appreciation on investments was $10,508,562, consisting of $34,449,722 gross unrealized appreciation and $23,941,160 gross unrealized depreciation. At June 30, 2010, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Fund 37 INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) At a meeting of the fund’s Board of Trustees held on February 9, 2010, the Board considered the re-approval of the fund’s Investment Management Agreement (“Management Agreement”), pursuant to which the Manager provides the fund with investment advisory and administrative services. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager. Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members considered information previously provided to them in a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and representatives of the Manager confirmed that there had been no material changes in this information.The Board also discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement. The Manager’s representatives reviewed the fund’s distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each.The Manager’s representatives noted the distribution channels for the fund, as well as the diversity of distribution among the funds in the Dreyfus fund complex, and the Manager’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including those of the fund.The Manager also provided the number of shareholder accounts in the fund, as well as the fund’s asset size. The Board members also considered the Manager’s research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements.The Board members also considered the Manager’s extensive administrative, accounting and compliance infrastructure. The Board also considered the Manager’s brokerage policies and practices and the standards applied in seeking best execution. 38 Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board members reviewed the fund’s performance and comparisons to a group of retail front-end load, high current yield funds (the “Performance Group”) and to a larger universe of funds, consisting of all retail and institutional high current yield funds (the “Performance Universe”) selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons and noted that the fund’s yield performance for the past ten one-year periods ended December 31st (2000-2009) was at or above the Performance Group median (except for the one-year periods ended December 31, 2001 and 2008 when the fund’s yield performance was below the Performance Group median) and above the Performance Universe median for each period. The Board members noted that the fund’s total return performance was above the respective Performance Group and Performance Universe medians for various periods ended December 31, 2009 (except for the one- and ten-year periods ended December 31, 2009 when the fund’s total return performance was below the respective Performance Group and Performance Universe medians). The Manager also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index. The Board members also discussed the fund’s contractual and actual management fees and expense ratio and reviewed the range of management fees and expense ratios of a comparable group of funds (the “Expense Group”) and a broader group of funds (the “Expense Universe”), each selected and provided by Lipper. Noting that the fund was the only fund in the Expense Group with a “unitary fee structure”, the Board members noted that the fund’s contractual management fee was above the Expense Group median, the fund’s actual The Fund 39 INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued) management fee was above the Expense Group and Expense Universe medians and the fund’s expense ratio was below the Expense Group and Expense Universe medians. Representatives of the Manager noted that there were no other funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included in the same Lipper category as the fund. Representatives of the Manager reviewed with the Board members the fees paid by the Manager or its affiliates by other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund (the “Similar Accounts”). The Manager’s representatives explained the nature of the Similar Accounts and the differences, from the Manager’s perspective, in providing services to such Similar Accounts as compared to managing and providing services to the fund. The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the services provided, noting the fund’s “unitary fee” structure. The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund’s management fee. Analysis of Profitability and Economies of Scale. The Manager’s representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit.The Board previously had been provided with information prepared by an independent consulting firm regarding the Manager’s approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board also was informed that the methodology had also been reviewed by an independent registered public accounting firm which,like the con-sultant,found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection 40 with the management of the fund. The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund. The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund’s portfolio. It was noted that the Board members should consider the Manager’s profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services, and that a discussion of economies of scale is predicated on increasing assets and that, if a fund’s assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within the range determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager. At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund’s Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations. The Board concluded that the nature, extent and quality of the services provided by the Manager are adequate and appropriate. The Board was satisfied with the fund’s relative performance. The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative performance, expense and management fee information, costs of the services pro- vided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund. The Fund 41 INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued) The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund. The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund’s Management Agreement was in the best interests of the fund and its shareholders. 42 NOTES For More Information Telephone Call your financial representative or 1-800-554-4611 Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-645-6561. Dreyfus Core Value Fund SEMIANNUAL REPORT June 30, 2010 Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes. The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Contents THE FUND 2 A Letter from the Chairman and CEO 3 Discussion of Fund Performance 6 Understanding Your Fund’s Expenses 6 Comparing Your Fund’s Expenses With Those of Other Funds 7 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 16 Financial Highlights 21 Notes to Financial Statements 31 Information About the Review and Approval of the Fund’s Investment Management Agreement FOR MORE INFORMATION Back Cover Dreyfus Core Value Fund The Fund A LETTER FROM THE CHAIRMAN AND CEO Dear Shareholder: We are pleased to present this semiannual report for Dreyfus Core Value Fund, covering the six-month period from January 1, 2010, through June 30, 2010. After posting solid gains over the first quarter of 2010, stocks encountered renewed volatility in the second quarter, which caused most equity indices to erase their previous gains and end the reporting period lower than where they began. The second-quarter correction occurred despite positive GDP reports, as manufacturing activity improved and unemployment began to moderate in a recovery that has so far proved sustainable but milder than historical averages. Indeed, many of the headlines that have affected investors emanated from overseas markets, including the sovereign debt crisis in Europe and inflation fears in China. Despite recent headlines about the current state of the U.S. economy, we still believe that it is unlikely that we’ll encounter a “double-dip” recession. Instead, we expect current financial strains to ease and the domestic economy to expand at a moderate pace over the second half of the year. However, we currently see a number of downside risks across the global markets that could result in volatility over the short term, which is why we still believe that a long-term investment focus with an emphasis on high-quality stocks may be suitable for many investors. As always, your financial advisor can help you assess both the risks and opportunities provided by the global financial markets in this investment climate. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow. Thank you for your continued confidence and support. Jonathan R. Baum Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2010 2 DISCUSSION OF FUND PERFORMANCE For the period of January 1, 2010, through June 30, 2010, as provided by Brian Ferguson, Portfolio Manager Fund and Market Performance Overview For the six-month period ended June 30, 2010, Dreyfus Core Value Fund’s Class A shares produced a total return of –7.49%, Class B shares returned –7.81%,Class C shares returned –7.82%,Class I shares returned –7.38% and Institutional shares returned –7.45%. 1 In comparison, the fund’s benchmark, the Russell 1000Value Index (the “Index”), produced a total return of –5.12% for the same period. 2 Stocks encountered heightened volatility late in the reporting period, and a market rally sputtered when investors grew concerned regarding a number of threats to global economic growth. The fund produced lower returns than its benchmark, mainly due to shortfalls in our stock selection strategy in the consumer discretionary and financials sectors. The Fund’s Investment Approach The fund invests primarily in large-cap companies that are considered undervalued based on traditional measures, such as price-to-earnings ratios. When choosing stocks, we use a “bottom-up” stock selection approach, focusing on individual companies, rather than a “top-down” approach that forecasts market trends. We also focus on a company’s relative value, financial strength, business momentum and likely catalysts that could ignite the stock price. Global Economic Concerns Intensified The year 2010 began in the midst of an economic recovery and stock market rally as improved manufacturing activity and an apparent bottoming of residential housing prices helped boost confidence among businesses, consumers and investors. The economic recovery appeared to gain additional traction during the first quarter of the year, when employment gains seemed to indicate that stubbornly high unemployment might moderate. The Fund 3 DISCUSSION OF FUND PERFORMANCE (continued) At the same time, however, several developments seemed to threaten the economic rebound. First, Europe was roiled by a sovereign debt crisis when Greece and other nations found themselves unable to finance heavy debt burdens, requiring intervention by the International Monetary Fund and the European Union. Meanwhile, robust economic growth in China, one of the primary engines of the global economic recovery, seemed to spark local inflationary pressures when urban property values soared, and investors grew worried that remedial measures might dampen the region’s growth. Finally, in the United States, a number of mixed economic indicators related to retail sales, employment and the housing market suggested that economic headwinds might constrain already mild growth. Consequently, large-cap stocks gave back their previous gains, generally ending the reporting period lower than where they began. Positioned for a Mild Recovery The fund began the reporting period with an emphasis on market sectors and individual companies that appeared poised to thrive in the economic rebound. However, this relatively constructive investment bias led to some lagging security selections in the consumer discretionary and financials sectors. Among consumer discretionary stocks, overweighted exposure to large media companies dampened the fund’s results.We had established positions in industry leaders—such as News Corp. and Omnicom Group—in light of their attractive valuations, but these economically sensitive companies were hurt when investors began to question the rebound’s sustainability. In the financials sector, lack of exposure to real estate investment trusts (REITs) prevented the fund from participating in the industry’s relative strength. REITs had responded positively to investors’ more optimistic outlook for the commercial real estate market, a view we do not necessarily share. In addition, our preference for large, national banks over their smaller, regional counterparts contributed to the fund’s underperformance when the capital markets faltered and regulatory uncertainty intensified. In other sectors, technology giant Microsoft lost value after off-hand remarks by the company’s CEO may have been misinterpreted by investors. 4 The fund achieved more positive results in other market segments.The energy sector proved particularly beneficial to results, as we held a larger active weight in growth-oriented oil producers, such as Occidental Petroleum, over integrated oil-and-gas companies, particularly Exxon Mobil. In the telecommunications services sector, the fund benefited from our preference for AT&T over rival Verizon Communications. The market apparently agreed with us that AT&T enjoys better business prospects, stemming in part from its relationship with electronics innovator Apple. Preparing for Bouts of Volatility Although we remain optimistic about the long-term prospects of the U.S. economy and stock market, we adopted a somewhat less constructive investment posture when headlines became more negative.We are aware of the risk that depressed sentiment could cause businesses to become more cautious in their investments and capital spending, and we intend to monitor developments carefully. Nonetheless,we have continued to uncover what we believe to be attractive values among fundamentally strong companies. Indeed, we would regard any further market pullbacks as opportunities to purchase shares of such companies at more compelling prices.We recently have identified a number of opportunities in the energy sector,where supply-and-demand dynamics remain favorable.We have found fewer companies meeting our value-oriented criteria in the technology sector. July 15, 2010 Equity funds are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus. 1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the maximum initial sales charges in the case of Class A shares or the applicable contingent deferred sales charges imposed on redemptions in the case of Class B and Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. 2 SOURCE: LIPPER INC. — Reflects the reinvestment of dividends and, where applicable, capital gain distributions.The Russell 1000 Value Index is an unmanaged index which measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Investors cannot invest directly in any index. The Fund 5 UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited) As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser. Review your fund’s expenses The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Core Value Fund from January 1, 2010 to June 30, 2010. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses. Expenses and Value of a $1,000 Investment assuming actual returns for the six months ended June 30, 2010 Class A Class B Class C Class I Institutional Expenses paid per $1,000 † $5.49 $9.05 $9.05 $4.30 $5.01 Ending value (after expenses) $925.10 $921.90 $921.80 $926.20 $925.50 COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited) Using the SEC’s method to compare expenses The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period. Expenses and Value of a $1,000 Investment assuming a hypothetical 5% annualized return for the six months ended June 30, 2010 Class A Class B Class C Class I Institutional Expenses paid per $1,000 † $ 5.76 $ 9.49 $ 9.49 $ 4.51 $ 5.26 Ending value (after expenses) $1,019.09 $1,015.37 $1,015.37 $1,020.33 $1,019.59 † Expenses are equal to the fund’s annualized expense ratio of 1.15% for Class A, 1.90% for Class B, 1.90% for Class C, .90% for Class I and 1.05% for Institutional Shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 6 STATEMENT OF INVESTMENTS June 30, 2010 (Unaudited) Common Stocks—99.8% Shares Value ($) Consumer Discretionary—11.0% Best Buy 52,880 1,790,517 Carnival 117,000 3,538,080 Home Depot 108,600 3,048,402 Johnson Controls 118,640 3,187,857 Mattel 78,690 1,665,080 News, Cl. A 293,540 3,510,738 Omnicom Group 143,380 4,917,934 Staples 79,160 1,507,998 Target 48,120 2,366,060 Time Warner 238,866 6,905,616 Walt Disney 50,060 1,576,890 Whirlpool 17,090 1,500,844 Consumer Staples—8.2% Clorox 54,020 3,357,883 CVS Caremark 161,160 4,725,211 Dr. Pepper Snapple Group 68,980 2,579,162 Kraft Foods, Cl. A 92,190 2,581,320 PepsiCo 162,770 9,920,832 Philip Morris International 67,840 3,109,786 Energy—13.4% Anadarko Petroleum 26,350 950,971 Chevron 47,430 3,218,600 ConocoPhillips 137,930 6,770,984 EOG Resources 61,360 6,035,983 Exxon Mobil 57,490 3,280,954 Occidental Petroleum 199,350 15,379,853 Peabody Energy 52,930 2,071,151 Schlumberger 98,140 5,431,068 Financial—25.4% ACE 52,930 2,724,836 Aflac 35,240 1,503,691 American Express 47,980 1,904,806 The Fund 7 STATEMENT OF INVESTMENTS (Unaudited) (continued) Common Stocks (continued) Shares Value ($) Financial (continued) Ameriprise Financial 85,470 3,088,031 AON 63,740 2,366,029 Bank of America 710,826 10,214,570 Berkshire Hathaway, Cl. B 50,490 a 4,023,548 Capital One Financial 27,620 1,113,086 Citigroup 1,043,310 a 3,922,846 Goldman Sachs Group 30,390 3,989,295 JPMorgan Chase & Co. 357,260 13,079,289 Marsh & McLennan 102,760 2,317,238 MetLife 138,020 5,211,635 Morgan Stanley 150,720 3,498,211 PNC Financial Services Group 42,520 2,402,380 Prudential Financial 56,360 3,024,278 SunTrust Banks 80,070 1,865,631 Travelers 65,860 3,243,605 U.S. Bancorp 170,450 3,809,558 Wells Fargo & Co. 336,330 8,610,048 Health Care—11.5% AmerisourceBergen 63,530 2,017,077 Amgen 60,790 a 3,197,554 Bristol-Myers Squibb 103,080 2,570,815 Covidien 78,630 3,159,353 Johnson & Johnson 27,730 1,637,734 McKesson 29,060 1,951,670 Merck & Co. 215,230 7,526,593 Pfizer 614,140 8,757,636 Thermo Fisher Scientific 36,370 a 1,783,948 UnitedHealth Group 52,280 1,484,752 Warner Chilcott, Cl. A 66,504 a 1,519,616 WellPoint 29,190 a 1,428,267 Industrial—11.7% Caterpillar 27,560 1,655,529 Dover 75,100 3,138,429 Eaton 46,710 3,056,702 8 Common Stocks (continued) Shares Value ($) Industrial (continued) General Electric 694,720 10,017,862 Honeywell International 43,370 1,692,731 Pitney Bowes 154,680 3,396,773 Raytheon 49,120 2,376,917 Republic Services 84,430 2,510,104 Tyco International 48,640 1,713,587 Union Pacific 80,440 5,591,384 United Technologies 38,450 2,495,790 Information Technology—6.5% AOL 69,438 a 1,443,616 Cisco Systems 263,800 a 5,621,578 Hewlett-Packard 103,970 4,499,822 Microsoft 274,240 6,310,262 QUALCOMM 43,680 1,434,451 Tyco Electronics 62,610 1,589,042 Materials—2.3% Air Products & Chemicals 22,480 1,456,929 CF Industries Holdings 18,940 1,201,743 Dow Chemical 65,830 1,561,488 Freeport-McMoRan Copper & Gold 24,870 1,470,563 International Paper 77,470 1,753,146 Telecommunication Services—5.0% AT & T 390,855 9,454,782 Vodafone Group, ADR 321,950 b 6,654,707 Utilities—4.8% Entergy 64,670 4,631,665 NextEra Energy 92,060 4,488,846 Questar 100,410 4,567,651 Southern 51,810 b 1,724,237 Total Common Stocks (cost $327,618,971) The Fund 9 STATEMENT OF INVESTMENTS (Unaudited) (continued) Other Investment—.4% Shares Value ($) Registered Investment Company; Dreyfus Institutional Preferred Plus Money Market Fund (cost $1,265,000) 1,265,000 c Investment of Cash Collateral for Securities Loaned—2.5% Registered Investment Company; Dreyfus Institutional Cash Advantage Fund (cost $7,897,958) 7,897,958 c Total Investments (cost $336,781,929) 102.7% Liabilities, Less Cash and Receivables (2.7%) Net Assets 100.0% ADR—American Depository Receipts a Non-income producing security. b Security, or portion thereof, on loan. At June 30, 2010, the total market value of the fund’s securities on loan is $7,458,714 and the total market value of the collateral held by the fund is $7,897,958. c Investment in affiliated money market mutual fund. Portfolio Summary (Unaudited) † Value (%) Value (%) Financial 25.4 Information Technology 6.5 Energy 13.4 Telecommunication Services 5.0 Industrial 11.7 Utilities 4.8 Health Care 11.5 Money Market Investments 2.9 Consumer Discretionary 11.0 Materials 2.3 Consumer Staples 8.2 † Based on net assets. See notes to financial statements. 10 STATEMENT OF ASSETS AND LIABILITIES June 30, 2010 (Unaudited) Cost Value Assets ($): Investments in securities—See Statement of Investments (including securities on loan, valued at $7,458,714)—Note 1(b): Unaffiliated issuers 327,618,971 321,387,736 Affiliated issuers 9,162,958 9,162,958 Receivable for investment securities sold 8,747,309 Dividends and interest receivable 765,848 Receivable for shares of Beneficial Interest subscribed 23,351 Liabilities ($): Due to The Dreyfus Corporation and affiliates—Note 3(b) 325,098 Cash overdraft due to custodian 114,503 Payable for investment securities purchased 9,790,132 Liability for securities on loan—Note 1(b) 7,897,958 Payable for shares of Beneficial Interest redeemed 76,594 Net Assets ($) Composition of Net Assets ($): Paid-in capital 415,504,334 Accumulated undistributed investment income—net 6,183 Accumulated net realized gain (loss) on investments (87,396,365) Accumulated net unrealized appreciation (depreciation) on investments (6,231,235) Net Assets ($) Net Asset Value Per Share Class A Class B Class C Class I Institutional Net Assets ($) 288,710,060 1,386,390 7,107,779 901,302 23,777,386 Shares Outstanding 14,365,584 70,421 361,374 44,846 1,183,554 Net Asset Value Per Share ($) See notes to financial statements. The Fund 11 STATEMENT OF OPERATIONS Six Months Ended June 30, 2010 (Unaudited) Investment Income ($): Income: Cash dividends: Unaffiliated issuers 3,616,739 Affiliated issuers 1,381 Income from securities lending—Note 1(b) 997 Interest 298 Total Income Expenses: Management fee—Note 3(a) 1,587,433 Distribution and service fees—Note 3(b) 462,845 Trustees’ fees—Note 3(a) 13,051 Loan commitment fees—Note 2 2,524 Total Expenses Less—Trustees’ fees reimbursed by the Manager—Note 3(a) (13,051) Net Expenses Investment Income—Net Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): Net realized gain (loss) on investments 6,214,132 Net unrealized appreciation (depreciation) on investments (33,589,096) Net Realized and Unrealized Gain (Loss) on Investments Net (Decrease) in Net Assets Resulting from Operations See notes to financial statements. 12 STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2010 Year Ended (Unaudited) December 31, 2009 a Operations ($): Investment income—net 1,566,613 4,312,321 Net realized gain (loss) on investments 6,214,132 (36,235,669) Net unrealized appreciation (depreciation) on investments (33,589,096) 87,286,702 Net Increase (Decrease) in Net Assets Resulting from Operations Dividends to Shareholders from ($): Investment income—net: Class A Shares (1,422,538) (3,933,828) Class B Shares (1,463) (23,861) Class C Shares (7,508) (44,329) Class I Shares (5,895) (12,221) Institutional Shares (129,718) (329,794) Total Dividends Beneficial Interest Transactions ($): Net proceeds from shares sold: Class A Shares 3,608,281 11,628,595 Class B Shares 15,625 48,918 Class C Shares 461,417 565,585 Class I Shares 113,380 233,888 Class T Shares — 4,900 Institutional Shares 1,064,205 259,267 The Fund 13 STATEMENT OF CHANGES IN NET ASSETS (continued) Six Months Ended June 30, 2010 Year Ended (Unaudited) December 31, 2009 a Beneficial Interest Transactions ($) (continued): Dividends reinvested: Class A Shares 1,237,783 3,386,255 Class B Shares 1,362 22,288 Class C Shares 6,630 38,504 Class I Shares 4,139 11,613 Institutional Shares 125,714 321,000 Cost of shares redeemed: Class A Shares (16,782,393) (37,592,218) Class B Shares (1,045,968) (3,443,128) Class C Shares (592,690) (2,215,012) Class I Shares (183,830) (64,206) Class T Shares — (1,037,083) Institutional Shares (1,172,915) (2,093,420) Increase (Decrease) in Net Assets from Beneficial Interest Transactions Total Increase (Decrease) in Net Assets Net Assets ($): Beginning of Period 362,397,650 341,302,583 End of Period Undistributed investment income—net 6,183 6,692 14 Six Months Ended June 30, 2010 Year Ended (Unaudited) December 31, 2009 a Capital Share Transactions: Class A b,c Shares sold 161,295 644,580 Shares issued for dividends reinvested 58,420 186,499 Shares redeemed (752,173) (2,017,879) Net Increase (Decrease) in Shares Outstanding Class B b Shares sold 729 2,707 Shares issued for dividends reinvested 69 1,373 Shares redeemed (47,545) (195,433) Net Increase (Decrease) in Shares Outstanding Class C Shares sold 20,771 30,654 Shares issued for dividends reinvested 337 2,342 Shares redeemed (27,358) (122,745) Net Increase (Decrease) in Shares Outstanding Class I Shares sold 5,044 11,070 Shares issued for dividends reinvested 193 635 Shares redeemed (8,346) (3,622) Net Increase (Decrease) in Shares Outstanding Class T c Shares sold — 291 Shares redeemed — (62,134) Net Increase (Decrease) in Shares Outstanding — Institutional Shares Shares sold 46,906 13,952 Shares issued for dividends reinvested 5,927 17,609 Shares redeemed (52,787) (119,227) Net Increase (Decrease) in Shares Outstanding 46 a Effective as of the close of business on February 4, 2009, the fund no longer offers Class T shares. b During the period ended June 30, 2010, 28,696 Class B shares representing $629,463 were automatically converted to 28,094 Class A shares and during the period ended Deceber 31, 2009, 94,322 Class B shares representing $1,726,360 were automatically converted to 92,335 Class A shares. c On the close of business on February 4, 2009, 61,363 Class T shares representing $1,023,527 were converted to 61,326 Class A shares. See notes to financial statements. The Fund 15 FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements. Six Months Ended June 30, 2010 Year Ended December 31, Class A Shares (Unaudited) 2009 2008 2007 2006 2005 Per Share Data ($): Net asset value, beginning of period 21.83 18.75 29.87 32.00 31.38 30.34 Investment Operations: Investment income—net a .10 .25 .38 .45 .38 .30 Net realized and unrealized gain (loss) on investments (1.73) 3.08 (11.10) .42 5.94 1.26 Total from Investment Operations (1.63) 3.33 (10.72) .87 6.32 1.56 Distributions: Dividends from investment income—net (.10) (.25) (.40) (.46) (.37) (.35) Dividends from net realized gain on investments — — (.00) b (2.54) (5.33) (.17) Total Distributions (.10) (.25) (.40) (3.00) (5.70) (.52) Net asset value, end of period 20.10 21.83 18.75 29.87 32.00 31.38 Total Return (%) c (7.49) d 18.07 (36.10) 2.75 21.00 5.18 Ratios/Supplemental Data (%): Ratio of total expenses to average net assets 1.16 e 1.17 1.16 1.16 1.15 1.15 Ratio of net expenses to average net assets 1.15 e 1.16 1.15 1.15 1.15 1.15 Ratio of net investment income to average net assets .90 e 1.33 1.53 1.38 1.17 .99 Portfolio Turnover Rate 27.87 d 64.35 53.58 45.19 44.73 55.95 Net Assets, end of period ($ x 1,000) 288,710 325,170 301,524 522,906 548,601 556,017 a Based on average shares outstanding at each month end. b Amount represents less than $.01 per share. c Exclusive of sales charge. d Not annualized. e Annualized. See notes to financial statements. 16 Six Months Ended June 30, 2010 Year Ended December 31, Class B Shares (Unaudited) 2009 2008 2007 2006 2005 Per Share Data ($): Net asset value, beginning of period 21.38 18.36 29.26 31.40 30.87 29.83 Investment Operations: Investment income—net a .01 .13 .17 .22 .13 .07 Net realized and unrealized gain (loss) on investments (1.68) 3.00 (10.85) .39 5.85 1.26 Total from Investment Operations (1.67) 3.13 (10.68) .61 5.98 1.33 Distributions: Dividends from investment income—net (.02) (.11) (.22) (.21) (.12) (.12) Dividends from net realized gain on investments — — (.00) b (2.54) (5.33) (.17) Total Distributions (.02) (.11) (.22) (2.75) (5.45) (.29) Net asset value, end of period 19.69 21.38 18.36 29.26 31.40 30.87 Total Return (%) c (7.81) d 17.21 (36.62) 2.01 20.12 4.47 Ratios/Supplemental Data (%): Ratio of total expenses to average net assets 1.90 e 1.91 1.90 1.91 1.90 1.90 Ratio of net expenses to average net assets 1.90 e,f 1.90 1.90 f 1.90 1.90 1.90 Ratio of net investment income to average net assets .10 e .74 .69 .70 .42 .24 Portfolio Turnover Rate 27.87 d 64.35 53.58 45.19 44.73 55.95 Net Assets, end of period ($ x 1,000) 1,386 2,505 5,665 26,646 55,112 64,239 a Based on average shares outstanding at each month end. b Amount represents less than $.01 per share. c Exclusive of sales charge. d Not annualized. e Annualized. f Expense waivers and/or reimbursements amounted to less than .01%. See notes to financial statements. The Fund 17 FINANCIAL HIGHLIGHTS (continued) Six Months Ended June 30, 2010 Year Ended December 31, Class C Shares (Unaudited) 2009 2008 2007 2006 2005 Per Share Data ($): Net asset value, beginning of period 21.36 18.35 29.24 31.38 30.85 29.83 Investment Operations: Investment income—net a .02 .11 .19 .21 .14 .07 Net realized and unrealized gain (loss) on investments (1.69) 3.01 (10.86) .40 5.84 1.24 Total from Investment Operations (1.67) 3.12 (10.67) .61 5.98 1.31 Distributions: Dividends from investment income—net (.02) (.11) (.22) (.21) (.12) (.12) Dividends from net realized gain on investments — — (.00) b (2.54) (5.33) (.17) Total Distributions (.02) (.11) (.22) (2.75) (5.45) (.29) Net asset value, end of period 19.67 21.36 18.35 29.24 31.38 30.85 Total Return (%) c (7.82) d 17.16 (36.59) 2.00 20.07 4.43 Ratios/Supplemental Data (%): Ratio of total expenses to average net assets 1.91 e 1.92 1.90 1.91 1.90 1.90 Ratio of net expenses to average net assets 1.90 e 1.91 1.90 f 1.90 1.90 1.90 Ratio of net investment income to average net assets .15 e .60 .76 .65 .42 .24 Portfolio Turnover Rate 27.87 d 64.35 53.58 45.19 44.73 55.95 Net Assets, end of period ($ x 1,000) 7,108 7,853 8,391 16,572 20,919 20,564 a Based on average shares outstanding at each month end. b Amount represents less than $.01 per share. c Exclusive of sales charge. d Not annualized. e Annualized. f Expense waivers and/or reimbursements amounted to less than .01%. See notes to financial statements. 18 Six Months Ended June 30, 2010 Year Ended December 31, Class I Shares (Unaudited) 2009 2008 2007 a 2006 2005 Per Share Data ($): Net asset value, beginning of period 21.83 18.74 29.85 31.98 31.36 30.33 Investment Operations: Investment income—net b .13 .30 .45 .57 .46 .38 Net realized and unrealized gain (loss) on investments (1.73) 3.09 (11.10) .39 5.95 1.25 Total from Investment Operations (1.60) 3.39 (10.65) .96 6.41 1.63 Distributions: Dividends from investment income—net (.13) (.30) (.46) (.55) (.46) (.43) Dividends from net realized gain on investments — — (.00) c (2.54) (5.33) (.17) Total Distributions (.13) (.30) (.46) (3.09) (5.79) (.60) Net asset value, end of period 20.10 21.83 18.74 29.85 31.98 31.36 Total Return (%) (7.38) d 18.43 (35.93) 3.04 21.26 5.45 Ratios/Supplemental Data (%): Ratio of total expenses to average net assets .91 e .92 .90 .91 .90 .90 Ratio of net expenses to average net assets .90 e .91 .90 f .90 .90 .90 Ratio of net investment income to average net assets 1.15 e 1.57 1.74 1.63 1.42 1.25 Portfolio Turnover Rate 27.87 d 64.35 53.58 45.19 44.73 55.95 Net Assets, end of period ($ x 1,000) 901 1,047 747 1,395 6,012 4,740 a Effective June 1, 2007, Class R shares were redesignated as Class I shares. b Based on average shares outstanding at each month end. c Amount represents less than $.01 per share. d Not annualized. e Annualized. f Expense waivers and/or reimbursements amounted to less than .01%. See notes to financial statements. The Fund 19 FINANCIAL HIGHLIGHTS (continued) Six Months Ended June 30, 2010 Year Ended December 31, Institutional Shares (Unaudited) 2009 2008 2007 2006 2005 Per Share Data ($): Net asset value, beginning of period 21.82 18.74 29.85 31.98 31.36 30.32 Investment Operations: Investment income—net a .11 .27 .41 .48 .42 .33 Net realized and unrealized gain (loss) on investments (1.73) 3.08 (11.09) .43 5.94 1.26 Total from Investment Operations (1.62) 3.35 (10.68) .91 6.36 1.59 Distributions: Dividends from investment income—net (.11) (.27) (.43) (.50) (.41) (.38) Dividends from net realized gain on investments — — (.00) b (2.54) (5.33) (.17) Total Distributions (.11) (.27) (.43) (3.04) (5.74) (.55) Net asset value, end of period 20.09 21.82 18.74 29.85 31.98 31.36 Total Return (%) (7.45) c 18.20 (36.05) 2.89 21.11 5.33 Ratios/Supplemental Data (%): Ratio of total expenses to average net assets 1.06 d 1.06 1.06 1.06 1.05 1.05 Ratio of net expenses to average net assets 1.05 d 1.06 e 1.05 1.05 1.05 1.05 Ratio of net investment income to average net assets 1.00 d 1.43 1.63 1.49 1.28 1.09 Portfolio Turnover Rate 27.87 c 64.35 53.58 45.19 44.73 55.95 Net Assets, end of period ($ x 1,000) 23,777 25,822 23,816 40,679 44,506 40,341 a Based on average shares outstanding at each month end. b Amount represents less than $.01 per share. c Not annualized. d Annualized. e Expense waivers and/or reimbursements amounted to less than .01%. See notes to financial statements. 20 NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1—Significant Accounting Policies: Dreyfus Core Value Fund (the “fund”) is a separate diversified series of The Dreyfus/Laurel Funds Trust (the “Trust”) which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company offering seven series, including the fund.The fund’s investment objective seeks long-term capital growth.The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of shares of Beneficial Interest in each of the following classes of shares: Class A, Class B, Class C, Class I and Institutional shares. Class A, Class B and Class C shares are sold primarily to retail investors through financial intermediaries and bear a distribution fee and/or service fee. Class A shares are subject to a front-end sales charge, while Class B and Class C shares are subject to a contingent deferred sales charge (“CDSC”). Class B shares automatically convert to Class A shares after six years. The fund does not offer Class B shares, except in connection with dividend reinvestment and permitted exchanges of Class B shares. Class I shares are sold primarily to bank trust departments and other financial service providers including The Bank of NewYork Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, acting on behalf of customers having a qualified trust or investment account or relationship at such institution, and bear no distribution or service fees. Class I and Institutional shares are offered without a front-end sales charge or CDSC. Institutional shares are offered only to those customers of certain financial planners and investment advisers who held shares of a predecessor class of the fund as of April 4, 1994, and bear a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution and service fees and voting rights on matters affecting a single class. The Fund 21 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets. The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities.Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System, for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Trustees. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securi- 22 ties and other appropriate indicators, such as prices of relevant ADRs and futures contracts. For other securities that are fair valued by the Board of Trustees, certain factors may be considered such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods. Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below: Level 1 —unadjusted quoted prices in active markets for identical investments. Level 2 —other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.). Level 3 —significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments). The Fund 23 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used as of June 30, 2010 in valuing the fund’s investments: Level 2—Other Level 3— Level 1— Significant Significant Unadjusted Observable Unobservable Quoted Prices Inputs Inputs Total Assets ($) Investments in Securities: Equity Securities— Domestic † 314,733,029 — — Equity Securities— Foreign † 6,654,707 — — Mutual Funds 9,162,958 — — † See Statement of Investments for industry classification. In January 2010, FASB issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about FairValue Measurements”. The portions of ASU No. 2010-06 which require reporting entities to prepare new disclosures surrounding amounts and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements as well as inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3 have been adopted by the fund.The remaining portion of ASU No. 2010-06 requires reporting entities to make new disclosures about information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of activity in Level 3 fair value measurements.These new and revised disclosures are required to be implemented for fiscal years beginning after December 15, 2010. Management is currently evaluating the impact that the adoption of this remaining portion of ASU No. 2010-06 may have on the fund’s financial statement disclosures. (b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest 24 income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis. Pursuant to a securities lending agreement withThe Bank of NewYork Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Manager, U.S. Government and Agency securities or letters of credit.The fund is entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction.Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner. During the period ended June 30, 2010,The Bank of New York Mellon earned $427 from lending portfolio securities, pursuant to the securities lending agreement. (c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” in the Act. The fund may invest in shares of certain affiliated investment companies also advised or managed by Dreyfus. Investments in affiliated investment companies for the period ended June 30, 2010 were as follows: The Fund 25 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid on a quarterly basis. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. (e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. As of and during the period ended June 30, 2010, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties. Each of the tax years in the three-year period ended December 31, 2009 remains subject to examination by the Internal Revenue Service and state taxing authorities. The fund has an unused capital loss carryover of $88,529,754 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2009. If not applied, $38,328,752 of the carryover expires in fiscal 2016 and $50,201,002 expires in fiscal 2017. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2009 was as follows: ordinary income $4,344,033. The tax character of current year distributions will be determined at the end of the current fiscal year. 26 NOTE 2—Bank Lines of Credit: The fund participates with other Dreyfus-managed funds in a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended June 30, 2010, the fund did not borrow under the Facilities. NOTE 3—Investment Management Fee and Other Transactions With Affiliates: (a) Pursuant to an investment management agreement with the Manager, the Manager provides or arranges for one or more third par ties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund. The Manager also directs the investments of the fund in accordance with its investment objective,policies and limitations.For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .90% of the value of the fund’s average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees and expenses, service fees and expenses of non-interested Trustees (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund’s allocable portion of fees and expenses of the non-interested Trustees (including counsel fees). Effective January 1, 2010, each Trustee who is not an “interested person” of the Trust (as defined in the Act) received $60,000 per annum, plus $7,000 per joint Board meeting of the Trust, The Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free Municipal Funds, Dreyfus Investment Funds and Dreyfus Funds, Inc. The Fund 27 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) (collectively, the “Board Group Open-End Funds”) attended, $2,500 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $2,000 for Board meetings and separate committee meetings attended that are conducted by telephone.The Board Group Open-end Funds also reimburse each Trustee who is not an “interested person” of the Trust (as defined in the Act) for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). Effective January 1, 2010, the Chair of each of the Board’s committees, unless the Chair also serves as Chair of the Board, receives $1,350 per applicable committee meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Board Group Open-end Funds and Dreyfus High Yield Strategies Fund, the $2,500 or $2,000 fee, as applicable, is allocated between the Board Group Open-end Funds and Dreyfus High Yield Strategies Funds.The Trust’s portion of these fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Trust directly to the non-interested Trustees, that would be applied to offset a portion of the management fee payable by certain other series of the Trust to the Manager, are in fact paid directly by the Manager to the non-interested Trustees. During the period ended June 30, 2010, the Distributor retained $2,175 from commissions earned on sales of the fund’s Class A shares and $2,315 and $1,031 from CDSCs on redemptions on the fund’s Class B and Class C shares, respectively. (b) Under separate Distribution Plans (the “Plans”) adopted pursuant to Rule 12b-1 under the Act, Class A shares and Institutional shares may pay annually up to .25% and .15%,respectively,of the value of their average daily net assets to compensate the Distributor for shareholder servicing activities and expenses primarily intended to result in the sale of 28 Class A and Institutional shares. Class B and Class C shares pay the Distributor for distributing their shares at an aggregate annual rate of .75% of the value of the average daily net assets of Class B and Class C shares.The Distributor may pay one or more agents in respect of advertising, marketing and other distribution services for Class T shares and determined the amounts, if any, to be paid to agents and the basis on which such payments were made. Class B and Class C shares are also subject to a Service Plan adopted pursuant to Rule 12b-1 (the “Service Plan”), under which Class B and Class C shares pay the Distributor for providing certain services to the holders of their shares a fee at the annual rate of .25% of the value of the average daily net assets of Class B and Class C shares. During the period ended June 30, 2010, Class A, Class B, Class C and Institutional shares were charged $395,566, $6,934, $29,104 and $19,229, respectively, pursuant to their respective Plans. During the period ended June 30, 2010, Class B and Class C shares were charged $2,311 and $9,701, respectively, pursuant to the Service Plan. Under its terms, the Plans and Service Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Plans or Service Plan. The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $251,863, Rule 12b-1 distribution plan fees $71,387 and shareholder services plan fees $1,848. NOTE 4—Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2010, amounted to $98,764,067 and $111,380,265, respectively. The Fund 29 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) The provisions of ASC Topic 815 “Derivatives and Hedging” require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.The fund held no derivatives during the period ended June 30, 2010.These disclosures did not impact the notes to the financial statements. At June 30, 2010, accumulated net unrealized depreciation on investments was $6,231,235, consisting of $18,460,552 gross unrealized appreciation and $24,691,787 gross unrealized depreciation. At June 30, 2010, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). 30 INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) At a meeting of the fund’s Board of Trustees held on February 9, 2010, the Board considered the re-approval of the fund’s Investment Management Agreement (“Management Agreement”), pursuant to which the Manager provides the fund with investment advisory and administrative services. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager. Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members considered information previously provided to them in a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and representatives of the Manager confirmed that there had been no material changes in this information.The Board also discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement. The Manager’s representatives reviewed the fund’s distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each.The Manager’s representatives noted the distribution channels for the fund, as well as the diversity of distribution among the funds in the Dreyfus fund complex, and the Manager’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including those of the fund.The Manager provided the number of shareholder accounts in the fund, as well as the fund’s asset size. The Board members also considered the Manager’s research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager’s extensive administrative, accounting and compliance infrastructure. The Board also considered the Manager’s brokerage policies and practices, the standards applied in seeking best execution and the Manager’s policies and practices regarding soft dollars. The Fund 31 INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued) Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board members reviewed the fund’s performance and comparisons to a group of retail front-end load, large-cap value funds (the “Performance Group”) and to a larger universe of funds, consisting of all retail and institutional large-cap value funds (the “Performance Universe”) selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons and noted that the fund’s total return performance was below the Performance Group and Performance Universe medians for each reported period, except the four- and five-year periods ended December 31, 2009, when the fund’s total return performance was above the respective Performance Universe medians.As part of an overall presentation to the Board members, representatives of the Manager discussed the market environment in 2009, noting that high beta stocks had outperformed during 2009 and high quality stocks had been out of favor in 2009. The Manager also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index. The Board members also discussed the fund’s contractual and actual management fees and expense ratio and reviewed the range of management fees and expense ratios of a comparable group of funds (the “Expense Group”) and a broader group of funds (the “Expense Universe”), each selected and provided by Lipper.The Board members noted that the fund was the only fund in the Expense Group with a “unitary fee” structure.The Board members also noted that the fund’s contractual management fee was above the Expense Group median, the fund’s actual management fee was above the Expense Group and Expense Universe medians and the fund’s expense ratio was below the Expense Group and Expense Universe medians. 32 Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by the only mutual fund managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included in the same Lipper category as the fund (the “Similar Fund”), and by other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund (the “Similar Accounts”).The Manager’s representatives explained the nature of the Similar Accounts and the differences, from the Manager’s perspective, in providing services to such Similar Accounts as compared to managing and providing services to the fund. The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the services provided, noting the fund’s “unitary fee” structure.The Board members considered the relevance of the fee information provided for the Similar Fund and the Similar Accounts to evaluate the appropriateness and reasonableness of the fund’s management fee. Analysis of Profitability and Economies of Scale. The Manager’s representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit. The Board previously had been provided with information prepared by an independent consulting firm regarding the Manager’s approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund com-plex.The Board also was informed that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund.The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund.The Board members also considered potential benefits to the Manager from acting as investment adviser and noted the Manager’s soft dollar arrangements with respect to trading the fund’s portfolio. The Fund 33 INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued) It was noted that the Board members should consider the Manager’s profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund’s assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within the range determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager. At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund’s Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations: The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate. The Board was concerned with the fund’s relative performance in more recent periods and determined to closely monitor performance. The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative performance, expense and management fee information, costs of the services pro- vided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund. 34 The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the management of the fund had been adequately considered by the Manager in con- nection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund. The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund’s Management Agreement was in the best interests of the fund and its shareholders. The Fund 35 NOTES For More Information Telephone Call your financial representative or 1-800-554-4611 Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-645-6561. Item 2. Code of Ethics. Not applicable. Item 3. Audit Committee Financial Expert. Not applicable. Item 4. Principal Accountant Fees and Services. Not applicable. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Investments. (a) Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. Not applicable. [CLOSED END FUNDS ONLY] Item 10. Submission of Matters to a Vote of Security Holders. There have been no material changes to the procedures applicable to Item 10. Item 11. Controls and Procedures. (a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable. (a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (a)(3) Not applicable. (b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. The Dreyfus/Laurel Funds Trust By: /s/ Bradley J. Skapyak Bradley J. Skapyak, President Date: August 23, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ Bradley J. Skapyak, Bradley J. Skapyak, President Date: August 23, 2010 By: /s/ James Windels James Windels, Treasurer Date: August 23, 2010 EXHIBIT INDEX (a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT) (b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended July 31, 2009 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period fromto Commission File Number 1-16497 MOVADO GROUP, INC. (Exact Name of Registrant as Specified in its Charter) New York 13-2595932 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 650 From Road, Ste. 375 Paramus, New Jersey 07652-3556 (Address of principal executive offices) (Zip Code) (201) 267-8000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for that past 90 days. YesxNo ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes¨ No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer,'' "accelerated filer'' and "smaller reporting company'' in Rule 12b-2 of the Exchange Act.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): December 4, 2012 URBAN BARNS FOODS INC. (Exact name of registrant as specified in charter) Nevada (State or other jurisdiction of incorporation or organization) 000-53942 Commission File Number 7170 Glover Drive Milner, British Columbia, Canada V0X 1T0 (Address of principal executive offices) Registrant’s telephone number, including area code: Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12) o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b)) o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c)) SECTION 1. REGISTRANT’S BUSINESS AND OPERATIONS ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT Consulting Agreements On December 4, 2012, the Board of Directors of Urban Barns Foods Inc., a Nevada corporation (the “Corporation”) authorized the execution of those two certain six-month consulting agreements each dated November 21, 2012 (collectively, the "Consulting Agreements") with Wakabayashi Fund LLC ("Wakabayashi Fund"). In accordance with the terms and provisions of the Consulting Agreements: (i) Wakabayashi Fund shall provide capital funding services, including serving as an investment banking liaison and acting as a capital consultant; (ii) Wakabayashi Fund shall contact institutional investors, arrange presentations of the Corporation, assist in restructuring the Corporation's business plan, and provide general capital structure, working capital, equipment financing, merger and acquisition, and reorganization consulting services; (iii) Wakabayashi Fund shall provide institutional market awareness and public relations services, including acting as an institutional public relations consultant; (iv) the Corporation shall pay to Wakabayashi a success fee of 7% of the amount of capital raised as a result of the contacts made by Wakabayashi Fund; and (v) the Corporation shall issue an aggregate of 3,000,000 shares of its restricted Class A common stock to Wakabayashi Fund. SECTION 3. SECURITIES AND TRADING MATTERS ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES Effective on December 6, 2012, the Corporation issued to Wakabayashi Fund an aggregate of 3,000,000 shares of restricted Class A common stock. The shares were issued under Regulation S of the Securities Act of 1933, as amended (the “Securities Act”). The shares of Class A common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. Wakabayashi acknowledged that the securities to be issued have not been registered under the Securities Act, that it understood the economic risk of an investment in the securities, and that it had the opportunity to ask questions of and receive answers from the Corporation’s management concerning any and all matters related to acquisition of the securities. 2 SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS Item 9.01Financial Statements and Exhibits (a) Financial Statements of Business Acquired. Not applicable. (b) Pro forma Financial Information. Not applicable. (c) Shell Company Transaction. Not applicable. (d) Exhibits. Consulting Agreement between Urban Barns Foods Inc. and Wakabayashi Fund LLC dated November 21, 2012. Consulting Agreement between Urban Barns Foods Inc. and Wakabayashi Fund LLC dated November 21, 2012. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Urban Barns Foods Inc. (Registrant) Date:December 10, 2012 By: /s/ Jacob Benne Jacob Benne President, Chief Executive Officer, Director 4
Name: Commission Regulation (EC) No 1125/2007 of 28 September 2007 establishing the standard import values for determining the entry price of certain fruit and vegetables Type: Regulation Date Published: nan 29.9.2007 EN Official Journal of the European Union L 255/12 COMMISSION REGULATION (EC) No 1125/2007 of 28 September 2007 establishing the standard import values for determining the entry price of certain fruit and vegetables THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to Commission Regulation (EC) No 3223/94 of 21 December 1994 on detailed rules for the application of the import arrangements for fruit and vegetables (1), and in particular Article 4(1) thereof, Whereas: (1) Regulation (EC) No 3223/94 lays down, pursuant to the outcome of the Uruguay Round multilateral trade negotiations, the criteria whereby the Commission fixes the standard values for imports from third countries, in respect of the products and periods stipulated in the Annex thereto. (2) In compliance with the above criteria, the standard import values must be fixed at the levels set out in the Annex to this Regulation, HAS ADOPTED THIS REGULATION: Article 1 The standard import values referred to in Article 4 of Regulation (EC) No 3223/94 shall be fixed as indicated in the Annex hereto. Article 2 This Regulation shall enter into force on 29 September 2007. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 28 September 2007. For the Commission Jean-Luc DEMARTY Director-General for Agriculture and Rural Development (1) OJ L 337, 24.12.1994, p. 66. Regulation as last amended by Regulation (EC) No 756/2007 (OJ L 172, 30.6.2007, p. 41). ANNEX to Commission Regulation of 28 September 2007 establishing the standard import values for determining the entry price of certain fruit and vegetables (EUR/100 kg) CN code Third country code (1) Standard import value 0702 00 00 MK 45,9 TR 97,6 XS 28,3 ZZ 57,3 0707 00 05 JO 151,2 MK 27,9 TR 87,4 ZZ 88,8 0709 90 70 IL 51,9 TR 107,9 ZZ 79,9 0805 50 10 AR 67,9 TR 97,9 UY 80,4 ZA 66,1 ZZ 78,1 0806 10 10 IL 284,6 MK 11,8 TR 110,7 US 284,6 ZZ 172,9 0808 10 80 AR 87,7 AU 127,2 CL 77,6 CN 79,8 MK 29,7 NZ 102,3 US 96,1 ZA 77,7 ZZ 84,8 0808 20 50 CN 86,5 TR 135,1 ZA 87,3 ZZ 103,0 0809 30 10, 0809 30 90 TR 146,4 US 161,1 ZZ 153,8 0809 40 05 IL 118,5 ZZ 118,5 (1) Country nomenclature as fixed by Commission Regulation (EC) No 1833/2006 (OJ L 354, 14.12.2006, p. 19). Code ZZ stands for of other origin.
As filed with the Securities and Exchange Commission on December 18, 2014 Registration No.333- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ASHLAND INC. (Exact name of Registrant as Specified in its Charter) Kentucky (State of incorporation) 20-0865835 (I.R.S. Employer Identification No.) 50 E. RiverCenter Boulevard P.O. Box 391 Covington, Kentucky 41012-0391 (859) 815-3033 (Address, including zip code, of registrant's principal executive offices) INDUCEMENT RESTRICTED STOCK AWARD (Full title of the Plan) Peter J. Ganz Senior Vice President, General Counsel and Secretary 50 E. RiverCenter Boulevard P.O. Box 391 Covington, Kentucky 41012-0391 (859) 815-3333 (Name, address, including zip code, and telephone number, including area code,of agent for service) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check One) ý Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated file (Do not check if a smaller reporting company) ¨ Smaller reporting company CALCULATION OF REGISTRATION FEE Title of Securities to be Registered Amount to be Registered (1) (2) Proposed Maximum Offering Price Per Share(2) Proposed Maximum Aggregate Offering Price(3) Amount of Registration Fee Common Stock, par value $0.01 per share 50,000 shares Represents the number of shares of Common Stock, par value $.01 per share, of Ashland Inc. to be issued pursuant to the Inducement Restricted Stock Award Agreement to be entered into between William A. Wulfsohn and Ashland Inc. Pursuant to Rule 416(a) under the Securities Act of 1933, this registration statement also covers an indeterminate amount of shares of Common Stock that may be offered or sold as a result of any adjustments based on stock splits, stock dividends or similar events provided under the agreement described above. Estimated solely for the purpose of calculating the registration fee in accordance with Rule457(h)(1) under the Securities Act of 1933 on the basis of the average of the high and low prices of the Common Stock as reported on the New York Stock Exchange on December 17, 2014. EXPLANATORY NOTE This Registration Statement on Form S-8 (this “Registration Statement”) is filed by Ashland Inc., a Kentucky corporation (“Ashland”) to register 50,000 shares of its Common Stock, par value $0.01 per share (“Common Stock”) that will be issued pursuant to an Inducement Restricted Stock Award Agreement (the “Inducement Award”) to be entered into between Ashland and William A. Wulfsohn as an inducement for his employment with Ashland. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item3. Incorporation of Documents by Reference. The following documents filed by Ashland with the Securities and Exchange Commission (the “Commission”) are incorporated herein by reference as of their respective dates of filing with the Commission: (a) Ashland’s Annual Report filed on Form 10-K for the fiscal year ended September 30, 2014 filed with the Commission on November 24, 2014, (b) Ashland’s Current Reports on Form 8-K filed on October 9, 2014, November 17, 2014 and December 1, 2014 (as amended by an amendment filed on December 11, 2014), and (c) The description of Ashland’s Common Stock contained in Ashland’s Registration Statement on Form S-4 filed with the Commission on August 8, 2008. All reports and other documents subsequently filed by Ashland pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), prior to the filing of a post-effective amendment which indicates that all securities offered hereunder have been sold or which deregisters all securities then remaining unsold hereunder shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such documents. Item5. Interests of Named Experts and Counsel. The validity of the Common Stock offered hereby has been passed upon by Peter J. Ganz, Ashland’s Senior Vice President, General Counsel and Secretary.As of the date this Registration Statement is filed with the Commission, Mr. Ganz beneficially owns 31,978 shares of Ashland Common Stock, of which 26,305 shares are unvested Restricted Common Stock, and 33,700 Stock Appreciation Rights, the value of which is based on the appreciation of the Common Stock over time. Item6. Indemnification of Directors and Officers. Kentucky Business Corporation Act Sections 271B.8-500 through 580 of the Kentucky Business Corporation Act (the “KBCA”) provide for indemnification of directors, officers, employees and agents of Kentucky corporations, subject to certain limitations. Although the below discussion is specific to directors, Section271B.8-560 permits a corporation to indemnify and advance expenses to officers, employees and agents to the same extent as a director and gives an officer who is not a director the same statutory right to mandatory indemnification and to apply for court-ordered indemnification as afforded a director. A corporation may also indemnify and advance expenses to an officer, employee, or agent who is not a director to the extent, consistent with public policy, that may be provided by its articles of incorporation, bylaws, general or specific action by its board of directors, or contract. Section271B.8-520 of the KBCA provides that, unless limited by the articles of incorporation, a corporation shall indemnify against reasonable expenses incurred in connection with a proceeding any director who entirely prevails in the defense of any proceeding to which the individual was a party because he or she is or was a director of the corporation. The term “proceeding” includes any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal. 2 Section271B.8-510 of the KBCA permits a corporation to indemnify an individual who is made a party to a proceeding because the individual is or was a director, as long as the individual (i)conducted himself or herself in good faith, (ii)reasonably believed, in the case of conduct in his or her official capacity with the corporation, that the conduct was in the best interests of the corporation or, in all other cases, was at least not opposed to its best interests, and (iii)in a criminal proceeding, had no reasonable cause to believe that the conduct was unlawful. The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere shall not be, alone, determinative that the director did not meet the applicable standard of care. Indemnification may be made against the obligation to pay a judgment, settlement, penalty, fine or reasonable expenses (including counsel fees) incurred with respect to a proceeding, except that if the proceeding was by or in the right of the corporation, indemnification may be made only against reasonable expenses. Section271B.8-510 of the KBCA specifically prohibits indemnification in (i)a proceeding by or in the right of the corporation in which the director is adjudged liable to the corporation or (ii)in connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in the director’s official capacity, where the director is adjudged liable on the basis of having received an improper personal benefit. Pursuant to Section271B.8-550, a determination that indemnification is permissible because the individual met the applicable standard of conduct must first be made before a director can be indemnified. This determination can be made (i)by majority vote of a quorum of disinterested directors or, if a quorum cannot be obtained, by majority vote of a committee made up solely of two or more disinterested directors, (ii)by special legal counsel selected by the majority vote of a quorum of disinterested directors or, if a quorum cannot be obtained, by majority vote of a committee made up solely of two or more disinterested directors; provided, however, if there are not two disinterested directors, then legal counsel can be selected by a majority vote of the full board of directors, or (iii)by the shareholders, but shares owned by any interested director cannot be voted. Under Section271B.8-530, Ashland may advance expenses incurred by a director who is party to a proceeding prior to the final disposition if (i)the director furnishes the corporation a written affirmation of his or her good faith belief that he or she has met the KBCA standards of director conduct, (ii)the director furnishes the corporation with a written undertaking, executed personally or on his or her behalf, to repay the advance if it is ultimately determined that he or she did not meet the standard of conduct, and (iii)a determination is made that the facts known to those making the determination would not preclude indemnification under the KBCA’s director indemnification provisions. The indemnification and advancement of expenses provided by, or granted pursuant to, KBCA Sections271B.8-500 – 271B.8-580 is not exclusive of any other rights to which those seeking indemnification or advancement of expenses may otherwise be entitled under any by-law, agreement, vote of shareholders or disinterested directors, or otherwise. Articles of Incorporation and By-laws of Ashland Article X of Ashland’s Fourth Restated Articles of Incorporation (the “Restated Articles”) permits, but does not require, Ashland to indemnify its directors, officers and employees to the fullest extent permitted by law. Ashland’s By-laws (the “By-laws”) require indemnification of its officers and employees under certain circumstances. 3 In general, Article X of the Restated Articles and Article IX, Section1 of the By-laws provide for indemnification of any individual who was or is a party to any threatened, pending or completed claim, action, suit or proceeding by reason of his or her status as a director, officer or employee of Ashland or of another entity at Ashland’s request (collectively referred to as a “covered person”) against any reasonable costs and expenses (including attorneys’ fees) and any liabilities (including judgments, fines, penalties or reasonable settlements) reasonably paid by or imposed against the individual if the individual: • has been successful on the merits or otherwise with respect to such claim, action, suit or proceeding; or • acted in good faith, in what the person reasonably believed to be the best interests of Ashland or such other entity, as the case may be, and in addition, in any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful. Pursuant to Article IX, Sections 2-4 of the By-laws, indemnification based on good faith and reasonable belief shall be made unless it is determined by any of the following that the covered person has not met the standard of conduct required for good faith indemnification (as described above): • the board of directors, acting by a quorum consisting of directors who were not parties to (or who were determined to have been successful with respect to) the claim, action, suit or proceeding; • a committee of the board of directors consisting of directors who were not parties to (or who were determined to have been successful with respect to) the claim, action, suit or proceeding; • any officer or group of officers who, by resolution adopted by the board of directors, has been given authority to make such determinations; or • either of the following selected by the board of directors if a disinterested committee of the board cannot be obtained: (i) independent legal counsel (who may be the regular counsel of Ashland) who has delivered to Ashland a written determination; or (ii) an arbitrator or a panel of arbitrators (which panel may include directors, officers, employees or agents of Ashland) who has delivered to Ashland a written determination. Article IX, Section3 of the By-laws requires Ashland to advance expenses to a director, officer or employee prior to the final disposition of the claim, action, suit or proceeding, but the individual shall be obligated to repay the advances if it is ultimately determined that the individual is not entitled to indemnification. In addition, the By-laws provide that Ashland may, as a condition to advancing the expenses, require the director, officer or employee to sign a written instrument acknowledging such obligation to repay expenses if it is ultimately determined that the person is not entitled to indemnity. Ashland also may refuse to advance expenses or discontinue advancing expenses if it is determined by Ashland, in its sole and exclusive discretion, not to be in the best interest of Ashland. Notwithstanding the other provisions of Article IX, pursuant to Article IX, Section4 of the By-laws, no person shall be indemnified in respect of any claim, action, suit or proceeding, initiated by such person or such person’s representative, or which involved the voluntary solicitation or intervention of such person or such person’s representative. Article IX, Section5 of the By-laws provides that the rights of indemnification provided under Article IX shall be in addition to any other rights to which the director, officer or employee may otherwise be entitled. Further, in the event of any such person’s death, then their indemnification rights extend to their heirs and legal representatives. 4 Contracts Ashland has entered into indemnification agreements with each of its directors that require indemnification to the fullest extent permitted by law (as described above), subject to certain exceptions and limitations. Insurance Section271B.8-570 permits a corporation to purchase and maintain insurance on behalf of directors, officers, employees or agents of the corporation, who is or was serving in that capacity, against liability asserted against or incurred in that capacity or arising from that status, whether or not the corporation would have power to indemnify against the same liability. Ashland has purchased insurance which insures (subject to certain terms and conditions, exclusions and deductibles) Ashland against certain costs that it might be required to pay by way of indemnification to directors or officers under the Restated Articles or the By-laws, indemnification agreements or otherwise, and protects individual directors and officers from certain losses for which they might not be indemnified by Ashland. In addition, Ashland has purchased insurance that provides liability coverage (subject to certain terms and conditions, exclusion and deductibles) for amounts that Ashland or the fiduciaries under their employee benefit plans, which may include its respective directors, officers and employees, might be required to pay as a result of a breach of fiduciary duty. Item8. Exhibits. The Exhibits to this Registration Statement are listed in the Exhibit Index following the signature page to this Registration Statement and are incorporated herein by reference. Item9. Undertakings. (a)The undersigned registrant hereby undertakes: (1)to file, during any period in which offers or sales are being made of the securities registered hereby, a post-effective amendment to this Registration Statement: (i)to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement.Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offered range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and (iii)to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement. 5 (2)that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3)to remove from registration by means of a post-effective amendment any of the securities being registered hereby which remain unsold at the termination of the offering. (b)The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section13(a) or Section15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c)Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in the first paragraph of Item 15 above, or otherwise, the registrant has been advised that in the opinion of theCommission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Covington, Commonwealth of Kentucky, on this 18th day of December, 2014. ASHLAND INC. By: /s/Peter J. Ganz Name:
Exhibit 10.2 SECOND AMENDMENT TO UNSECURED MASTER LOAN AGREEMENT      THIS SECOND AMENDMENT TO UNSECURED MASTER LOAN AGREEMENT (this “Amendment”) made as of this 30th day of April, 2007, by and among RAMCO-GERSHENSON PROPERTIES, L.P., a Delaware limited partnership (“Borrower”), RAMCO-GERSHENSON PROPERTIES TRUST, a Maryland real estate investment trust (“Trust”), ROSSFORD DEVELOPMENT LLC, a Delaware limited liability company (“Rossford”), RAMCO ROSEVILLE PLAZA LLC, a Michigan limited liability company (“Roseville”), RAMCO MICHIGAN INVESTMENT LIMITED PARTNERSHIP, a Delaware limited partnership (“Michigan Investment”), and TEL-TWELVE LIMITED PARTNERSHIP, a Delaware limited partnership (“Tel-Twelve LP”; the Trust, Rossford, Roseville, Michigan Investment and Tel-Twelve LP are hereinafter referred to collectively as the “Guarantors”), and KEYBANK NATIONAL ASSOCIATION, as Agent (the “Agent” for the Banks). WITNESSETH:      WHEREAS, Borrower, Trust, Agent, and the Banks entered into that certain Unsecured Master Loan Agreement dated as of December 13, 2005, as amended by that certain First Amendment to Unsecured Master Loan Agreement dated as of December 27, 2006 (the “First Amendment”; such agreement, as amended, the “Loan Agreement”); and      WHEREAS, pursuant to the First Amendment, the limited liability of Tel-Twelve and Michigan Investment shall terminate on April 30, 2007 if such Guarantors have not been released as Guarantors as provided in the Loan Agreement on or before April 30, 2007; and      WHEREAS, Borrower and Guarantors have requested that the Agent and the Banks extend such date; and      WHEREAS, the Agent and the Banks have consented to such extension, subject to the execution and delivery of this Amendment.      NOW, THEREFORE, for and in consideration of the sum of TEN and NO/100 DOLLARS ($10.00), and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby      1. Definitions. All terms used herein which are not otherwise defined herein shall have the meanings set forth in the Loan Agreement.      2. Modification of Loan Agreement. The Agent on behalf of the Banks and the Borrower hereby amend the First Amendment by deleting the date “April 30, 2007” appearing in the last sentence of Paragraph 2(a) of the First Amendment and inserting in lieu thereof the date “January 10, 2008”.      3. References to Loan Agreement. All references in the Loan Documents to the Loan Agreement shall be deemed a reference to the Loan Agreement as modified and amended herein.          4. Consent of Guarantors. By execution of this Amendment, Guarantors hereby expressly consent to the modifications and amendments relating to the Loan Agreement and the Loan Documents as set forth herein, and Borrower and Guarantors hereby acknowledge, represent and agree that the Loan Documents (including without limitation the Guaranty) remain in full force and effect and constitute the valid and legally binding obligation of Borrower and Guarantors, respectively, enforceable against such Persons in accordance with their respective terms, and that the Guaranty extends to and applies to the foregoing documents as modified and amended.      5. Representations. Borrower and Guarantors represent and warrant to Agent and the Banks as follows:           (a) Authorization. The execution, delivery and performance of this Amendment and the transactions contemplated hereby (i) are within the authority of Borrower and Guarantors, (ii) have been duly authorized by all necessary proceedings on the part of such Persons, (iii) do not and will not conflict with or regulation to which any of such Persons is subject or any judgment, order, writ, injunction, license or permit applicable to such Persons, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the partnership agreement or certificate, certificate of formation, operating agreement, articles of incorporation or other charter documents or bylaws of, or any mortgage, indenture, agreement, contract or other instrument binding upon, any of such Persons or any of its properties or to which any of such Persons is subject, and (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of such Persons, other than the liens and encumbrances created by the Loan Documents.           (b) Enforceability. The execution and delivery of this Amendment are valid and legally binding obligations of Borrower and Guarantors enforceable in accordance with the respective terms and provisions hereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and the effect of general principles of equity.           (c) Approvals. The execution, delivery and performance of this Amendment and the transactions contemplated hereby do not require the approval or consent of or approval of any Person or the authorization, consent, approval of or any license or permit issued by, or any filing or registration with, or the giving of any notice to, any court, department, board, commission or other governmental agency or authority other than those already obtained.           (d) Representations in Loan Documents. The representations and warranties made by the Borrower and Guarantors and their Subsidiaries under the Loan Documents or otherwise made by or on behalf of the Borrower, the Guarantors or any of their respective Subsidiaries in connection therewith or after the date thereof were true and correct in all material respects when made and are true and correct in all material respects as of the date hereof (as modified and amended herein), except to the extent of changes resulting from transactions contemplated or permitted by the Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, except to the extent that 2   such representations and warranties relate expressly to an earlier date, and except as disclosed to the Agent and the Banks in writing and approved by the Agent and the Majority Banks in writing.      6. No Default. By execution hereof, the Borrower and Guarantors certify that the Borrower and Guarantors are and will be in compliance with all covenants under the Loan Documents after the execution and delivery of this Amendment, and that no Default or Event of Default has occurred and is continuing.      7. Waiver of Claims. Borrower and Guarantors acknowledge, represent and agree that Borrower and Guarantors as of the date hereof have no defenses, setoffs, claims, counterclaims or causes of action of any kind or nature whatsoever with respect to the Loan Documents, the administration or funding of the Loans or with respect to any acts or omissions of Agent or any of the Banks, or any past or present officers, agents or employees of Agent or any of the Banks, and each of Borrower and Guarantors does hereby expressly waive, release and relinquish any and all such defenses, setoffs, claims, counterclaims and causes of action, if any.      8. Ratification. Except as hereinabove set forth or in any other document previously executed or executed in connection herewith, all terms, covenants and provisions of the Loan Agreement, the Notes and the Guaranty remain unaltered and in full force and effect, and the parties hereto do hereby expressly ratify and confirm the Loan Agreement, the Notes and the Guaranty as modified and amended herein. Nothing in this Amendment shall be deemed or construed to constitute, and there has not otherwise occurred, a novation, cancellation, satisfaction, release, extinguishment or substitution of the indebtedness evidenced by the Notes or the other obligations of Borrower and Guarantors under the Loan Documents (including without limitation the Guaranty).      9. Counterparts. This Amendment may be executed in any number of counterparts which shall together constitute but one and the same agreement.      10. Miscellaneous. This Amendment shall be construed and enforced in accordance with the laws of the State of Michigan (excluding the laws applicable to conflicts or choice of law). This Amendment shall be binding upon and shall successors, successors-in-title and assigns as provided in the Loan Documents.      11. Effective Date. This Amendment shall be deemed effective and in full force and effect as of the date hereof upon the execution and delivery of this Amendment by Borrower, Guarantors and the Agent. Agent has obtained the approval of the Required Banks of this Amendment. [SIGNATURES BEGIN ON NEXT PAGE] 3        IN WITNESS WHEREOF, the parties hereto have hereto set their hands as of             BORROWER: RAMCO-GERSHENSON PROPERTIES, L.P., a Delaware limited partnership, by its sole general partner By: Ramco-Gershenson Properties Trust, a        Maryland real estate investment trust       By:   /s/ Richard J. Smith         Name:   RICHARD J. SMITH        Title:   CHIEF FINANCIAL OFFICER        TRUST: RAMCO-GERSHENSON PROPERTIES TRUST, a Maryland real estate investment trust Title:   CHIEF FINANCIAL OFFICER        ROSSFORD: ROSSFORD DEVELOPMENT LLC, a Delaware limited liability company Title:   CHIEF FINANCIAL OFFICER      [SIGNATURES CONTINUE ON NEXT PAGE] 4               ROSEVILLE: RAMCO ROSEVILLE PLAZA LLC, a Michigan limited liability company By: Ramco-Gershenson Properties, L.P., a        Delaware limited partnership, its Sole        Member By: Ramco-Gershenson Properties Trust,        a Maryland real estate investment        trust, its General Partner Title:   CHIEF FINANCIAL OFFICER        TEL-TWELVE LP: TEL-TWELVE LIMITED PARTNERSHIP, a Delaware limited partnership By: Ramco General Partner LLC, a Delaware        limited liability company, general partner 5               MICHIGAN INVESTMENT: RAMCO MICHIGAN INVESTMENT LIMITED PARTNERSHIP, a Delaware limited partnership 6               AGENT: KEYBANK NATIONAL ASSOCIATION, as Agent       By:   /s/ Daniel L. Silbert         Name:   DANIEL L. SILBERT        Title:   SR. BANKER      7
Exhibit 10.2 NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER. NOTICE: THIS INSTRUMENT SECURES, INTER ALIA, OBLIGATIONS THAT PROVIDE FOR A VARIABLE RATE OF INTEREST AND OBLIGATORY FUTURE ADVANCES. ALL SUCH OBLIGATORY FUTURE ADVANCES SHALL HAVE THE SAME LIEN PRIORITY AS IF MADE ON THE DATE HEREOF. [SEE THE FOLLOWING DEED OF TRUST FOR PARTICULARS.] DC-5000 BOWEN ROAD, LLC, as Grantor to GARY S. FARMER, as Trustee for the benefit of KEYBANK NATIONAL ASSOCIATION, a national banking association, as Agent, as Beneficiary DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS       Dated:    As of August 16, 2012     Property Address:          5000 South Bowen Road      Arlington, Texas     Location:    Tarrant County, Texas WHEN RECORDED, RETURN TO: McKenna Long & Aldridge LLP 303 Peachtree Street, N.E., Suite 5300 Atlanta, Georgia 30308 Attention: William F. Timmons, Esq. ATTENTION: COUNTY CLERK – THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN THE RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE RECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT COVERING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING ADDRESSES OF GRANTOR (DEBTOR) AND AGENT (SECURED PARTY) ARE SET FORTH IN THIS INSTRUMENT. THIS DOCUMENT SERVES AS A FIXTURE FILING UNDER SECTION 9.502 OF THE TEXAS BUSINESS AND COMMERCE CODE. Grantor’s Organizational Identification Number: 5190776.   2 THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS (this “Instrument”) is made and entered into as of this      day of August, 2012, by and among DC-5000 BOWEN ROAD, LLC, a Delaware limited liability company (“Grantor”), having a mailing address of 4211 W. Boy Scout Boulevard, Tampa, Florida 33607, GARY S. FARMER, as trustee (“Trustee”), having a business address of c/o Heritage Title Company of Austin, Inc., 401 Congress Avenue, Suite 1500, Austin, Texas 78701, and KEYBANK NATIONAL ASSOCIATION, a national banking association (“KeyBank”), having a mailing address of 4900 Tiedeman Road, Brooklyn, Ohio 44144, Attn: Real Estate Capital Services, with a copy to KeyBank National Association, 1200 Abernathy Road, N.E., Suite 1550, Atlanta, Georgia 30328, Attn: Daniel Stegemoeller, as Agent (KeyBank, in its capacity as Agent, is hereinafter referred to as “Agent”) for itself and each other lender (collectively, the “Lenders”) which is or may hereafter become a party to that certain Credit Agreement, dated as of March 30, 2012, by and among Carter/Validus Operating Partnership, LP, a Delaware limited partnership (“Borrower”), KeyBank, as Agent and the Lenders, as amended by that certain First Amendment to Credit Agreement, dated as of May 8, 2012, by and among Borrower, Carter Validus Mission Critical REIT, Inc., a Maryland Corporation (“REIT”), HC-2501 W William Cannon Dr, LLC, a Delaware limited liability company (“HC-2501”), and Keybank, individually and as Agent for the Lenders, as further amended by that certain Second Amendment to Credit Agreement, dated as of June 29, 2012, by and among Borrower, REIT, HC-2501, DC-19675 W. Ten Mile, LLC, a Delaware limited liability company (“DC-19675”), Synovus Bank and KeyBank, individually and as Agent for the Lenders, and as further amended by that certain Third Amendment to Credit Agreement, dated as of July 30, 2012 by and among Borrower, REIT, HC-2501, DC-19675, KeyBank, individually and as Agent for the Lenders, and Synovus Bank (as the same may be varied, amended, restated, renewed, consolidated, extended or otherwise supplemented from time to time, the “Credit Agreement”). Capitalized terms used herein that are not otherwise defined herein shall have the meanings set forth in the Credit Agreement. Grantor is a Guarantor and will benefit from the Credit Agreement, as more fully set forth in the Guaranty (as hereinafter defined) executed by Grantor, and is granting this Instrument in consideration for such benefit. FOR AND IN CONSIDERATION of the sum of Ten and No/100 Dollars ($10.00) and other acknowledged, and in order to secure the indebtedness and other obligations of Grantor and Borrower hereinafter set forth, Grantor does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER and SET OVER UNTO Trustee, with GENERAL WARRANTY in trust WITH POWER OF SALE, for the benefit of Agent and for the ratable benefit of the Lenders and the holders of the Hedge Obligations, and their successors and assigns, all of Grantor’s right, title and interest in and to the following described land and interests in land, estates, easements, rights, improvements, property, fixtures, equipment, furniture, furnishings, appliances, general intangibles, and appurtenances, whether now or hereafter existing or acquired (collectively, the “Property”: (a) All those tracts or parcels of land and easements more particularly described in Exhibit “A” attached hereto and by this reference made a part hereof (the “Land”).   3 (b) All present and future buildings, structures, parking areas, annexations and improvements of every nature whatsoever now or hereafter situated on the Land (hereinafter referred to as the “Improvements”) and all materials intended for construction, reconstruction, alteration and repairs of the Improvements now or hereafter erected, all of which materials shall be deemed to be included within the Improvements immediately upon the delivery thereof to the Land, and all gas and electric fixtures, radiators, heaters, engines and machinery, boilers, ranges, elevators and motors, plumbing and heating fixtures, incinerating, sprinkling, and waste removal systems, carpeting and other floor coverings, fire extinguishers and any other safety equipment required by governmental regulation or law, washers, dryers, water heaters, mirrors, mantels, air conditioning apparatus, refrigerating plants, refrigerators, cooking apparatus and appurtenances, storm windows and doors, window and door screens, awnings and storm sashes, which are or shall be owned by Grantor and attached to said Improvements and all other furnishings, furniture, glassware, tableware, uniforms, linen, drapes and curtains and related hardware and mounting devices, wall to wall carpeting, radios, lamps, telephone systems, televisions and television systems, computer systems, guest ledgers, vehicles, fixtures, machinery, equipment, apparatus, appliances, books and records, chattels, inventory, accounts, farm products, consumer goods, general intangibles and personal property of every kind and nature whatsoever now or hereafter owned by Grantor and located in, on or about, or used or intended to be used with or in connection with the use, operation or enjoyment of the Property, including all extensions, additions, improvements, betterments, after-acquired property, renewals, replacements and substitutions, or proceeds from a permitted sale of any of the foregoing, together with the benefit of any deposits or payments now or hereafter made by Grantor or on behalf of Grantor, all of which are hereby declared and shall be deemed to be fixtures and accessions to the Land and a part of the Property as between the parties hereto and all persons claiming by, through or under them, and which shall be deemed to be a portion of the security for the indebtedness herein described and to be secured by this Instrument. (c) All easements, access rights, rights-of-way, strips and gores of land, vaults, streets, ways, alleys, passages, sewer rights, waters, water courses, water rights and powers, irrigation systems (including, without limitation, underground wiring, pipes, pumps and sprinkler heads), minerals, flowers, plants, shrubs, crops, trees, timber, fences, signs, bridges, fountains, monuments and other emblements now or hereafter located on the Land or under or above the same or any part or parcel thereof, and all estates, rights, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances, reversion and reversions, remainder and remainders, whatsoever, in any way belonging, relating or appertaining to the Land or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto, whether now owned or hereafter acquired by Grantor. (d) All leases and all subleases, tenancies, occupancies and licenses, whether oral or written (collectively, the “Leases”), and all income, rents, issues, profits, room rentals, transient or guest payments, fees, charges or other payments for the use or occupancy of rooms or other facilities, and revenues of the Property from time to time accruing (including, without limitation, all payments under Leases, all guarantees of the foregoing or letters of credit relating to the foregoing, lease termination payments, proceeds of insurance, condemnation payments, tenant security, damage or other deposits whether held by Grantor or in a trust account, all escrow agreements relating to any of the Leases, escrow funds, including, without limitation, any funds escrowed for tenant improvements, fees, charges, rents, license fees, accounts, royalties, security,   4 damage or other deposits from time to time accruing, all payments under working interests, production payments, royalties, overriding royalties, operating interests, participating interest and other such entitlements, and all the estate, right, title, interest, property, possession, claim and demand whatsoever at law, as well as in equity, of Grantor of, in and to the same (collectively, the “Revenues”); reserving only the right to Grantor to collect the same (other than lease termination payments, insurance proceeds and condemnation payments) so long as no Event of Default has occurred and is continuing. (e) All insurance policies, building service, building maintenance, construction, development, management, indemnity, and other similar agreements and contracts and subcontracts, written or oral, express or implied, now or hereafter entered into, arising or in any manner related to the purchase, construction, design, improvement, use, operation, ownership, occupation, enjoyment, sale, conversion or other disposition (voluntary or involuntary) of the Property, or the buildings and improvements now or hereafter located thereon, or any other interest in the Property, or any combination thereof, franchise agreements, property management agreements, cable television agreements, contracts for the purchase of supplies, telephone service agreements, yellow pages or other advertising agreements, sales contracts, construction contracts, architects agreements, general contract agreements, design agreements, engineering agreements, technical service agreements, sewer and water and other utility agreements, service contracts, agreements relating to the collection of receivables or use of customer lists, all bookings and reservations for space or facilities within the Property, all purchase options, option agreements, rights of first refusal, contract deposits, earnest money deposits, prepaid items and payments due and to become due thereunder, and further including all payment and performance bonds, labor, deposits, assurances, construction guaranties, guaranties, warranties, indemnities and other undertakings, architectural plans and specifications, drawings, surveys, soil reports, engineering reports, inspection reports, environmental audits and other technical descriptions and reports relating to the Property, renderings and models, permits, consents, approvals, licenses, variances, agreements, contracts, building permits, purchase orders and equipment leases, personal property leases, and all causes of action relating thereto. (f) All deposit accounts, instruments, accounts receivable, documents, causes of action, claims, names by which the Property or the improvements thereon may be operated or known, all rights to carry on business under such names, all telephone numbers or listings, all rights, interest and privileges of which Grantor may have in any capacity under any covenants, restrictions or declarations now or hereafter relating to the Property or the Improvements, and all notes or chattel paper now or hereafter arising from or by virtue of any transactions relating to the Property or the Improvements located thereon and all customer lists, other lists, and business information relating in any way to the Property or the Improvements or the use thereof, whether now owned or hereafter acquired; (g) All assets related to the ownership or operation of the Property or the Improvements now or hereafter erected thereon, including, without limitation, accounts (including, without limitation, health-care-insurance receivables), chattel paper (whether tangible or electronic), deposit accounts, documents, general intangibles (including, without limitation, payment intangibles, and all current and after acquired copyrights, copyright rights, advertising materials, web sites, and web pages, software and software licenses, trademarks and service marks, trademark rights, trademark applications, service mark rights, service mark applications,   5 trade dress rights, company names, logos, and all domain names, owned or used in connection with the Grantor’s business, and in each case all goodwill associated therewith), goods (including, without limitation, inventory, property, possessions, equipment, fixtures and accessions), instruments (including, without limitation, promissory notes), investment property, letter-of-credit rights, letters of credit, money, supporting obligations, as-extracted collateral, timber to be cut and all proceeds and products of anything described or referred to above in this Subsection (g), in each case as such terms are defined under the Uniform Commercial Code as in effect in the applicable jurisdiction. (h) All cash funds, deposit accounts and other rights and evidence of rights to cash, now or hereafter created or held by Trustee or Agent pursuant to this Instrument, the Credit Agreement or any other of the Loan Documents. (i) All proceeds, products, substitutions and accessions of the foregoing of every type. TO HAVE AND TO HOLD the Property and all parts, rights, members and appurtenances thereof, to the Trustee, for the use, benefit and behoof of Agent for the ratable benefit of the Lenders and the holders of the Hedge Obligations and their respective successors and assigns, IN FEE SIMPLE forever; and Grantor covenants that Grantor is lawfully seized and possessed of the Property as aforesaid, and has good right to convey its indefeasible fee simple interest in the Land, that the same is unencumbered except for those matters expressly set forth in Exhibit “B” attached hereto and by this reference made a part hereof (the “Permitted Encumbrances”), and that Grantor does warrant and will forever defend the title thereto against the claims of all persons whomsoever, except as to those matters set forth in said Exhibit “B” attached hereto, or otherwise specifically approved by Agent in writing after the date hereof. IN TRUST NEVERTHELESS to secure the following described obligations (collectively, the “Secured Obligations”): (a) The debt evidenced by (i) those certain Revolving Credit Notes made by Borrower in the aggregate principal amount of Fifty-Five Million and No/100 Dollars ($55,000,000.00) to the order of Lenders, which evidence a revolving credit loan in the initial principal amount of up to $55,000,000.00 and that may be increased to up to Two Hundred Fifty Million and No/100 Dollars ($250,000,000.00) pursuant to Section 2.11 of the Credit Agreement, and (ii) that certain Swing Loan Note made by Borrower in the principal amount of Ten Million and No/100 Dollars ($10,000,000.00) to the order of KeyBank, each of which has been issued pursuant to the Credit Agreement and each of which is due and payable in full on or before March 30, 2015, unless extended as provided in the Credit Agreement; and (iii) each other note as may be issued under the Credit Agreement, each as originally executed, or if varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated from time to time as so varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated (collectively, the “Note”); (b) The payment, performance and discharge of each and every obligation, covenant and agreement of Grantor contained herein or of Grantor contained in that certain Unconditional Guaranty of Payment and Performance by Grantor and others in favor of KeyBank, as Agent for   6 itself and each other Lender, dated as of March 30, 2012, as amended by that certain First Amendment to Unconditional Guaranty of Payment and Performance, dated as of June 29, 2012, and that certain Second Amendment to Unconditional Guaranty of Payment and Performance dated as of July 19, 2012 (as amended, restated, modified, renewed, supplemented or extended from time to time, the “Guaranty”), of Borrower contained in the Credit Agreement, and of Grantor and Borrower in the other Loan Documents, including, without limitation, the obligation of Borrower to reimburse Issuing Lender for any draws under the Letters of Credit; (c) Any and all additional advances made by Agent or any Lender to protect or preserve the Property or the lien and security title hereof in and to the Property, or for taxes, assessments or insurance premiums as hereinafter provided (whether or not Grantor is the owner of the Property at the time of such advances); (d) The payment, performance and discharge of each and all of the Hedge Obligations; (e) Any and all other indebtedness now or hereafter owing by Borrower to Agent or any Lender pursuant to the terms of the Credit Agreement, whether now existing or hereafter arising or incurred, however evidenced or incurred, whether express or implied, direct or indirect, absolute or contingent, due or to become due, including, without limitation, all principal, interest, fees, expenses, yield maintenance amounts and indemnification amounts, and all renewals, modifications, consolidations, replacements and extensions thereof; and (f) All costs and expenses incurred by the Trustee, Agent, the Lenders and the holders of the Hedge Obligations in connection with the enforcement and collection of the Secured Obligations, including, without limitation, all attorneys’ fees and disbursements, and all other such costs and expenses described in and incurred pursuant to the Note, the Credit Agreement, the Guaranty, this Instrument, and the other Loan Documents and the agreements evidencing or relating to the Hedge Obligations (the “Hedge Documents”) (collectively, the “Enforcement Costs”). Subject to Section 2.22 hereof, should the Secured Obligations secured by this the same shall become due and payable, and should Grantor perform all covenants contained herein in a timely manner and the obligation of the Lenders to make Loans and issue Letters of Credit under the Credit Agreement has terminated, then this Instrument shall be released. Grantor hereby further covenants and agrees with Trustee and Agent as follows: ARTICLE 1 1.01 Payment of Secured Obligations. Grantor will pay and perform or cause to be paid and performed the Secured Obligations according to the tenor thereof and all other sums now or hereafter secured hereby as the same shall become due. 1.02 Funds for Impositions. After the occurrence and during the continuance of an Event of Default, Grantor shall pay to Agent, subject to Agent’s option under Section 1.03   7 hereof, on the days that monthly installments of interest are payable under the Note, until the Note is paid in full, a sum (hereinafter referred to as the “Funds”) reasonably estimated by Agent to provide an amount necessary for payment of the following items in full fifteen (15) days prior to when such items become due (hereinafter collectively referred to as the “Impositions”): (a) the yearly real estate taxes, ad valorem taxes, personal property taxes, assessments and betterments, and (b) the yearly premium installments for the insurance covering the Property and required by the Credit Agreement. The Impositions shall be reasonably estimated initially and from time to time by Agent on the basis of assessments and bills and estimates thereof. The Funds shall be held by Agent in a separate interest bearing account free of any liens or claims on the part of other creditors of Grantor and as part of the security for the Secured Obligations. Grantor shall pay all Impositions prior to delinquency as required by Section 1.03 hereof. In the event Agent elects to reserve Funds as permitted under this Section 1.02, within ten (10) days after Grantor furnishes Agent with reasonably satisfactory evidence that Grantor has paid one or more of the items comprising the Impositions, Agent shall reimburse Grantor (or the one paying the Impositions) therefor to the extent of the Funds (plus accrued interest) then held by Agent. Alternatively, Agent shall apply the Funds to pay the Impositions with respect to which the Funds were paid to the extent of the Funds then held by Agent and provided Grantor has delivered to Agent the assessments or bills therefor. Grantor shall be permitted to pay any Imposition early in order to take advantage of any available discounts. Agent shall make no charge for so holding and applying the Funds or for verifying and compiling said assessments and bills. The Funds are pledged as additional security for the Secured Obligations, and may be applied, at Agent’s option and without notice to Grantor, to the payment of the Secured Obligations upon the occurrence of any Event of Default. If at any time the amount of the Funds held by Agent shall be less than the amount reasonably deemed necessary by Agent to pay Impositions as such become due, Grantor shall pay to Agent any amount necessary to make up the deficiency within fifteen (15) business days after notice from Agent to Grantor requesting payment thereof. Upon payment and performance in full of the Secured Obligations and termination of the obligation of the Lenders to make Loans and of Issuing Lender to issue Letters of Credit, Agent shall promptly refund to Grantor any Funds then held by Agent. 1.03 Impositions, Liens and Charges. Grantor shall pay all Impositions and other charges, if any, attributable to the Property prior to delinquency, and at Agent’s option during the continuance of an Event of Default, Grantor shall pay in the manner hereafter provided under this Section 1.03. Grantor shall, during continuance of an Event of Default, furnish to Agent all bills and notices of amounts due under Section 1.03 as soon as received, and in the event Grantor shall make payment directly, Grantor shall, as and when available, furnish to Agent receipts evidencing such payments prior to the dates on which such payments are delinquent, subject to Grantor’s right to contest taxes, assessments and other governmental charges as provided in the Credit Agreement. Grantor shall promptly discharge (by bonding, payment or otherwise) any lien filed against the Property or Grantor (including federal tax liens) and will keep and maintain the Property free from the claims of all persons supplying labor or materials to the Property, subject to Grantor’s right to contest the same as provided in the Credit Agreement. Grantor shall not claim or be entitled to any credit against the taxable value of the Property by reason of this Instrument, or any deduction in or credit on the Secured Obligations by reason of Impositions paid.   8 1.04 Taxes, Liens and Other Charges. (a) In the event of the passage of any state, federal, municipal or other governmental law, order, rule or regulation, subsequent to the date hereof, in any manner changing or modifying the laws now in force governing the taxation of debts secured by deeds of trust or the manner of collecting taxes so as to adversely affect Agent or the Lenders, Grantor will promptly pay any such tax. If Grantor fails to make such payment promptly, or if, in the opinion of Agent, any such state, federal, municipal, or other governmental law, order, rule or regulation prohibits Grantor from making such payment or would penalize Agent or the Lenders if Grantor makes such payment or if, in the opinion of Agent, the making of such payment could reasonably result in the imposition of interest beyond the maximum amount permitted by applicable law, then the entire balance of the principal sums secured by this Instrument and all interest accrued thereon shall, at the option of Agent, become immediately due and payable. (b) Grantor will pay all taxes, liens, assessments and charges of every character including all utility charges, whether public or private, already levied or assessed or that may hereafter be levied or assessed upon or against the Property as required under the Credit Agreement. 1.05 Insurance. Grantor shall procure for, deliver to and maintain for the benefit of Agent and Lenders the insurance policies described in the Credit Agreement. Grantor shall pay all premiums on such insurance policies. All proceeds of any property or casualty insurance or awards of damages on account of any taking or condemnation for public use of or injury to the Property are hereby assigned and shall be paid to Agent, for the benefit of the Lenders, subject to Borrower’s and Grantor’s right to adjust certain claims and use such proceeds as provided in the Credit Agreement. Any such proceeds shall be released and advanced to Borrower or Grantor in accordance with and subject to the requirements of the Credit Agreement and be applied to the cost of repairing or restoring the Property or the remaining portion of the Property, with any balance remaining to be applied in accordance with the terms and provisions of the Credit Agreement. In the event of a foreclosure sale of all or any part of the Property pursuant to the enforcement of this Instrument, the purchaser of such Property shall succeed to all rights of Grantor, including any rights to the proceeds of insurance and to unearned premiums, in and to all of the policies of insurance. In the event of a foreclosure sale, Agent is hereby authorized, without the further consent of Grantor, to take such steps as Agent may deem advisable to cause the interest of such purchaser to be protected by any of such policies. In case of Grantor’s failure to keep the Property properly insured as required herein, Agent, after notice to Grantor, at its option may (but shall not be required to) acquire such insurance as required herein at Borrower’s and Grantor’s sole expense. TEXAS FINANCE CODE SECTION 307.052 COLLATERAL PROTECTION INSURANCE NOTICE: (A) GRANTOR IS REQUIRED TO (i) KEEP THE PROPERTY INSURED AGAINST DAMAGE IN THE AMOUNT SPECIFIED IN THE CREDIT AGREEMENT; (ii) PURCHASE THE INSURANCE FROM AN INSURER THAT IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS LINES INSURER OR OTHERWISE AS PROVIDED IN THE CREDIT AGREEMENT; AND (iii) NAME AGENT AS THE PERSON TO BE PAID UNDER THE POLICY IN THE EVENT OF A LOSS AS PROVIDED IN THE CREDIT   9 AGREEMENT; (B) SUBJECT TO THE PROVISIONS HEREOF AND OF THE CREDIT AGREEMENT, GRANTOR MUST, IF REQUIRED BY AGENT, DELIVER TO AGENT A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS; AND (C) SUBJECT TO THE PROVISIONS HEREOF AND OF THE CREDIT AGREEMENT, IF GRANTOR FAILS TO MEET ANY REQUIREMENT LISTED IN THE FOREGOING SUBPARTS (A) OR (B), AGENT MAY OBTAIN COLLATERAL PROTECTION INSURANCE ON BEHALF OF GRANTOR AT BORROWER’S AND GRANTOR’S EXPENSE. 1.06 Condemnation. If all or any portion of the Property shall be damaged or taken through condemnation (which term when used in this Instrument shall include any damage or taking by any governmental authority or any transfer by private sale in lieu thereof), either temporarily or permanently, then all compensation, awards and other payments or relief thereof, shall be paid and applied in accordance with terms and provisions of the Credit Agreement. 1.07 Care, Use and Management of Property. (a) Grantor will keep, or cause to be kept, the roads and walkways, landscaping and all other Improvements of any kind now or hereafter erected on the Land or any part thereof in good condition and repair, will not commit or suffer any waste, impairment or deterioration (ordinary wear and tear excepted) and will not do or suffer to be done anything which will increase the risk of fire or other hazard to the Property or any part thereof. (b) Grantor will not remove or demolish nor alter the structural character of any building located on the Land or any fixtures or personal property relating thereto except when incidental to the replacement of fixtures and personal property with items of like kind and value or customary tenant improvements pursuant to Leases approved or deemed approved pursuant to the Credit Agreement. (c) If the Property or any part thereof is materially damaged by fire or any other cause, Grantor will give immediate written notice thereof to Agent. (d) Grantor will promptly comply with all present and future laws, ordinances, rules and regulations of any governmental authority, all restrictive covenants and other agreements affecting the Property or relating to the operation thereof affecting the Property or any part thereof and all licenses or permits affecting the Property or any part thereof, subject to Grantor’s right to contest the same as provided in the Credit Agreement. (e) Grantor shall keep the Property, including the Improvements and the Personal Property (as hereinafter defined), in good order, repair and tenantable condition and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good order, repair, and tenantable condition (ordinary wear and tear excepted). (f) Grantor shall keep all franchises, trademarks, trade names, service marks and licenses and permits necessary for the Grantor’s use and occupancy of the Property in good standing and in full force and effect.   10 (g) Unless required by applicable law or unless Agent has otherwise agreed in writing, Grantor shall not allow changes in the nature of the occupancy or use for which the Property was intended at the time this Instrument was executed. Grantor shall not abandon the Property. Grantor shall not initiate, fail to contest or acquiesce in a change in the zoning classification of the Property or subject the Property to restrictive or negative covenants without Agent’s written consent. Grantor shall comply with, observe and perform all zoning and other laws affecting the Property, all agreements and restrictive covenants affecting the Property, and all licenses and permits affecting the Property, subject to Grantor’s right to contest compliance with laws to the extent permitted in the Credit Agreement. (h) To the extent permitted under the terms of the applicable Leases, Agent may, at Grantor’s expense, make or cause to be made reasonable entries upon and inspections of the Property as permitted in the Credit Agreement during normal business hours and upon reasonable advance notice, or at any other time when necessary or appropriate in an emergency circumstance or during the continuance of an Event of Default, in the sole reasonable discretion of Agent, to protect or preserve the Property. (i) If all or any part of the Property shall be damaged by fire or other casualty or loss, then, subject to the provisions of the Credit Agreement, Grantor will promptly restore the Property to the equivalent of its original condition; and if a part of the Property shall be damaged through condemnation, Grantor will promptly restore, repair or alter the remaining portions of the Property in a manner satisfactory to Agent. Notwithstanding the foregoing, Grantor shall not be obligated to so restore unless, in each instance, Agent agrees to make available to Grantor (subject to the terms of the Credit Agreement) any net insurance or condemnation proceeds actually received by Agent hereunder in connection with such casualty loss or condemnation, to the extent such proceeds are required to defray the expense of such restoration; provided, however, that, subject to the provisions of the Credit Agreement, the insufficiency of any such insurance or condemnation proceeds to defray the entire expense of restoration shall in no way relieve Grantor of its obligation to restore. (j) Grantor shall pay all normal and customary operating expenses for the Property as the same become due. 1.08 Leases and other Agreements Affecting Property. (a) As additional security for the Secured Obligations, Grantor presently and unconditionally assigns and transfers to Agent all of Grantor’s right, title and interest in and to the Leases and the Revenues, including those now due, past due or to become due by virtue of any of the Leases for the occupancy or use of all or any part of the Property. Grantor hereby authorizes Agent or Agent’s agents to collect the Revenues and hereby directs such tenants, lessees and licensees of the Property to pay the Revenues to Agent or Agent’s agents; provided, however, Grantor shall have a license (revocable upon the occurrence and during the continuance of an Event of Default) to collect and receive the Revenues. Grantor agrees that each and every tenant, lessee and licensee of the Property may pay, and hereby irrevocably authorizes and directs each and every tenant, lessee and licensee of the Property to pay, the Revenues to Agent or Agent’s agents on Agent’s written demand therefor (which demand may be made by Agent at any time after the occurrence and during the continuance of an Event of Default) without any   11 obligation on the part of said tenant, lessee or licensee to inquire as to the existence of an Event of Default and notwithstanding any notice or claim of Grantor to the contrary, and Grantor agrees that Grantor shall have no right or claim against said tenant, lessee or licensee for or by reason of any Revenues paid to Agent following receipt of such written demand. (b) Grantor hereby covenants that Grantor has not executed any prior assignment of the Leases or the Revenues, that Grantor has not performed, and will not perform, any acts and has not executed, and will not execute, any instruments which would prevent Agent from exercising the rights of the beneficiary of this Instrument, and that at the time of execution of this Instrument, there has been no anticipation or prepayment of any of the Revenues for more than one (1) month prior to the due dates of such Revenues. Grantor further covenants that Grantor will not hereafter collect or accept payment of any Revenues more than one (1) month prior to the due dates of such Revenues. (c) Grantor agrees that neither the foregoing assignment of Leases and Revenues nor the exercise of any of Agent’s rights and remedies under this Section or Article 2 hereof shall be deemed to make Agent a mortgagee-in-possession or otherwise responsible or liable in any manner with respect to the Leases, the Property or the use, occupancy, enjoyment or operation of all or any portion thereof, unless and until Agent, in person or by agent, assumes actual possession thereof. Grantor further agrees that the appointment of any receiver for the Property by any court at the request of Agent or by agreement with Grantor, or the entering into possession of any part of the Property by such receiver, shall not be deemed to make Agent a mortgagee-in-possession or thereof. (d) If Agent exercises its rights and remedies pursuant to this Section or Article 2 hereof, all Revenues thereafter collected shall be applied in such order as Agent may elect in its discretion to the reasonable costs of taking control of and managing the Property and collecting the Revenues, including, but not limited to, reasonable attorneys’ fees actually incurred, fees, receiver fees, premiums on receiver’s bonds, costs of repairs to the Property, premiums on insurance policies, Impositions and other charges on the Property, and the costs of discharging any obligation or liability of Grantor as landlord, lessor or licensor of the Property, or to the Secured Obligations. Agent or any receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those Revenues actually received. Agent shall not be liable to Grantor, anyone claiming under or through Grantor or anyone having an interest in the Property by reason of anything done or left undone by Agent pursuant to this Section or Article 2 hereof, except in the event of Agent’s gross negligence or willful misconduct. If the Revenues are not sufficient to meet the costs of taking control of and managing the Property and collecting the Revenues, any monies reasonably expended by Agent for such purposes shall become a portion of the Secured Obligations. Unless Agent and Grantor agree in writing to other terms of payment, such amounts shall be payable upon notice from Agent to Grantor requesting payment thereof and shall bear interest from the date of disbursement at the Default Rate stated in the Credit Agreement unless payment of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Grantor under applicable law. The entering upon and taking possession of and maintaining of control of the Property by Agent or any receiver and the application of Revenues as provided herein shall not cure or waive any Event of Default or invalidate any other right or remedy of Agent hereunder.   12 (e) It is the intention of Agent and Grantor that the assignment effectuated by this Instrument with respect to the Revenues shall be a direct and currently effective assignment and shall not constitute merely an obligation to grant a lien, security interest or pledge for the purpose of securing the Secured Obligations. (f) In the event that a court of competent jurisdiction determines that, notwithstanding such expressed intent of the parties, Agent’s interest in the Revenues constitutes a lien on or security interest in or pledge of the Revenues, it is agreed and understood that the forwarding of a notice to Borrower after the occurrence of an Event of Default advising Borrower of the revocation of Borrower’s license to collect such Revenues, shall be sufficient action by Agent to (i) perfect such lien on or security interest in or pledge of the Revenues, (ii) take possession thereof and (iii) entitle Agent to immediate and direct payment of the Revenues, for application as provided in this Instrument, all without the necessity of any further action by Agent, including, without limitation, any action to obtain possession of the Land, Improvements or any other portion of the Property. 1.09 Leases of the Property. (a) Except as permitted in the Credit Agreement, Grantor shall not enter into any Lease of all or any portion of the Property or amend, supplement or otherwise modify, or terminate or cancel, or accept the surrender of, or consent to the assignment or subletting of, or grant any concessions to or waive the performance of any obligations of any tenant, lessee or licensee under, any now existing or future Lease of the Property, without the prior written consent of Agent. Grantor, at Agent’s request, shall furnish Agent with executed copies of all Leases hereafter made of all or any part of the Property. Upon Agent’s request, Grantor shall make a separate and distinct assignment to Agent, as additional security, of all Leases hereafter made of all or any part of the Property. (b) There shall be no merger of the leasehold estates created by the Leases with the fee estate of the Land without the prior written consent of Agent. Agent may at any time and from time to time by specific written instrument intended for the purpose, unilaterally subordinate the lien of this Instrument to any Lease, without joinder or consent of, or notice to, Grantor, any tenant or any other Person, and notice is hereby given to each tenant under a Lease of such right to subordinate. No such subordination shall constitute a subordination to any lien or other encumbrance, whenever arising, or improve the right of any junior lienholder. Nothing herein shall be construed as subordinating this Instrument to any Lease. (c) Grantor hereby appoints Agent its attorney-in-fact, coupled with an interest, empowering Agent to subordinate this Instrument to any Leases. 1.10 Security Agreement. (a) Insofar as the machinery, apparatus, equipment, fittings, fixtures, building supplies and materials, general intangibles and articles of personal property either referred to or described in this Instrument, or in any way connected with the use and enjoyment of the Property   13 is concerned, Grantor grants unto Agent a security interest therein and this Instrument is hereby made and declared to be a security agreement, encumbering each and every item of personal property (the “Personal Property”) included herein, in compliance with the provisions of the Uniform Commercial Code as enacted in the applicable jurisdiction as set forth in Section 3.04 below (the “UCC”). Any notification required by the UCC shall be deemed reasonably and properly given if sent in accordance with the notice provisions of this Instrument at least ten (10) days before any sale or other disposition of the Personal Property. Disposition of the Personal Property shall be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. It shall be deemed commercially reasonable for the Trustee and/or Agent to dispose of the Personal Property without giving any warranties as to the Personal Property and specifically disclaiming all disposition warranties. A financing statement or statements affecting all of said personal property aforementioned, shall be appropriately filed. The remedies for any violation of the covenants, terms and conditions of the security agreement herein contained shall be (i) as prescribed herein with respect to the Property, or (ii) as prescribed by general law, or (iii) as prescribed by the specific statutory consequences now or hereafter enacted and specified in said UCC, all at Agent’s sole election. Grantor and Agent agree that the filing of such financing statement(s) in the records normally having to do with personal property shall never be construed as in any way derogating from or impairing this declaration and hereby stated intention of Grantor and Agent that everything used in connection with the production of income from the Property and/or adapted for use therein and/or which is described or reflected in this Instrument, is to the full extent provided by law, and at all times and for all purposes and in all proceedings both legal or equitable shall be, regarded as part of the real estate irrespective of whether (i) any such item is physically attached to the Improvements, (ii) serial numbers are used for the better identification of certain items capable of being thus identified in a recital contained herein, or (iii) any such item is referred to or reflected in any such financing statement(s) so filed at any time. Similarly, the mention in any such financing statement(s) of the rights in and to (1) the proceeds of any fire and/or hazard insurance policy, or (2) any award in eminent domain proceedings for a taking or for loss of value, or (3) Grantor’s interest as lessor in any present or future lease or rights to income growing out of the use and/or occupancy of the Property, whether pursuant to lease or otherwise, shall never be construed as in any way altering any of the rights of Agent as determined by this Instrument, subject to the provisions of the Credit Agreement, or impugning the priority of Agent’s lien granted hereby or by any other recorded document, but such mention in such financing statement(s) is declared to be for the protection of Agent in the event any court shall at any time hold with respect to the foregoing (1), (2) or (3), that notice of Agent’s priority of interest to be effective against a particular class of persons, must be filed in the UCC records. (b) Grantor warrants that (i) Grantor’s (that is, “Debtor’s”) correct legal name (including, without limitation, punctuation and spacing) indicated on the public record of Grantor’s jurisdiction of organization, identity or corporate structure, residence or chief executive office and jurisdiction of organization are as set forth in Subsection 1.10(c) hereof; (ii) Grantor (that is, “Debtor”) has been using or operating under said name, identity or corporate structure without change for the time period set forth in Subsection 1.10(c) hereof, and (iii) the location of the Personal Property secured by this Instrument is upon the Land (except that the books and records related to the Property may be stored and maintained at another site). Grantor covenants and agrees that Grantor shall not change any of the matters addressed by clauses (i) or   14 (iii) of this Subsection 1.10(b) unless it has given Agent thirty (30) days prior written notice of any such change and has executed or authorized at the request of Agent such additional financing statements or other instruments in such jurisdictions as Agent may deem necessary or advisable in its sole discretion to prevent any filed financing statement from becoming misleading or (c) The information contained in this Subsection 1.10(c) is provided in order that this Instrument shall comply with the requirements of the Uniform Commercial Code, as enacted in the State of Texas, for instruments to be filed as financing statements. The names of the “Debtor” and the “Secured Party”, the identity or corporate structure, jurisdiction of organization, organizational number, federal tax identification number, and residence or chief executive office of “Debtor”, and the time period for which “Debtor” has been using or operating under said name and identity or corporate structure without change, are as set forth in Schedule 1 of Exhibit “C” attached hereto and by this reference made a part hereof; the mailing address of the “Secured Party” from which information concerning the security interest may be obtained, and the mailing address of “Debtor”, are as set forth in Schedule 2 of Exhibit “C” attached hereto; and a statement indicating the types, or describing the items, of Personal Property secured by this Instrument is set forth hereinabove. (d) Exhibit “C” correctly sets forth all names and tradenames that Grantor has used within the last five years, and also correctly sets forth the locations of all of the chief executive offices of Grantor over the last five years. (e) The Grantor hereby covenants and agrees that: (1) Grantor shall not merge or consolidate into, or transfer any of the Property to, any other person or entity except as permitted under the Credit Agreement. (2) Grantor shall, at any time and from time to time, take such steps as Agent may reasonably request for Agent (A) to obtain an acknowledgment, in form and substance reasonably satisfactory to Agent, of any bailee having possession of any of the Property, stating that the bailee holds possession of such Property on behalf of Agent, (B) to obtain “control” of any investment property, deposit accounts, letter-of-credit rights, or electronic chattel paper (as such terms are defined by the UCC with corresponding provisions thereof defining what constitutes “control” for such items of collateral), with any agreements establishing control to be in form and substance reasonably satisfactory to Agent, and (C) otherwise to insure the continued perfection and priority of the Agent’s security interest in any of the Property and of the preservation of its rights therein. If Grantor shall at any time, acquire a “commercial tort claim” (as such term is defined in the UCC) with respect to the Property or any portion thereof, Grantor shall promptly notify Agent thereof in writing, providing a reasonable description and summary thereof, and shall execute a supplement to this Instrument in form and substance acceptable to Agent granting a security interest in such commercial tort claim to Agent. (3) Grantor hereby authorizes Agent, its counsel or its representative, at any time and from time to time, to file financing statements, amendments and continuations that describe or relate to the Property or any portion thereof in such jurisdictions as Agent may   15 deem necessary or desirable in order to perfect the security interests granted by Grantor under this Instrument or any other Loan Document, and such financing statements may contain, among other items as Agent may deem advisable to include therein, the federal tax identification number of Grantor. (4) Grantor shall not license, lease, sell or otherwise transfer any of the general intangibles to any third party during the term of this Instrument and the Credit Agreement without the prior written consent of the Agent (which consent may be withheld in the Agent’s sole discretion); and the Grantor will continue to use all trademarks, service marks and trade names in a consistent manner and shall take all steps necessary to properly maintain any formal registrations on the general intangibles, and to defend and enforce them, for the term of this Instrument and the Credit Agreement. 1.11 Further Assurances; After-Acquired Property. At any time and from time to time, upon request by Agent, Grantor will make, execute and deliver or cause to be made, executed and delivered, to Trustee and Agent and, where appropriate, cause to be recorded and/or filed and from time to time thereafter to be rerecorded and/or refiled at such time and in such offices and places as shall be deemed desirable by Agent, any and all such other and further deeds of trust, security agreements, financing statements, notice filings, continuation statements, instruments of further assurance, certificates and other documents as may, in the opinion of Agent, be necessary or desirable in order to effectuate, complete, or perfect, or to continue and preserve (a) the obligation of Grantor under the Guaranty, this Instrument, the other Loan Documents and the Hedge Documents and (b) this Instrument as a first and prior lien upon and security interest in and to all of the Property, whether now owned or hereafter acquired by Grantor. Upon any failure by Grantor so to do, Agent may make, execute, record, file, re-record and/or refile any and all such deeds of trust, security agreements, financing statements, continuation statements, instruments, certificates, and documents for and in the name of Grantor and Grantor hereby irrevocably appoints Agent the agent and attorney-in-fact of Grantor so to do. The lien hereof will automatically attach, without further act, to all after acquired property attached to and/or used in the operation of the Property or any part thereof. 1.12 Expenses. Grantor will pay or reimburse Agent, upon demand therefor, for all reasonable attorney’s fees, costs and expenses incurred by Agent in any suit, action, legal proceeding or dispute of any kind in which Lenders, Agent, Trustee or the holders of the Hedge Obligations is made a party or appears as party plaintiff or defendant, affecting or arising in connection with the Secured Obligations secured hereby, this Instrument or the interest created herein, or the Property, including, but not limited to, the exercise of the power of sale contained in this Instrument, any condemnation action involving the Property or any action to protect the security hereof; and any such amounts paid by Lenders, Agent, the holders of the Hedge Obligations or the Trustee shall be added to the Secured Obligations secured by the lien of this Instrument. 1.13 Subrogation. Agent shall be subrogated to the claims and liens of all parties whose claims or liens are discharged or paid with the proceeds of the Secured Obligations secured hereby.   16 1.14 Limit of Validity. If from any circumstances whatsoever fulfillment of any provision of this Instrument, the Guaranty, the Credit Agreement, the Note, any other Loan Document or any Hedge Document, at the time performance of such provision shall be due, shall be subject to the defense of usury or otherwise transcend or violate applicable law concerning interest or other charges, then ipso facto the obligation to be fulfilled shall be reduced to the limit, so that in no event shall any exaction be possible under this Instrument, the Guaranty, the Note, the Credit Agreement, any other Loan Document or any Hedge Document be subject to the defense of usury or otherwise transcend or violate applicable law concerning interest or other charges that is in excess of the current limit, but such obligation shall be fulfilled to the maximum limit permitted. The provisions of this Section 1.14 shall control every other provision of this Instrument, the Guaranty, the Note, the Credit Agreement or any other Loan Document or any Hedge Document. 1.15 Conveyance of Property. Grantor hereby acknowledges to Agent that (a) the identity and expertise of Grantor was and continues to be a material circumstance upon which Agent has relied in connection with, and which constitute valuable consideration to Agent for, the extending to Borrower of the loans and other extensions of credit evidenced by the Note and Credit Agreement, and (b) any change in such identity or expertise could materially impair or jeopardize the security for the payment of the Secured Obligations granted to Agent by this Instrument. Grantor therefore covenants and agrees with Agent, as part of the consideration for the extending to Grantor of the loans evidenced by the Note, that Grantor shall not convey, transfer, assign, further encumber or pledge any or all of its interest in the Property except as permitted under the Credit Agreement. ARTICLE 2 2.01 Events of Default. The terms “Default” and “Event of Default” as used herein shall have the following meanings: “Default” shall mean any event which, with the giving of notice or the lapse of time, or both, would become an Event of Default. “Event of Default” shall mean (a) any default in the payment or performance of the obligations of Grantor hereunder or of Borrower or any other Guarantor under any of the other Loan Documents when the same shall become due and payable which is not cured within any grace or notice and cure period provided in the Credit Agreement or such other Loan Documents, if any, subject to any limitations in the Credit Agreement on the right of Grantor, Borrower or any other Guarantor to receive notices of default, or (b) any representation or warranty of Grantor hereunder proving to be false or incorrect in any material respect upon the date when made or deemed to have been repeated, or (c) any default in the performance of the obligations of Grantor or Borrower or any other Person under any of the Security Documents beyond the expiration of any applicable notice and cure period, (d) the occurrence of any “Event of Default” under the Credit Agreement or any other Loan Document, (e) any amendment to or termination of a financing statement naming Grantor as debtor and Agent as secured party, or   17 any correction statement with respect thereto, is filed in any jurisdiction by, or caused by, or at the instance of Grantor or by, or caused by, or at the instance of any principal, member, general partner or officer of Grantor (collectively, “Grantor Party”) without the prior written consent of Agent; or (f) in the event that any amendment to or termination of a financing statement naming Grantor as debtor and Agent as secured party, or any correction statement with respect thereto, is filed in any jurisdiction by any party other than a Grantor Party or Agent or Agent’s counsel without the prior written consent of Agent and Grantor fails to use its best efforts to cause the effect of such filing to be completely nullified to the reasonable satisfaction of Agent within ten (10) days after notice to Grantor thereof. 2.02 Acceleration of Maturity. If an Event of Default shall have occurred and be continuing, then the entire Secured Obligations secured hereby shall, at the option of Agent and as permitted by the terms of the Credit Agreement, immediately become due and payable without notice or demand except as required by law, time being of the essence of this Instrument. 2.03 Right to Enter and Take Possession. (a) If an Event of Default shall have occurred and be continuing, Grantor, upon demand of Agent, shall forthwith surrender to Agent the actual possession of the Property, and if and to the extent permitted by law, Agent itself, or by such officers or agents as it may appoint, may enter and take possession of all the Property (or such portion or portions as Agent may select) without the appointment of a receiver, or an application therefor, and may exclude Grantor and its agents and employees wholly therefrom, and may have joint access with Grantor to the books, papers and accounts of Grantor. (b) If Grantor shall for any reason fail to surrender or deliver the Property or any part thereof after such demand by Agent, Agent may obtain a judgment or decree conferring upon Agent the right to immediate possession or requiring Grantor to deliver immediate possession of the Property to Agent. Grantor will pay to Agent, upon demand, all expenses of obtaining such judgment or decree, including reasonable compensation to Agent, its attorneys and agents; and all such expenses and compensation shall, until paid, be secured by the lien of this Instrument. (c) Upon every such entering upon or taking of possession, Agent may hold, store, use, operate, manage and control the Property and conduct the business thereof and, from time to time, (i) make all necessary and proper maintenance, repairs, renewals, replacements, additions, betterments and improvements thereto and thereon and purchase or otherwise acquire additional fixtures, personalty and other property; (ii) insure or keep the Property insured; (iii) lease, manage and operate the Property and exercise all the rights and powers of Grantor to the same extent as Grantor could in its own name or otherwise with respect to the same; and (iv) enter into any and all agreements with respect to the exercise by others of any of the powers herein granted Agent, all as Agent from time to time may determine to be in its best interest. Agent may collect and receive all the rents, issues, profits and revenues from the Property, including those past due as well as those accruing thereafter, and, after deducting (1) all expenses of taking, holding, managing and operating the Property (including compensation for the services   18 of all persons employed for such purposes); (2) the cost of all such maintenance, repairs, renewals, replacements, additions, betterments, improvements, purchases and acquisitions; (3) the cost of such insurance; (4) such taxes, assessments and other similar charges as Agent may at its option pay; (5) other proper charges upon the Property or any part thereof; and (6) the reasonable compensation, expenses and disbursements of the attorneys and agents of Agent, Agent shall apply the remainder of the monies and proceeds so received by Agent in accordance with Section 12.5 of the Credit Agreement. Agent shall have no obligation to discharge any duties of a landlord to any tenant or to incur any liability as a result of any exercise by Agent of any rights under this Instrument or otherwise. Agent shall not be liable for any failure to collect rents, issues, profits and revenues from the Property, nor shall Agent be liable to account for any such rents, issues, profits or revenues unless actually received by Agent. (d) Whenever all that is due upon the Secured Obligations and under any of the terms, covenants, conditions and agreements of this Instrument shall have been paid, the Lenders have no obligation to make further Loans and the Issuing Lender has no further obligation to issue Letters of Credit, and all Events of Default cured, Agent shall surrender possession of the Property to Grantor, its successors or assigns. The same right of taking possession, however, shall exist if any subsequent Event of Default shall occur and be continuing. 2.04 Performance by Agent. If there shall be a Default or Event of Default in the payment, performance or observance of any term, covenant or condition of this Instrument, Agent may, so long as such Default or Event of Default continues, at its option, pay, perform or observe the same, and all payments made or costs or expenses incurred by Agent in connection therewith, shall be secured hereby and shall be, upon demand, immediately repaid by Grantor to Agent with interest thereon at the Default Rate. Agent shall be the sole judge of the necessity for any such actions and of the amounts to be paid. Agent is hereby empowered to enter and to authorize others to enter upon the Land or any part thereof for the purpose of performing or observing any such defaulted term, covenant or condition without thereby becoming liable to Grantor or any person in possession holding under Grantor. 2.05 Receiver. If an Event of Default shall have occurred and be continuing, Agent, upon application to a court of competent jurisdiction, shall be entitled as a matter of strict right without regard to the occupancy or value of any security for the Secured Obligations secured hereby or the solvency of any party bound for its payment, to the appointment of a receiver to take possession of and to operate the Property (or such portion or portions as Agent may select) and to collect and apply the rents, issues, profits and revenues thereof. The receiver shall have all of the rights and powers permitted under the laws of the State of Texas. Grantor will pay to Agent upon demand all reasonable expenses, including receiver’s fees, attorney’s fees, costs and agent’s compensation, incurred pursuant to the provisions of this Section 2.05, and all such expenses shall be secured by this Instrument. 2.06 Enforcement. (a) If an Event of Default shall have occurred and be continuing, to the extent permitted by law, Agent, at its option, may effect the foreclosure of this Instrument by directing the Trustee to sell the Property (or such portion or portions thereof as the Trustee may select) at   19 public auction at such time and place and upon such terms and conditions as may be required or permitted by applicable law, after having first advertised the time, place and terms of sale not less than once a week for three successive weeks in a newspaper having general circulation in the city or county in which the Land being sold lies. At any foreclosure sale, such portion of the Property as is offered for sale may, at the Trustee’s option, be offered for sale for one total price, and the proceeds of such sale accounted for in one account without distinction between the items of security or without assigning to them any proportion of such proceeds, the Grantor hereby waiving the application of any doctrine of marshalling. (b) If an Event of Default shall have occurred and be continuing, Agent may, in addition to and not in abrogation of the rights covered under subparagraph (a) of this Section 2.06, either with or without entry or taking possession as herein provided or otherwise, proceed by a suit or suits in law or in equity or by any other appropriate proceeding or remedy (i) to enforce payment of the Secured Obligations or the performance of any term, covenant, condition or agreement of this Instrument or any other right, and (ii) to pursue any other remedy available to it, all as Agent shall determine most effectual for such purposes. 2.07 Purchase by Agent. Upon any foreclosure sale, Agent, on behalf of the Lenders and the holders of the Hedge Obligations, may bid for and purchase the Property and shall be entitled to apply all or any part of the Secured Obligations secured hereby as a credit to the purchase price. 2.08 Application of Proceeds of Sale. The proceeds received by Agent as a result of the foreclosure sale of the Property or the exercise of any other rights or remedies hereunder shall be applied in the manner provided for in Section 12.5 of the Credit Agreement. 2.09 Grantor as Tenant Holding Over. In the event of any such foreclosure sale by Agent, Grantor shall be deemed a tenant holding over and shall forthwith deliver possession to the purchaser or purchasers at such sale or be summarily dispossessed according to provisions of law applicable to tenants holding over. 2.10 Waiver of Appraisement, Valuation, Stay, Extension and Redemption Laws. Grantor agrees, to the full extent permitted by law, that in case of a Default or Event of Default, neither Grantor nor anyone claiming through or under it shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension, homestead, exemption or redemption laws now or hereafter in force and Grantor, for itself and all who may at any time claim through or under it, hereby waives to the full extent that it may lawfully so do, the benefit of all such laws, and any and all right to have the assets comprised in the security intended to be created hereby marshaled upon any foreclosure of the lien hereof. 2.11 Waiver of Homestead. Grantor hereby waives and renounces all homestead and exemption rights provided for by the Constitution and the laws of the United States and of any state, in and to the Property as against the collection of the Secured Obligations, or any part hereof. 2.12 Leases; Licensees. Agent, at its option, is authorized to foreclose this Instrument subject to the rights of any tenants and licensees of the Property, and the failure to make any   20 such tenants or licensees parties to any such foreclosure proceedings and to foreclose their rights will not be, nor be asserted by Grantor to be a defense to any proceedings instituted by Agent to collect the sums secured hereby. 2.13 Discontinuance of Proceedings and Restoration of the Parties. In case Agent shall have proceeded to enforce any right, power or remedy under this Instrument by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to Agent, then and in every such case Grantor and Agent shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Agent shall continue as if no such proceeding had been taken. 2.14 Remedies Cumulative. No right, power or remedy conferred upon or reserved to Agent by this Instrument is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and may be exercised against Grantor as Agent may select and shall be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity or by statute. 2.15 Waiver. (a) No delay or omission of Agent, any Lender or any holder of the Hedge Obligations to exercise any right, power or remedy accruing upon any Default or Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Default or Event of Default, or acquiescence therein; and every right, power and remedy given by this Instrument to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. No consent or waiver, expressed or implied, by Agent to or of any Default or Event of Default by Grantor in the performance of the obligations thereof hereunder shall be deemed or construed to be a consent or waiver to or of any other Default or Event of Default in the performance of the same or any other obligations of Grantor hereunder. Failure on the part of Agent, the Lenders or any holder of the Hedge Obligations to complain of any act or failure to act or to declare a Default or Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent, any Lender or any holder of the Hedge Obligations of its rights hereunder or impair any rights, powers or remedies consequent on any Default or Event of Default by Grantor. (b) If Lenders or Agent on behalf of the Lenders, or any holder of the Hedge Obligations (i) grant forbearance or an extension of time for the payment of any sums secured hereby; (ii) take other or additional security for the payment of any sums secured hereby; (iii) waive or do not exercise any right granted herein or in the Note, the Credit Agreement, any other Loan Document or any Hedge Document; (iv) release any part of the Property from the lien of this Instrument or otherwise change any of the terms, covenants, conditions or agreements of the Note, this Instrument, any other Loan Document or any Hedge Document; (v) consent to the filing of any map, plat or replat affecting the Property; (vi) consent to the granting of any easement or other right affecting the Property; or (vii) make or consent to any agreement subordinating the lien hereof, any such act or omission shall not release, discharge, modify, change or affect the original liability under the Note, the Credit Agreement, the Guaranty, this Instrument or any other obligation of Grantor, or any subsequent purchaser of the Property or any part thereof, or any maker, co-signer, endorser, surety or guarantor; nor shall any such act or   21 omission preclude Agent from exercising any right, power or privilege herein granted or intended to be granted in the event of any Default then made or of any subsequent Default; nor, except as otherwise expressly provided in an instrument or instruments executed by Agent, shall the lien of this Instrument be altered thereby. In the event of the sale or transfer by operation of law or otherwise of all or any part of the Property, Agent, without notice, is hereby authorized and empowered to deal with any such vendee or transferee with reference to the Property or the Secured Obligations secured hereby, or with reference to any of the terms, covenants, conditions or agreements hereof, as fully and to the same extent as it might deal with the original parties hereto and without in any way releasing or discharging any liabilities, obligations or undertakings. 2.16 Suits to Protect the Property. Agent shall have power (a) to institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Property by any acts which may be unlawful or in violation of this Instrument, (b) to preserve or protect its interest in the Property and in the rents, issues, profits and revenues arising therefrom, and (c) to restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security hereunder or be prejudicial to the interest of Lenders or the holders of the Hedge Obligations. 2.17 Agent May File Proofs of Claim. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting Grantor, its creditors or its property, Agent, to the extent permitted by law, shall be entitled to file such proofs of claim and Agent, Lenders and the holders of the Hedge Obligations allowed in such proceedings for the entire amount due and payable by Grantor under this Instrument at the date of the institution of such proceedings and for any additional amount which may become due and payable by Grantor hereunder after such date. 2.18 WAIVER OF GRANTOR’S RIGHTS. BY EXECUTION OF THIS INSTRUMENT, GRANTOR EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT OF AGENT, THE LENDERS AND/OR THE HOLDERS OF THE HEDGE OBLIGATIONS TO ACCELERATE THE SECURED OBLIGATIONS AND, TO THE EXTENT PERMITTED BY LAW, THE POWER OF AGENT TO CAUSE TRUSTEE TO SELL THE PROPERTY BY NONJUDICIAL FORECLOSURE UPON DEFAULT BY GRANTOR WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE OTHER THAN SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS INSTRUMENT OR BY LAW; (B) TO THE FULL EXTENT PERMITTED BY LAW, WAIVES ANY AND ALL RIGHTS WHICH GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE UNITED STATES (INCLUDING, WITHOUT LIMITATION, THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW, TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE EXERCISE BY AGENT OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO AGENT, EXCEPT SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE PROVIDED IN THIS INSTRUMENT OR BY APPLICABLE LAW; (C) ACKNOWLEDGES THAT GRANTOR HAS READ THIS INSTRUMENT AND THE OTHER LOAN DOCUMENTS   22 AND ANY AND ALL QUESTIONS REGARDING THE LEGAL EFFECT OF THIS INSTRUMENT AND THE OTHER LOAN DOCUMENTS AND THEIR PROVISIONS HAVE BEEN EXPLAINED FULLY TO GRANTOR AND GRANTOR HAS CONSULTED WITH COUNSEL OF GRANTOR’S CHOICE PRIOR TO EXECUTING THIS INSTRUMENT; AND (D) ACKNOWLEDGES THAT ALL WAIVERS OF THE AFORESAID RIGHTS OF GRANTOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY AND WILLINGLY BY GRANTOR AS PART OF A BARGAINED FOR LOAN TRANSACTION. 2.19 Claims Against Agent, Lenders and Holders of Hedge Obligations. No action at law or in equity shall be commenced, or allegation made, or defense raised, by Grantor against Agent, the Lenders or any holder of the Hedge Obligations for any claim under or related to this Instrument, the Note, the Credit Agreement, the Guaranty or any other instrument, document, transfer, conveyance, assignment or loan agreement given by Grantor with respect to the Secured Obligations secured hereby, or related to the conduct of the parties thereunder, unless written notice of such claim, expressly setting forth the particulars of the claim alleged by Grantor, shall have been given to Agent within sixty (60) days from and after the initial awareness of Grantor of the event, omission or circumstances forming the basis of Grantor for such claim. Any failure by Grantor to timely provide such written notice to Agent shall constitute a waiver by Grantor of such claim. 2.20 [Intentionally Omitted]. 2.21 Indemnification; Subrogation; Waiver of Offset. (a) Grantor shall indemnify, defend and hold Agent, the Lenders and the holders of the Hedge Obligations harmless for, from and against any and all liability, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses (including Agent’s reasonable attorneys’ fees, together with reasonable appellate counsel fees, if any) of whatever kind or nature which may be asserted against, imposed on or incurred by Agent, or the Lenders or the holders of the Hedge Obligations in connection with the Secured Obligations, this Instrument, the Property, or any part thereof, or the exercise by Agent of any rights or remedies granted to it under this Instrument; provided, however, that nothing herein shall be construed to obligate Grantor to indemnify, defend and hold harmless Agent, the Lenders or the holders of the Hedge Obligations for, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses asserted against, imposed on or incurred by Agent or a Lender by reason of such Person’s willful misconduct or gross negligence if a judgment is entered against Agent, a Lender or a holder of a Hedge Obligation by a court of competent jurisdiction after the expiration of all applicable appeal periods. (b) If Agent, a Lender or a holder of a Hedge Obligation is made a party defendant to any litigation or any claim is threatened or brought against Agent, a Lender or a holder of a Hedge Obligation concerning the Secured Obligations, this Instrument, the Property, or any part thereof, or any interest therein, or the construction, maintenance, operation or occupancy or use thereof, then Grantor shall indemnify, defend and hold such Person harmless for, from and against all liability by reason of said litigation or claims, including reasonable attorneys’ fees (together with reasonable appellate counsel fees, if any) and expenses incurred by such Person in any such litigation or claim, whether or not any such litigation or claim is   23 prosecuted to judgment; provided, however, that nothing in this Section 2.21(b) shall be construed to obligate Grantor to indemnify, defend and hold harmless Agent, a Lender or a holder of a Hedge Obligation for, from and against any and all liabilities or claims imposed on or incurred by such Person by reason of such Person’s willful misconduct or gross negligence if a judgment is entered against such Person by a court of competent jurisdiction after expiration of all applicable appeal periods. If Agent commences an action against Grantor to enforce any of the terms hereof or to prosecute any breach by Grantor of any of the terms hereof or to recover any sum secured hereby, Grantor shall pay to Agent its reasonable attorneys’ fees (together with reasonable appellate counsel, fees, if any) and expenses. The right to such attorneys’ fees (together with reasonable appellate counsel fees, if any) and expenses shall be deemed to have accrued on the commencement of such action, and shall be enforceable whether or not such action is prosecuted to judgment. If Grantor breaches any term of this Instrument, Agent may engage the services of an attorney or attorneys to protect its rights hereunder, and in the event of such engagement following any breach by Grantor, Grantor shall pay Agent reasonable attorneys’ fees (together with reasonable appellate counsel fees, if any) and expenses incurred by Agent, whether or not an action is actually commenced against Grantor by reason of such breach. All references to “attorneys” in this Subsection and elsewhere in this Instrument shall include without limitation any attorney or law firm engaged by Agent and Agent’s in-house counsel, and all references to “fees and expenses” in this Subsection and elsewhere in this Instrument shall include without limitation any fees of such attorney or law firm and any allocation charges and allocation costs of Agent’s in-house counsel. (c) A waiver of subrogation shall be obtained by Grantor from its insurance carrier and, consequently, Grantor waives any and all right to claim or recover against Agent, the Lenders, the holders of the Hedge Obligations and each of their respective officers, employees, agents and representatives, for loss of or damage to Grantor, the Property, Grantor’s property or the property of others under Grantor’s control from any cause insured against or required to be insured against by the provisions of this Instrument. (d) ALL SUMS PAYABLE BY GRANTOR HEREUNDER SHALL BE PAID WITHOUT NOTICE (EXCEPT AS MAY OTHERWISE BE PROVIDED HEREIN), DEMAND, COUNTERCLAIM, SETOFF, DEDUCTION OR DEFENSE AND WITHOUT ABATEMENT, SUSPENSION, DEFERMENT, DIMINUTION OR REDUCTION, AND THE SECURED OBLIGATIONS AND LIABILITIES OF GRANTOR HEREUNDER SHALL IN NO WAY BE RELEASED, DISCHARGED OR OTHERWISE AFFECTED BY REASON OF: (I) ANY DAMAGE TO OR DESTRUCTION OF OR ANY CONDEMNATION OR SIMILAR TAKING OF THE PROPERTY OR ANY PART THEREOF; (II) ANY RESTRICTION OR PREVENTION OF OR INTERFERENCE WITH ANY USE OF THE PROPERTY OR ANY PART THEREOF; (III) ANY TITLE DEFECT OR ENCUMBRANCE OR ANY EVICTION FROM THE LAND OR THE IMPROVEMENTS ON THE LAND OR ANY PART THEREOF BY TITLE PARAMOUNT OR OTHERWISE; (IV) ANY BANKRUPTCY, INSOLVENCY, REORGANIZATION, COMPOSITION, ADJUSTMENT, DISSOLUTION, LIQUIDATION, OR OTHER LIKE PROCEEDING RELATING TO AGENT, THE LENDERS OR ANY HOLDER OF THE HEDGE OBLIGATIONS, OR ANY ACTION TAKEN WITH RESPECT TO THIS INSTRUMENT BY ANY TRUSTEE OR BY ANY RECEIVER OF AGENT, OR BY ANY COURT, IN SUCH PROCEEDING; (V) ANY CLAIM WHICH GRANTOR HAS, OR MIGHT HAVE, AGAINST AGENT, THE LENDERS OR ANY HOLDER OF THE HEDGE   24 OBLIGATIONS; (VI) ANY DEFAULT OR FAILURE ON THE PART OF AGENT, THE LENDERS OR ANY HOLDER OF THE HEDGE OBLIGATIONS TO PERFORM OR COMPLY WITH ANY OF THE TERMS HEREOF OR OF ANY OTHER AGREEMENT WITH GRANTOR; OR (VII) ANY OTHER OCCURRENCE WHATSOEVER, WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING, WHETHER OR NOT GRANTOR SHALL HAVE NOTICE OR KNOWLEDGE OF ANY OF THE FOREGOING. GRANTOR WAIVES ALL RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE OR OTHERWISE TO ANY ABATEMENT, SUSPENSION, DEFERMENT, DIMINUTION, OR REDUCTION OF ANY SUM SECURED HEREBY AND PAYABLE BY GRANTOR. 2.22 Revolving Credit/Future Advance. This Instrument secures Secured Obligations which may provide for a variable rate of interest as well as revolving credit advances and other future advances, whether such advances are obligatory or otherwise. Advances under the Note are subject to the terms and provisions of the Credit Agreement and the other Security Documents. Grantor acknowledges that the Secured Obligations may increase or decrease from time to time and that if the outstanding balance of the Secured Obligations is ever repaid to zero the security title and security interest created by this Instrument shall not be deemed released or extinguished by operation of law or implied intent of the parties. This Instrument shall remain in full force and effect as to any further advances under the Credit Agreement made after any such zero balance until the Secured Obligations are paid in full, all agreements to make further advances or issue letters of credit have been terminated and this Instrument has been canceled of record. Grantor waives the operation of any applicable statutes, case law or regulation having a contrary effect. ARTICLE 3 3.01 Successors and Assigns. This Instrument shall inure to the benefit of and be binding upon Grantor, Trustee and Agent and their respective heirs, is made in this Instrument to Grantor, Trustee or Agent such reference shall be deemed to include a reference to the heirs, executors, legal representatives, successors and assigns of Grantor or Agent. 3.02 Terminology. All personal pronouns used in this Instrument whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and vice versa. Titles and Articles are for convenience only and neither limit nor amplify the provisions of this Instrument itself, and all references herein to Articles, Sections or subsections thereof, shall refer to the corresponding Articles, Sections or subsections thereof, of this Instrument unless specific reference is made to such Articles, Sections or subsections thereof of another document or instrument. 3.03 Severability. If any provision of this Instrument or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Instrument and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.   25 3.04 Applicable Law. This Instrument will be governed by the substantive laws of the State of Texas, without giving effect to its principles of choice of law or conflicts of law (except with respect to choice of law or conflicts of law provisions of its Uniform Commercial Code), and the laws of the United States applicable to transactions in the State of Texas. Should any obligation or remedy under this Instrument be invalid or unenforceable pursuant to the laws provided herein to govern, the laws of any other state referred to herein or of another state whose laws can validate and apply thereto shall govern. 3.05 Notices. Except as otherwise provided herein, any notice or other communication required hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered if given and delivered as provided in the Guaranty if given to Grantor or as provided in the Credit Agreement if given to Agent. 3.06 Conflict with Credit Agreement Provisions. Grantor hereby acknowledges and agrees that, in the event of any conflict between the terms hereof and the terms 3.07 Assignment. This Instrument is assignable by Agent, and any assignment hereof by Agent shall operate to vest in the assignee all rights and powers herein conferred upon and granted to Agent. 3.08 Time of the Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of Grantor under this Instrument, and any and all other instruments now or hereafter evidencing, securing or otherwise relating to the Secured Obligations. 3.09 Grantor. Unless the context clearly indicates otherwise, as used in this Instrument, “Grantor” means the grantors named in recitals hereof or any of them. The obligations of Grantor hereunder shall be joint and several. If any Grantor, or any signatory who signs on behalf of any Grantor, is a corporation, partnership or other legal entity, Grantor and any such signatory, and the person or persons signing for it, represent and warrant to Agent that this instrument is executed, acknowledged and delivered by Grantor’s duly authorized representatives. 3.10 Place of Payment; Forum; Waiver of Jury Trial. All Secured Obligations which may be owing hereunder at any time by Borrower or Grantor shall be payable at the place designated in the Credit Agreement (or if no such designation is made, at the address of Agent indicated at the end of this Instrument). Grantor hereby irrevocably submits generally and unconditionally for itself and in respect of its property to the non-exclusive jurisdiction of any state court, or any United States federal court, sitting in the county in which the Secured Obligations are payable, and to the non-exclusive jurisdiction of any state court or any United States federal court sitting in the state in which any of the Property is located, over any suit, action or proceeding arising out of or relating to this Instrument or the Secured Obligations. Grantor hereby irrevocably waives, to the fullest extent permitted by law, any objection that Grantor may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum. Grantor hereby agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in   26 any such suit, action or proceeding may be made by certified or registered mail, return receipt requested, directed to Grantor at its address stated in the first paragraph of this Instrument, or at a subsequent address of Grantor of which Agent received actual notice from Grantor in accordance with the Credit Agreement, and service so made shall be completed five (5) days after the same shall have been so mailed. Nothing herein shall affect the right of Agent to serve process in any manner permitted by law or limit the right of Agent to bring proceedings against Grantor in any other court or jurisdiction. TO THE FULLEST EXTENT PERMITTED BY LAW, GRANTOR WAIVES THE RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS INSTRUMENT OR ANY OTHER LOAN DOCUMENT. ARTICLE 4 – STATE SPECIFIC PROVISIONS 4.01 Principles of Construction. In the event of any inconsistencies between the terms and conditions of this Article 4 and the terms and conditions of this Instrument, the terms and conditions of this Article 4 shall control and be binding. 4.02 Future Advances. This Instrument is given to secure not only the existing Secured Obligations, but also such future advances, whether such advances are obligatory or are to be made at the option of Agent or the holder hereof, or otherwise as are made within twenty (20) years from the date hereof, to the same extent as if such future advances were made on the date of the execution of this Instrument. The total amount of Secured Obligations that may be so secured by this Instrument may be increased or decreased from time to time (as set forth in the Credit Agreement), but the total unpaid balance so secured at any one time shall not exceed the face amount of the Secured Obligations secured by this Instrument on the date hereof, plus interest thereon, and any disbursements made for the payment of Impositions and any other liens, assessments and charges of every character (the “Other Charges”), insurance premiums, or other costs to be incurred hereunder, with interest on such disbursements at the rate set forth in the Credit Agreement, plus any increases in the principal balance as the result of negative amortization or deferred interest, if any. It is agreed that any additional sum or sums advanced by Agent pursuant to the terms hereof or pursuant to the Credit Agreement shall be equally secured with and have the same priority as the original Secured Obligations and shall be subject to all of the terms, provisions and conditions of this Instrument, whether or not such additional loans or advances are evidenced by other promissory notes or other guaranties of Grantor and whether or not identified by a recital that it or they are secured by this Instrument. It is further agreed that any additional promissory note or promissory notes executed and delivered pursuant to this paragraph shall automatically be deemed to be included in the term “Note” wherever they appear in the context of this Instrument. 4.03 State-Specific Provisions. (a) The assignments of Leases and Revenues set forth in this Instrument are not intended to constitute payment to Agent, Lenders or Trustee unless Grantor’s license to collect Revenues is terminated, and then only to the extent that the Revenues are actually received by Agent or any Lender (as opposed to constituting a portion of the voluntary payments of any amounts due under the Guaranty or the other Loan Documents) and are not used for the operation or maintenance of the Property or for the payment of costs and expenses in connection   27 therewith, taxes, assessments, water charges, sewer rents, and other charges levied, assessed or imposed against the Property, insurance premiums, costs and expenses with respect to any litigation affecting the Property, the leases, the concessions, and the rent, any wages and salaries of employees, commissions of agents and attorneys fees. It is further the intent of Grantor, Agent and Lenders that the Revenues hereby absolutely assigned are no longer, during the term of this Instrument, property of Grantor or property of any estate of Grantor as defined in 11 U.S.C. § 541 and shall not constitute collateral, cash or otherwise, of Grantor. The term Revenues as used herein shall mean the gross rents without deduction or offsets of any kind. (b) BY EXECUTION OF THIS INSTRUMENT AND TO THE FULL EXTENT PERMITTED BY LAW, GRANTOR EXPRESSLY WAIVES ANY AND ALL RIGHTS WHICH GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE UNITED STATES (INCLUDING, WITHOUT LIMITATION, THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW, TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE EXERCISE BY AGENT OF (1) INTENT TO ACCELERATE THE LOAN, OR (2) ACCELERATION THE LOAN. (c) Notwithstanding anything to the contrary herein, all references in this Instrument to an assignment or transfer of Leases and Revenues is intended to and shall be deemed to provide to Agent and the Lenders a security interest in all “Rents” as defined in Chapter 64 of the Texas Property Code. Agent and the Lenders shall be entitled to all rights and remedies of an assignee as set forth in said Chapter 64. 4.04 Additional Remedy Provisions. (a) Delivery Upon Sale. Upon the completion of any sale or sales pursuant hereto, Trustee shall execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument, or good and sufficient instruments, conveying, assigning and transferring all estate, right, title and interest in and to the property and rights sold by general warranty of title. Trustee is hereby irrevocably appointed the true and lawful attorney of Grantor, in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the Property and rights so sold and for that purpose Trustee may execute all necessary instruments of conveyance, assignment and transfer, and may substitute one or more persons with like power, Grantor hereby ratifying and confirming all that its said attorney or such substitute or substitutes shall lawfully do by virtue hereof. Any sale or sales made under or by virtue of this section, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of Grantor in and to the properties and rights so sold, and shall be a perpetual bar both at law and in equity against Grantor and against any and all persons claiming or who may claim the same, or any part thereof from, through or under Grantor. (b) Option to Bid. Upon any sale made under or by virtue of this paragraph, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, Agent may bid for and acquire   28 the Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the Secured Obligations the net sales price after deducting therefrom the expenses of the sale and costs of the action and any other sums which Agent is authorized to deduct under this Instrument. (c) Remaining Liens. No recovery of any judgment by Agent and no levy of an execution under any judgment upon the Property shall affect in any manner or to any extent the lien of this Instrument upon the Property or any part thereof, or any liens, rights, powers or remedies of Agent hereunder, but such liens, rights, powers and remedies of Agent shall continue unimpaired as before. (d) No Waiver of Remedies. Agent may resort to any remedies and the security given by the Guaranty, this Instrument or the other Loan Documents in whole or in part, and in such portions and in such order as determined by Agent’s sole discretion. No such action shall in any way be considered a waiver of any rights, benefits or remedies evidenced or provided by the Guaranty, this Instrument or any of the other Loan Documents. The failure of Agent to exercise any right, remedy or option provided in the Guaranty, this Instrument or any of the other Loan Documents shall not be deemed a waiver of such right, remedy or option or of any covenant or obligation secured by the Guaranty, this Instrument or the other Loan Documents. No acceptance by Agent of any payment after the occurrence of any Event of Default and no payment by Agent of any obligation for which Grantor is liable hereunder shall be deemed to waive or cure any Event of Default with respect to Grantor’s liability to pay such obligation. No sale of all or any portion of the Property, no forbearance on the part of Agent, and no extension of time for the payment of the whole or any portion of the Secured Obligations or any other indulgence given by Agent to Grantor, shall operate to release or in any manner affect the interest of Agent, any Lender or any holder of the Hedge Obligations in the remaining Property or the liability of Grantor to pay the Secured Obligations or the liability of Grantor under the Guaranty. No waiver by Agent shall be effective unless it is in writing and then only to the extent specifically stated. All costs and expenses of Agent and Lenders in exercising their rights and remedies under this Instrument (including reasonable attorneys’ fees and disbursements to the extent permitted by law), shall be paid by Grantor immediately upon notice from Agent, and such costs and expenses shall constitute a portion of the Secured Obligations and shall be secured by this Instrument. The interests and rights of Agent, any Lender or any holder of the Hedge Obligations under the Guaranty, this Instrument or in any of the other Loan Documents shall not be impaired by any indulgence, including (i) any renewal, extension or modification which Agent or any Lender may grant with respect to any of the Secured Obligations, (ii) any surrender, compromise, release, renewal, extension, exchange or substitution which Agent, any Lender, or any holder of the Hedge Obligations may grant with respect to the Property or any portion thereof; or (iii) any release or indulgence granted to any maker, endorser, guarantor or surety of any of the Secured Obligations.   29 (e) Foreclosure. Upon the occurrence and during the continuance of any Event of Default, Agent may request Trustee to proceed with foreclosure under the power of sale which is hereby conferred, such foreclosure to be accomplished in (1) Public Sale. Trustee is hereby authorized and empowered, and it shall be Trustee’s special duty, upon such request of Agent, to sell the Property, or any part thereof, at public auction to the highest bidder for cash, with or without having taken possession of same. Any such sale (including notice thereof) shall comply with the applicable requirements, at the time of the sale, of Section 51.002 of the Texas Property Code or, if and to the extent such statute is not then in force, with the applicable requirements, at the time of the sale, of the successor statute or statutes, if any, governing sales of Texas real property under powers of sale conferred by deeds of trust. If there is no statute in force at the time of the sale governing sales of Texas real property under powers of sale conferred by deeds of trust, such sale shall comply with applicable law, at the time of the sale, governing sales of Texas real property under powers of sale conferred by deeds of trust. Trustee or his successor or substitute may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Trustee, including the posting of notices, and the conduct of sale, but in the name and on behalf of Trustee, his successor or substitute. (2) Right to Require Proof of Financial Ability and/or Cash Bid. To the extent permitted by applicable law, any time during the bidding, Trustee may require a bidding party (A) to disclose its full name, state and city of residence, occupation, and specific business office location, and the name and address of the principal the bidding party is representing (if applicable), and (B) to demonstrate reasonable evidence of the bidding party’s financial ability (or, if applicable, the financial ability of the principal of such bidding party), as a condition to the bidding party submitting bids at the foreclosure sale. If any such bidding party (the “Questioned Bidder”) declines to comply with Trustee’s requirement in this regard, or if such Questioned Bidder does respond but Trustee, in Trustee’s sole and absolute discretion, deems the information or the evidence of the financial ability of the Questioned Bidder (or, if applicable, the principal of such bidding party) to be inadequate, then Trustee may continue the bidding with reservation; and in such event (1) Trustee shall be authorized to caution the Questioned Bidder concerning the legal obligations to be incurred in submitting bids, and (2) if the Questioned Bidder is not the highest bidder at the sale, or if having been the highest bidder the Questioned Bidder fails to deliver the cash purchase price payment promptly to Trustee, all bids by the Questioned Bidder shall be null and void. Trustee may, in Trustee’s sole and absolute discretion, determine that a credit bid may be in the best interest of the Grantor and Agent, and elect to sell the Property for credit or for a combination of cash and credit; provided, however, that Trustee shall have no obligation to accept any bid except an all cash bid. In the event Trustee requires a cash bid and cash is not delivered within a reasonable time after conclusion of the bidding process, as specified by Trustee, but in no event later than 3:45 p.m. local time on the day of sale, then said contingent sale shall be null and void, the bidding process may be recommenced, and any subsequent bids or sale shall be made as if no prior bids were made or accepted. (3) Sale Subject to Unmatured Secured Obligations. In addition to the rights and powers of sale granted under the preceding provisions of this subsection (e), if default is made in the payment of any installment of the Secured Obligations and is not cured within applicable cure periods, Agent may, at Agent’s option, at once or at any time thereafter while any matured installment remains unpaid, without declaring the entire Secured Obligations to be due and payable, orally or in writing direct Trustee to enforce this Instrument and to sell the Property subject to such unmatured Secured Obligations and to the rights, powers, liens, security   30 interests, and assignments securing or providing recourse for payment of such unmatured Secured Obligations, in the same manner, all as provided in the preceding provisions of this subsection. Sales made without maturing the Secured Obligations may be made hereunder whenever there is a default in the payment of any installment of the Secured Obligations, without exhausting the power of sale granted hereby, and without affecting in any way the power of sale granted under this subsection, the unmatured balance of the Secured Obligations or the rights, powers, liens, security interests, and assignments securing or providing recourse for payment of the Secured Obligations. (4) Partial Foreclosure. Sale of a part of the Property shall not exhaust the power of sale, but sales may be made from time to time until the Secured Obligations are paid in full. It is intended by each of the foregoing provisions of this subsection that Trustee may, after any request or direction by Agent, sell not only the Land and the Improvements, but also the fixtures and other interests constituting a part of the Property or any part thereof, along with the Land and the Improvements or any part thereof, as a unit and as a part of a single sale, or may sell at any time or from time to time any part or parts of the Property separately from the remainder of the Property. It shall not be necessary to have present or to exhibit any of the Property at any sale. Any sale of personal property made hereunder shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with, or as part of, and upon the same notice as required for the sale of real property under the power of sale granted herein. (f) Trustee’s Deeds. After any sale under this subsection, Trustee shall make good and sufficient deeds, assignments, and other conveyances to the purchaser or purchasers thereunder in the name of Grantor, conveying the Property or any part thereof so sold to the purchaser or purchasers with general warranty of title by Grantor. It is agreed that in any deeds, assignments or other conveyances given by Trustee, any and all statements of fact or other recitals therein made as to the identity of Agent, the occurrence or existence of any Event of Default, the notice of intention to accelerate, or acceleration of, the maturity of the Secured Obligations, the request to sell, notice of sale, time, place, terms and manner of sale, and receipt, distribution, and application of the money realized therefrom, the due and proper appointment of a substitute trustee, and without being limited by the foregoing, any other act or thing having been duly done by or on behalf of Agent or by or on behalf of Trustee, shall be taken by all courts of law and equity as prima facie evidence that such statements or recitals state true, correct, and complete facts and Grantor does hereby ratify and confirm any and all acts that Trustee may lawfully do in the premises by virtue hereof. (g) Inapplicability of Credit Code. In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving triparty accounts) apply to the Secured Obligations. (h) Maturity Date. The Secured Obligations have a final maturity date of March 30, 2015, unless extended as provided in the Credit Agreement. (i) Notice of Indemnification. GRANTOR ACKNOWLEDGES THAT THIS INSTRUMENT PROVIDES FOR INDEMNIFICATION OF AGENT, LENDERS, HOLDERS OF THE HEDGE OBLIGATIONS AND TRUSTEE BY GRANTOR. EXCEPT FOR THE   31 GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BAD FAITH, FRAUD, OR ILLEGAL ACTS OF AGENT, LENDERS, HOLDERS OF THE HEDGE OBLIGATIONS OR THEIR RESPECTIVE AGENTS, EMPLOYEES OR CONTRACTORS WHICH SHALL BE EXCLUDED FROM THE INDEMNIFICATION OF GRANTOR, IT IS SPECIFICALLY INTENDED BY GRANTOR, AGENT, LENDERS, THE HOLDERS OF THE HEDGE OBLIGATIONS AND TRUSTEE THAT ALL INDEMNITY OBLIGATIONS AND LIABILITIES ASSUMED BY GRANTOR HEREUNDER BE WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF (INCLUDING PREEXISTING CONDITIONS), STRICT LIABILITY, OR THE NEGLIGENCE OF ANY PARTY OR PARTIES (INCLUDING AGENT, LENDERS, HOLDERS OF THE HEDGE OBLIGATIONS AND TRUSTEE) WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR PASSIVE. THE PARTIES SPECIFICALLY INTEND THAT AGENT, LENDERS, THE HOLDERS OF THE HEDGE OBLIGATIONS AND TRUSTEE ARE TO BE INDEMNIFIED AGAINST THEIR OWN NEGLIGENCE (BUT NOT THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT). (j) Substitute Trustee. In case of the resignation of Trustee, or the inability (through death or otherwise), refusal or failure of Trustee to act, or at the option of Agent for any other reason (which reason need not be stated), a substitute Trustee (herein referred to as the “Substitute Trustee”) may be named, constituted and appointed by Agent, without other formality than an appointment and designation in writing, which appointment and designation shall be full evidence of the right and authority to make the same and of all facts therein recited, and this conveyance shall vest in the Substitute Trustee the title, powers and duties herein conferred on Trustee originally named herein, and the conveyance of the Substitute Trustee to the purchaser(s) at any sale of the Property or any part thereof shall be equally valid and effective. The right to appoint a Substitute Trustee shall exist as often and whenever from any of said causes, Trustee or Substitute Trustee, resigns or cannot, will not or does not act, or Agent desires to appoint a new Trustee. No bond shall ever be required of Trustee or Substitute Trustee. The recitals in any conveyance made by Trustee or Substitute Trustee, shall be accepted and construed in court and elsewhere as prima facie evidence and proof of the facts recited, and no other proof shall be required as to the request by Agent to Trustee to enforce this Instrument, or as to the notice of or holding of the sale, or as to any particulars thereof, or as to the resignation of Trustee or Substitute Trustee, or as to the inability, refusal or failure of Trustee or Substitute Trustee, to act, or as to the election of Agent to appoint a new Trustee, or as to appointment of a Substitute Trustee, and all prerequisites of said sale shall be presumed to have been performed; and each sale made under the powers herein granted shall be a perpetual bar against Grantor and the successors and assigns of Grantor. Trustee or Substitute Trustee is hereby authorized and empowered to appoint any one or more persons as attorney-in-fact to act as Trustee under him and in his name, place and stead in order to take any actions that Trustee is authorized and empowered to do hereunder, such appointment to be evidenced by an instrument signed and acknowledged by said Trustee or Substitute Trustee and all acts done by said attorney-in-fact shall be valid, lawful and binding as if done by said Trustee or Substitute Trustee in person. The Agent may appoint or authorize a mortgage servicer to appoint a substitute trustee, such appointment or authorization to be made by power of attorney, corporate resolution or other written instrument. A mortgage servicer may authorize an attorney to appoint a substitute trustee or substitute trustees on behalf of Agent and the Lenders. The name and street address of such trustee or substitute trustee shall be disclosed on the notice of sale required by Section 51.002 of the Texas Property Code.   32 (k) Grantor hereby waives any right or remedy which Grantor may have or be able to assert pursuant to Chapter 34 of the Texas Business and Commerce Code, or any other provision of Texas law, pertaining to the rights and remedies of sureties. (l) The remedies in this Section 4.04 shall be available under and governed by the real property laws of Texas and shall not be governed by the personal property laws of Texas, including, but not limited to, the power to dispose of personal property in a commercially reasonable manner under Section 9.504 of the Texas Uniform Commercial Code, unless Lender elects to proceed as to the Collateral together with the other Property under and pursuant to the real property remedies of this Section 4.04. (m) Waiver. In the event an interest in any of the Property is foreclosed upon pursuant to a judicial or nonjudicial foreclosure sale, Grantor agrees as follows: notwithstanding the provisions of Sections 51.003, 51.004, and 51.005 of the Texas Property Code (as the same may be amended from time to time), and to the extent permitted by law, Grantor agrees that Agent and the Lenders shall be entitled to seek a deficiency judgment from Grantor and any other party obligated on the Note equal to the difference between the amount owing on the Note and the amount for which the Property was sold pursuant to judicial or nonjudicial foreclosure sale. Grantor expressly recognizes that this Section 4.04(m) constitutes a waiver of the above cited provisions, to the extent permitted by applicable law, of the Texas Property Code which would otherwise permit Grantor and other persons against whom recovery of deficiencies is sought or Guarantor independently (even absent the initiation of deficiency proceedings against them) to present competent evidence of the fair market value of the Property as of the date of the foreclosure sale and offset against any deficiency the amount by which the foreclosure sale price is determined to be less than such fair market value. Grantor further recognizes and agrees that this waiver creates an irrebuttable presumption that the foreclosure sale price is equal to the fair market value of the Property for purposes of calculating deficiencies owed by Grantor, Guarantor, and others against whom recovery of a deficiency is sought. 4.05 Waiver of Consequential, Punitive and Speculative Damages. Grantor and Agent agree that, in connection with any action, suit or proceeding relating to or arising out of this Instrument or any of the other Loan Documents, each mutually waives to the fullest extent permitted by applicable law, any claim for consequential, punitive or speculative damages. 4.06 Notice of Insurance Termination/Cancellation. Notwithstanding anything to the contrary set forth in the Credit Agreement, Borrower and Grantor shall only be required to provide fifteen (15) days prior written notice of the early cancellation or termination of any insurance policy covering the Property. ARTICLE 5 – COMPLIANCE WITH CREDIT AGREEMENT 5.01 Representations and Warranties. In addition to the representations and warranties made by Grantor herein, Grantor hereby makes to the Agent and the Lenders the representations and warranties set forth in the Credit Agreement applicable to it, as if it were a party thereto,   33 including, without limitation, those contained in the following sections: Sections 6.1(c) and (d), 6.2, 6.6, 6.7, 6.8, 6.9, 6.10, 6.12, 6.14, 6.15, 6.16, 6.17, 6.20, 6.23, 6.25, 6.26, 6.27, 6.28, 6.29, 6.30 and 6.32. 5.02 Covenants and Agreements. The Grantor covenants and agrees that so long as any Loan, Note or Letter of Credit is outstanding that Grantor shall comply with all of the covenants and agreements set forth in the Credit Agreement applicable to it, as if it were a party thereto, including, without limitation, those contained in the following sections: Sections 7.2, 7.3, 7.4(e), 7.5(a), (b), (c), and (d), 7.6, 7.7 (to the extent required by Section 1.05 hereof), 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.16, 7.19, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.8, 8.10, 8.12, 8.13, 8.14, 8.15, 18.9, 21, and 25. For purposes of Sections 7.5(a), (b), (c) and (d) of the Credit Agreement, notice given to Agent by Borrower shall satisfy any requirement that Grantor deliver notice under the relevant section.   34 THIS INSTRUMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. IN WITNESS WHEREOF, Grantor has executed this Instrument as of the day and year first above written.   GRANTOR: By:   Carter/Validus Operating Partnership, LP, a Delaware limited partnership, its sole member   By:   Carter Validus Mission Critical REIT, Inc., a Maryland corporation, its General Partner     By:   /s/ John E. Carter     Name:   John E. Carter     Title:   Chief Executive Officer   35 ACKNOWLEDGMENT   THE STATE OF FLORIDA    §    § COUNTY OF HILLSBOROUGH    § This instrument was acknowledged before me on August 16, 2012, by John E. Carter, as Chief Executive Officer of Carter Validus Mission Critical REIT, Inc., a Maryland corporation, which is the general partner of Carter/Validus Operating Partnership, LP, a Delaware limited partnership, which is the sole member of DC-5000 Bowen Road, LLC, a Delaware limited liability company, on behalf of said limited liability company.   (SEAL)     /s/ Elizabeth Fay     Notary Public My Commission Expires:     Print Name of Notary: August 24, 2012     Elizabeth Fay   EXHIBIT “A” - PAGE 1 EXHIBIT “A” LEGAL DESCRIPTION [Attached]   EXHIBIT “A” - PAGE 2 TRACT I: Situated in the G.W. Jopling Survey, Abstract No. 878, Tarrant County, Texas, and being a portion of Lot 2, Block 1, Replat Bowen Addition, according to the plat thereof recorded in Cabinet A, Slide 12771 of the said county records, and being more particularly described as follows: Commencing at a Found X Cut in concrete at the Southeast Corner of Lot 2, G.W. Jopling Addition as shown in Volume 388-126, Page 80, Tarrant County Records, Thence N89°54’20”W along the Southerly line of said Lot 2, a distance of 18.16 feet to the Southeast corner of Lot 2, Block 1, Replat Bowen Addition as shown in Cabinet A, Slide 12771, said point also being a point on the Westerly right-of-way of South Bowen Road for the Point of Beginning. Thence departing said Southeast corner and right-of-way and continuing N89°54’20”W along the southerly line of said Lot 2, Block 1, also being the Northerly line of Block 1, Wimbledon West as recorded in Volume 388-167, Page 21 a distance of 1282.05 feet to angle point in said southerly line. Thence continuing along the Southerly line of Lot 2, Block 1, also being the northerly line of Block 1, Twin Gates as shown in Cabinet A, Slide 560 Tarrant County Records, S89°56’53”W, a distance of 500.12 feet to a Found 3/4” Iron rod at the Southwest corner of said Lot 2, Block 1, also being the Southeast corner of Lot 6, Block 8, Indian Wells Addition as shown in Volume 388-125, Page 43. Thence along the Easterly line of said Indian Wells Addition N06°41’13”E, a distance of 257.28 feet to the Southwest corner of Lot 1, Block 1, Replat Bowen Addition, Cabinet A, Slide 12771. Thence along the South line of Lot 1, Block 1, S89°54’21” E, a distance of 1107.97 feet to the Southeast corner of Lot 1, Block 1; Thence with the East line of said Lot, N00°00’57”W, a distance of 264.77 feet to a Found 1/2” iron pin at the Northeast corner of said Lot 1, Block 1; Thence leaving said Lot and crossing Lot 2, Block 1, N89°48’24”E, a distance of 642.56 feet to a point on the Westerly right-of-way of South Bowen Road; Thence S00°11’36”E along said right-of-way, a distance of 522.32 feet to the Point of Beginning. Containing 620,885 square feet or 14.254 acres more or less. TRACT II: Lot 1, Block 1, Bowen Addition, being a revision of Lot 2, G.W. Jopling Addition, an addition to the City of Arlington, Tarrant County, Texas, according to the map or plat thereof recorded in Cabinet A, Slide 12771, Plat Records, Tarrant County, Texas.   EXHIBIT “A” - PAGE 3 EXHIBIT “B” Permitted Encumbrances Permitted Encumbrances are such matters as are shown on Schedule B to the Pro Forma Loan Title Insurance Policy File No. 4712001697 issued by Chicago Title Insurance Company to the Agent in connection with this Instrument.   EXHIBIT “B” - PAGE 1 EXHIBIT “C” Schedule 1 (Description of “Debtor” and “Secured Party”)   A. Debtor:     1. DC-5000 BOWEN ROAD, LLC, a limited liability company organized under the laws of the State of Delaware. Debtor has been using or operating under said name and identity or corporate structure without change since July 27, 2012. Names and Tradenames used within last five years: None. Location of all chief executive offices over last five years: 4211 W. Boy Scout Boulevard, Suite 500, Tampa, Florida 33607. Organizational Number: 5190776 Federal Tax Identification Number: 30-0745117   B. Secured Party: KEYBANK NATIONAL ASSOCIATION, a national banking association, as Agent.   EXHIBIT “C” - PAGE 1 Schedule 2 (Notice Mailing Addresses of “Debtor” and “Secured Party”)   A. The mailing address of Debtor is: DC-5000 Bowen Road, LLC 4211 W. Boy Scout Boulevard Suite 500 Tampa, Florida 33607 Attn: Todd Sakow, Chief Financial Officer   B. The mailing address of Secured Party is: KeyBank National Association 1200 Abernathy Road, N.E. Suite 1550 Atlanta, Georgia 30328 Attn: Daniel Stegemoeller   Schedule 2 - Page 1
Exhibit 10.3 Name: [●] Number of Shares of Stock subject to Option: [●] Price Per Share: $[●] Date of Grant: [●] the l.s. starrett company 2012 Long-Term Incentive Plan Non-statutory Stock Option Agreement This agreement (the “Agreement”) evidences a stock option granted by The L.S. Starrett Company (the “Company”) to the undersigned (the “Optionee”), pursuant to and subject to the terms of The L.S. Starrett Company 2012 Long-Term Incentive Plan (as amended from time to time, the “Plan”), which is incorporated herein by reference. 1.Grant of Stock Option.The Company grants to the Optionee on the date set forth above (the “Date of Grant”) an option (the “Stock Option”) to purchase, on the terms provided herein and in the Plan (including, without limitation, the exercise provisions in Section 6(b)(3) of the Plan), the number of shares of Stock of the Company set forth above (the “Shares”) with an exercise price per Share as set forth above, in each case subject to adjustment pursuant to Section 7 of the Plan in respect of transactions occurring after the date hereof. The Stock Option evidenced by this Agreement is a non-statutory option (that is, an option that is not to be treated as a stock option described in subsection (b) of Section 422 of the Code) and is granted to the Optionee in connection with the Optionee’s employment by the Company and its qualifying subsidiaries.For purposes of the immediately preceding sentence, “qualifying subsidiary” means a subsidiary of the Company as to which the Company has a “controlling interest” as described in Treas. Regs. §1.409A-1(b)(5)(iii)(E)(1). 2.Meaning of Certain Terms.Except as otherwise defined herein, all capitalized terms used herein have the same meaning as in the Plan.The following terms have the following meanings: (a) “Beneficiary” means, in the event of the Optionee’s death, the beneficiary named in the written designation (in form acceptable to the Administrator) most recently filed with the Administrator by the Optionee prior to the Optionee’s death and not subsequently revoked, or, if there is no such designated beneficiary, the executor or administrator of the Optionee’s estate.An effective beneficiary designation will be treated as having been revoked only upon receipt by the Administrator, prior to the Optionee’s death, of an instrument of revocation in form acceptable to the Administrator. (b) “Option Holder” means the Optionee or, if as of the relevant time the Stock Option has passed to a Beneficiary, the Beneficiary. 3.Vesting; Method of Exercise; Treatment of the Stock Option Upon Cessation of Employment. (a) Vesting.As used herein with respect to the Stock Option or any portion thereof, the term “vest” means to become exercisable and the term “vested” as applied to any outstanding Stock Option means that the Stock Option is then exercisable, subject in each case to the terms of the Plan.Unless earlier terminated, forfeited, relinquished or expired, the Stock Option shall become vested as to 33.3% of the total number of Shares subject to the Stock Option on each of the first three anniversaries of the Date of Grant.Notwithstanding the foregoing, Shares subject to the Stock Option shall not vest on any vesting date unless the Optionee has remained in continuous Employment from the Date of Grant through such vesting date.[Notwithstanding the foregoing, immediately prior to a “Change of Control,” as such term is defined in the Change of Control Agreement between the Optionee and the Company, dated [], the provisions of Section [3(b)]/[4(d)] of that Change of Control Agreement shall apply.]1 (b) Exercise of the Stock Option.No portion of the Stock Option may be exercised until such portion vests.Each election to exercise any vested portion of the Stock Option will be subject to the terms and conditions of the Plan and shall be in writing, signed by the Option Holder (or in such other form as is acceptable to the Administrator).Each such written exercise election must be received by the Company at its principal office or by such other party as the Administrator may prescribe and be accompanied by payment in full as provided in the Plan.The exercise price may be paid (i) by cash or check acceptable to the Administrator, (ii) to the extent permitted by the Administrator, through a broker-assisted cashless exercise program acceptable to the Administrator, (iii) by such other means, if any, as may be acceptable to the Administrator, or (iv) by any combination of the foregoing permissible forms of payment.In the event that the Stock Option is exercised by a person other than the Optionee, the Company will be under no obligation to deliver shares hereunder unless and until it is satisfied as to the authority of the Option Holder to exercise the Stock Option and compliance with applicable securities laws.The latest date on which the Stock Option or any portion thereof may be exercised will be the 10th anniversary of the Date of Grant (the “Final Exercise Date”); provided, however, if at such time the Optionee is prohibited by applicable law or written Company policy applicable to similarly situated employees from engaging in any open-market sales of Stock, the Final Exercise Date will be automatically extended to thirty (30) days following the date the Optionee is no longer prohibited from engaging in such open-market sales.If the Stock Option is not exercised by the Final Exercise Date the Stock Option or any remaining portion thereof will thereupon immediately terminate. 1This provision should only be included for Optionees who are subject to a Change of Control Agreement. -2- (c) Treatment of the Stock Option Upon Cessation of Employment.If the Optionee’s Employment ceases, the Stock Option, to the extent not already vested will be immediately forfeited, and any vested portion of the Stock Option that is then outstanding will be treated as follows: (i)Subject to clauses (ii) and (iii) below and Section 4 of this Agreement, the Stock Option, to the extent vested immediately prior to the cessation of the Optionee’s Employment, will remain exercisable until the earlier of (A) the date which is 60 days after the date of such cessation of Employment, or (B) the Final Exercise Date, and except to the extent previously exercised as permitted by this Section 3(c)(i) will thereupon immediately terminate. (ii)Subject to clause (iii) below and Section 4 of this Agreement, the Stock Option, to the extent vested immediately prior to the cessation of the Optionee’s Employment due to death or disability, will remain exercisable until the earlier of (A) the first anniversary of the Optionee’s death or (B) the Final Exercise Date, and except to the extent previously exercised as permitted by this Section 3(c)(ii) will thereupon immediately terminate. (iii)If the Optionee’s Employment is terminated by the Company and its subsidiaries in connection with an act or failure to act constituting Cause (as the Administrator, in its sole discretion, may determine), or such termination occurs in circumstances that in the determination of the Administrator would have entitled the Company and its subsidiaries to terminate the Optionee’s Employment for Cause, the Stock Option (whether or not vested) will immediately terminate and be forfeited upon such termination. 4.Forfeiture; Recovery of Compensation. (a) The Administrator may cancel, rescind, withhold or otherwise limit or restrict the Stock Option at any time if the Optionee is not in compliance with all applicable provisions of this Agreement and the Plan. (b) The Stock Option is subject to Section 6(a)(5) of the Plan.The Stock Option (whether or not vested or exercisable) is subject to forfeiture, termination and rescission, and the Optionee will be obligated to return to the Company the value received with respect to the Stock Option (including Shares delivered under the Stock Option, and any gain realized on a subsequent sale or disposition of Shares), (ii)in accordance with Company policy relating to the recovery of erroneously-paid incentive compensation, as such policy may be amended and in effect from time to time, or (ii)as otherwise required by law or applicable stock exchange listing standards, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act. -3- 5.Transfer of Stock Option. The Stock Option may not be transferred except as expressly permitted under Section 6(a)(3) of the Plan. 6.Withholding.The exercise of the Stock Option will give rise to “wages” subject to withholding.The Optionee expressly acknowledges and agrees that the Optionee’s rights hereunder, including the right to be issued shares upon exercise, are subject to the Optionee promptly paying to the Company in cash (or by such other means as may be acceptable to the Administrator in its discretion) all taxes required to be withheld.No shares will be transferred pursuant to the exercise of this Stock Option unless and until the person exercising this Stock Option has remitted to the Company an amount in cash sufficient to satisfy any federal, state, or local withholding tax requirements, or has made other arrangements satisfactory to the Company with respect to such taxes.The Optionee authorizes the Company and its subsidiaries to withhold such amount from any amounts otherwise owed to the Optionee, but nothing in this sentence shall be construed as relieving the Optionee of any liability for satisfying his or her obligation under the preceding provisions of this Section. 7.Effect on Employment.Neither the grant of the Stock Option, nor the issuance of shares upon exercise of the Stock Option, will give the Optionee any right to be retained in the employ of the Company or any of its Affiliates, affect the right of the Company or any of its Affiliates to discharge or discipline such Optionee at any time, or affect any right of such Optionee to terminate his or her Employment at any time. 8.Governing Law.This Agreement and all claims or disputes arising out of or based upon this Agreement or relating to the subject matter hereof will be governed by and construed in accordance with the domestic substantive laws of the Commonwealth of Massachusetts without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction. By acceptance of the Stock Option, the undersigned agrees to be subject to the terms of the Plan.The Optionee further acknowledges and agrees that (i) the signature to this Agreement on behalf of the Company is an electronic signature that will be treated as an original signature for all purposes hereunder and (ii) such electronic signature will be binding against the Company and will create a legally binding agreement when this Agreement is countersigned by the Optionee. -4- [The remainder of this page is intentionally left blank] -5- Executed as of the day of [●]. Company: THE L.S. STARRETT COMPANY By: Name: Title: Optionee: Name: Address: [Signature Page to Non-Statutory Option Agreement]
Title: Can an employer force you to have a healthcare plan if you don't have one? I know the governments policy is you are supposed to have healthcare but isn't that the job of the government to enforce that policy and not a company? Question:Aurora, Colorado Answer #1: As a note, understand that your employer has the right to fire you for declining coverage.
Title: Was this negligence? Question:So I was in a store the other day (it will remain unnamed) and I was having trouble opening a package that I had purchased. One of the store employees noticed and without hesitation handed me a knife to open it. I couldn't figure out how to open the knife so he did it for me and handed it back to me. He then walked away, and as I was trying to use the knife to open the package it slipped and I gauged my thumb open. I had to get rushed to the hospital and received 6 stitches. They said it would heal in about 10 days. Was this situation negligence and do you think I am eligible for a claim? EDIT: Location is Vancouver, British Columbia, Canada Answer #1: Yes. You were negligent in handling the knife and that caused you to hurt yourself. If you can sue yourself, then you might be eligible for a claim.
Title: Is it legal to admit to police you've tested a drug in report of a drug dealer? Question:Street drugs have become more dangerous then ever with the introduction of fentanyl into the market. The most popular overdose causing cut but more importantly counterfeit drug in modern time is Xanax. A coworker of mine offered me one for free, which he admitted was his way of trying to turn me into an addict. Apparently he and everyone else thinks its an anti depressant, when in fact its an anti anxiety medication. As someone who knows a lot about drugs, I knew these could be fake Xanax laced with fentanyl, so much like Dexter I went back to my laboratory to experiment. I chopped the pill in half and began testing. My drug testing kit for fentanyl sure enough came back with positive results. I'd like to assist police in investigation to this guy, a real careless scum bag so innocent people are not killed by their ignorance. Three grains of sand is all it takes to kill someone? These pills are the size of 1000s of grains of sand if there's one thing the DEA should be stopping its this drug from hitting the streets. But I'm not sure I want to testify. Could this be a way into the police academy? Or should I protect my anonymity to protect me and my family? I guess what I'm really asking is it legal to admit I've tested this persons drugs? And that I'm still in possesion of them? This is in WA state. Answer #1: You’re not Batman. Stop trying to be Batman. Calling the police and telling them that you have illegal drugs is a terrible idea.Answer #2: Possession of these substances is a criminal act of a type known as "strict liability". If you know what it is, and you have access and control over it, then you are committing a felony punishable with prison time. To do what you're suggesting, you would have to call up the police and tell them you've committed felonies. This is a very very bad idea. The idea that you were trying to investigate something that you are (rightfully) offended by, and the idea that you had altruistic motives aimed at betterment of society are **irrelevant**. It was in your control, and you knew what it was. That's the end of the analysis. There are a variety of situations where strict liability can create a situation like this, but where the chances of actually getting charged with a crime are pretty remote. But dealing with counterfeit xanax and fentanyl aren't going to fall into that group. That's not to say you *would* get in trouble (no one can predict the future like that). But what you stand to lose (liberty, civil rights like voting and gun ownership, ability to get a good job, etc.) should be enough to make you realize what a bad idea this is. Committing crimes is not a good way into the police academy. You are probably thinking that your intent to thwart crime or your ingenuity or cleverness in doing what you've done will impress a police force. What actually impresses them is much simpler: Good reputation and a clean criminal record, and physical fitness sufficient to meet the demands of the job. For things like forensic or other specialized positions, good grades in whatever undergrad program they look to as a source of good candidates.
EXHIBIT 32.3 STATEMENT OF CHIEF ACCOUNTING OFFICER PURSUANT TO SECTION 1 Pursuant to Section 1350 of Title 18 of the United States Code, the undersigned, Sam H. Lindsey, Jr., Chief FinancialOfficer of Biofuels Power Corporation (the “Company”), hereby certifies that: The Company’s Form 10-Q Report for the six months ended June 30, 2010 (the “Report”) fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Sam H. Lindsey, Jr., Sam H. Lindsey, Jr., Chief Financial Officer Dated: August 23, 2010
Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-154708) and Form S-3 (No. 333-160991) of our report dated March 15, 2010, with respect to the consolidated financial statements and financial statement schedule of Arabian American Development Company for the year ended December 31, 2009, included in this Annual Report (Form 10-K) for the year ended December 31, 2011. /s/Travis Wolff, LLP Dallas, Texas March 9, 2012
Title: [Utah] Someone is falsely claiming they have a stalking injunction against me Question:Two years ago, a staff member at my (public) university made false stalking reports to get me kicked out. No stalking occurred. She invited me into her office, admitted guilt to violating campus policies, and turned around and reported my visit with her as stalking. This was the last contact I had with her, and it was her initiating it. I made no unwanted communication and promptly left. A few months later, I went to a vigil hosted at a public park. She was there, but I had no expectation to see her there. I went for my own personal reasons. She confronted me and initiated contact against my wishes. I ignored her and walked away. She later accused me of stalking. She's the one who confronted me. Another few months later, I temporarily moved to another state. While out of the state, police visited my family's house here in Utah, claiming I had been seen on campus with firearms (I was accused of being an active shooter). I made no threats or any other statements that could sound like threats - I left Utah to avoid the stress this person had caused me, not to dwell on it. The name police gave of the person who made the report matched that of one of the students closely associated with this employee. The video doorbell recording of the officer talking to my family has the officer admitting he has no idea what's going on or why the staff is so obsessed over me. Over the past two years, there's been a few incidents that have continued to cause me severe emotional distress. I have been part of the local LGBT community for the past 10 years. This employee has only been part of it for 3 (she moved here for her job), but she's trying to force me out of it. She has been telling these people that she has a stalking injunction against me to have them ban me from participating in their events. She is doing this while representing the university, including using her department's funding to sponsor these off-campus groups. No stalking injunction exists. There is no court order. But people believe her and are banning me from these off-campus resources specifically in retaliation of this rumored court order and in support of this person. I didn't violate any rules in these groups, it's just "one of our members has a civil stalking injunction against you, so you are no longer allowed to participate." I believe that, over the past two years, she has potentially violated FERPA law because she has disclosed my protected educational information with students and other people who this information is protected from. I also suspect that she's in violation of her social worker ethics, but I don't know if that actually affects anything. Her attacks against me have caused me severe emotional distress: multiple visits to the ER, crisis center, in-patient hospital stays (suicide attempts), and 2.5 years of ongoing mental health counseling because of her actions. I don't know what to do. Is she defaming me by claiming she has a court order that doesn't actually exist? Is this unlawful behavior? Is there anything I can claim over the fact that she has caused me such emotional distress (demonstrated by 2.5 years of mental health visit summaries)? Answer #1: This woman has waged a sustained attack on your reputation for what sounds like several years. It sounds like she is very clever and highly manipulative, and that is probably why you haven’t reported her. The only thing I think you can do is go to the police and take every bit of information you have with you. Definitely cite the complaint about you being on campus, when you were out of state. (Hopefully you have some concrete evidence of your trip). If anyone witnessed her coming to confront you at the vigil, it would be important to ask them if they will vouch for what they saw. This has been going on for a while, so you would want to sit down and write out the timeline from when he first began her accusations until the present day. It would actually be a surprise if she hasn’t done this same sort of thing to someone else. Wishing you all the best in this fight.
Exhibit 10.1 AGREEMENT TO TERMINATE CREDIT AGREEMENT AGREEMENT TO TERMINATE THE CREDIT AGREEMENT (this “Termination Agreement”) is made and entered into as of the 30th day of July, 2019, among BLUE CAPITAL REINSURANCE HOLDINGS LTD. (the “Company”), and Endurance Specialty Insurance Ltd. (successor in law to Endurance Investments Holdings Ltd., the “Lender”). WHEREAS, the Company and the Lender are parties to that certain Credit Agreement, dated as of May 6, 2016 as amended on July 31, 2018 (together, the “Credit Agreement”), pursuant to which the Lender has extended credit to the Company on the terms set forth therein; WHEREAS, the Company and Lender have agreed to terminate the Credit Agreement and amend the Commitment Termination Date (as such term is defined in the Credit Agreement); receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Definitions. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Credit Agreement. 2. Amendment to Credit Agreement. The definition of “Commitment Termination Date” is hereby amended to read in its entirety as follows: “Commitment Termination Date” means July 30, 2019. 3. No Waiver. Nothing contained herein shall be deemed to (i) constitute a waiver of any Default or Event of Default that may heretofore or hereafter occur or have occurred and be continuing or, except as expressly provided herein, to otherwise modify any provision of the Credit Agreement, or (ii) give rise to any defenses or counterclaims to the Lender’s right to compel payment of the Outstandings when due or to otherwise enforce its rights and remedies under the Credit Agreement. 4. Governing Law. This Termination Agreement and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Termination Agreement, the Credit Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the Laws of Bermuda. 5. Counterparts; Integration; Effectiveness. This Termination Agreement may be executed in counterparts (and by different parties hereto in different taken together shall constitute a single contract. This Termination Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have received a counterpart hereof that bears the signature of the Company. Delivery of an executed counterpart of a signature page of this Termination Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Termination Agreement. IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.              BLUE CAPITAL REINSURANCE HOLDINGS LTD. By: /s/ MICHAEL J MCGUIRE     Name: Michael J. McGuire Title: Chief Executive Officer              ENDURANCE SPECIALTY INSURANCE LTD. By: /s/ John V. Del Col     Name: John V. Del Col Title: Director
May 24, 2011 Securities and Exchange Commission treet, NE Washington, DC 20549 RE: First Variable Rate Fund for Government Income (“Registrant”) File Numbers 2-56809 and 811-02633 Withdrawal of a Registration Withdrawal Request (Accession No. 0000205355-11-000009) Filed May 23, 2011 Ladies and Gentlemen: Registrant hereby requests withdrawal of the above-referenced registration withdrawal request. The Form RW was filed in error. A proper withdrawal of amendment to a registration statement, the Form AW, will be filed. Please feel free to contact me at 301-657-7045 with any questions. Sincerely, /s/ Lancelot A. King Lancelot A. King Assistant Vice President Associate General Counsel
NOTE AND WARRANT PURCHASE AGREEMENT THIS NOTE AND WARRANT PURCHASE AGREEMENT, dated as of April 7, 2010 (this “Agreement”), is entered into by and between RADIENT PHARMACEUTICALS CORPORATION, a Delaware corporation with headquarters located at 2492 Walnut Ave., Suite 100 Tustin, CA 92780-6953 (the “Company”), and , (the “Buyer”). W I T N E S S E T H: WHEREAS, the Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration for offers and sales to accredited investors afforded, inter alia, by Rule 506 under Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and/or Section 4(2) of the 1933 Act; and WHEREAS, the Buyer wishes to acquire from the Company, and the Company desires to issue and sell to the Buyer, (i) the Note (as defined below), which Note will be convertible into shares of Common Stock, $0.001 par value, of the Company (the “Common Stock”), and (ii) the Warrant (as defined hereafter), which will be exercisable for shares of Common Stock, upon the terms and subject to the conditions of the Note, the Warrant, this Agreement and the other Transaction Documents (as defined below). 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 parties agree as follows: 1.CERTAIN DEFINITIONS.As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires: “Affiliate” means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled by or is under common control with such specified Person. “Buyer’s Counsel” means “Buyer Control Person” means each director, executive officer, promoter, and such other Persons as may be deemed in control of the Buyer pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as defined below). “Certificate of Incorporation” means the certificate of incorporation, articles of incorporation or other charter document (howsoever denominated) of the Company, as amended to date. “Closing Date” means the date of the closing of the purchase and sale of the Securities. “Company Control Person” means each director, executive officer, promoter, and such other Persons as may be deemed in control of the Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act. “Company Counsel” means Leser, Hunter, Taubman & Taubman. “Company’s SEC Documents” means the Company’s filings on the SEC’s EDGAR system which are listed on Annex I annexed hereto, to the extent available on EDGAR or otherwise provided to the Buyer as indicated on said Annex I. “Conversion Date” means the date a Holder submits a Notice of Conversion, as provided in the Note. “Conversion Shares” means the shares of Common Stock issuable upon conversion of the Note and/or in payment of accrued interest, as contemplated in the Note. “Converting Holder” means the Holder of the Note, who or which has submitted a Notice of Conversion (as contemplated by the Note) and/or Holder of the Warrant who or which has submitted a Notice of Exercise. “Delivery Date” has the meaning ascribed to it, as may be relevant in the Note (with respect to Conversion Shares). “Disbursement Instructions” means the Net Purchase Price Disbursement Instructions provided by the Company substantially in the form attached hereto as Annex IIIand incorporated herein by this reference. “Disclosure Annex” means Annex IIto this Agreement; provided, however, that the Disclosure Annex shall be arranged in sections corresponding to the identified Sections of this Agreement, but the disclosure in any such section of the Disclosure Annex shall qualify other provisions in this Agreement to the extent that it would be readily apparent to an informed reader from a reading of such section of the Disclosure Annex that it is also relevant to other provisions of this Agreement. “Holder” means the Person holding the relevant Securities at the relevant time. “Last Audited Date” means December 31, 2008. “Material Adverse Effect” means an event or combination of events, which individually or in the aggregate, would reasonably be expected to (x) adversely affect the legality, validity or enforceability of the Purchased Securities or any of the Transaction Documents, (y)have or result in a material adverse effect on the results of operations, assets, or financial condition of the Company and its subsidiaries, taken as a whole, or (z) adversely impair the Company’s ability to perform fully on a timely basis its material obligations under any of the Transaction Documents or the transactions contemplated thereby. “Maturity Date” has the meaning ascribed to it in the Note. “Person” means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust. “Principal Trading Market” means (a) the NYSE Amex, (b) the New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin Board, or (f) such other market on which the Common Stock is principally traded at the relevant time, but shall not include the “pink sheets.” 2 “Regular Trading Day” means the regular trading hours of a Trading Day on the Principal Trading Market shall be open for business (as of the date of this Agreement, such hours are, for most Trading Days, approximately 9:00 or 9:30AM to approximately 4PM Eastern Time; provided, however, that certain Trading Days may have shorter regular trading hours; and provided, further, that the regular trading hours may be subsequently changed for the Principal Trading Market). “Reporting Service” means Bloomberg LP or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by a Majority in Interest of the Holders. “Rule 144” means (i) Rule 144 promulgated under the 1933 Act or (ii) any other similar rule or regulation of the SEC that may at any time permit Holder to sell securities of the Company to the public without registration under the 1933 Act. “Securities” means the Purchased Securities (as defined in Section 2(a)(iii) below) and the Shares. “Shares” means the shares of Common Stock representing any or all of the Conversion Shares and/or the Warrant Shares (as defined hereafter). “State of Incorporation” means New Jersey. “Subsidiary” means, as of the relevant date, any subsidiary of the Company (whether or not included in the Company’s SEC Documents) whether now existing or hereafter acquired or created. “Trading Day” means any day during which the Principal Trading Market shall be open for business. “Transaction Documents” means (i) this Agreement, (ii) the Note, (iii) the Disclosure Annex, (iv) the Warrant (as defined hereafter), (v) the Registration Rights Agreement substantially in the form attached hereto as Annex IV, (vi) the Consent to Entry of Judgment by Confession (the “Confession of Judgment”) substantially in the form attached hereto as Annex V, (vii) the Unanimous Written Consent of the Board substantially in the form attached hereto as Annex VI, (viii) the Officer Certificate substantially in the form attached hereto as Annex VII, and (ix) all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement. “Transfer Agent” means, at any time, the transfer agent for the Company’s Common Stock. “Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrant. 2.AGREEMENT TO PURCHASE; NET PURCHASE PRICE; CLOSING. a.Purchase. (i)Subject to the terms and conditions of this Agreement and the other Transaction Documents, the undersigned Buyer hereby agrees to loan to the Company the Net Purchase Price (as defined hereafter) set forth on the Buyer’s signature page of this Agreement. 3 (ii)The obligation to repay the loan from the Buyer shall be evidenced by the Company’s issuance of a Convertible Promissory Note to the Buyer in the principal amount of $ substantially in the form attached hereto as Annex VIII (the “Note”).The Note shall provide for a Conversion Price (as defined in the Note), which price may be adjusted from time to as provided in the Note. (iii)As additional consideration for the Net Purchase Price, the Company shall also issue to the Buyer a warrant to purchase shares of the Common Stock substantially in the form attached hereto as Annex IX (the “Warrant,” and together with the Note, the “Purchased Securities”). b.Closing; Delivery of Transaction Documents.The sale and purchase of the Purchased Securities shall take place at a closing (the “Closing”) to be held at the offices of the Buyer on the Closing Date.At the Closing, the Company will deliver to the Buyer the Transaction Documents against receipt by the Company of the Net Purchase Price. c.Net Purchase Price.The Note carries a $ original issue discount (“OID”).In addition, the Company agrees to pay $ to the Buyer to cover the Buyer’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Purchased Securities (the “Transaction Expenses”).The Transaction Expenses shall be withheld by the Buyer at the Closing.Accordingly, the “Net Purchase Price” shall be $, computed as follows: $ less the OID less the Transaction Expenses. d.Method of Payment.Payment of the Net Purchase Price shall be made to the Company in immediately available funds of the United States as provided in the Disbursement Instructions. 3.BUYER REPRESENTATIONS AND WARRANTIES.The Buyer represents and warrants to, and covenants and agrees with, the Company, as of the date hereof and as of the Closing Date, as follows: a.Without limiting Buyer’s right to sell the Securities pursuant to an effective registration statement or otherwise in compliance with the 1933 Act, the Buyer is purchasing the Securities for its own account for investment only and not with a view towards the public sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof. b.All subsequent offers and sales of the Securities by the Buyer shall be made pursuant to registration of the Securities under the 1933 Act or pursuant to an exemption from such registration. c.The Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the 1933 Act and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities. d.If the Buyer is an individual, then the Buyer resides in the state or province identified in the address of the Buyer set forth on the Buyer’s signature page to this Agreement.If the Buyer is a partnership, corporation, limited liability company or other entity, then the office or offices of the Buyer in which its principal place of business is the address or addresses of the Buyer set forth on the Buyer’s signature page to this Agreement. e.The 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 Securities. 4 f.The Transaction Documents to which the Buyer is a party, and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Buyer.This Agreement has been executed and delivered by the Buyer, and this Agreement is, and each of the other Transaction Documents to which the Buyer is a party, when executed and delivered by the Buyer (if necessary), will be valid and binding obligations of the Buyer enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally. g.The Buyer is an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the 1933 Act. 4.COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the Buyer as of the date hereof and as of the Closing Date that, except as otherwise provided in the Disclosure Annex: a.Rights of Others Affecting the Transactions.Except for the right of participation (the “Participation Rights”) under Section 4.11 of the Securities Purchase Agreement dated as of November 30, 2009 with Whalehaven LP and Alpha Capital Anstalt (the “Participation Rights Holders”), there are no preemptive rights of any stockholder of the Company, as such, to acquire the Purchased Securities or the Shares.No other party has a currently exercisable right of first refusal which would be applicable to any or all of the transactions contemplated by the Transaction Documents.The Company has undertaken all actions, and otherwise complied with all requirements of, required by the Participation Rights and has received written confirmation that the Participation Rights Holders will neither participate in nor object to the transactions contemplated hereby, as more fully set forth on the Officer Certificate. b.Status.The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Incorporation and has the requisite corporate power to own its properties and to carry on its business as now being 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 or result in a Material Adverse Effect.The Company has registered its stock under Section 12(g) of the Securities and Exchange Act of 1934, as amended (the “1934 Act”), and is obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act.The Company has taken no action designed to terminate, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the 1934 Act nor has the Company received any notification that the SEC is contemplating terminating such registration.The Common Stock is quoted on the Principal Trading Market.The Company has received no notice, either oral or written, with respect to the continued eligibility of the Common Stock for quotation on the Principal Trading Market, and the Company has maintained all requirements on its part for the continuation of such quotation. The Company has not, in the twelve (12) months preceding the date hereof, received notice from the Principal 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 Principal 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. c.Authorized Shares. (i)The authorized capital stock of the Company consists of (x) 100,000,000 shares of Common Stock, of which approximately 24,700,000 undiluted shares and approximately 41,115,000 (fully diluted) are outstanding as of the March 15, 2010. Of the outstanding shares of Common Stock, approximately 250,000 shares are beneficially owned by Affiliates of the Company as of March 15, 2010. (ii)Other than as set forth in the Company’s SEC Documents and the agreements referred to with holders of the Company’s indebtedness as described in the Preliminary Proxy Statement filed with the SEC on February 1, 2010 (the “Preliminary Proxy Statement”), there are no outstanding securities which are convertible into or exchangeable for shares of Common Stock, whether such conversion is currently exercisable or exercisable only upon some future date or the occurrence of some event in the future. 5 (iii)All issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and non-assessable.Except for all of the issuances as proposed in the Preliminary Proxy Statement, after considering all other commitments that may require the issuance of Common Stock, the Company has sufficient authorized and unissued shares of Common Stock as may be necessary to effect the issuance of the Shares on the Closing Date, were the Note fully converted, and the Warrant fully exercised, on that date. (iv)The Shares have been duly authorized by all necessary corporate action on the part of the Company, and, when issued on conversion of, or in payment of interest on the Note, in each case in accordance with their respective terms, will have been duly and validly issued, fully paid and non-assessable, free from all taxes, liens, claims, pledges, mortgages, restrictions, obligations, security interests and encumbrances of any kind, nature and description, and will not subject the Holder thereof to personal liability by reason of being such Holder. d.Transaction Documents and Stock.This Agreement and each of the other Transaction Documents, and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Company.This Agreement has been duly executed and delivered by the Company and this Agreement is, and the Note, and each of the other Transaction Documents, when executed and delivered by the Company (if necessary), will be, valid and binding obligations of the Company enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally. e.Non-contravention.The execution and delivery of this Agreement and each of the other Transaction Documents by the Company, the issuance of the Securities in accordance with the terms hereof, and the consummation by the Company of the other transactions contemplated by this Agreement, the Note, and the other Transaction Documents do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute a default under (i) the Certificate of Incorporation or by-laws of the Company, each as currently in effect, (ii) any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock except as herein set forth, or (iii) to its knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company or any of its properties or assets, except such conflict, breach or default which would not have or result in a Material Adverse Effect. f.Approvals.No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the issuance and sale of the Securities to the Buyer as contemplated by this Agreement, except the approval of the NYSE Amex to list the Conversion Shares or the Warrant Shares, and the approval of the NYSE Amex and the Company’s stockholders to issue a number of Shares in excess of 19.99% of the outstanding shares of Common Stock of the Company as of the Closing Date (the “19.99% Cap”) . 6 g.Filings; Financial Statements.None of the Company’s SEC Documents contained, at the time they were filed, 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 made therein, in light of the circumstances under which they were made, not misleading.Since December 31, 2006, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company with the SEC under the 1934 Act on timely basis or has received a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension.As of their respective dates, the financial statements of the Company included in the Company’s 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, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the Note thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnote 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 Company’s 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 circumstance under which they are or were made, not misleading. h.Absence of Certain Changes.Since the Last Audited Date, there has been no Material Adverse Effect, except as disclosed in the Company’s SEC Documents. Since the Last Audited Date, except as provided in the Company’s SEC Documents, the Company has not (i) incurred or become subject to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business consistent with past practices; (ii) discharged or satisfied any material lien or encumbrance or paid any material obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business consistent with past practices; (iii) declared or made any payment or distribution of cash or other property to stockholders with respect to its capital stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or transferred any other material tangible assets, or canceled any material debts owed to the Company by any third partyor material claims of the Company against any third party, except in the ordinary course of business consistent with past practices; (v) waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of existing business; (vi) made any increases in employee compensation, except in the ordinary course of business consistent with past practices; or (vii) experienced any material problems with labor or management in connection with the terms and conditions of their employment. i.Full Disclosure.There is no fact known to the Company or that the Company should know after having made all reasonable inquiries (other than conditions known to the public generally or as disclosed in the Company’s SEC Documents) that has not been disclosed in writing to the Buyer that would reasonably be expected to have or result in a Material Adverse Effect. j.Absence of Litigation.There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, any of the Transaction Documents.The Company is not aware of any valid basis for any such claim that (either individually or in the aggregate with all other such events and circumstances) could reasonably be expected to have a Material Adverse Effect. There are no outstanding or unsatisfied judgments, orders, decrees, writs, injunctions or stipulations to which the Company is a party or by which it or any of its properties is bound, that involve the transaction contemplated herein or that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 7 k.Absence of Events of Default.Except as set forth on Annex IIor in Section 3(e) hereof, no Event of Default (or its equivalent term), as defined in the respective agreement to which the Company or its Subsidiary is a party, and no event which, with the giving of notice or the passage of time or both, would become an Event of Default (or its equivalent term) (as so defined in such agreement), has occurred and is continuing, which would have a Material Adverse Effect. l.Absence of Certain Company Control Person Actions or Events.Other than as set forth in the Company’s SEC Documents, none of the following has occurred during the past five (5) years with respect to a Company Control Person: (i) A petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such Company Control Person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; (ii) Such Company Control Person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) Such Company Control Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities: (A) acting, as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, any other Person regulated by the Commodity Futures Trading Commission (“CFTC”) or engaging in or continuing any conduct or practice in connection with such activity; (B) engaging in any type of business practice; or (C) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; (iv) Such Company Control Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such Company Control Person to engage in any activity described in paragraph (3) of this item, or to be associated with Persons engaged in any such activity; or (v) Such Company Control Person was found by a court of competent jurisdiction in a civil action or by the CFTC or SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the CFTC or SEC has not been subsequently reversed, suspended, or vacated. 8 m.No Undisclosed Liabilities or Events.The Company has no liabilities or obligations other than those disclosed on Annex II or in the Transaction Documents or the Company’s SEC Documents or those incurred in the ordinary course of the Company’s business since the Last Audited Date, or which individually or in the aggregate, do not or would not have a Material Adverse Effect.No event or circumstance has occurred or exists with respect to the Company or its properties, business, operations, condition (financial or otherwise), or results of operations, which, 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.There are no proposals currently under consideration or currently anticipated to be under consideration by the Board of Directors or the executive officers of the Company which proposal would (x) change the Certificate of Incorporation or by-laws of the Company, each as currently in effect, with or without stockholder approval, which change would reduce or otherwise adversely affect the rights and powers of the stockholders of the Common Stock or (y) materially or substantially change the business, assets or capital of the Company, including its interests in subsidiaries. n.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 offer or sales of any security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Regulation D in connection with the offer and sale of the Securities as contemplated hereby. o.Dilution.Each of the Company and its executive officers and directors is aware that the number of shares issuable on conversion of the Note, or pursuant to the other terms of the Transaction Documents may have a dilutive effect on the ownership interests of the other stockholders (and Persons having the right to become stockholders) of the Company.The Company specifically acknowledges that its obligation to issue the Conversion Shares upon conversion of the Note is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other stockholders of the Company, and the Company will honor such obligations, including honoring every Notice of Conversion (as contemplated by the Note), unless the Company is subject to an injunction (which injunction was not sought by the Company) prohibiting the Company from doing so. p.Fees to Brokers, Placement Agents and Others.Other than a cash finder’s fee of 10% of the net proceeds received by the Company plus a 3% unaccountable expense reimbursement, there are no other fees or expenses to be paid in reference to this Offering, of which the Company shall be solely responsible to pay, the Company has taken no action which would give rise to any claim by any Person for brokerage commission, placement agent or finder’s fees or similar payments by Buyer relating to this Agreement or the transactions contemplated hereby.Except for such fees arising as a result of any agreement or arrangement entered into by the Buyer without the knowledge of the Company (a “Buyer’s Fee”), Buyer shall have no obligation with respect to such fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this paragraph that may be due in connection with the transactions contemplated hereby.The Company shall indemnify and hold harmless each of Buyer, its 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 suffered in respect of any such claimed or existing fees (other than a Buyer’s Fee). q.Disclosure.All information relating to or concerning the Company set forth in the Transaction Documents or in the Company’s public filings with the SEC is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.No event or circumstance has occurred or exists with respect to the Company or its business, properties, prospects, operations or financial conditions, which under applicable law, rule or regulation, requires public disclosure or announcement by the Company. r.Confirmation.The Company agrees that, if, to the knowledge of the Company, any events occur or circumstances exist prior to the payment of the Net Purchase Price to the Company which would make any of the Company’s representations or warranties set forth herein materially untrue or materially inaccurate as of such date, the Company shall immediately notify the Buyer in writing prior to such date of such fact, specifying which representation, warranty or covenant is affected and the reasons therefor. 9 s.Title. The Company and the Company’s subsidiaries, if applicable, own and have good and marketable title in fee simple absolute to, or a valid leasehold interest in, all their respective real properties and good title to their other respective assets and properties, subject to no liens except as have been disclosed to the Investor. t.Intellectual Property. (i)Ownership.The Company owns or possesses or can obtain on commercially reasonable terms sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, processes and similar proprietary rights (“Intellectual Property”) necessary to the business of the Company as presently conducted, the lack of which could reasonably be expected to have a Material Adverse Effect.Except for agreements with its own employees or consultants, standard end-user license agreements, support/maintenance agreements and agreements entered in the ordinary course of the Company’s business, all of which have been made available for review by the Investor, there are no outstanding options, licenses or agreements relating to the Intellectual Property, and the Company is not bound by or a party to any options, licenses or agreements with respect to the Intellectual Property of any other person or entity.The Company has not received any written communication alleging that the Company has violated or, by conducting its business as currently conducted, would violate any of the Intellectual Property of any other person or entity, nor is the Company aware of any basis therefor.The Company is not obligated to make any payments by way of royalties, fees or otherwise to any owner or licensor of or claimant to any Intellectual Property with respect to the use thereof in connection with the present conduct of its business other than in the ordinary course of its business.There are no agreements, understandings, instruments, contracts, judgments, orders or decrees to which the Company is a party or by which it is bound which involve indemnification by the Company with respect to infringements of Intellectual Property, other than in the ordinary course of its business. (ii)No Breach by Employees.The Company is not aware that any of its employees is obligated under any contract or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with the use of his or her efforts to promote the interests of the Company or that would conflict with the Company’s business as presently conducted.Neither the execution nor delivery of this Agreement, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as presently conducted, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employee is now obligated.The Company does not believe it is or will be necessary to use any inventions of any of its employees made prior to their employment by the Company of which it is aware. 5.CERTAIN COVENANTS AND ACKNOWLEDGMENTS. a.Covenants and Acknowledgements of Buyer. (i)Transfer Restrictions.The Buyer acknowledges that (1) the Securities have not been and are not being registered under the provisions of the 1933 Act and, except as included in an effective registration statement, the Shares have not been and are not being registered under the 1933 Act, and may not be transferred unless (A) subsequently registered thereunder, or (B) the Buyer shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; (2) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule 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 used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (3) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or to comply with the terms and conditions of any exemption thereunder. 10 (ii)Restrictive Legend.The Buyer acknowledges and agrees that, until such time as the relevant Shares have been registered under the 1933 Act, and may be sold in accordance with another effective registration statement, or until such Shares can otherwise be sold without restriction, whichever is earlier, the certificates and other instruments representing any of the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such Securities): THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. (iii)Confession of Judgment.The Buyer shall not file the Confession of Judgment unless and until an Event of Default (as defined in the Note) shall have occurred. b.Covenants, Acknowledgements and Agreements of the Company.As a condition to the Buyer’s obligation to purchase the Securities contemplated by this Agreement, and as a material inducement for the Buyer to enter into this Agreement and the other Transaction Documents, the Company covenants and agrees as follows: (i)Filings.From the date hereof until all the Conversion Shares either have been sold by the Buyer, or may permanently be sold by the Buyerwithout any restrictions pursuant to Rule 144, (the “Registration Period”), the Company shalltimely make all filings required to be made by it under the 1933 Act, the 1934 Act, Rule 144 or any United States state securities laws and regulations thereof applicable to the Company or by the rules and regulations of the Principal Trading Market and such reports shall conform to the requirement of the applicable laws, regulations and government agencies, and, unless such filing is publicly available on the SEC’s EDGAR system (via the SEC’s web site at no additional charge), to provide a copy thereof to the Buyer promptly after such filing.Additionally, within four business days following the date of this Agreement, the Company shall file a current report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents in the form required by the Exchange Act and approved by Buyer and attaching the material transaction documents as exhibits to such filing.Reference is made to the Section titled “Publicity, Filings, Releases, Etc.” below.Additionally, the Company shall furnish to the Buyer, so long as the Buyer owns any Purchased Securities or Common Stock, promptly upon request, (1) a written statement by the Company that it has complied with the reporting requirements of Rule 144, (2) 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 Buyer to sell such securities pursuant to Rule 144 without registration. (ii)Reporting Status.So long as the Buyer beneficially owns any of the Purchased Securities and for at least twenty (20) Trading Days thereafter, the Company shall file all reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, shall take all reasonable action under its control to ensure that adequate current public information with respect to the Company, as required in accordance with Rule 144(c)(2) of the 1933 Act, is publicly available, and shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination. 11 (iii)Listing.The Company’s Common Stock shall be listed or quoted for trading on any of (a) theNYSE Amex, (b) New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin Board. The Company shall promptly secure the listing of all of the Conversion Shares upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall maintain such listing of all securities from time to time issuable under the terms of the Transaction Documents.The Company will comply in all material respects with the Company’s reporting, filing and other obligations under the by-laws or rules of the Principal Trading Market and/or the Financial Industry Regulatory Authority, Inc. (“FINRA”) or any successor thereto, as the case may be, applicable to it at least through the date which is sixty (60) days after the later of the date on which all of the Note have been converted or have been paid in full. (iv)Use of Proceeds.The Company will use the net proceeds received hereunder for working capital and general corporate purposes; provided, however, that the Company will not use such proceeds to pay fees payable (x) to any broker or finder relating to the offer and sale of the Purchased Securities except Galileo, or (y) to any other party who purchased securities or loaned funds to the Company in any financing transaction effected prior to the Closing Date. (v)Publicity, Filings, Releases, Etc.Each of the parties agrees that it will not disseminate any information relating to the Transaction Documents or the transactions contemplated thereby, including issuing any press releases, holding any press conferences or other forums, or filing any reports (collectively, “Publicity”), without giving the other party reasonable advance notice and an opportunity to comment on the contents thereof.Neither party will include in any such Publicity any statement or statements or other material to which the other party reasonably objects, unless in the reasonable opinion of counsel to the party proposing such statement, such statement is legally required to be included.In furtherance of the foregoing, the Company will provide to the Buyer’s Counsel drafts of the applicable text the first filing of a current report on Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K (or equivalent SB forms), as the case may be, intended to be made with the SEC which refers to the Transaction Documents or the transactions contemplated thereby as soon as practicable (but at least two (2) Trading Days before such filing will be made) and will not include in such filing (or any other filing filed before then) any statement or statements or other material to which the other party reasonably objects, unless in the reasonable opinion of counsel to the party proposing such statement, such statement is legally required to be included.Notwithstanding the foregoing, each of the parties hereby consents to the inclusion of the text of the Transaction Documents in filings made with the SEC (but any descriptive text accompanying or part of such filing shall be subject to the other provisions of this paragraph).Notwithstanding, but subject to, the foregoing provisions of thisprovision, the Company will, after the Closing Date, promptly issue a press release and file a current report on Form 8-K or, if appropriate, a quarterly or annual report on the appropriate form, referring to the transactions contemplated by the Transaction Documents. (vi)FINRA Rule 5110. The Company is aware that the Corporate Financing Rule 5110 (“FINRA Rule 5110”) of FINRA is or may become applicable to the transactions contemplated by the Transaction Documents or to the sale by a Holder of any of the Securities. If FINRA Rule 5110 is so applicable, the Company shall, to the extent required by such rule, timely make any filings and cooperate with any broker or selling stockholder in respect of any consents, authorizations or approvals that may be necessary for FINRA to timely and expeditiously permit the stockholder to sell the securities. (vii)Keeping of Records and Books of Account. The Company shall keep and cause each Subsidiary, if any, to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and such subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. 12 (viii)Corporate Existence.The Company shall (a) do all things necessary to preserve and keep in full force and effect its corporate existence, including, without limitation, all licenses or similar qualifications required by it to engage in its business in all jurisdictions in which it is at the time so engaged, (b) continue to engage in business of the same general type as conducted as of the date hereof, and (c) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder. (ix)Taxes.The Company shall pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become delinquent or in default, which, if unpaid, might reasonably be expected to give rise to liens or charges upon such properties or any part thereof, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and the Company has maintained adequate reserves with respect thereto in accordance with GAAP. (x)Stockholder Approval.The Company shall use its best efforts to obtain approval by the Company’s stockholders of the Transaction Documents at the first meeting of its stockholders following the Closing Date including, without limitation, a waiver ofNYSE Amex Rule 713 (“Rule 713”) in order that the 19.99% Cap shall not apply to any conversions of the Note or any exercise of the Warrant and approval for the issuance of not less than 4,800,001 shares of Common Stock, including the shares of Common Stock contemplated hereby pursuant to the Note and the Warrant, at a discount from book or market value at the time of issuance. Such approval shall be obtained no later than July 15, 2010.For the avoidance of doubt, in the event the Company fails to obtain such approval, an Event of Default (as defined in the Note) shall occur but the Transaction Documents will remain in full force and effect. (xi)Compliance. The Company shall comply in all material respects with all federal, state and local laws and regulations, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations and requirements applicable to it (collectively, “Requirements”) of all governmental bodies, departments, commissions, boards, companies or associations insuring the premises, courts, authorities, officials or officers which are applicable to the Company, its business, operations, or any of its properties, except where the failure to so comply would not have a Material Adverse Effect on the Company or any of its properties; provided, however, that nothing provided herein shall prevent the Company from contesting the validity or the application of any Requirements. (xii)3(a)(10) Shares.In the event the Company, in violation of the covenants contained herein, ever ceases to be a reporting company for purposes of the 1934 Act for any period of time, then the Company, for so long as Rule 144 is not available to the Buyer as an exemption from registration, shall cause any of its shareholders who at such time are in possession of Common Stock tradable under Section 3(a)(10) of the Securities Act (“3(a)(10) Shares”) to cease to sell such 3(a)(10) Shares. (xiii)Litigation.From and after the date hereof and until all of the Company’s obligations hereunder and the Note are paid and performed in full, the Company shall notify the Buyer in writing, promptly upon learning thereof, of any litigation or administrative proceeding commenced or threatened against the Company involving a claim in excess of $100,000. (xiv)Performance of Obligations.The Company shall promptly and in a timely fashion perform and honor all demands, notices, requests and obligations that exist or may arise under the Transaction Documents. 13 (xv)Listing Approval.The Company shall have received listing approval from NYSE Amex for the shares of Common Stock issuable upon conversion of the Note and exercise of the Warrant as soon as practicable after Closing, but in no event later than May 1, 2010. (xvi)Authorized Shares. The Company shall at all times prior to repayment of the Note maintain sufficient authorized and unissued shares of Common Stock as may be necessary to effect the issuance of the Shares upon complete conversion of the Note and exercise of the Warrant. In any event, the Company shall reserve (i) for issuance upon conversion and/or payment of the Note not less than Shares and (ii) for issuance upon exercise of the Warrant not less than Shares. 6.TRANSFER AGENT INSTRUCTIONS. a.The Company warrants that, with respect to the Securities, other than the stop transfer instructions to give effect to Section 4(a)(i) hereof, it will give the Transfer Agent no instructions inconsistent with instructions to issue Common Stock from time to time upon conversion of the Note, as may be applicable from time to time, in such amounts as specified from time to time by the Company to the Transfer Agent, bearing the restrictive legend specified in Section 4(a)(ii) of this Agreement prior to registration of the Shares under the 1933 Act, registered in the name of the Buyer or its nominee and in such denominations to be specified by the Holder in connection therewith.Except as so provided, the 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 other Transaction Documents.Nothing in this Section shall affect in any way the Buyer’s obligations and agreement to comply with all applicable securities laws upon resale of the Securities.If the Buyer provides the Company with an opinion of counsel reasonably satisfactory to the Company that registration of a resale by the Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)(i) of this Agreement is not required under the 1933 Act or upon request from a Holder while the Registration Statement is effective, the Company shall (except as provided in clause (2) of Section 4(a)(i) of this Agreement) permit the transfer of the Securities and, in the case of the Conversion Shares, as may be applicable, use its best efforts to cause the Transfer Agent to promptly electronically transmit to the Holder via the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program such Conversion Shares.The Company specifically represents that, as of the date hereof and as of the Closing Date, (i) the Company’s Transfer Agent is (a) participating in the DTC program, (b) is DWAC eligible, and (ii)the Company is not aware of any plans of the Transfer Agent to terminate such DTC participation or DWAC eligibility.While any Holder holds Securities, the Company shall at all times maintain a transfer agent which participates in the DTC program and is DWAC eligible, and the Company will not appoint any transfer agent which does not both participate in the DTC program and maintain DWAC eligibility.Nevertheless, in the event the Transfer Agent is not participating in the DTC/DWAC program or the Conversion Shares are not otherwise transferable via the DTC/DWAC program, then the Company shall instruct the Transfer Agent to issue one or more certificates for Common Stock without legend in such name and in such denominations as specified by the Buyer.In the event the Company’s transfer agent is not DWAC eligible on any Conversion Date, and consequently the Company issues Conversion Shares pursuant to the Conversion Notice in certificated rather than electronic form, then in such event if the closing bid price of the Common Stock on the Principal Trading Market is lower on the date of delivery of the certificates to the Buyer than on the Conversion Date, such difference in the closing bid prices, multiplied by the number of Conversion Shares shall be added to the principal balance of the Note. b. The Company shall assume any fees or charges of the Transfer Agent or Company Counsel regarding (i) the removal of a legend or stop transfer instructions with respect to Securities, and (ii) the issuance of certificates or DTC registration to or in the name of the Holder or the Holder’s designee or to a transferee as contemplated by an effective Registration Statement.Notwithstanding the foregoing, it shall be the Holder’s responsibility to obtain all needed formal requirements (specifically: medallion guarantee and prospectus delivery compliance) in connection with any electronic issuance of shares of Common Stock. 14 c.The Holder of the Noteshall be entitled to exercise its conversion privilege with respect to the Note, as the case may be, notwithstanding the commencement of any case under 11 U.S.C. §101 et seq. (the “Bankruptcy Code”).In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of such holder’s exercise privilege.The Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of the conversion of the Note. The Company agrees, without cost or expense to such Holder, to take or to consent to any and all action necessary to effectuate relief under 11 U.S.C. §362. 7.CLOSING DATE. a.The Closing Date shall occur on the date which is the first Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof shall have either been satisfied or been waived by the party in whose favor such conditions run, but in any event shall not be later than April 7, 2010. b.Closing of the purchase and sale of Purchased Securities shall occur on the Closing Date at the offices of the Buyer and shall take place no later than 3:00 P.M., Eastern Time, on such day or such other time as is mutually agreed upon by the Company and the Buyer. 8.CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. The Buyer understands that the Company’s obligation to sell the relevant Purchased Securities to the Buyer pursuant to this Agreement on the Closing Date is conditioned upon: a.The execution and delivery of this Agreement and, as applicable, the other Transaction Documents by the Buyer on or before such Closing Date; b.Delivery by the Buyer by the Closing Date of good funds as payment in full of an amount equal to the Net Purchase Price in accordance with this Agreement; c.The accuracy on the Closing Date of the representations and warranties of the Buyer contained in this Agreement, each as if made on such date, and the performance by the Buyer on or before such date of all covenants and agreements of the Buyer required to be performed on or before such date; and d.There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained. 9.CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE. Generally.The Buyer’s obligation to purchase the Purchased Securities is conditioned upon and subject to the fulfillment, on or prior to the Closing Date, of all of the following conditions, any of which may be waived in whole or in part by the Buyer: a.The execution and delivery of this Agreement and the other Transaction Documents by the Company on or before the Closing Date; 15 b.Without limiting the generality of the requirement in the immediately preceding section, the delivery by the Company of the Note and the Warrant in accordance with this Agreement; c.On the Closing Date, each of the Transaction Documents executed by the Company on or before such date shall be in full force and effect and the Company shall not be in default thereunder; d.The accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained in this Agreement and the other Transaction Documents, each as if made on such date, and the performance by the Company on or before such date of all covenants and agreements of the Company required to be performed on or before such date; e.There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained; and f.From and after the date hereof to and including the Closing Date, each of the following conditions will remain in effect: (i) the trading of the Common Stock shall not have been suspended by the SEC or on the Principal Trading Market; (ii) trading in securities generally on the Principal Trading Market shall not have been suspended or limited; (iii), no minimum prices shall been established for securities traded on the Principal Trading Market; (iv) there shall not have been any material adverse change in any financial market; and (v) there shall not have occurred any Material Adverse Effect. g.Except for any notices required or permitted to be filed after the Closing Date with certain federal and state securities commissions, the Company shall have obtained (a) all governmental approvals required in connection with the lawful sale and issuance of the Securities, and (b) all third party approvals required to be obtained by the Company in connection with the execution and delivery of the Transaction Documents by the Company or the performance of the Company’s obligations thereunder. h.All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Buyer. 10.INDEMNIFICATION AND REIMBURSEMENT. a.The Company agrees to defend, indemnify and forever hold harmless the Buyer and its officers, directors, employees, and agents, and each Buyer Control Person (the “Buyer Parties”) from and against any losses, claims, damages, liabilities or expenses incurred (collectively, “Damages”), joint or several, and any action in respect thereof to which the Buyer, its partners, Affiliates, officers, directors, employees, and duly authorized agents, and any such Buyer Control Person becomes subject, resulting from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Company contained in this Agreement, as such Damages are incurred.The Buyer Parties with the right to be indemnified under this Section (the “Indemnified Parties”) shall have the right to defend any such action or proceeding with attorneys of their own selection, and the Company shall be solely responsible for all costs and expenses related thereto.If the Indemnified Parties opt not to retain their own counsel, the Company shall defend any such action or proceeding with attorneys of its choosing at its sole cost and expense, provided that such attorneys have been pre-approved by the Indemnified Parties, which approval shall not be unreasonably withheld, and provided further that the Company may not settle any such action or proceeding without first obtaining the written consent of the Indemnified Parties. 16 b.The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar rights of the Buyer Parties against the Company or others, and (ii) any liabilities the Company may be subject to. 11.JURY TRIAL WAIVER. The Company and the Buyer hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the Parties hereto against the other in respect of any matter arising out or in connection with the Transaction Documents. 12.SPECIFIC PERFORMANCE.The Company andthe Buyer acknowledge and agree that irreparable damage would occur in the event that any provision of this Agreement or any of the other Transaction Documents were not performed in accordance with its specific terms or were otherwise breached.It is accordingly agreed that the parties (including any Holder) shall be entitled to an injunction or injunctions, without (except as specified below) the necessity to post a bond, to prevent or cure breaches of the provisions of this Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity; provided, however that the Company, upon receipt of a Notice of Conversion or a Notice of Exercise, may not fail or refuse to deliver the stock certificates and the related legal opinions, if any, or if there is a claim for a breach by the Company of any other provision of this Agreement or any of the other Transaction Documents, the Company shall not raise as a legal defense, based on any claim that the Holder or anyone associated or affiliated with the Holder has violated any provision hereof or any other Transaction Document, has engaged in any violation of law or for any other reason, unless the Company has first posted a bond for one hundred fifty percent (150%) of the principal amount and, if relevant, then obtained a court order specifically directing it not to deliver said stock certificates to the Holder. The proceeds of such bond shall be payable to the Holder to the extent that the Holder obtains judgment or its defense is recognized.Such bond shall remain in effect until the completion of the relevant proceeding and, if the Holder appeals therefrom, until all such appeals are exhausted.This provision is deemed incorporated by reference into each of the Transaction Documents as if set forth therein in full. 13.OWNERSHIP LIMITATION.If at any time after the Closing, the Buyer shall receive (or shall attempt to convert the Note into or exercise the Warrant for) shares of the Common Stock in payment of interest or principal or on conversion of the Note or exercise of the Warrant, so that the Buyer would hold by virtue of such action or receipt of shares of Common Stock under or pursuant to conversion of the Note or exercise of the Warrant a number of shares exceeding 9.99% of the number of shares of the Company’s Common Stock outstanding on such date (the “9.99% Cap”), the Company shall not be obligated and shall not issue to the Buyer shares of its Common Stock which would exceed the 9.99% Cap. 14.NYSE AMEX19.99% CAP.The parties understand that the issuance of the Common Stock upon conversion of the Note or exercise of the Warrant may be or may become subject to Rule 713, which requires stockholder approval prior to the issuance of additional shares under certain circumstances.Accordingly, in the event (i) the Buyer attempts to convert the Note or exercise the Warrant prior the Company’s receipt of such shareholder approval, and (ii) such conversion or exercise would require the Company to issue in excess of 19.99% of the Company’s outstanding Common Stock on the Closing Date, then the Company shall not be obligated to issue to the Buyer any shares that would be in excess of the 19.99% Cap until required approvals are obtained from the stockholders and NYSE Amex; provided, however, that in the event that Rule 713 or other applicable NYSE Amex Rules do not apply, then the Company shall issue all requested shares in accordance with the terms and conditions Transaction Documents. 15.MISCELLANEOUS.The Company and the Buyer hereby agree that the provisions of this Section shall apply to all of the Transaction Documents. 17 a.Governing Law and Venue.This Agreement shall be governed by and interpreted in accordance with the laws of the State of Illinois for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws.Each of the parties consents to the exclusive jurisdiction of the federal courts whose districts encompass any part of the County of Cook or the state courts of the State of Illinois sitting in the County of Cook in connection with any dispute arising under this Agreement or any of the other Transaction Documents and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions or to any claim that such venue of the suit, action or proceeding is improper. To the extent determined by such court, the Company shall reimburse the Buyer for any reasonable legal fees and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under any of the Transaction Documents.Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law. b.No Waiver.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. c.Successors and Assigns.This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. d.Pronouns.All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. e.Counterparts.This Agreement may be signed in one or more counterparts, each of which shall be deemed an original, but all of which together shall be deemed to constitute one instrument.Facsimile and email copies of signed signature pages will be deemed binding originals. f.Headings.The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. g.Severability.Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. h.Amendment.This Agreement may be amended only by an instrument in writing signed by the party to be charged with enforcement thereof. i.Entire Agreement.This Agreement together with the other Transaction Documents constitute and contain the entire agreement between the Company and the Buyer and supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. j.Currency.All dollar amounts referred to or contemplated by this Agreement or any other Transaction Document shall be deemed to refer to US Dollars, unless otherwise explicitly stated to the contrary. k.Buyer’s Expenses.Except as otherwise provided herein, the Company and the Buyer shall be responsible for paying such party’s own fees and expenses (including legal expenses) incurred in connection with the preparation and negotiation of the Transaction Documents and the closing of the transactions contemplated thereby. 18 l.Assignment by the Company.Notwithstanding anything to the contrary herein, the rights, interests or obligations hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Buyer, which consent may be withheld at the sole discretion of the Buyer; provided, however, that in the case of a merger, sale of substantially all of the Company’s assets or other corporate reorganization, the Buyer shall not unreasonably withhold, condition or delay such consent. m.Advice of Counsel. In connection with the preparation of this Agreement and all other Transaction Documents, each of the Company, its shareholders, officers, agents, and representatives acknowledges and agrees that the attorney that prepared this Agreement and all of the other Transaction Documents acted as legal counsel to the Buyer only.Each of the Company, its shareholders, officers, agents, and representatives (i) hereby acknowledges that he/she/it has been, and hereby is, advised to seek legal counsel and to review this Agreement and all of the other Transaction Documents with legal counsel of his/her/its choice, and (ii) either has sought such legal counsel or hereby waives the right to do so. n.No Strict Construction. The language used in this Agreement is the language chosen mutually by the parties hereto and no doctrine of construction shall be applied for or against any party. o.Attorneys’ Fees.In the event of any action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Transaction Documents, the Prevailing Party (as defined hereafter) shall be entitled to reasonable attorneys’ fees, court costs and collection costs in addition to any other relief to which such party may be entitled.“Prevailing Party” shall mean the party in any litigation or enforcement action that prevails in the highest number of final rulings, counts or judgments adjudicated by a court of competent jurisdiction. p.Replacement of the Note. Subject to any restrictions on or conditions to transfer set forth in the Note, the Holder of a Note, at its option, may in person or by duly authorized attorney surrender the same for exchange at the Company’s chief executive office, and promptly thereafter and at the Company’s expense, except as provided below, receive in exchange therefor one or more new convertible secured promissory note(s), each in the principal requested by such Holder, dated the date to which interest shall have been paid on the Note so surrendered or, if no interest shall have yet been so paid, dated the date of the Note so surrendered and registered in the name of such person or persons as shall have been designated in writing by such holder or its attorney for the same principal amount as the then unpaid principal amount of the Note so surrendered. As applicable, upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of a Note and (a)in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it; or (b)in the case of mutilation, upon surrender thereof, the Company, at its expense, will execute and deliver in lieu thereof a new convertible secured promissory note executed in the same manner as the Note being replaced, in the same principal amount as the unpaid principal amount of such Note and dated the date to which interest shall have been paid on such Note or, if no interest shall have yet been so paid, dated the date of such Note. 16.NOTICES.Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of (a) the date delivered, if delivered by personal delivery as against written receipt therefor or by confirmed facsimile transmission, 19 (b) the fifth Trading Day after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, (c) the third Trading Day after mailing by domestic or international express courier, with delivery costs and fees prepaid, or (d) when faxed or sent by electronic mail, upon confirmation of receipt, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by ten (10) days’ advance written notice similarly given to each of the other parties hereto): COMPANY: At the address set forth at the head of this Agreement. Attn: Chief Executive Officer Telephone No.: 714 505-4461 Telecopier No.: 714 505-4464 BUYER: At the address set forth on the signature page of this Agreement. with a copy (which shall not constitute notice) to: Telephone No.: () Telecopier No.() 17.SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company’s and the Buyer’s representations and warranties herein shall survive the execution and delivery of this Agreement and the delivery of the Transaction Documents and the payment of the Net Purchase Price and shall inure to the benefit of the Buyer and the Company and their respective successors and assigns. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] 20 IN WITNESS WHEREOF, each of the undersigned represents that the foregoing statements made by it above are true and correct and that it has caused this Agreement to be duly executed on its behalf (if an entity, by one of its officers thereunto duly authorized) as of the date first above written. NET PURCHASE PRICE: BUYER: By: Name: Its: COMPANY: RADIENT PHARMACEUTICALS CORPORATION By: Name: Title: [SIGNATURE PAGE TO NOTE AND WARRANT PURCHASE AGREEMENT] 21 ANNEX I COMPANY’S SEC DOCUMENTS ANNEX II DISCLOSURE ANNEX ANNEX III DISBURSEMENT INSTRUCTIONS ANNEX IV REGISTRATION RIGHTS AGREEMENT ANNEX V UNANIMOUS WRITTEN CONSENT OF THE BOARD ANNEX VI OFFICER CERTIFICATE ANNEX VII NOTE ANNEX VIII
Exhibit 10.8 AMENDED AND RESTATED FIXED LOAN NOTE (Collateral Pool 3) This AMENDED AND RESTATED FIXED LOAN NOTE is effective as of February 27, 2013, by and among the undersigned Borrower (together with its permitted successors and assigns, “Borrower”) and FANNIE MAE, the body corporate duly organized under the Federal National Mortgage Associates Charter Act, as amended, 12 U.S.C. § 1716 et seq. and duly organized and existing under the laws of the United States (“Fannie Mae”). PRELIMINARY STATEMENTS A. Pursuant to that certain Master Credit Facility Agreement dated as of October 5, 2007, as amended and restated by that certain Amended and Restated Master Credit Facility Agreement dated December 2, 2010 (the “Original Agreement”), the lender under the Original Agreement made loans, including a loan to certain of the undersigned borrowers (the “Original Borrowers”) and to certain other parties (the “Released Borrowers”) in the original principal amount of ONE BILLION TWO HUNDRED SIXTY-FIVE MILLION EIGHT HUNDRED FIVE THOUSAND SIX HUNDRED FIFTY-NINE AND NO/100 DOLLARS (US $1,265,805,659.00) (the “Loan”). Fannie Mae is the holder of the Loan, which is evidenced by that certain Fixed Loan Note (Collateral Pool 3) dated as of October 5, 2007, in the original principal sum of ONE BILLION TWO HUNDRED SIXTY-FIVE MILLION EIGHT HUNDRED FIVE “Original Note”). B. As security for their obligations under the Original Note and otherwise with respect to the Loan, the Original Borrowers and the Released Borrowers executed various multifamily mortgages, deeds to secure debt or deeds of trust described in the Original Agreement as comprising Collateral Pool 3. On or prior to the date hereof, the Released Borrowers have been released from their obligations under the Original Note. C. On the date hereof, Borrower and Fannie Mae have executed the Master Agreement (defined below) which amends and supersedes the Original Agreement in its entirety as it relates to the Loan and certain other loans made under the Original Agreement and outstanding as of the date hereof. D. As a condition to Fannie Mae’s execution of the Master Agreement (i) each Borrower that is not one of the Original Borrowers has agreed (a) to repay the Loan and assume the obligations of Borrower with respect to the Loan by executing the Note (defined below), and (b) to include such Borrower’s property in Collateral Pool 3 by executing, among other things, a multifamily mortgage, deed to secure debt or deed of trust as security for such Borrower’s obligations under the Note and otherwise with respect to the Loan; and (ii) each of the Original Borrowers has agreed to execute this Note. Borrower and Fannie Mae agree that the Original Note is hereby amended and restated in its entirety as follows (as amended and restated, the “Note”):   Amended and Restated Fixed Loan Note Collateral Pool 3   1 FIXED LOAN NOTE   US $1,265,805,659.00    February 27, 2013 FOR VALUE RECEIVED, the undersigned together with its permitted successors and assigns, (“Borrower”) jointly and severally promises to pay to the order of FANNIE MAE, the body corporate duly organized under the Federal National Mortgage Associates Charter Act, as amended, 12 U.S.C. § 1716 et seq. and duly organized and existing under the laws of the United States (together with its successors and assigns, “Fannie Mae”) the principal sum of ONE BILLION TWO HUNDRED SIXTY-FIVE MILLION EIGHT HUNDRED FIVE THOUSAND SIX HUNDRED FIFTY-NINE AND NO/100 DOLLARS (US $1,265,805,659.00), with interest accruing on the unpaid principal balance from the date of disbursement until fully paid at the annual Interest Rate. This Note is executed and delivered by Borrower pursuant to that certain Master Credit Facility Agreement dated as of the date hereof, by and between Borrower, Fannie Mae and other borrowers (as amended from time to time, the “Master Agreement”), to evidence the obligation of Borrower to repay a Fixed Loan made to Borrower (Collateral Pool 3 Borrower) in accordance with the terms of the Master Agreement. This Note is entitled to the benefit and security of the Loan Documents provided for in the Master Agreement, to which reference is hereby made for a statement of all of the terms and conditions under which the Fixed Loan evidenced hereby is made. All references to Loan Documents and Security Documents herein shall be with respect to Collateral Pool 3 (the “Collateral Pool”) as further identified in the Master Agreement. Section 1. Defined Terms. In addition to defined terms found elsewhere in this Amortization Period: N/A. Fannie Mae is not open for business. Default Rate: A rate equal to the lesser of four (4) percentage points above the under applicable law. Disbursement Date: The date of disbursement of the Loan proceeds hereunder. First Payment Date: The first day of March, 2013.   Collateral Pool 3 1 Instrument. Interest Rate: The annual rate of six and two hundred fifty-six thousandths percent (6.2560%). Maturity Date: The first day of November, 2017 or any earlier date on which the otherwise. Original Note: Collectively, that certain Fixed Loan Note (Collateral Pool 3) dated as of October 5, 2007, in the original principal sum of ONE BILLION TWO AND NO/100 DOLLARS (US $1,265,805,659.00). Security Instrument: Individually and collectively, various multifamily mortgages, deeds to secure debt or deeds of trust described in the Master Agreement comprising Collateral Pool 3. last day of April, 2017. Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Master Agreement or, if not defined in the Master Agreement, as defined in the Security Instrument. Section 2. Address for Payment. All payments due under this Note shall be payable at c/o Wells Fargo Bank, N.A., 2010 Corporate Ridge – Suite 1000, McLean, Virginia 22102, Attention: Servicing Department, or such other place as may be designated by written notice to Borrower from or on behalf of Fannie Mae. Section 3. Payment of Principal and Interest. Principal and interest shall be paid as follows: (a) [RESERVED]. (b) Interest Computation Actual/360. Interest under this Note shall be computed on the basis of a 360-day year. The amount of each monthly payment made by Borrower pursuant to Paragraph 3(c) below will be based on the actual number of calendar days during such month and shall be calculated by multiplying the unpaid principal balance of this Note by the per annum interest rate, dividing the product by 360 and multiplying the quotient by   Collateral Pool 3 2 the amount of interest for each month will vary depending on the actual number of calendar days during such month. (c) Monthly Installments. Consecutive monthly installments of interest only, shall be payable as follows:     (i) SIX MILLION ONE HUNDRED FIFTY-NINE THOUSAND ONE HUNDRED TWENTY-NINE AND 05/100 DOLLARS (US $6,159,129.05), shall be payable on the first day of each month during the term hereof which follows a 28-day month;     (ii) SIX MILLION THREE HUNDRED SEVENTY-NINE THOUSAND NINETY-SEVEN AND 94/100 DOLLARS (US $6,379,097.94), shall be payable on the first day of each month during the term hereof which follows a 29-day month,     (iii) SIX MILLION FIVE HUNDRED NINETY-NINE THOUSAND SIXTY-SIX AND 84/100 DOLLARS (US $6,599,066.84), shall be payable on the first day of each month during the term hereof which follows a 30-day month, or     (iv) SIX MILLION EIGHT HUNDRED NINETEEN THOUSAND THIRTY-FIVE AND 73/100 DOLLARS (US $6,819,035.73), shall be payable on the first day of each month during the term hereof which follows a 31-day month, until the entire unpaid principal balance evidenced by this Note is fully paid. The entire principal balance and accrued but unpaid interest shall be due and payable on the Maturity Date. The unpaid principal balance shall continue to bear interest after the Maturity Date at the Default Rate set forth in this Note until and including the date on which it is paid in full. (d) Payments Before Due Date. Any regularly scheduled monthly installment of interest that is received by Fannie Mae before the date it is due shall be deemed to have been received on the due date solely for the purpose of calculating interest due. Section 4. Application of Payments. If at any time Fannie Mae receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is less than all amounts due and payable at such time, Fannie Mae may apply that payment to amounts then due and payable in any manner and in any order determined by Fannie Mae, in Fannie Mae’s discretion. Borrower agrees that neither Fannie Mae’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Fannie Mae’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.   Collateral Pool 3 3 Section 5. Security. The Indebtedness is secured, among other things, by the rights of Fannie Mae concerning the collateral for the Indebtedness. Section 6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Section 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Fannie Mae, without any prior notice to Borrower. Fannie Mae may exercise this option to accelerate regardless of any prior forbearance. Section 7. Late Charge. Subject to the provisions of Section 9.01(b) of the Master Agreement, if any monthly installment due hereunder is not received by Fannie Mae on or before the tenth (10th) day of each month or if any other Loan Document is not received by Fannie Mae within ten (10) days after the date such amount is due, counting from and including the date such amount is due, Borrower shall pay to Fannie Mae, immediately and without demand by Fannie Mae, a late charge equal to five percent (5%) of such monthly installment or other amount due (provided that in connection with the payment in full on the Maturity Date, such 10-day period shall be increased to fifteen (15) days and such late charge shall equal one percent (1%) of such payment or other amount due). Borrower acknowledges that its failure to make timely payments will cause Fannie Mae to incur additional expenses in servicing and processing the Loan and that it is extremely difficult and impractical to determine those additional Fannie Mae will incur by reason of such late payment. The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Section 8. Section 8. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for thirty (30) days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at the Default Rate. If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Fannie Mae to incur additional expenses in servicing and payment under this Note is delinquent for more than thirty (30) days, Fannie Mae will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Fannie Mae’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any monthly installment or other payment due under this Note is delinquent for more than thirty (30) days, Fannie Mae’s risk of nonpayment of this Note will be materially increased and Fannie Mae is entitled to be compensated for such increased risk. Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of   Collateral Pool 3 4 the additional costs and expenses Fannie Mae will incur by reason of Borrower’s delinquent payment and the additional compensation Fannie Mae is entitled to receive for the increased risks of nonpayment associated with a delinquent advance. Section 9. Limits on Personal Liability. The provisions of Article 12 of the Master Agreement (entitled “Limits on Personal Liability”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Article were set forth in its entirety herein. Section 10. Voluntary and Involuntary Prepayments. (a) A prepayment premium shall be payable in connection with any prepayment made under this Note as provided below: Borrower may voluntarily prepay all (or a portion) of the unpaid principal balance of this Note only on the last calendar day of a calendar month (the “Last Day of the Month”) and only if Borrower has complied with all of the following: (i) Borrower must give Fannie Mae at least thirty (30) days (if given via U.S. Postal Service) or twenty (20) days (if given via facsimile, email or overnight courier), but not more than sixty (60) days, prior written notice of Borrower’s intention to make a prepayment (the “Prepayment Notice”). The Prepayment Notice shall be given in writing (via facsimile, email, U.S. Postal Service or overnight courier) and addressed to Fannie Mae. The Prepayment Notice shall include, at a minimum, the Business Day upon which Borrower intends to make the prepayment (the “Intended Prepayment Date”). (ii) Borrower acknowledges that the Fannie Mae is not required to accept any voluntary prepayment of this Note on any day other than the Last Day of the Month even if Borrower has given a Prepayment Notice with an Intended Prepayment Date other than the Last Day of the Month or if the Last Day of the Month is not a Business Day. Therefore, even if Fannie Mae accepts a voluntary prepayment on any day other than the Last Day of the Month, for all purposes (including the prepayment received by Fannie Mae on any day other than the Last Day of the Month shall be deemed to have been received by Fannie Mae on the Last Day of the Month and any prepayment calculation will include interest to and including the Last Day of the Month in which such prepayment occurs. If the Last Day of the Month is not a Business Day, then the Borrower must make the payment on the Business Day immediately preceding the Last Day of the Month. (iii) Any prepayment shall be made by paying (A) the amount of principal being (C) all other sums due Fannie Mae at the time of such prepayment, and (D) the prepayment premium calculated pursuant to Schedule A. (iv) If, for any reason, Borrower fails to prepay this Note (A) within five (5) Business Days after the Intended Prepayment Date or (B) if the prepayment occurs in a month other than the month stated in the original Prepayment Notice, then Fannie Mae shall have   Collateral Pool 3 5 the right, but not the obligation, to recalculate the prepayment premium based upon the date that Borrower actually prepays this Note and to make such calculation as described in Schedule A attached hereto. For purposes of such recalculation, such new prepayment date shall be deemed the “Intended Prepayment Date.” (v) Upon Fannie Mae’s exercise of any right of acceleration under this Note, Borrower shall pay to Fannie Mae, in addition to the entire unpaid principal accrued interest and all other sums due Fannie Mae under this Note and the other A. (vi) Any application by Fannie Mae of any collateral or other security to the repayment of any portion of the unpaid principal balance of this Note prior to partial prepayment by Borrower, requiring the payment to Fannie Mae by Borrower of a prepayment premium. The amount of any partial prepayment shall be computed so as to provide to Fannie Mae a prepayment premium computed pursuant to Schedule A without Borrower having to pay out-of-pocket additional amounts. (b) Notwithstanding the provisions of Section 10(a), no prepayment premium shall be payable (1) with respect to any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument, or (2) as provided in subparagraph (b) of Schedule A. (d) Any permitted or required prepayment of less than the entire unpaid principal balance of this Note shall not extend or postpone the due date of any subsequent monthly installments, provided the amount of each monthly installment shall be recomputed to reflect such prepayment of the Indebtedness. (e) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from an Event of Default by Borrower, will result in Fannie Mae’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Fannie Mae’s ability to meet its commitments to third parties. Borrower agrees to pay to Fannie Mae upon demand damages for the detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents all of the damages Fannie Mae will incur because of a prepayment. (f) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the Loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of Borrower’s voluntary agreement to the prepayment premium provisions.   Collateral Pool 3 6 Section 11. Costs and Expenses. Borrower shall pay on demand all reasonable expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, actually incurred by Fannie Mae as a result of any Event of Default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding. Section 12. Forbearance. Any forbearance by Fannie Mae in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document the exercise of that or any other right or remedy. The acceptance by Fannie Mae of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Fannie Mae’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment. Enforcement by Fannie Mae of any security for Borrower’s obligations under this Note shall not constitute an election by Fannie Mae of remedies so as to preclude the exercise of any other right or remedy available to Fannie Mae. Section 13. Waivers. Except as expressly provided in this Note or the Master Agreement, presentment demand, notice of dishonor, protest, notice of collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors. Section 14. Loan Charges. Borrower agrees to pay an effective rate of interest the nature of interest paid or to be paid in connection with the Loan evidenced detention of money requiring payment of interest at a rate greater than the maximum interest rate permitted to be charged under applicable law. If any collected from Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that eliminate that violation. The amounts, if any, previously paid to Fannie Mae in excess of the permitted amounts shall be applied by Fannie Mae to reduce the unpaid principal balance of this Note. For the purpose of determining whether be collected from Borrower has been violated, all Indebtedness that constitutes   Collateral Pool 3 7 Section 15. Commercial Purpose. Borrower represents that the Indebtedness is Section 16. Counting of Days. Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days. Section 17. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. The provisions of Section 13.06 of the Master Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein. Section 18. Captions. The captions of the paragraphs of this Note are for Section 19. Notices. All notices, demands and other communications required or permitted to be given by Fannie Mae to Borrower pursuant to this Note shall be given in accordance with Section 13.08 of the Master Agreement. Section 20. Security for this Note. The indebtedness evidenced by this Note is Reference is made hereby to the Master Agreement and the Security Documents for additional rights and remedies of Fannie Mae relating to the Indebtedness evidenced by this Note. Each Security Document shall be released in accordance with the provisions of the Master Agreement and the Security Documents. Section 21. Loan May Not Be Reborrowed. Borrower may not re-borrow any amounts under this Note which it has previously borrowed and repaid under this Note. Section 22. Fixed Loan. This Note is issued to evidence a Fixed Loan made in accordance with the terms of the Master Agreement. Section 23. Cross-Default with Master Agreement. The occurrence and continuance of an Event of Default with respect to the Collateral Pool under the Master Agreement shall constitute an “Event of Default” under this Note, and, accordingly, upon the occurrence of an Event of Default under the Master Agreement with respect to the Collateral Pool, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof.   Collateral Pool 3 8   x    Schedule A Prepayment Premium (required)   Collateral Pool 3 9 IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative (which authorized representative shall have no personal liability hereunder). Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.   BORROWER: SMITH PROPERTY HOLDINGS SIX (D.C.) L.P., a Delaware limited partnership    By:     Archstone DC 6 Holdings LLC,       its member       By:     Archstone DC Property Holdings LP,          a Delaware limited partnership, its sole member          By:     Archstone 5 Holdings LP,             its general partner             By:     Archstone DC Investments 5-I LP,                its general partner                By:     Archstone Master Holdings GP LLC,                   its general partner                   By:     ERP Operating Limited Partnership,                      an Illinois limited partnership, its sole member                      By:     Equity Residential,                         a Maryland real estate investment trust, its general partner                         By:    /s/ Robert Garechana                         Name:    Robert Garechana                         Title:    Senior Vice President–Treasurer      Collateral Pool 3 S-1 ASN HOBOKEN I LLC, a Delaware limited liability company    By:     Archstone Hoboken Holdings LLC,       its sole managing member       By:     DB Master Accommodation LLC,          its sole managing member          By:     Deutsche Bank Like-Kind Exchange Services Corp.,             a Delaware corporation, its sole managing member             By:     /s/ Brenton J. Allen                Name:    Brenton J. Allen                Title:    President                By:     /s/ Vickie Chaplin                Name:    Vickie Chaplin                Title:    Associate       ASN HOBOKEN II LLC, a Delaware limited liability company    By:     DB Master Accommodation LLC,       its sole managing member a Delaware corporation, its sole managing member          By:                    Name:    Brenton J. Allen                Title:    President                By:                    Name:    Vickie Chaplin                Title:    Associate            Collateral Pool 3 S-2 SMITH PROPERTY HOLDINGS 4411 CONNECTICUT L.L.C., a Delaware limited liability company    By:     Archstone DC 6 Holdings LLC,       its member its sole member its general partner its general partner its general partner    its sole member its general partner                         By:      Collateral Pool 3 S-3 SMITH PROPERTIES HOLDINGS PARC VISTA L.L.C., a Delaware limited liability company    By:     Archstone Master Holdings LLC,       its sole member its sole member its general partner             By:                    Name:    Robert Garechana                Title:    Senior Vice President–Treasurer       ASN MARINA LLC, a Delaware limited liability company    By:     Archstone Master Holdings LLC,       its sole member its sole member its general partner                   By:     President–Treasurer         Collateral Pool 3 S-4 ASN SEATTLE LLC, a Delaware limited liability company    By:     DB Master Accommodation LLC,       its sole managing member a Delaware corporation, its sole managing member          By:                    Name:    Brenton J. Allen                Title:    President                By:                    Name:    Vickie Chaplin                Title:    Associate          ASN SANTA CLARA LLC, a Delaware limited liability company    By:     Archstone Master Property Holdings LLC,       its sole member       By:     Lexford Properties, L.P.,          an Ohio limited partnership, its sole member          By:     Lexford Partners, L.L.C.,             an Ohio limited liability company, its general partner its sole member its general partner                   By:       Collateral Pool 3 S-5 ASN SANTA MONICA LLC, a Delaware limited liability company    By:     Archstone Master Property Holdings LLC,       its sole member its sole member its general partner its sole member its general partner                   By:     Senior Vice President–Treasurer    SMITH PROPERTY HOLDINGS WATER PARK TOWERS L.L.C., a Delaware limited liability company    By:     Archstone Master Holdings LLC,       its sole member its sole member its general partner             By:                       Name:    Robert Garechana                   Title:    Senior Vice President–Treasurer            Collateral Pool 3 S-6 ARCHSTONE CAMARGUE I LLC, a Delaware limited liability company    By:     its sole member its sole member its general partner its sole member its general partner                   By:       Collateral Pool 3 S-7 ARCHSTONE CAMARGUE II LLC, a Delaware limited liability company    By:     its sole member its sole member its general partner its sole member its general partner                   By:       Collateral Pool 3 S-8 ARCHSTONE CAMARGUE III LLC, a Delaware limited liability company    By:     its sole member its sole member its general partner its sole member its general partner                   By:     Vice President–Treasurer      Collateral Pool 3 S-9 ASN SAN MATEO LLC, a Delaware limited liability company    By:     Archstone San Mateo Holdings LLC,       its sole member       By:     Archstone Master Property Holdings LLC,          its sole member its sole member its general partner its sole member its general partner                      By:       Collateral Pool 3 S-10 ARCHSTONE SOUTH MARKET LLC, a Delaware limited liability company    By:     its sole member its sole member its general partner its sole member its general partner                   By:       Collateral Pool 3 S-11 ASN FAIRCHASE LLC, a Delaware limited liability company    By:     Archstone its sole member its sole member its general partner its sole member its general partner                   By:       Collateral Pool 3 S-12 ARCHSTONE FAIRCHASE II LLC, a Delaware limited liability company    By:     its sole member its sole member its general partner its sole member its general partner                   By:       Collateral Pool 3 S-13 SMITH PROPERTY HOLDINGS VAN NESS L.P., a Delaware limited partnership    By:     Archstone DC 5 Holdings LLC,       its member its sole member its general partner its general partner its general partner    its sole member its general partner                         By:      Collateral Pool 3 S-14 SCHEDULE A PREPAYMENT PREMIUM Any prepayment premium payable under Section 10 of this Note shall be computed as follows:     (a) If the prepayment is made at any time after the date of this Note and before the Yield Maintenance Period End Date, the prepayment premium shall be the greater of:     (i) one percent (1%) of the amount of principal being prepaid; or     (ii) The product obtained by multiplying:     (A) the amount of principal being prepaid, by     (B) yield rate (the “Yield Rate”) on the 4.50% U.S. Treasury Security due May, 2017 (the “Specified U.S. Treasury Security”), on the twenty-fifth (25th) Business Day preceding (x) the Intended Prepayment Date, or (y) the date Fannie Mae accelerates the Loan or otherwise accepts a prepayment pursuant to Section 10(a)(3) of this Note, as the Yield Rate is reported in The Wall Street Journal, by     (C) the present value factor calculated using the following formula:     1 – (1 + r)-n/12     r   n = the number of months remaining between (1) either of the following: (x) in the case of a voluntary prepayment, the Last Day of the Month during which the prepayment is made, or (y) in any other case, the date on which Fannie Mae Maintenance Period End Date] In the event that no Yield Rate is published for the Specified U.S. Treasury Security, then the nearest equivalent non-callable U.S.   Collateral Pool 3 Schedule A-1 Treasury Security having a maturity date closest to the Yield Maintenance Period End Date of this Note shall be selected at Fannie Mae’s discretion. If the publication of such Yield Rates in The Wall Street Journal is discontinued, Fannie Mae shall determine such Yield Rates from another source selected by Fannie Mae.     (b) Notwithstanding the provisions of Paragraph 10(a) of this Note, no prepayment premium shall be payable with respect to any prepayment made after the Yield Maintenance Period End Date.   Collateral Pool 3 Schedule A-2 [Initial Page to Schedule A to Fixed Loan Note]     INITIAL(S)   INITIAL(S)   Collateral Pool 3 Schedule A (initials)
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Schedule 13G Under the Securities Exchange Act of 1934 (Amendment No.: 3 )* Name of issuer: Matrix Service Co Title of Class of Securities:Common Stock CUSIP Number:576853105 Date of Event Which Requires Filing of this Statement: December 31, 2012 Check the appropriate box to designate the rule pursuant to which this Schedule is filed: (X) Rule 13d-1(b) ( ) Rule 13d-1(c) ( ) Rule 13d-1(d) *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). (Continued on the following page(s)) 13G CUSIP No.:576853105 1.NAME OF REPORTING PERSON S.S.
Explanations of vote The next item is explanations of vote. (ET) Mr President, inherent in the concept of Europe working together is the idea that, in principle, the euro area can only go in two directions: it can either become stronger or disintegrate. In the current economic situation, a practical and decisive political response is needed. I support the creation of the stability mechanism, and accordingly I also supported the report, which paves the way for a legal framework enabling the creation of this mechanism. Mr President, yesterday we voted on the permanent stability mechanism and we flunked it. Amendment 33, which would have given the fund the ability to purchase bonds on the secondary markets, was withdrawn. The Parliament, like the European Council up to now, refused to take the hard decisions. Yes, they are hard decisions, but these decisions will determine the future or the failure of the euro zone. Our heads are in the sand, like the proverbial ostrich. We do not just have a currency crisis; we have a banking crisis and we have a sovereign debt crisis. And yet we persist in putting sticking plaster on deep wounds. My own country, Ireland, is shouldering intolerable debt, all because German, French, Irish, British and other banks - along with lax regulation and non-existent supervision - acted like casinos. Bad debt has become citizens' debt. I will not say sovereign debt, it is citizens' debt. All of this happened under the noses of the ECB, with interest rates that were totally inappropriate. Irish citizens are expected to deal with all of this. Nobody is prepared to face reality. The debt is unsustainable. We have been trying to buy time with bailouts. What we need is major restructuring. (FI) Mr President, the creation of a permanent crisis management mechanism for Europe is justified in case of future economic and financial crises. No one wants crises, but they are bound to happen and we need to prepare for the worst. It is unfortunate that the plan is to establish this crisis management mechanism outside the EU institutions. The mechanism should now be brought as close as possible to EU institutions. It is also important and a good thing that the United Kingdom and Sweden, countries outside the euro area, can participate in this mechanism. I support the attempts to step up coordination of economic policy in Europe, and the notion that, if there are to be sanctions, the Commission will decide on them, and they will apply automatically and not become the subject of discussions or 'horsetrading'. Mr President, I had thought that after 12 years in this House nothing could faze me any more, but I was shocked by the tone in which Mr Brok introduced his report yesterday. What shocked me was not the arrogance or the disconnection from reality, or even the disdain for public opinion, but the flagrancy. He said in so many words that we have had to avoid the usual Treaty revision procedure because otherwise it might have triggered a referendum in some Member States! There you see unsheathed the contempt for the voters that the elites of Europe now habitually display. Public opinion is treated not as a reason to change direction, but as an obstacle to be overcome. I cannot help being reminded of Mr Brok's countryman's words following the rising in East Berlin. Would it not therefore be easier to dissolve the people and elect another in their place? Mr President, one of the inherent problems of a single currency which has a number of different Member States, with economic cycles at different rates, is that it is pointless having one set of interest rates if you have different spending decisions. The result of that has obviously come to bear, because we can see the problems that the euro zone is in. On top of that, governments have to understand that they cannot spend more money than they get in revenue. When governments do that and cook the books, or do not fulfil the roles of economic governance and economic discipline, the others get into trouble. Of course, we want a strong euro zone, especially for those members outside the euro zone. We want to continue to trade with countries in the euro zone. We do not benefit from a weaker euro. However, at the same time, we have to be quite clear that the countries in the euro zone should fight their own problems themselves, and not rely on others. I wish you luck in the euro zone, but please learn the lessons of not spending more money than you earn. Mr President, I want to make clear on behalf of the European Conservative and Reformist Group that we are in favour of the European Stability Mechanism which has been set up, but we voted against the Brok/Gualtieri report because that opinion was not in line with the conclusions reached by the Council. What the Brok/Gualtieri report wanted was for the European Parliament and for the Commission effectively to interfere with an intergovernmental mechanism. It is entirely appropriate that this mechanism should be intergovernmental because of the enormous sums of money which are being committed to it. National ministers responsible to their national parliaments: that is the correct line of responsibility. Underlying the whole euro crisis, of course, is not a problem with the euro, but a problem with governments that are spending too much of their taxpayers' money. Mr President, I welcome the conclusion of the second phase of the US-EU open skies agreement. I think this is a breakthrough, but obviously there are those of us who would want more liberalisation and a move away from the protectionism which still hinders this industry in many ways. I would like to see the US remove its barriers or its restrictions on foreign ownership, and I think passengers across the world would benefit from more open skies agreements. I also pay tribute to the ECR shadow rapporteur, Jackie Foster, who is an expert in this area, and who has worked in the area of air transport as well as in the Transport Committee. However, I think it is very important that we continue to push for further liberalisation not only on the EU-US agreement but also in the emerging markets of Asia, so I welcome the move today with regard to the agreement on the EU-Vietnam agreement. Long may we continue to have better access to the growing markets of the world. (IT) Mr President, ladies and gentlemen, first of all I would like to thank the rapporteur, Mrs Balzani, for the excellent work she has accomplished. Getting to the heart of the matter, there are four points in this own-initiative report that I think are crucial. The first, in general terms, is the explicit reference to the European Union budget and its redistributive nature, which are the cornerstones of European solidarity. The second, in specific terms, reaffirms the principle that outstanding commitments - which are particularly high in the cohesion sector - ought to be carried out and not, as the Council suggests, simply cut out. The third sets out some doubts - entirely reasonably in my view - as to the effectiveness of an estimate criterion based on performance in the previous year. The fourth urges the Commission to formulate proposals for the creation of new resources and, in particular, new resources must be designed to combat the persistent effects of the crisis with a robust and effective commitment to policies for innovation, research and growth in economic, productive and employment terms across Europe. (IT) Mr President, ladies and gentlemen, at such an important time, a document like the one approved today is certainly based on criteria of good sense and reason. Supporting the 2020 Strategy is without doubt not only a sign of credibility but also of consistency in the actions of Parliament. However, a number of important criteria and guidelines must be strengthened further by means of a list showing the priorities of the interventions. Today, at such a delicate time in which the difficulties in the Mediterranean above all, but also in Japan, are directly linked to a rapidly changing situation, an authoritative and credible Parliament is needed, together with responses that provide a boost for growth, competitiveness and intelligent sustainability in the things that need to be done. (IT) Mr President, ladies and gentlemen, I think that at such a delicate time for the finances of the Member States of Europe, as was said a short time ago, I should like to sound an alarm about an expenditure that is under discussion in the Committee on Budgets: the astonishing case of the vast expenses set aside for the House of European History. I think it would be a disgrace if it were approved. We already own the Eastman Building, but between EUR 26 million and EUR 31 million have been allocated merely for renovation costs, plus EUR 3.3 million for the plans alone. The fixed costs amount to more than EUR 3 million whilst the variable costs come to EUR 3.2 million, plus EUR 3.2 million for a 50-strong staff, EUR 2 million for security and then EUR 13.45 million are required just to manage it. I think we ought to set an example of prudent spending through our institutions. This, however, would be a disgrace. (DE) Mr President, I would like to make three comments, if I may, with regard to the general guidelines for the preparation of the 2012 budget. Firstly, I think it is good that we are debating the 2012 budget at an early stage, because - secondly - we do not want another calamity like we had between the European Parliament, the Council and the Commission with regard to the 2011 budget. Thirdly, I am particularly proud of the fact that the European budget does not need to go into borrowing. I believe that should also continue to be the case. (ET) Mr President, legal immigration undoubtedly has a large role to play in promoting European economic development and improving competitiveness. There is certainly a recurring problem here, though, and that is the lack of a firm legal status for immigrants and, as a result, the possibility of discrimination against them. It is not normal to have a situation where, in the 21st century, we still see incidents which essentially involve slavery. Everyone must be treated equally in the labour market. This report contained the provisions that are currently lacking in our framework of standards, and I therefore supported the creation of a legal framework in this area, something which I consider to be very important. (IT) Mr President, ladies and gentlemen, administrative simplification and facilitating access to relevant information are the right instruments to make the European labour market more attractive to third-country workers. Provisions for a single application procedure leading to one combined title encompassing both residence and work permits within one administrative act will contribute to simplifying and harmonising the rules currently applicable in Member States. This will make for a clearer and more efficient procedure both for the migrants and for their employers, whilst at the same time allowing for easier controls of the lawfulness of their residence and employment. The single procedure will also mean that the rights gap between EU citizens and third-country citizens can also be reduced. That is why I voted in favour of the report by Mrs Mathieu. - (SK) Mr President, I voted against the approved draft of the directive. I consider it important to apply a single procedure for handling work permits and residency permits. It is equally vital to try and create a single set of rights for third country nationals legally living and working in any of the EU Member States. It is without doubt also necessary to have legal certainty and transparency in respect of the decisions taken by the competent national bodies when handling these applications. Since they have a considerable influence on the lives of these people, they should be assessed as objectively as possible. Equal treatment should be guaranteed in all areas of social provision, and their rights must be upheld in legislation. Since these changes were not incorporated into the directive on economic migration, I think it was not correct of the parties on the right to approve it. (FI) Mr President, first of all, the fact that this single permit promises the same rights and the same treatment for foreign workers is a good starting point. We have to ensure that human rights in the European Union are implemented in such a way that workers coming here from third countries also receive the same pay and the same levels of social security, and that the same conditions of employment apply to them as well as the other employees. This is obviously a basic consideration. I am rather worried about one matter concerning the report, although I did vote in favour of it. This is the scope of application of Article 3, which still does not cover posted or seasonal workers or intracorporate transferees from third countries. It is to be hoped that progress will be made on this, so that everyone will be considered equally in this single permit package. The onestopshop principle is a positive thing: the idea that everyone can apply for this permit in one place and that they no longer have to hop from pillar to post because of red tape. (DE) Mr President, I absolutely agree with those Members who say that we must ensure equal treatment for workers from third countries who have been employed in the EU for more than a year. I also agree that workers who have been working in the European Union for less than six months must not receive equal treatment in respect of family allowances and unemployment benefit. However, I am very much in favour - and I would like to emphasise this once again - of these groups also being insured against accidents and sickness. Thirdly, I believe that old-age benefits are a component of a person's wages and, in accordance with Regulation (EC) No 883/2004, it should be possible to transfer them according to the rules of the Member States, provided that this only happens if the third country is also happy for this to be done and if it actually transfers them. Mr President, I welcome the fact that we are beginning our preparations for the 2012 budget so early. It allows for there to be proper consideration of the issues. One of the matters that we talk a great deal about in the European Union, and in this Chamber, is the issue of solidarity. We are often very keen to show solidarity for various groups of people. I would ask this Parliament to show some solidarity with the taxpayers of our constituencies, because we have so far failed to do that. In this age of austerity we need to show restraint. We should set an example. We should do so by freezing the salaries and allowances of all MEPs and officials in this place for 2012, and we should also abandon plans for the House of European History, which will cost millions of euros to construct and for which there is no long-term plan to fund. No doubt that will fall on the taxpayer as well. (IT) Mr President, ladies and gentlemen, there is no doubt that the fragmentation of the rules on consumer rights creates a very significant obstacle to cross-border purchases and sales and is also a problem for the effective creation of a real internal market. I believe that the proposal for a directive, which was sent back to committee today with important additions, can contribute to mapping out a clear legal framework on consumer rights. (IT) Mr President, ladies and gentlemen, by revising the four current directives, this report aims to bring an end to a fragmentation of the legal framework that has so far hindered the completion of the internal market. The objective is to improve the functioning of the market for consumers and undertakings, boosting consumer confidence and reducing the reluctance of undertakings to operate at a cross-border level. The proposal is complex and contains many specific aspects which have been scrutinised and debated ever since France last held the rotating presidency. Under the new Commission headed by Mr Barroso, Mrs Reding's work has led to total harmonisation no longer being thought of as dogmatic and we have rightly started out on the road towards a more targeted harmonisation. Despite not being completely satisfied by the end result achieved - which I consider to be mediocre and the fruit of a poor compromise - I believe and I hope that this proposal can offer a starting-point for further developments. I therefore supported this report. (IT) Mr President, ladies and gentlemen, the text voted on today is the result of a long and complicated journey that began in October 2008 with the aim of putting the consumer at the heart of the protection offered for purchases made abroad. The objective that the Union and the EU institutions must set themselves is to help the internal market to function better, with the aim of increasing consumer confidence whilst at the same time supporting our businesses. The directive voted on today by this House represents the synthesis of four directives on this issue which were in force until today. The directive shows our desire to harmonise the regulations currently in force in the different legal systems in a much more incisive way, avoiding the legal fragmentation that unfortunately has very often ended up being a hindrance both to undertakings - whose aim is to be able to be competitive on the cross-border market - and to consumers. For these reasons, I consented to and voted in favour of this report. (FI) Mr President, the reform of the directive on consumer rights has been a long and sporadic process. The Commission's original idea for fullscale harmonisation threatened to impair levels of consumer protection, particular that of consumers in the Nordic countries. This would have been contrary to the Treaty on the Functioning of the European Union, according to which consumer legislation must be based on levels of consumer protection that are as high as possible. We should therefore always remember that the markets are for consumers, and it is not the case that consumers are for the markets. Legislation on consumers and small entrepreneurs must always be as clear as possible and easy to understand. Legislation that is precisely and carefully drafted is in the interests of all parties. Accordingly, it is good that the directive is being referred back to committee, as Parliament today decided it should. (FI) Mr President, up until now the internal market of the European Union has been developed on the terms of mainly large companies. Now it is time to turn our attention to small and mediumsized enterprises and, above all, consumers, to ensure that their interests in the internal market are more vigorously protected. This Commission proposal to reform consumer protection has met with a fairly controversial reception. In Finland, for example, the Consumers' Association collected signatures on a petition, stating that the proposal, if it had gone ahead, would have harmed consumer protection in Finland irreparably. This compromise we have now voted on, which will go for further discussion, is very obscure. A large number of the original proposals have been cut out, with the result that it is in no way ambitious. The biggest problem, however, is that it is actually hard to understand. I would like to make it a condition that the directive on consumer rights should be one that consumers also understand, thus offering them protection. (FI) Mr President, my Finnish fellow Members who spoke before me, Mr Repo and Mrs Jäätteenmäki, expressed some welcome views regarding this directive on consumer rights. As Finns and Nordic people, we are worried that consumer protection might be impaired. Full harmonisation would mean just that, especially as far as the Nordic countries are concerned. Moreover, it would delay measures in those countries where things at present are hardly perfect. It is excellent that this proposal is being referred back to committee, because it contains certain slightly problematic points, particularly for small entrepreneurs. I would like the Committee to focus attention on one small issue. Amendments 18 and 107 suggest that this would have a very negative impact on travel companies in northern Finland, for example. Frequently a decision to go to a company, hotel or tourist accommodation is made on the road, and people call and book. Under this directive, that would not be enough: people would have to send a fax or something similar. This is not always possible in practice. This issue should be approached at the level of the public, and the different situations in the various Member States need to be understood. (DE) Mr President, I think the approach being taken to harmonise our fragmented European consumer law, which poses a barrier to trade, is a sound one and the right way to go. It is also important for consumers to be able to develop a sense of European law, in other words for it to be possible for them to be confident when they do business or when they buy or acquire something anywhere in the European Union. That will bring certainty not only for consumers, but also for producers. I am particularly pleased about the improvements in the information requirements for door-to-door selling and for distance contracts. In future debates - and I am therefore very pleased that this report has been referred back to committee once again - we should ensure that, when we talk about producers, we do not just consider the large corporations but also the small family businesses, and we should not overburden them with legal subtleties. Mr President, when my constituents ask me about the main benefit of being part of the European Union, my reply is always the free trade that exists between nations and the internal market that we are seeking to complete. I therefore welcome this consumer rights directive. I welcome it because it takes an - albeit small - step towards completing that single market. It will give some benefits to consumers and small businesses. It will assist in Internet and cross-border trade. However, I have to say that this directive has taken a long time to come about, and progress is modest. The plea that I would make to the Commission is that we need a framework for completing the single market, as opposed to the rather disconnected series of initiatives that we have at the moment. (ET) Mr President, the adoption of the harmonised European Consumer Rights Directive is certainly one way of improving the functioning of the internal market. This harmonised directive, which brings together a number of directives relating to consumer rights, will considerably simplify the legal framework, will undoubtedly help to increase consumer confidence, and of course will also encourage cross-border trade. This is a step towards reducing fragmentation. Unfortunately, the full harmonisation of consumer rights in the European Union is still not a reality today. Nevertheless, this is an important step towards better consumer protection and trade. I therefore supported the adoption of this document. (IT) Mr President, ladies and gentlemen, news of the earthquake swarm that has been affecting the Far East and Japan in particular since 11 March has left us all astonished by the scale of the human tragedy that is unfolding. For these reasons, I think this resolution represents a necessary first step to guarantee the people of Japan all the humanitarian, technical and financial support they will need in the coming months and years. I believe that the incident at the Fukushima plant should force us all to reflect carefully, scrupulously and calmly on the risks of nuclear power. Europe must invest and must also direct the Member States to concentrate more closely and more effectively on alternative energy sources. Our thoughts go out to Japan today and our commitment for the future must be to avoid similar situations being repeated in Europe and elsewhere in the world. (DE) Mr President, I believe that we can all learn lessons from the situation in Japan. These lessons relate in particular to nuclear power stations. I call on the Council urgently to table proposals in this regard. What the Commission has so far presented provides an incentive for the European Council Atomic Questions Working Group finally to address the demands made by the European Parliament. We need an intensive debate on this issue, and I believe that the time has now come for this to happen. Written explanation of vote I support this report, which once again points out that we should help Moldova to recover economically, taking into account that about 40% of its economy is dependent on agriculture. I completely agree with the measures proposed by the rapporteur in order to have an agreement that is more comprehensive and relevant to the economic recovery of this country, which is an EU partner. in writing. - (LT) I agreed with this report which increases Moldova's duty free tariff quotas for wine. Moldova is experiencing difficulties related to wine exports, which poses a threat to its economic recovery and agriculture, in particular medium-sized and family farms. The agricultural sector accounts for around 40% of Moldova's economy. The wine sector alone employs approximately 300 000 people, most of whom live in rural areas. Hitherto Moldova has fully exhausted the quota it was allocated, therefore an increase in duty free tariff quotas will enable Moldova to increase sales of its production in the EU, without damaging the EU's wine industry. Russia is an important market outlet for Moldova's winemakers. However, recently, the Russian market is no longer a certainty for wine product exports. In its quest to find an alternative to the Russian market, the European Commission has proposed increasing duty-free quotas from 100 000 hectolitres (hl) to 150 000 hl this year, from 120 000 hl to 180 000 hl in 2012 and up to 240 000 hl from 2013. I voted for this amendment in trade relations with the Republic of Moldova in order to increase the volume of duty-free wine imports. This amendment to Regulation (EC) No 55/2008 may provide a solution for the Republic of Moldova's wine producers so that they can benefit from a more reliable market outlet, compared to when Russia imposed an embargo on Moldovan wines in 2006 and 2010, causing a number of winemakers to go bankrupt. in writing. - (PT) I abstained from voting on the proposal introducing autonomous trade preferences for the Republic of Moldova as I believe that its current wording does not adequately address the necessary provisions for the protection of EU geographical indications (GIs), particularly the GI that relates to port wines. I would like to express my support for the economic recovery of Moldova and offer a positive outlook for the people who work in the country's wine industry. I agree with the increase in the duty free tariff quota for wine, from 120,000 hl to 180,000 hl for 2011, and from 2013 onwards to 240,000 hl per year. I therefore voted in favour of this report, which in no way jeopardises the EU wine industry. I voted for the report on introducing autonomous trade preferences for the Republic of Moldova, given that this sends a positive signal from the EU to this country, a member of the Eastern Partnership, which recently stated that it hopes to be able to submit its application to join the European Union in 2011. Moldova has undertaken an ambitious set of political, economic and social reforms, which must be encouraged to continue. At the same time, the Republic of Moldova has been hit hard by the economic and financial crisis. During the last four years, 40% of its wine producers have either ceased trading or gone into liquidation, while the companies still operating in this key sector of its economy have accumulated losses. Increasing the duty-free tariff rate quota for wine and extending the validity of Council Regulation No 55/2008 until the end of 2015 would help this country where the number of workers in the wine industry has risen to 300 000 and the agricultural sector accounts for 40% of GDP, without affecting the Union's economy at the same time. These measures would also leave sufficient time to prepare the negotiations on creating an expanded, comprehensive free trade area, which is an objective shared by the EU and the Republic of Moldova. I voted in favour of this report as I believe that the Commission's proposal, which amends the regulation that is currently in force, may serve to support Moldova's economic recovery and provide a positive outlook for people working in the country's wine industry, without damaging the interests of EU producers. The Moldovan wine industry is going through a period of crisis sparked by the reduction in exports, which have set back its economic recovery and reforms that would enable it to aspire to EU integration in a more realistic way. The increase in the duty free tariff quota, particularly for Moldovan wine, may help to alleviate the pressure on this sector. I must stress that despite the EU's willingness to help Moldova, the Union and its Member States should seek to ensure that wine from other states does not have quality standards that are below those required for EU wines. in writing. - (PT) This draft legislative resolution by Parliament is based on a proposal for a regulation by Parliament and the Council which amends Council Regulation (EC) No 55/2008 introducing autonomous trade preferences for the Republic of Moldova. Despite the efforts being made by its people and the reforms implemented by its government, the Republic of Moldova is undergoing a difficult situation due to the crisis which the wine sector, the most productive sector in the country, is facing, as it represents 40% of Moldova's economy and employs more than a quarter of its working population. It is therefore important to support Moldova's economic recovery and give a positive sign of EU solidarity with a population that lives mostly in rural areas. I also welcome and am voting in favour of this draft legislative resolution to extend Council Regulation (EC) No 55/2008 until 31 December 2015, and I hope that a 'deep and comprehensive free trade area' will be set up between the EU and the Republic of Moldova by that date. This report approves a Commission proposal to authorise the increase in the duty free tariff quota for Moldovan wine. The Commission is proposing an increase in the quota from 100 000 hl to 150 000 hl in 2011, from 120 000 hl to 180 000 hl in 2012, and from 2013 onwards to 240 000 hl per year. According to the Commission, the proposed increases are based on the fact that Moldova has systematically exhausted the existing quote, and take into account 'the potential of the sector to improve its niche markets in the EU'. Although it has been stated that the proposed level of increase does not jeopardise the EU wine industry, we believe that there are still some doubts as to whether this is indeed the case, and that is why we have abstained. This consideration has taken account of the situation of crisis which many producers, particularly small and medium-sized producers, are currently facing in countries such as Portugal, with the dramatic drop in production prices and the incessant increases in input costs. These difficulties are exacerbated by changes introduced with the reform of the Common Market Organisation (CMO) and the planned aim of production rights. This reform has benefited large wine industry most of all, along with some importers... (Explanation of vote abbreviated in accordance with Rule 170 of the Rules of Procedure) Mr Moreira's report was adopted today, supporting a Commission proposal to authorise the increase in the duty free tariff quota for Moldovan wine. Although the Community's executive states that the level of increase does not jeopardise the EU wine industry, given that there is doubt, and in the interests of Portuguese agriculture, we have abstained from voting. Moldova has asked the Commission to increase its duty free tariff quota for wine under the autonomous trade preferences granted to the country in a 2008 regulation. In order to support Moldova's economic recovery and provide a positive outlook for people working in the wine industry in the country (one quarter of the workforce), there is a proposed increase in the duty free tariff quota for wine, from 100 000 hl to 150 000 hl for 2011, from 120 000 hl to 180 000 hl for 2012, and from 2013 onwards to 240 000 hl per year. The Commission states that 'as the general level of imports from Moldova is merely 0.04% of all EU imports, further market opening is not expected to create negative effects for the EU. Currently around 90% of all imports from Moldova...' The Commission's proposal provides for a change to the regulations for relations with the Republic of Moldova. Given the period of crisis that the country in question is facing, the plan aims to increase the amount of wine imported from Moldova. According to the Commission, these imports would have a minimal impact on our markets and yet I do not feel that I can support the proposal in this current period of major economic crisis, which is already putting our farmers and wineries under serious pressure. in writing. - (LT) I agreed with this document, because in order to support Moldova's economic recovery and provide the people working in the wine industry in Moldova with a positive outlook, it is proposed to increase the duty free tariff quota for wine for 2011 from 100,000 hectolitres (hl) to 150,000 hl, for 2012 from 120,000 hl to 180,000 hl, and from 2013 onwards to 240,000 hl per year. The level of the proposed increase is based on the fact that Moldova has systematically exhausted the existing quota and the potential of the sector to improve its niche markets in the EU. Moreover, the level of the increase does not destabilise the EU wine industry. It is expected that Moldova's wine sector will continue to improve the quality of its wines. As Council Regulation (EC) No 55/2008 expires on 31 December 2012, and as it is important to ensure legal certainty for producers, exporters and importers, it is proposed to extend the validity of Council Regulation (EC) No 55/2008 for another three years to 31 December 2015. in writing. - I will always declare that the Republic of Moldova has to be encouraged in its pro-European path. Moldova is experiencing difficulties with its wine exports to some of its traditional markets, which threaten its economic recovery and the reform process that it is vigorously pursuing. The arguments given in Vital Moreira's report are convincing, Moldova needs Council Regulation (EC) No 55/2008 to be extended for a further three years, until 31 of December 2015. The request made by the Republic of Moldova in July 2010 is justified. Moldova needs the European Union to be a trustworthy partner. For these reasons, I endorse the report drafted by Vital Moreira on the proposal for a regulation of the European Parliament in writing. - (DE) The trade preferences granted to the Republic of Moldova by the EU have proven to be appropriate. Furthermore, no damaging effects on the EU wine industry have been recorded. As the poorest country in Europe, the Republic of Moldova needs the support of the EU. This is our moral duty in the interests of European unity and harmony. I therefore welcome the Commission's proposal to extend the period of validity. in writing. - I voted for this report on the proposal for a regulation of the European Parliament and of the Council amending Council Regulation (EC) No 55/2008 introducing autonomous trade preferences for the Republic of Moldova. This brings our trade relations with Moldova into line with other neighbouring countries. in writing. - (IT) In the context of the Union's neighbourhood policy, Moldova has always adopted an ambitious programme of political association and increasing economic integration with the EU, thereby making decisive progress towards convergence of its own laws with EU legislation and regulations ahead of the preparation for future, more extensive negotiations. Moldova has shown that it is ready to promote and bear the effects of such an ambitious undertaking, continuing along the lines of the progress already made in terms of the free EU market. We do however agree with the rapporteur, Mr Moreira, when he says that the Republic of Moldova is currently in a difficult situation over the export of some products, with consequent problems for its economic recovery. We therefore believe it is necessary to extend the validity of the regulation on some autonomous trade preferences by three years so as to give Moldova enough time to adequately prepare for the negotiations on the free trade area. Beginning with these considerations, the report that we have adopted aims to encourage Moldova's economic recovery, in particular by increasing the tariff quota exempt from duties of some products subject to current autonomous trade preferences. in writing. - (PT) Moldova has been making efforts in recent years to move ever closer towards European standards of freedom, democracy and good governance. The efforts highlighted here have been consistent and have demonstrated Moldova's concern with continuing on the route towards possible enlargement. Thus, in order to support Moldova's economic recovery and provide a positive perspective for people working in the wine industry in the country (one quarter of the workforce), there is a proposed increase in the duty free tariff quota for wine, from 100 000 hl to 150 000 hl for 2011, from 120 000 hl to 180 000 hl for 2012, and from 2013 onwards to 240 000 hl per year. This is the direction which the amendments to this regulation are taking, and this will help the Moldovan economy and its development. in writing. - Given that Moldova is experiencing difficulties with its wine exports to some of its traditional markets, which threaten its economic recovery and the reform process that it is vigorously pursuing, and in order to take measures to increase Moldova's wine exports to support its economic development, it is necessary to: 1. increase the duty-free tariff quota for wine under the autonomous trade preferences; 2. extend the validity of the relevant regulation (which is due to expire on 31 December 2012) for another three years, until 31 December 2015; 3. increase the duty-free tariff quota for wheat, barley and maize. I therefore voted 'for'. in writing. - (RO) I welcome the vote in favour of this report. The Republic of Moldova needs the European Union's support at this juncture when it is facing economic problems, like most countries in the world, but also problems intrinsic to political transition. At a time when Moldova is virtually facing a boycott of its wine exports in the Russian Federation's market, increasing the duty-free tariff rate quota for wine is a timely measure and one which, I hope, will benefit this country's economy. in writing. - (LT) I agree with this resolution which proposes increasing autonomous trade preferences for the Republic of Moldova in the wine sector, which is vitally important for this country. It is noted that this would be an even greater incentive to enhance mutual relations between the European Union and Moldova, and to develop the European neighbourhood policy. As hitherto Moldova has fully exhausted the quota set, I agree with the proposal to increase the duty free tariff quota for wine. Attention is drawn to the fact that such regulation will not have a negative impact on the EU's wine industry. Moldova is one of Europe's poorest countries, facing major economic and political problems. The EU should create favourable conditions for Moldova to choose an appropriate geopolitical direction that would help address the country's difficulties. Furthermore, the provisions of this resolution will create favourable conditions for the Moldovan wine sector to improve the quality of its product. I believe that it is reasonable to extent the validity of the entire regulation for another three years, to ensure legal clarity and certainty for producers, exporters and importers. I voted in favour of the report by Mr Moreira on autonomous trade preferences for the Republic of Moldova because it is consistent with the Union's neighbourhood policy and the economic agreements already in place with other bordering countries. Indeed, I think it is a good idea for the countries bordering the EU to receive reciprocal trade concessions, both for economic development and socio-political issues. The free movement of goods or a reduced customs duty allow a greater flow of capital and facilitate cooperation agreements. This will benefit bordering countries as well as the internal market. Clearly, its commercial purpose is important, however in doing this it is important not to forget other aspects that must be kept under consideration. As I had the chance to say earlier, it is vital that the EU has a coherent and effective European neighbourhood policy. Within the scope of this neighbourhood policy, Regulation (EC) No 55/2008 introduces a specific system of autonomous trade preferences for the Republic of Moldova, which provides free access to the EU market for all products from Moldova, with the exception of certain agricultural products listed in its annex, for which limited concessions have been given either in the form of exemption from customs duties within the limit of tariff quotas, or in the form of lower customs duties. One of the exceptions to free movement is focused on the wine industry, with the implementation of a tariff quota that, according to the available data, has been fully used up months before the end of the year. Given the fact that the economy of Moldova is being heavily hit by the negative effects of the global financial and economic crisis, and that its wine sector employs about 300 000 workers, this report, which I voted for, proposes the increase of the current tariff quota for wine in order to support Moldova's efforts and to provide an attractive and viable market for its wine exports, which, moreover, do not compete with Portuguese products. In order to support Moldova's efforts at economic recovery and encourage the movement that has been seen towards convergence with EU legislation and standards, the Commission has put forward a proposal to increase the tariff quota for Moldovan wine. According to the Commission, this measure will not have any negative effects on the European wine industry, so I felt that it was worth supporting the granting of this aid to Moldova. in writing. - The text of the report is short. It says: 'The European Parliament, - having regard to the Commission proposal to Parliament and the Council, - having regard to Article 294(2) and Article 207(2) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C7-0364/2010), - having regard to Article 294(3) of the Treaty on the Functioning of the European Union, - having regard to Rule 55 and 46(1) of its Rules of Procedure, - having regard to the report of the Committee on International Trade, 1. Adopts its position at first reading, taking over the Commission proposal; 2. Calls on the Commission to refer the matter to Parliament again if it intends to amend its proposal substantially or replace it with another text; 3. Instructs its President to forward its position to the Council, the Commission and the national parliaments'. The Republic of Moldova is going through a difficult period in terms of its wine exports, which is having a negative effect on the process of reform and economic recovery being undertaken by its government. The wine sector provides work for around 300 000 people (a quarter of the active population of the country) who mostly live in rural areas, cultivating small or medium-sized family plots. With these changes, I think that Regulation (EC) No 55/2008 can contribute to supporting Moldova's economic recovery, providing workers in the country's wine sector with better prospects for the period 2011-2013. In order to achieve the best possible neighbourhood policy it will now be important to pursue tariff preferences, with the aim of halting the decline of Moldova's economy whilst at the same time reducing fiscal losses for the EU as much as possible. I am in favour of this report, given the amendments that were introduced in order to extend the validity of the current system - the Generalised System of Preferences (GSP) - until December 2013, taking into account the uncertainty as to the time required to complete the current legislative process. The adoption of this report thus avoids a break in the legal coverage of the GSP and prevents disparities in treatment between different countries. in writing. - I voted in favour of this report since the Generalised System of Preferences (GSP) is a highly important trade and development mechanism that the EU has at hand. However, I would like to urge the Commission to come up with a more substantial review of the GSP scheme as soon as possible. I also think it is time for us to engage in a more substantial review of the GSP and GSP+ beneficiaries' lists. The European Parliament should be consulted on this issue from the earliest stage. I also expect that Parliament will be involved in the process of monitoring whether the GSP+ beneficiaries uphold the 27 ILO and UN conventions, something that must be scrutinised thoroughly in order to maintain the reliability of the GSP+ mechanism. in writing. - (LT) I voted in favour of this report. In 1968, the United Nations Conference on Trade and Development (UNCTAD) recommended the creation of a Generalised System of Preferences (GSP) under which industrialised countries would grant trade preferences to all developing countries on a non-reciprocal basis, not just to former colonies. The European Community was the first to implement a GSP scheme in 1971 and it has been one of the key EU trade and development policy instruments to help developing countries reduce poverty by generating revenue through international trade. The GSP scheme applied by the EU offers the most favourable treatment, granting the least-developed countries duty-free and quota-free access to the EU's market. This system also helps promote sustainable development and good governance for developing countries ratifying and implementing international conventions and protocols on human and labour rights, environmental protection, drugs and the fight against corruption. In 1968, the United Nations Conference on Trade and Development recommended the creation of a Generalised System of Preferences (GSP) under which industrialised countries would grant trade preferences to all developing countries on a non-reciprocal basis. The European Community was the first to implement a GSP scheme and since its creation the GSP has been one of the key EU trade and development policy instruments to assist developing countries reduce poverty by generating revenue through international trade. Although the system is the most used of the industrialised countries' systems, I agree that we need to review the regulation in question so as to simplify the application of the scheme. Additionally, I think that the general review should be dealt with in the proposal for a new regulation, which I hope will be tabled without delay. The new proposal must aim at making the GSP a clearer and more transparent system. I should also like to call on the Commission to look at the possibility of checking that the commitments have been fulfilled by periodically carrying out investigations that would also involve Parliament and representatives of civil society in the country in question. in writing. - (BG) I voted for this report because I think that the impact of the present system needs to be increased and the use of the Generalised System of Preferences improved by providing technical assistance specifically designed to create the institutional and regulatory capacity required to allow the countries most in need to take maximum advantage of the benefits of international trade and the system of preferences. Assistance must also be provided with the effective implementation of the international conventions required by this scheme and with the fulfilment of their commitments. I think that developing countries must offer assistance in the battle against poverty by generating revenue through international trade. This is the system most widely used among such systems available to the developed countries. I think that it must be extended in order to achieve legal certainty and guarantee the interests of both the EU and the beneficiary countries. However, during that time, the current unsatisfactory situation should be resolved without delay, accompanied by constant efforts to find a way of assisting the weaker countries which are in need. I decided to vote for the report on generalised tariff preferences as it proposed the immediate adaptation of the 'Generalised System of Preferences' to the provisions of the Treaty of Lisbon, as well as a general review of the scheme in the future. This general review would be aimed at increasing the involvement of beneficiary countries in the reform processes which affect them, granting technical assistance to help develop their institutional capacity, as well as at reviewing and harmonising the rules of origin. in writing. - (FR) Parliament has just agreed to extend the Generalised System of Preferences (GSP) for developing countries to run from 1 January 2012 to 31 December 2013. The GSP scheme is due to be reviewed this year, a process that should take into account the concerns expressed in the Committee on International Trade. We are calling for greater transparency and genuine cooperation during the GSP negotiations with each country. Commissioner De Gucht has undertaken to ensure that the European Parliament is closely involved in the decision-making process. He must now keep that promise. in writing. - (PT) The current regulation which establishes the Generalised System of Preferences (GSP) will expire by the end of this year. However, since the Commission is still awaiting the conclusion of a study on the matter, so as to present a new proposal for the GSP, in order to avoid a legal vacuum it was decided to extend the existing regulation and its current arrangements for another two years. However, the Commission needs to present a legislative initiative on this subject very soon, because the current system needs to be reviewed and made more effective as a matter of urgency. I therefore endorse the main points highlighted by the rapporteur, to be reviewed in this legislative proposal by the Commission. These propose an effective system that will respond better to the interests of the recipient countries and economic operators, and rules that provide for a reform process which ensures the participation of the recipients and which will also ensure that Parliament can carry out its task of democratic oversight. in writing. - (PT) In 1968 the United Nations Conference on Trade and Development (UNCTAD) recommended the creation of a Generalised System of Preferences (GSP) under which countries that were considered to be more developed would support developing countries by granting trade preferences. The European Community was the first to implement a GSP scheme in 1971. This has proved to be one of the key methods for cooperation at the level of international trade with developing countries, by reducing poverty. The current regulation needs to be updated as it is due to lapse and as it is not covered in the Treaty of Lisbon. It also requires substantial reform. Although this proposal does not yet constitute a new regulation, the drafting of which is necessary, I would like to express my agreement with the report under discussion, and I hope that the Commission will submit a new proposal as soon as possible, so that the EU can continue to support developing countries. The Generalised System of Preferences (GSP) is a trade mechanism which allows the EU to grant developing countries preferential, non-reciprocal access to its market through tariff reductions. While it is defined as a tool for development aid, this mechanism is not free of contradictions, especially between some of its stated purposes and the results that are actually obtained. In effect, many developing countries have become increasingly economically dependent and have been shaping their economies according to a model of reduced diversification, based on a limited set of products for export, instead of developing their internal markets. An international division of labour has become ingrained. This is unfavourable to these countries; it is often the large multinationals, some of them European, that reap the greatest benefits from this system. There needs to be a comprehensive review of this mechanism, along with a thorough discussion of its various aspects and complexities and their impact not only on developing countries, but also on the EU Member States, particularly the weakest. Given the Commission's delay in submitting a new proposal for regulation, which means that it cannot enter into force immediately after the term of the existing regulation, there needs to be an extension of the existing... The current scheme of generalised tariff preferences expires at the end of this year, so this is simply about voting for the necessary extension in order to ensure legal certainty and the mutual interests of the approximately 150 countries involved. However, the importance of this subject for both developing countries and EU Member States with weaker economies, whose industrial, agricultural or social interests are not always respected in the international trade agreements promoted by the Commission, makes it necessary to conduct a thorough discussion on the new regulation. The Commission should submit the proposal for this as soon as possible so as to allow all the different aspects and complexities of the Generalised System of Preferences to be properly analysed, along with its impact on different areas and countries. in writing. - (IT) The Generalised System of Preferences (GSP) has been one of the key EU trade and development policy instruments to assist developing countries to reduce poverty. This measure prolongs the current situation since a new regulation has not been tabled, which is somewhat regrettable. Despite this, considering the importance of the instrument under discussion, I will vote in favour. in writing. - (DE) Trade is an important and efficient instrument for combating poverty in developing countries. The transitional regulation on a scheme of generalised tariff preferences legally enshrines preferential access to the EU market for 176 developing countries. I supported the regulation, which ensures legal continuity, so that opportunities for trade remain available to developing countries. Moreover, it is the EU's moral duty to support these countries in the development of democracy and the rule of law by enabling fair trade. The resolution on the proposal to amend Council Regulation (EC) No 732/2008 applying a system of generalised tariff preferences for the period from 1 January 2009 to 31 December 2011 was adopted by a wide majority in this House. If the Generalised System of Preferences (GSP) were not extended, many developing countries could actually find themselves in hugely difficult situations. Ever since 1971, Europe has tried to support and assist developing countries in order to reduce poverty by generating revenue through international trade. Following the entry into force of the Treaty of Lisbon, the procedure to change the GSP requires the intervention of the Council and of Parliament, which must pursue the creation of an effective system that is sensitive to the interests of the beneficiary countries whilst also requiring them to ratify and implement 27 international conventions on the protection of human rights, sustainable development, fundamental labour standards and good governance. Despite my support for this proposal for an extension valid until 2011, I feel I must emphasise the regret - which was also expressed by my group - over the Commission's tardiness in dealing with this bill. in writing. - I voted in favour of this report which is a technical rollover to the GSP regulation. It extends the duration of the regulation until 31 December 2013 in order to allow sufficient time for the new regulation to be drafted by the Commission and for Parliament to exercise its new powers in international trade policy. This report is therefore not intended to tackle the substance of the regulation and it does not comment on whether GSP+ beneficiaries do in fact continue to qualify for these trade preferences on the basis of good governance, sustainable development and ratification and implementation of UN conventions in the field of social, environmental and human rights. We are all convinced that since its creation the Generalised System of Preferences (GSP) has been one of the key European Union trade and development policy instruments. It has represented a major incentive for developing countries, long embroiled in the fight against poverty, to favour free access to their market and imports of their goods via tariff reductions. However, we agree with the rapporteur, Mr Scholz, who has expressed hope that the current Regulation on the subject will need to be extended, since this would ensure legal certainty and guarantee the interests of both the EU and the beneficiary countries and also avoid the current situation (which is still unsatisfactory) being extended. So far we have seen a certain underuse of the trade preferences guaranteed by the GSP, above all those related to the rules of origin, caused by a problem in the administrative procedures that characterise them. It would therefore be advisable to provide targeted technical assistance, for instance by operating twinning programmes, with the principal aim of promoting the development of regulatory capacities and guaranteeing the proper transposition of the international conventions. Finally, we are of the opinion that the Commission should carry out constant monitoring, with greater involvement from Parliament and the relevant social partners. in writing. - (PT) The existing regulation on generalised tariff preferences expires at the end of this year. Given the impossibility of a new regulation coming into force in due time because of the delay in the submission of the study requested by the committee, we are obliged to extend the existing regulation for two more years. However, given the importance of this regulation for governing trade between developing countries and the EU, the Commission needs to submit a new, updated version very soon. There can be no development without economic growth. Yet as I have said before, in the absence of an impartial state, economic growth is no guarantee of development. EU trade policy has an essential part to play in combating poverty and achieving the Millenium Development Goals. The EU's Generalised System of Preferences (GSP) is one of the tools that enables developing countries to compete on the international markets by offering either reduced customs duties or zero-rate access to the EU market for their exports. The GSP also releases countries from dependency on aid. We have approved the extension of the current regulation while we await the new draft regulation that has been requested in order to guarantee legal certainty. However, the European Parliament's new powers in the field of trade following the entry into force of the Treaty of Lisbon must be taken into account. Under the Treaty, measures in the GSP Regulation are considered to be delegated acts, which means that the European Parliament will have greater supervisory powers in future. in writing. - (DE) As long ago as 1964, some developing countries were already calling loudly for trade preferences in order to improve their economic situation. In 1968, after an agreement was reached, a Generalised System of Preferences (GSP) was introduced. The European Economic Community introduced the GSP in 1971 and other nations like the United States followed suit. The temporary granting of trade preferences sought to achieve the following goals: an increase in developing countries' export proceeds by diversification of the exported products, promotion of industrialisation and an acceleration of economic growth in the developing countries. Furthermore, the GSP was intended to ensure that the products supported originated in developing countries. To date, the GSP represents one of the most important EU instruments in the area of trade and it is monitored by the European Commission. As the current scheme expires on 31 December of this year, the Commission already presented a new proposal back in May 2010. No amendments are proposed for the new regulation, although the rapporteur definitely believes that a redrafting of the schemes is necessary. I am abstaining from the vote because there do not seem to be any new, tangible proposals for the new regulation. The regulation currently in force for generalised tariff preferences that enable free trade or lower duties in the trade of products between Member States and third countries, a regulation which is generally used to encourage trade with poor and/or developing countries, needs to be changed and put back into place, given its forthcoming expiry. I voted in favour of the report on the proposal for a new regulation on this subject because I agree with the objectives of the changes it aims to bring in. The amendment aims to create an effective system that is more sensitive to the interests of the beneficiary countries and economic operators, to develop more comprehensive rules and to guarantee Parliament's role as the body of democratic control. I hope that this is the first step towards a solution to be identified at a global level for a general agreement on trade. After the failure of the Doha negotiations, these measures can only really be provisional, ahead of a more long-term solution. Regulation (EC) No 732/2008 established a Generalised System of Preferences (GSP) that is valid until 31 December 2011. The GSP has been one of the EU's main trade and development policy instruments for helping developing countries to reduce poverty, by generating income through international trade. Parliament's consultation process with regard to the latest GSP was insufficient, and did not allow for wide-ranging negotiation. Parliament emphasised that in future more time will be needed for it to carry out its functions. On 26 May 2010, the Commission proposed simply extending the period of application of the current regulation, claiming that there was not enough time to table a new regulation. This proposed extension did not take into account the entry into force of the Treaty of Lisbon. Parliament raised this failure and proposed amendments to the Commission's draft, with a view to ensuring that the rights and powers that Parliament had acquired through the Treaty of Lisbon would be respected. I therefore voted in favour of this report, which approves the extension of the regulation in question and amends the elements required for respecting the new powers acquired by Parliament in the light of the Treaty of Lisbon, in particular guaranteeing new powers with regard to delegated acts. Under the Generalised System of Preferences (GSP) industrialised countries guarantee trade preferences to all developing countries on a non-reciprocal basis. It is one of the key EU trade and development policy instruments to assist developing countries to reduce poverty by generating revenue through international trade. The regulation currently in force and valid until 31 December 2012 does not respect the new powers granted to Parliament by the Treaty of Lisbon. The new proposal for a regulation aims to create a system that is more sensitive to the interests of the beneficiary countries and economic operators, to develop more rules that allow for a better regulated reform process and to ensure that the regulation gives due importance to the task of democratic control asked of Parliament. For these reasons I voted in favour of the proposal for a new regulation that aims for greater clarity and transparency in the GSP system. in writing. - (PT) Since 1971, the European Union has been awarding preferential trade arrangements to developing countries within the framework of its Generalised System of Preferences (GSP). The GSP is applied through successive regulations implementing a system of generalised tariff-related preferences, generally for three years at a time. The current system was instituted by Regulation (EC) No 732/2008 and applies until 31 December 2011, when it will be replaced by a new regulation, yet to be drawn up. However, the remaining period of application of Regulation (EC) No 732/2008 is not sufficient to allow a Commission proposal to be drawn up and a new regulation to be adopted by means of the Ordinary legislative procedure, so it would appear necessary to extend this regulation's period of application until 31 December 2013, in order to ensure continuity in the functioning of the system. I voted in favour, in the expectation that the Commission will table a new proposal quickly, which would contribute to making the GSP a clearer, more transparent and more effective system. in writing. - The idea of a Generalised System of Preferences (GSP) goes back to 1968, when tariffs were much higher in general and when they were still seen as the main barrier to trade from developing to industrialised countries. The concept was initially proposed by the UNCTAD as a development tool: industrialised countries should grant non-reciprocal trade preferences to developing countries, allowing them to generate revenue not via aid, but via international preferential trade. The European Community started to apply this scheme in 1971. The first three-year scheme was implemented from 2006 to 2008. The second scheme is due to expire on 31 December 2011. The current scheme was adopted in 2008 under the consultation procedure. However, at that time, the referral arrived in Parliament at very short notice. Meaningful Parliament involvement in the regulation was impossible. This should not happen again for the forthcoming regulation, in particular given Parliament's new competencies under the Treaty of Lisbon. I voted in favour of the text of this resolution because I think that the European Union's Generalised System of Preferences (GSP) is one of the key instruments to make it easier for developing countries to achieve growth. For this very reason it must be put into practice without delay. As far back as 1971, the European Union stood out from the other economic powers as it was the first to establish a preferential tariff system for developing countries. The main aim is to eradicate endemic poverty everywhere, enabling countries in difficulty to draw the greatest benefits from international trade. Now the tariff agreement is close to expiry and the Commission has decided that the new proposal will be tabled in the coming months, though its entry into force will be delayed until at least the second half of 2012. This delay will result in a legal vacuum of more than six months, causing a discontinuity in the programme that even risks putting the many results already achieved under threat. I hope that this lamented delay will not cause the use of the generalised tariff system to decline and that the new agreement will provide a stimulus for the implementation of a global trade system based on ethics and democracy. in writing. - (LT) It is very important for the EU's Generalised System of Preferences to become more transparent. It is important for the EU's tariff preferences for imports from third countries to be based on democracy and ethics, and not simply the pursuit of profit. Tariff preferences should be beneficial to the whole of society and not just a certain number of companies. The rapporteur accurately observed that the proposal to extend the current regulation is not ideal, but it would allow us to avoid a legal vacuum lasting more than six months. Under the current regulation, the European Parliament has no say on the criteria for eligibility, or on the list of the beneficiary countries. This should change: The time has come for Parliament to make use of its new post-Lisbon powers in the trade arena. The EU should pay more attention to the development of cooperation with neighbouring countries in the area of trade policy. This would help establish a stable and liberal business environment and would facilitate the gradual enlargement of the European single market. It is in the EU's interests to sign a free trade agreement with Ukraine and begin negotiations with other Eastern Partnership countries which are members of the World Trade Organisation - Georgia, Moldova and Armenia. in writing. - (DE) I have voted against this report. As the rapporteur himself states, the system in its current form has more than a few shortcomings. Although the Commission was called on to table a proposal for a new regulation which would, on the one hand, address the inadequacies of the legal framework and, on the other, take account of the institutional changes since the entry into force of the Treaty of Lisbon, ensuring among other things that Parliament is given greater powers of scrutiny than it has under the procedure that is currently applied, the draft that has been tabled contains an unnecessary extension of the current unsatisfactory situation. In the parliamentary report, the rapporteur also discusses some of his proposals for improvements which could or should be included in the future proposal for a new regulation. The Commission should take these proposals on board and table a new, improved regulation without delay. I am voting for this report, given that the combined air space of the US and the EU represents 60% of global air traffic, and current bilateral agreements between Member States and the US do not reflect reality. The opening up of air space between the US and EU on a non-discriminatory basis should provide improved services for the transportation of passengers and cargo, economic benefits, and above all jobs. I would therefore say that this is beneficial, as a convergence regulation could promote free competition, particularly with regard to state subsidies, and social and environmental criteria. The US and European aviation markets represent over half of the world's air traffic. Consequently, in view of global warming, the European Union and the United States need to work together to reduce the environmental impact of international aviation. I have therefore voted in favour of the Agreement in which both parties undertake to adopt environmental and social standards that will considerably reduce noise pollution and mitigate the effects of air traffic emissions on air quality, whilst also committing to developing sustainable alternative fuels. For the first time, both parties have also agreed to guarantee the social rights of airline staff. in writing. - (LT) I agreed with this Protocol to amend the EU-US air transport agreement. The Protocol contains important elements of progress in EU-US cooperation on air transport issues. It also avoids the risk that, in the absence of such an agreement, someone might trigger the suspension clause, contained in the first-stage Agreement. Suspension could lead to European passengers and airlines losing the significant gains that have been enjoyed since March 2008. Attention should also be drawn to the fact that this new Agreement has opened the way to opportunities in terms of additional investment and market access as well as strengthening cooperation in regulatory areas such as safety, security and the environment, where both sides agreed a dedicated Joint Statement on the Environment. The EU Member States and the US account for a share of 60% of global aviation markets. We should therefore strive to ensure a steady increase in the quality of services in this area. By agreeing to the conclusion of an air transport Agreement between the EU and the United States, we are contributing to the growth of the aviation sector by making it possible to attract greater investment on both sides of the Atlantic. Furthermore, the Agreement will help to strengthen the protection of employee rights within the sector, step up cooperation on air travel safety and also, thanks to the compatibility requirement, strengthen cooperation on environmental matters. It is also significant that the role of the EU-US Joint Committee is strengthened, by enabling it to promote new initiatives when putting the Agreement into effect. I believe that the new Agreement will help further to open up access to the market, which will mean higher-quality services and more stringent safety requirements, and I therefore endorse the resolution. in writing. - (ES) I voted in favour of this initiative because air transport markets represent 60% of world traffic. This Agreement will bring about the changes in United States legislation that are necessary for increasing convergence on regulations preventing unfair competition. New routes will be opened, and operators and passengers will be offered improved services and prices, which will, in turn, contribute to economic growth, leading to job creation on both sides of the Atlantic. Although far from perfect, the EU-US Air Transport Agreement marks a step forward, paving the way not only for future opportunities in terms of additional investment and market access, but also for measures providing increased safety and security. The air transport market has not been completely opened up by both sides as a result of the version of the Agreement reached through negotiation. However, it contains sufficient incentives to encourage reform. The US needs to change its domestic legislation to allow EU investors majority ownership of US airlines, generating reciprocal measures from the EU. The EU-US Joint Committee has received increased powers, which means that it will be able to enhance cooperation by promoting new initiatives. The new rules will reduce red tape, including through mutual recognition of each other's regulatory decisions, and avoid the wasteful duplication of resources. The recognition of the importance of the social dimension and the responsibility given to the Joint Committee to monitor the social effects of the Agreement and develop appropriate responses as necessary are an innovation introduced in the second stage of the Agreement. in writing. - (PT) I welcome the fact that the European Union and the United States have declared their intention of working together to reduce the impact of international aviation on the environment. I applaud the initiatives for reducing noise, for reducing the impact of aviation on air quality and the global climate, for encouraging the development of environmentally friendly aviation technology, and for innovation with regard to air traffic management, and for the sustainable development of alternative aviation fuels. in writing. - (PT) I voted in favour of this recommendation, as I believe that the Agreement under consideration may be an important step towards opening up the market to EU and US airlines on a non-discriminatory basis. This opening up of the market may contribute to the improvement of services provided to passengers, in terms of both variety and cost, and provide substantial economic benefits. in writing. - (PT) Although it has not yet achieved a single transatlantic market for air transport, the amendment to the Air Transport Agreement between the United States and the European Union contains significant improvements compared to the previous version, particularly in terms of the environment and security. I hope that the progress made will enable continued efforts towards reducing the obstacles to creating this market, particularly with regard to the inter-operability and compatibility of systems, and the imbalance in competition laws, which favour US firms in terms of the ownership and control of airlines, not least the Fly America Act. in writing. - (PT) This draft legislative resolution is based on the draft decision of the Council and the Representatives of the Governments of the Member States of the European Union, meeting within the Council on the conclusion of the Protocol to Amend the Air Transport Agreement between the United States of America, of the one part, and the European Community and its Member States, of the other part. The ideal agreement would be one that proposed a complete opening up of the aviation market, without any restrictions on either side. However, this objective has not been achieved. Therefore, taking into account the regulatory changes due to the Treaty of Lisbon, the size of the aviation markets within the EU and the US, which account for 60% of global air traffic, the need to respect the privacy of European and US citizens, and the existence of rules ensuring respect for the rights of passengers, I welcome this Agreement. It represents significant progress compared with the status quo. However, it is important to emphasise the need for the European Parliament and the United States Congress to maintain dialogue on issues not covered by this Agreement. in writing. - (PT) The objectives of this Agreement are set out clearly by the rapporteur: the 'opening of the market': in other words, the deepening of the liberalisation under way within this sector, 'creating a single market for air transport'. It should be stressed, as pointed out by the rapporteur, that the aviation markets of the EU and the US together represent around 60% of global air traffic. The promises of benefits for workers and passengers that always accompany these liberalisation processes are as old and trite as they are false, as demonstrated by the reality in cases where liberalisation has gone ahead, whether in this sector or in other sectors. Propaganda relating to 'environmental cooperation' has now been added to these promises; a question that can and must be tackled without doubt, but not within this context. Even here, it is clear what the intention is: promoting the compatibility and interaction of emission licence-trading regimes. In the name of free competition, which justifies everything and to which everything is subject, severe limitations are being placed on state intervention in defence of the interests of national airlines, and therefore in defence of national strategic interests in a number of areas, such as links with migrant communities. These agreements are another part of the process of liberalisation under way within the air transport sector, which obstructs state intervention in and regulation of this strategic sector, opening the door to the monopolistic concentration that always results from free competition, which is sacrosanct and defended at all cost. In the name of facilitating business opportunities within international air transport, which promotes the interests of multinationals within the sector at the expense of national companies and their respective strategic interests, including those that are publicly owned, as is the case in Portugal with TAP Portugal. As a result, aviation company workers lose out, passengers lose out, and other workers lose out, as liberalisation facilitates dumping by multinationals, imposing unsecure jobs through the levelling down of working conditions. in writing. - (LT) I agreed with this document, because the Treaty of Lisbon, which entered into force on 1 December 2009, extended the circumstances in which Parliament's consent was required for the conclusion of an international agreement. Air agreements now fall within this category because they cover a field to which the ordinary legislative procedure applies. The EU-US aviation markets account for about 60% of world air traffic. Opening the market to EU and US airlines on a non-discriminatory basis would offer passengers and freight operators improved services, in terms of both variety and cost, provide substantial economic benefits and create jobs. Regulatory convergence could do much to promote fair competition, particularly with regard to state subsidies, social and environmental standards. While the second-stage Agreement represents a significant step forward, it is important for it not to be regarded as the end of the process of establishing a transatlantic aviation market. I believe that the Commission needs to look forward towards negotiating another stage of this Agreement covering issues including: further liberalisation of traffic rights; additional foreign investment opportunities; the effect of environmental measures and infrastructure constraints on the exercise of traffic rights; and better coordination of passenger rights policies in order to ensure the highest possible level of protection for passengers. Consistent standards of passenger rights, including those for people of reduced mobility, are of particular importance so as to avoid travellers facing inconsistent treatment while travelling. All of these air agreements are beneficial and necessary for the European Union, our airlines and our citizens. in writing. - I voted for this Agreement, which is correct in so far as it goes. However, while the incentives to further market opening are welcome, the absence of substantive progress in removing outdated regulatory constraints in the area of foreign investment is disappointing, as this will maintain the current unbalanced restrictions on foreign ownership and control in the United States. In addition, EU carriers will only gain limited access to US Government-financed traffic. This again represents the continuation of an unbalanced situation, given that EU national governments do not impose similar restrictions. This amendment to the Agreement on air transport between the European Union and the United States represents an excellent opportunity to develop the potential of a market that accounts for 60% of world air traffic. The European Commission has by now made significant progress in the attempt to establish an Open Aviation Area between the EU and the US, in which investments could flow freely and both EU and US airlines would be able to provide air services without any restriction. We now recognise the need for more intense cooperation in order to face up to ever-changing challenges in the fields of security and the environment, as well as to promote further investment in order to guarantee free access to the market. The provision of an EU-US Joint Committee is crucial: it will monitor the social impact of the regulatory cooperation programme, which will help reduce existing red tape. We would mention the problematic issue of exchanging personal passenger data between the EU and the US, and therefore the relationship between international security and the privacy of citizens. We consider it essential that Parliament be kept fully informed about the work of the Joint Committee, foreign investments, infrastructure constraints on the exercise of traffic rights and the coordination of passenger rights policies. The EU-US Agreement is very important for the future of relations between both sides. As such, following the entry into force of the Treaty of Lisbon, the European Parliament needs to be fully informed and consulted with regard to the work carried out by the Joint Committee, as well as all of the entities involved. Any agreement that is to be concluded will need to be adopted by Parliament, which will therefore need to be kept up-to-date with all negotiations, and it will be important in the future for regular meetings to be held between Members of this House and members of the US Congress, in order to debate all questions relating to aviation policy between the EU and the US. This Agreement is therefore an important step towards opening up the market to airlines from the EU and the US without any discrimination. This opening up of the market may contribute to the improvement of services provided to passengers. in writing. - (NL) The delegation of the Dutch Labour Party to the European Parliament certainly does not consider this second stage Agreement to be perfect, but it takes the view that it will lead to progress in important areas. In addition, it will prevent the United States from activating the suspension clause in the absence of such an Agreement. Suspension could lead to European passengers and airlines no longer being able to profit from the significant benefits which they have enjoyed since March 2008 thanks to this protocol. The benefits and positive aspects include, in particular, agreements on working standards for airline staff, sharing good practice with regard to noise abatement, strengthening cooperation in the field of environmental protection etc. The delegation of the Dutch Labour Party to the European Parliament recognises the ongoing need to pursue a proper debate on safety requirements (such as the use of scanners) and the impact on privacy and health of passengers of such requirements. In addition, it would highlight the need for the privacy of European and US citizens to be put centre stage and respected when passengers' personal data is exchanged between the EU and the US. It is essential that Parliament is and remains involved in these negotiations and that European regulations are not eroded. in writing. - The Agreement is not perfect but does herald some serious progress. If there is no such Agreement, someone might trigger the suspension clause, which would deprive the EU's passengers and airlines of the significant gains that have been enjoyed since March 2008. Given the fact that US is a difficult partner in negotiations we should aspire for progress in further negotiations in this direction. in writing. - (DE) Air transport has increased in general and therefore the aviation markets of the EU and the United States have also grown. For a long time, the Member States have negotiated with the United States on an individual basis and concluded bilateral agreements. The shift to EU level enables European airlines to fly to any destination in the United States from any point in the EU. As a precondition for this, some reforms had to be carried out both in the United States and in the European Union. The new Agreement is intended to open the way to future opportunities in terms of additional investment and market access and improve cooperation between the regulatory authorities. However, the agreement is one-sided if existing restrictions on foreign ownership and control in the United States continue to remain. Thus, with this new agreement, the EU is allowing itself once again to be deceived by the United States, and that is something that I cannot support. in writing. - (DE) It makes perfect sense for air transport agreements with the United States to now be concluded at European level instead of separately with individual Member States as they were previously. This will allow European airlines to fly to all destinations within the United States. What I am not happy about, however, is the one-sided nature of this Agreement, in which the EU, on the one hand, is making numerous concessions, while the United States, on the other, is insisting on restrictions on foreign ownership, for example. The EU must put itself in a stronger position in relation the United States in this regard. in writing. - (LT) The open-skies agreement reached between the United States and the European Union is a guarantor of progress and a mirror of economic development for both regions. Fully opening the transatlantic market would represent an important step towards improving the situation in the global aviation sector. There would be an economic benefit for both parties worth millions, and many new jobs would be created, along with business development opportunities. While striving for economic benefits, we must not forget security requirements. Standards of flight safety and security are vitally important to passengers, crew and the whole aviation sector. Security standards must be harmonised in ascending order. EU and US institutions responsible for flight security must cooperate at all levels. EU security standards must meet the requirements set by the International Civil Aviation Organisation. We must make every effort to ensure that our own lives, as well as those of our children and the loved ones, are taken seriously. We cannot allow the flying, working and rest time of flight crew members in the European Union to be subject to lower security requirements, which could endanger people's lives. I voted in favour of the Agreement on Air Transport between the European Union and the United States. I did so precisely in order to make our political weight felt since, although they are not considered the best even by Mr Zasada himself, the agreements reached do offer a way to manage air transport that will in any case benefit the citizens of the two continents, both in terms of travel and trade. Thanks to further liberalisation of traffic rights, additional foreign investment opportunities and better coordination of passenger rights policies, the EU and USA have both been guaranteed important benefits. in writing. - (PT) I voted in favour of this amendment to the EU-US Air Transport Agreement. Any suspension would lead to passengers and airlines from the Union experiencing significant losses to the benefits that they have enjoyed since March 2008. I agree with the rapporteur's analysis that this Agreement is not perfect. However, it has the merit of tabling important elements that enable this process to move forward, and avoid the risk of the activation of the suspension clause in the absence of an agreement of this nature. In fact, this Agreement - a second-stage Agreement - does not achieve the end objective of a complete opening up of the market, with no restrictions on either side, although it does contain a series of incentives promoting reform. In concrete terms, when the US amends its legislation to allow EU investors to become majority shareholders in US airlines, the EU will reciprocate. In any case, this process will not be straightforward, and any decision relating to it will depend on monitoring and the final proposal arrived at, under circumstances that are instrumental to ensuring improved air transport and the success of European companies. The European Union and United States aviation markets, taken together, account for about 60% of world air traffic. The Protocol to Amend the Air Transport Agreement provides for the market to be opened up to EU and US airlines on a non-discriminatory basis and offers passengers and freight operators improved services, in terms of both variety and cost, provides substantial economic benefits and creates jobs. In addition, further progress on cooperation and regulatory convergence in this area could do much to promote fair competition, particularly with regard to State subsidies and social and environmental standards. For the reasons outlined above, I am therefore voting in favour of the adoption of the Protocol to Amend the Air Transport Agreement between the EU and the US. in writing. - (PT) Despite not having achieved the end objective of the complete opening up of the transatlantic air market, this second-stage Agreement between the EU and the US represents significant progress in this direction, providing new commercial opportunities for European airlines and substantial benefits to passengers and cargo operators, in terms both of strengthening the provision of services and of reducing costs. I therefore voted in favour of the conclusion of this signing of this Protocol to Amend the Air Transport Agreement between the EU and the US, as I would like to see a continuation of negotiating efforts towards greater liberalisation of traffic rights, the strengthening of cooperation in different areas, and the abolition of regulatory restrictions in place in the US with regard to the ownership and control of US airlines by non-nationals. in writing. - The Treaty of Lisbon, which entered into force on 1 December 2009, extended the circumstances in which Parliament's consent is required for the conclusion of international agreements. Air transport agreements now fall within this category because they cover a field to which the ordinary legislative procedure applies. Previously, Parliament was only consulted on such agreements. As a result, this Protocol to Amend the Air Transport Agreement is subject to Parliament's consent, whereas the initial Agreement was concluded after consultation of Parliament. The EU-US aviation markets, taken together, account for about 60% of world air traffic. Opening the market to EU and US airlines on a non-discriminatory basis would offer passengers and freight operators improved services, in terms of both variety and cost, provide substantial economic benefits and create jobs. In addition, regulatory convergence could do much to promote fair competition, particularly with regard to state subsidies and social and environmental standards. European and United States airlines, taken together, account for around 60% of world air traffic, thereby representing an unrivalled economic force in the sector. Opening up the EU and US aviation market would, de facto, enable more services to be offered at lower costs, with positive repercussions for both the economy and employment. Indeed, common standards would favour a more uniform integrated development, above all from the social and environmental point of view. I am therefore pleased to see that the agreement reached contains numerous incentives designed to encourage these changes. The ability to make equity investments in the respective airlines, as well as increased consultation and cooperation on security, are just some examples of this. I now hope that Parliament adopts the Protocol to Amend the Air Transport Agreement between the EU and the US, avoiding triggering the suspension clause, which would cause the benefits achieved so far to be lost. in writing. - (PT) The European Parliament today adopted an Protocol to Amend the Air Transport Agreement in place between the European Union and the United States, and I voted in favour of it. The proposal is a significant step toward improving transatlantic relations in the area of aviation. The aviation markets in the EU and the US together represent around 60% of global air traffic. The opening up of markets to airlines will provide improved services for passengers and cargo operators, and will bring great benefits in terms of the economy and of job creation. However, the Agreement should not be seen as the end of the process. The Agreement in question, described as second-stage, does not achieve the end objective of the complete opening up of the market, with no restrictions on either side. It is also extremely important to have consistent rules with regard to the rights of passengers, and better coordination of policies relating to this. Finally, it should also be emphasised that issues such as greater liberalisation of traffic rights, increased opportunities for foreign investment, and the effect of environmental measures on traffic rights will need to be taken into account during any future phase of negotiation. I am in favour of adopting the motion for a resolution on the above matter. The Treaty of Lisbon extended the circumstances in which Parliament's consent was required for the conclusion of an international agreement. Air agreements now fall within this category, because they cover a field to which the ordinary legislative procedure applies. Previously Parliament had only been consulted on such agreements. The EU-US aviation markets, taken together, account for around 60% of world air traffic. Opening the market to EU and US airlines on a non-discriminatory basis would offer passengers and freight operators improved services in terms of both variety and cost, provide substantial economic benefits and create jobs. In addition, regulatory convergence could do much to promote fair competition, particularly with regard to state subsidies and social and environmental standards. At the same time, we should recognise that a number of issues remain outside the scope of the Agreement as amended by the new Protocol. For this reason, the Commission needs to look forward towards negotiating another stage of this Agreement, covering issues including: further liberalisation of traffic rights, additional foreign investment opportunities and the effect of environmental measures and infrastructure constraints on the exercise of traffic rights. I am voting for this report, firstly because it is a substantial improvement on the current bilateral agreements between Member States and Canada, which are quite restricted, and secondly because of the significant improvement that it offers in terms of services and air connections between the two markets, with the resulting economic, environmental, security, passenger transport, competition and legal benefits, amongst other things. The European Union and Canada have agreed to cooperate on air transport with the aim of mitigating the impact of aviation on climate change. In terms of security and passenger safety, the Agreement envisages mutual recognition of standards and 'one-stop' security. All European Union airlines will be able to operate weekly flights between Canada and the EU. This Agreement will significantly improve the connections between the markets of both countries and the links between people, while creating new opportunities for the airline sector through a gradual liberalisation of foreign ownership rules. I voted for this report as it contains specific provisions for improving consumer interests. Until now, air transport between EU Member States and Canada has been regulated solely by bilateral agreements. As the European Union and Canada have long maintained economic and political links, it has become necessary for the two parties to reach an agreement on air transport. I have therefore voted in favour of this Agreement, which provides for the phased implementation of traffic rights, investment opportunities and cooperation in a number of areas (not least air safety through the creation of a shared security system, but also social matters, consumer interests and environmental issues). Under the Agreement, all existing restrictions on routes, pricing and the number of services flying between the European Union and Canada will also be removed. This Agreement is both ambitious and essential. in writing. - (LT) I agreed with the EU-Canada Air Transport Agreement. The Agreement includes a gradual phasing-in of traffic rights and investment opportunities, as well as far reaching cooperation on a number of issues including safety, security, social matters, consumer interests, environment, air traffic management, state aids and competition. All EU airlines will be able to operate direct flights to Canada from anywhere in Europe. It is also to be welcomed that this Agreement removes all restrictions on routes, prices, or the number of weekly flights between Canada and the EU. Airlines will be free to enter into commercial arrangements such as code-share agreements, which are important for airlines serving a large number of destinations, and to establish their tariffs in line with the countries' competition law. In 2007, the Council granted the Commission a mandate to negotiate a global aviation agreement. That year 9 million people travelled between the United States and Canada. The purpose of the Agreement was to create a single market for air transport. This entailed the need to modify Canadian legislation. Progress in totally opening up the market and implementing the necessary legislative changes has been gradual. Nonetheless, the fact that restrictions on routes have been eliminated, weekly flights have been introduced and commercial agreements are now open to airlines, all constitute advances. Despite the difficulties, I believe we must continue to work until the single market becomes a reality. That is why I voted in favour. in writing. - (BG) It is well known that prior to this Agreement, aviation was the subject of bilateral agreements with 19 of the EU Member States. I supported this proposal because it will facilitate air transport, but mainly because it includes a gradual phasing-in of air traffic rights and investment opportunities, as well as far-reaching cooperation on a number of issues including safety, security, social matters, consumer interests, the environment, air traffic management, state aids and competition. Such an Agreement was a necessity. in writing. - (CS) An aviation agreement between the EU and Canada would, under normal circumstances, have my full support, as I am wholly in favour in removing barriers to free movement, both within the EU and between the EU and third countries. In a situation where Canada continues to impose a unilateral visa requirement on citizens of the Czech Republic, however, I regard this Agreement as the misguided accommodation on the part of the EU of a country which does not deserve such accommodation. The EU should have the courage to link both of these issues - the visa requirement and the signing of the international agreement - as this may provide a rare opportunity to put effective pressure on Canada over the visa affair. It is astonishing that Canada, on the one hand, allows EU airlines to operate direct flights to Canada from anywhere in the EU, and, on the other hand, prevents the citizens of one Member State from travelling freely to Canada. It is widely felt that the relationship between the EU and Canada has gradually developed into a strategic partnership, and the concluded Agreement will confirm and strengthen the nature of the partnership. However, if Canada continues to impose a unilateral visa requirement against Czech citizens, this partnership will have a very bitter taste to it. This Agreement, which will enable European airlines to establish direct flights to Canada from any point in Europe, as well as to explore code sharing for these routes, can be described as the most ambitious air transport agreement concluded by the European Union. It seeks to eliminate provisions included in previous bilateral agreements that violated Union Law, and which threatened equality of treatment between companies owned by nationals of different Member States. I would like to see European Union-Canada relations strengthened, and for us to be able to move more and better toward air space with fewer barriers between states. in writing. - (PT) This recommendation deals with the draft decision of the Council and of the Representatives of the Governments of the Member States of the European Union, meeting within the Council on the conclusion of the Agreement on Air Transport between the European Community and its Member States, of the one part, and Canada, of the other part. Economic and political relations between the European Union and Canada date back a long time, and have given rise to bilateral agreements in this area. However, with the entry into force of the Treaty of Lisbon on 1 December 2009, which requires European Parliament approval for agreements relating to air services, the Commission began a process of negotiation that has now come to an end, through which a set of traffic rights and investment possibilities have been established, together with cooperation in several areas: security, defence of consumer rights, the environment, management of air traffic, social rights and fair competition. I therefore welcome the adoption of this proposal, which will facilitate travel for EU and Canadian citizens by removing various restrictions, enabling code sharing and establishing fairer pricing. The similarities between the objectives in this case and the Agreement with the US are clear: the creation of a single market for air transport between the EU and Canada, a market that, in 2007, represented a volume of 9 million passengers. The rapporteur stated that the Agreement is even 'more ambitious and specific than the EU-US Agreement', but also acknowledges that 'Although this Agreement is more ambitious than that with the US regarding market access, it is less explicit when it comes to recognising the importance of the social dimension'. In other words, even the empty references made to the impact of the Agreement on jobs, workers and working conditions were overlooked in this case. The truth is that, in this case as well, the absence of restrictions that was demanded with regard to suppliers and services provided - for operations between countries, within each country, and even outside the EU and Canadian markets, as provided for by the Agreement - and to limitations on state intervention in airlines will contribute to the objective of opening the way to monopolistic concentration within the sector... The objectives of this report are clear: the creation of a single market for air transport between the EU and Canada, a market that, in 2007, represented a volume of 9 million passengers. The rapporteur stated that the Agreement is even 'more ambitious and specific than the EU-US Agreement', but also acknowledges that 'Although this Agreement is more ambitious than that with the US regarding market access, it is less explicit when it comes to recognising the importance of the social dimension'. In other words, even the empty references made to the impact of the Agreement on jobs, workers and working conditions were overlooked in this case. Even the absence of restrictions that was demanded with regard to suppliers and services provided - for operations between countries, within each country, and even outside the EU and Canadian markets, as provided for by the Agreement - and to limitations on state intervention in airlines will contribute to the objective of opening the way to monopolistic concentration within the sector, with adverse effects for workers and passengers, contrary to what has been said. That is why we voted against. in writing. - (LT) I agreed with this document, because the Agreement includes a gradual phasing-in of traffic rights and investment opportunities, as well as far reaching cooperation on a number of issues including safety, security, social matters, consumer interests, environment, air traffic management, state aids and competition. All EU airlines will be able to operate direct flights to Canada from anywhere in Europe. The Agreement removes all restrictions on routes, prices, or the number of weekly flights between Canada and the EU. Airlines will be free to enter into commercial arrangements such as code-share agreements, which are important for airlines serving a large number of destinations, and to establish their tariffs in line with competition law. The Agreement contains provisions for the phased market opening linked to the granting of greater investment freedoms by both sides. The ambitious nature of this Agreement is very much to be welcomed. It should serve as a target for other negotiations currently underway. I therefore believe that Parliament should consent to the EU-Canada Air Transport Agreement. All of these air agreements are beneficial and necessary for the European Union, our airlines and our citizens. in writing. - I welcome this Agreement, which can fairly be described as the most ambitious air transport agreement between the EU and a major world partner. It will significantly improve both the connections between respective markets and people-to-people links, as well as creating new opportunities for the airline sector through a gradual liberalisation of foreign ownership rules. In particular, it is more ambitious and specific than the EU-US Agreement with regard to traffic rights, ownership and control, even following the provisional application of the amending Protocol ('second stage'). According to a study launched by the Commission, an open agreement with Canada would generate an additional half a million passengers in its first year and, within a few years, 3.5 million extra passengers might be expected to take advantage of the opportunities such an agreement could offer. The Agreement could generate consumer benefits of at least EUR 72 million through lower fares and would also create new jobs. Although the European Union and Canada have long-standing economic and political ties, prior to the current Agreement, aviation was the subject of bilateral agreements with a number of the Member States. It is therefore necessary to pursue the objective of establishing an Open Aviation Area that clears the way for the creation of a single market for air transport, in which investments would flow freely and both parties' airlines would be able to provide air services without any restrictions. We think that existing legal restrictions on ownership of Canadian airlines should be removed and, at the same time, new traffic rights and cooperation on a range of issues - including passenger safety, respect for the environment, air traffic management and security - ought to be introduced. We can therefore surely say that the Agreement adopted today is truly ambitious. It will bring about a decisive improvement in connections between the respective markets and will create new opportunities for the sector. However, we do recommend increased consultation and cooperation on the delicate issue of security and we call on the Commission to keep Parliament informed of all developments and to watch over the work of the new Joint Committee. The EU-Canada Air Transport Agreement is very important for the future of relations between both sides. As such, following the entry into force of the Treaty of Lisbon, the European Parliament needs to be fully informed and consulted with regard to the work carried out by the Joint Committee, as well as all of the entities involved. Any Agreement that is to be concluded will need to be adopted by Parliament, which will therefore need to be kept up-to-date with all negotiations. This Agreement is therefore an important step towards opening up the market to airlines from the EU and Canada without any discrimination. This opening up of the market may contribute to the improvement of services provided to passengers. This is the most ambitious transport Agreement ever signed between two countries. in writing. - I fully agree with Silvia-Adriana Ţicău: the Agreement is the most ambitious air transport agreement between the EU and a major world partner. It will significantly improve both connections between the respective markets and people-to-people links, and will create new opportunities for the airline sector through a gradual liberalisation of foreign ownership rules. In particular, it is more ambitious and better focused than the EU-US Agreement in terms of traffic rights, ownership and control. I voted in favour of this agreement on air transport between the European Community and its Member States, of the one part, and Canada, of the other part. This is a very ambitious Agreement, which provides for the gradual establishment of traffic rights and investment possibilities, together with full cooperation in several areas, including questions of security, social questions, the defence of consumer interests, the environment, the management of air traffic, state aid and competition. All European Union airlines will be able to operate direct flights to Canada from any European airport. The Agreement removes all existing restrictions on routes, prices and the number of weekly flights between Canada and the EU. It is with satisfaction that I am voting vote for this Agreement, given its ambitious nature and the possibilities that it opens up for making the historical ties that exist between the Azores and Canada even closer. The EU-Canada Air Transport Agreement is one of the most ambitious air transport agreements between the EU and a major world partner. It includes a gradual phasing-in of traffic rights and investment opportunities, as well as far-reaching cooperation on issues such as: safety, security, social matters, consumer interests, the environment, air traffic management, state subsidies and competition. The Agreement will improve the connections between the respective markets and people-to-people links, as well as creating new opportunities for the airline sector through a gradual liberalisation of foreign ownership rules. According to recent studies, an open agreement with Canada would generate an additional half million passengers in its first year and, within a few years, 3.5 million extra passengers might be expected to take advantage of the opportunities such an agreement could offer. The Agreement could generate consumer benefits of at least EUR 72 million through lower fares and would also create new jobs. For the reasons outlined above, I am voting in favour of the adoption of the Agreement on air transport between the EU and Canada. in writing. - (PT) I voted in favour of concluding the EU-Canada Air Transport Agreement, which will enable European airlines to establish direct flights to Canada from any point within Europe, generating, firstly, new opportunities for European companies - in particular, thanks to the possibility of reaching code-sharing agreements and the progressive liberalisation of rules in the area of foreign investment - and, secondly, substantial economic benefits, both for consumers and with regard to job creation. , in writing - (CS) In my opinion, the aviation agreement with Canada is a fundamental commercial instrument which will deliver benefits to both sides, but in view of the discrimination against Czech citizens and the position of MPs from the Chamber of Deputies of the Parliament of the Czech Republic, I am abstaining from the vote. The Foreign Affairs Committee of the Chamber of Deputies of the Parliament of the Czech Republic has suspended talks on the ratification of the Agreement until such time as there is clear progress by the Commission in talks with Canada over ending the unilateral visa requirement for Czech citizens. For almost two years there has been a two-tier citizenship of the EU, as Czech citizens cannot travel freely to Canada like others do, while Canadians can travel freely to the Czech Republic. The Czech Republic cannot respond reciprocally because of the common visa policy of the EU, but the Commissioner is failing to safeguard this policy. Although the EU and Canada have long-standing economic and political ties, prior to the current Agreement, aviation was the subject of bilateral agreements with 19 of the EU Member States. Many of these agreements were restrictive and did not offer full access to the respective markets. In November 2002, the European Court of Justice ruled that certain provisions in these bilateral agreements were incompatible with Community law. The Council therefore gave the Commission a mandate, in October 2007, to negotiate a comprehensive aviation agreement in place of the existing bilateral agreements. In that year nine million people were travelling between the EU and Canada. The EU-Canada Air Transport Agreement was initialled on 30 November 2008, endorsed by the EU-Canada summit on 6 May 2009 and signed on 17-18 December 2009. The EU and Canada also negotiated an agreement on air safety. This is the subject of a separate recommendation. Although the European Union and Canada have long-standing economic and political ties, until today the only existing Agreement on aviation between the EU and Canada was borne out of a combination of bilateral agreements between countries. This protocol includes the introduction of traffic rights and investment opportunities, as well as cooperation on a number of issues, particularly increased guarantees on safety and security. I am in favour of the text of this Agreement because it introduces measures designed to gradually open up the Canadian air market, allowing greater investment freedoms for both parties. In order to properly fulfil the mandate, Canada needs to change its legislation to remove the existing legal restrictions on ownership and control of Canadian airlines and on the number of services offered by each airline. This Agreement, which can be described as the most ambitious air transport agreement concluded by the European Union, will enable European airlines to operate direct flights to Canada from any European airport, while also introducing commercial mechanisms such as code sharing. The Agreement provides for the gradual establishment of traffic rights and investment possibilities, together with full cooperation in several areas, including questions of security, social questions, the defence of consumer interests, the environment, the management of air traffic, state aids and competition. In the document adopted today in the sitting, the Committee on Transport and Tourism, of which I am a substitute member, calls upon the European Commission to ensure that Parliament be informed and consulted systematically with regard to the activities of the Joint Committee established, so that it can monitor the various stages of the opening up of the market. I voted in favour of the recommendation, and the Agreement in question should serve as an example for other negotiations currently under way. in writing. - (DE) This Agreement serves as a model for current and future negotiations with other States. It will remove all restrictions on routes, prices, or the number of weekly flights between the two parties to the agreement. According to predictions, the potential savings as a result of cheaper flight prices amount to EUR 72 million, which would benefit consumers directly. The Aagreement will have further indirect benefits for our citizens as a result of the creation of new jobs. I therefore voted in favour of the Agreement. I am voting for this report because the continuation of the existing bilateral air agreements with Vietnam would not be in line with European law, and because of the possible opportunities that this greater openness could bring about. Until now, bilateral agreements on air transport concluded between EU Member States and third countries have created the potential for discrimination against certain European Union carriers. The new Agreement therefore includes an EU designation clause that encompasses all European Union carriers and will replace the traditional designation clauses which referred to air carriers from individual Member States. In doing so, the Agreement is designed to prevent discrimination amongst European Union carriers and to eliminate anti-competitive practices. I have therefore voted in favour of the Agreement, which will allow all European Union air carriers to operate flights between any Member State and Vietnam. in writing. - (LT) I agreed with the conclusion of this Agreement. The Agreement's objective is to give all EU air carriers non-discriminatory access to routes between the European Union and Vietnam. This Agreement also ensures that safety provisions in bilateral agreements are applicable to situations when regulatory control over an air carrier is exercised by a Member State other than the Member State that designated that air carrier. Furthermore, I believe that it is very important that the Agreement prohibits anti-competitive practices. The Court of Justice has ruled that all bilateral agreements signed before now are in contravention of European Union law. It has therefore been necessary to amend three articles in order to prevent discrimination between airlines and outlaw potentially anti-competitive activities, as well as to ensure that safety clauses apply where a Member State controls transport designated by another Member State. in writing. - (BG) I wish to explain my vote on the Aair Transport Agreement between the European Union and Vietnam. I voted in favour of this Agreement because I learnt that the Agreement concluded by the Commission replaces, for the better, certain provisions in the existing 17 bilateral air services agreements concluded between EU Member States and Vietnam. As we are aware, according to Parliament's Rules of Procedure, no amendments can be tabled, but I think that the Commission has agreed the necessary arrangements and I support this Agreement. The Commission has been asked by the Council to seek the replacement of certain provisions within the agreements relating to air services, after the Court of Justice found that they did not comply with Union Law. The amendments in question provide for granting all European airlines access to routes between the European Union and Vietnam, and prohibit anti-competitive practices. These amendments ensure compliance with the principle of freedom of establishment, and seek to ensure identical treatment within a host Member State to that availed to nationals of that Member State. I would like to see contacts and exchanges between the European Union and Vietnam benefiting from the mutual advantages offered to airlines, and for these to lead to their peoples to have better knowledge of each other. in writing. - (PT) I welcome the adoption of this draft Council decision seeking the conclusion of an agreement between the European Union on the one hand, and the Government of the Socialist Republic of Vietnam on the other, relating to certain aspects of air services. International relationships in the area of aviation between Member States and third countries used to be regulated through the establishment of bilateral agreements. However, a 2002 judgement by the Court of Justice of the European Union deemed this situation to be illegal, as it contravened Article 49 of the Treaty on the Functioning of the European Union. The Commission therefore initiated a negotiation process seeking to replace the 17 bilateral agreements on air services that are in force between Member States and Vietnam. This process, which has now come to an end, aimed to provide all EU carriers with non-discriminatory access to routes between the EU and Vietnam, require compliance with safety standards, and prevent anti-competitive practices. This Agreement, like the others, serves the objectives of liberalisation within the air services sector, with the justification, as in other cases, that the 2002 judgement of the EU Court of Justice deems existing bilateral agreements to contravene Union law. As in other regrettable situations, the interpretation of Union law once more seems to give priority to freedom of competition over all other social and economic precepts. We are expressing here the same reservations that we have about other agreements, their scope and the possible consequences that they may have. Within the current context in which civil aviation activity is taking place, the creation of equal conditions for the various European companies could contribute to facilitating the process of monopolistic concentration within the sector that is already under way, with all the adverse effects that this would have for aviation company workers and for passengers. In order for the market to be dominant within this sector, the ability of Member States to defend their flag carriers has to be reduced. We are faced with an agreement that serves the objectives of liberalisation within the air services sector, with the justification, as in other cases, that the 2002 ruling of the EU Court of Justice deems existing bilateral agreements contravene Union law. Once again, as in other regrettable situations, the interpretation of Union law seems to give priority to freedom of competition over all other social and economic precepts, even where there are bilateral agreements between Member States. We are therefore expressing the same reservations that we have about other agreements, their scope and their possible consequences. Within the current context in which civil aviation activity is taking place, the creation of equal conditions for the various European companies could contribute to facilitating the process of monopolistic concentration within the sector that is already under way, with all the adverse effects that this would have for aviation company workers and for passengers. The ability of Member States to defend their flag carriers should not be reduced. in writing. - (IT) The new competences acquired by the European Union also include air transport agreements. The Agreement in question with Vietnam sets out procedures to implement a number of regulations, particularly in terms of security. The recommendation is clear and I support it. in writing. - (LT) I agreed with this report, because international aviation relations between Member States and third countries have traditionally been governed by bilateral air services agreements. As for bilateral air services agreements between EU Member States and Vietnam, I am pleased that the objective is to give all EU air carriers non-discriminatory access to routes between the European Union and Vietnam; safety provisions in bilateral agreements are applicable to situations when regulatory control over an air carrier is exercised by a Member State other than the Member State that designated that air carrier; and anti-competitive practices are prohibited. All of these air agreements are beneficial and necessary for the European Union, our airlines and our citizens. in writing. - I voted in favour of this report. International aviation relations between Member States and third countries have traditionally been governed by bilateral air services agreements. The EU Court of Justice ruled in 2002 that traditional designation clauses in Member States' bilateral air services agreements infringe EU law. They allow a third country to reject, withdraw or suspend the permissions or authorisations of an air carrier that has been designated by a Member State but that is not substantially owned and effectively controlled by that Member State or its nationals. This has been found to constitute discrimination against EU carriers established in the territory of a Member State but owned and controlled by nationals of other Member States. This is contrary to Article 49 of the Treaty on the Functioning of the European Union, which guarantees nationals of Member States who have exercised their freedom of establishment the same treatment in the host Member State as that accorded to nationals of that Member State. There are also further issues, such as competition, where compliance with EU law should be ensured through amending or complementing existing provisions in bilateral air services agreements between Member States and third countries. That is why the Commission negotiated this agreement. The bilateral agreements on international air transport entered into by the European Union with third countries now require a radical overhaul. The Court of Justice has ruled that traditional designation clauses in such agreements are entirely incompatible with EU law since they violate the freedom of establishment of foreign companies and do not guarantee them the same treatment that the host Member State accords to its own companies. We therefore welcome the conclusion of this agreement tabled by the Commission, which aims to give all European Union air carriers non-discriminatory access to routes to and from Vietnam, while avoiding any anti-competitive practice. The clauses on possible fuel tax for air services ought to be removed and it would be desirable for the traditional designation clauses referring to air carriers of third countries to be replaced by a European Union designation clause referring to EU air carriers. By doing this, an extra balancing factor would be added to the bilateral agreements. Lastly, it would be worth establishing increasingly stringent safety measures, particularly in situations where regulatory control over an air carrier is exercised by a Member State other than that which designated it. The EU-Vietnam Agreement is very important for the future of relations between both sides. As such, following the entry into force of the Treaty of Lisbon, the European Parliament needs to be fully informed and consulted with regard to the work carried out by the Joint Committee, as well as all of the entities involved. Any agreement that is to be concluded will need to be adopted by Parliament, which will therefore need to be kept uptodate with all negotiations. This Agreement is therefore an important step towards opening up the market to airlines from the EU and Vietnam without any discrimination. This opening up of the market may contribute to the improvement of services provided to passengers. The bilateral agreements on air services between the European Union and third countries include clauses that have proved to be in breach of EU law as they do not guarantee equal treatment outside the EU for the various air carriers, which is why we need a specific agreement that protects passengers and airlines. I voted in favour of the agreement precisely in order to guarantee that all European air carriers can use Vietnamese air routes equally, without running the risk of being banned. Furthermore, the scope of the agreement aims at greater flight and passenger safety. If, in fact, for various reasons we cannot have the same standards that we have within the Union, then it is appropriate that some core points and rules are established. Following the 2002 judgement of the Court of Justice of the European Union ruling that the traditional designation clauses included within bilateral Air Services Agreements signed by Member States contravened Union law, it became necessary to negotiate an agreement that sought to replace certain provisions within the current 17 bilateral air services agreements between Member States and Vietnam. The clause in question contravened Article 49 of the Treaty on the Functioning of the European Union, which guarantees nationals of Member States exercising their freedom of establishment the same treatment within a host Member State as that given to nationals of that Member State. Thus, in order to avoid discrimination between EU air carriers, the traditional designation clauses relating to air carriers of a Member State that is a party to a bilateral Agreement are being replaced by an EU designation clause, applicable to all EU carriers. The aim of this is to provide all EU air carriers with non-discriminatory access to routes between the European Union and Vietnam. In light of all of the above, I voted in favour of this report, which also merited a favourable opinion from the Committee on Transport and Tourism. in writing. - (PT) I voted in favour of the conclusion of the Agreement on Air Transport between the EU and Vietnam, which is aimed at replacing certain provisions of the 17 existing bilateral air services agreements signed by that country and the Member States, guaranteeing EU air carriers non-discriminatory access to routes between the European Union and Vietnam, in accordance with what was established by the Court of Justice in 2002, along with compliance with Community law on competition. This was found to constitute discrimination against EU carriers established in the territory of a Member State but owned and controlled by nationals of other Member States, contrary to Article 49 of the Treaty on the Functioning of the European Union which guarantees nationals of Member States who have exercised their freedom of establishment the same treatment in the host Member State as that accorded to nationals of that Member State. I think the final text voted on today is pleasing because it allows all European Union carriers to have access to routes between the EU and Vietnam, avoiding discrimination between the various air carriers. In addition, guarantees have been made on security and competition which are crucially important for improving air services on this route, which will benefit operators and passengers alike. The constant economic growth of this country, which, thanks to the flexibility of its entrepreneurial fabric, has managed to deal with the international crisis better than many, makes it a favoured partner for the EU and today's vote cannot but support this important line of development. The Commission has negotiated an agreement between the EU and the Republic of Vietnam which replaces the 17 existing bilateral air services agreements between that country and the Member States. The Agreement in question does not contain the usual provision on the taxation of fuel in the EU on flights conducted by third-country operators. However, the Agreement entails significant benefits for the EU, and my vote goes towards supporting Parliament's recommendation. To this end, I would like to highlight the clause on the designation included in the Agreement which is aimed at giving all EU air carriers non-discriminatory access to routes between the EU and Vietnam, but also the provisions relating to security and compliance with competition rules. in writing. - (DE) The Agreement brought the designation clauses of the previous bilateral air services agreements into line with EU law in accordance with the ruling of the European Court of Justice in 2002. I have voted in favour of the conclusion of the Agreement. I am voting in favour of this report because it is necessary to conclude negotiations on trade with this region, and I believe that there are positive developments by virtue of the fact that this document includes sectors like energy, industry and raw materials, and, above all, research, innovation and education. in writing. - I voted in favour of this report and would like to urge EU and GCC leaders to intensify cooperation, especially in the area of trade, since negotiations on a free-trade agreement between the EU and the GCC were opened 20 years ago and still have not been concluded. Apart from being strategically a very important region for the EU and the West in general, the GCC states are also important trade partners. Our trade with this region has been on a constant rise and in 2009 it amounted to EUR 79.7 billion. We also have a positive trade balance with GCC countries, as we export goods worth EUR 57.8 billion and our imports amount to EUR 21.8 billion. The EEAS should pay more attention to this important region and new EU diplomatic missions should be opened in the GCC member states. In this way we would be able to raise the profile of the EU and have more influence in this part of the world. EU engagement is needed now more than ever considering the turmoil and unrest this region is experiencing. The European Union and Gulf Cooperation Council have been negotiating a free trade agreement for some 20 years. Both parties would benefit from more in-depth relations, especially as there are numerous opportunities for cooperation in the fields of education, scientific research and renewable energies. On the domestic front, the GCC countries have, for some years now, been going through a new process of political and social modernisation, which must be supported and encouraged. I think that we need continuous dialogue between the European Union and Gulf Cooperation Council in order to make progress in promoting human rights and freedoms, as well as those of minorities, and in the battle against every form of discrimination, including discrimination based on gender or religion. This is the reason why I voted for this report. For some 20 years, the European Union and the Gulf Cooperation Council have been trying to negotiate a free trade agreement. The negotiations have still not been concluded. A great deal has changed over those 20 years. The Gulf Cooperation Council members have now become the economic powerhouse of the Middle East and North Africa region. They also constitute the main investors in the European Union's southern Mediterranean neighbourhood. Consequently, the potential for cooperation between the European Union and the members of the Gulf Cooperation Council goes beyond trade, extending to fields such as science and education. This is why I voted in favour of the own-initiative report which calls on the European Parliament to devise a more ambitious policy with regard to the Gulf Cooperation Council. in writing. - (LT) I voted in favour of this report. The European Union and the Gulf Cooperation Council (GCC) have been negotiating a free trade agreement for some 20 years. These are the longest-running and hitherto non-concluded trade negotiations that the EU has undertaken. In the course of this period, the situation in this region has changed profoundly. Over two decades, the GCC member states became the main economic powerhouse for the Middle East and North Africa, while the newly emerging region itself has significant influence on the development of the global economy. I agree with the proposals made in the report that it is necessary to swiftly conclude a free trade agreement with this region that is important for the EU. The potential for cooperation between the EU and the Gulf region applies not only to the realm of trade, but to other shared interests in international security, in combating terrorism, in diplomatic mediation in Middle Eastern trouble spots, in regional crisis management and in intercultural dialogue and global economic governance. in writing. - (BG) Through this own-initiative report the European Parliament aims to call for a more ambitious EU policy to be devised in relation to the Gulf Cooperation Council and its member states. I voted for this report because I think that this is the direction we should choose. All the more so as the Gulf Cooperation Council recently declared that it no longer recognises Muammar Gaddafi's regime as legitimate. We are pleased and encouraged by this policy. The Council condemned the crimes perpetrated by the Gaddafi regime against the civilian population and called for immediate intervention from the League of Arab States and the UN Security Council. The integration process initiated 30 years ago by the six member states of this Council is still so far the only experiment of its kind in the Arab world. We must support them. It is more important than ever for the European Union to have a free trade agreement with the Gulf states. The record in terms of negotiations on such an agreement is poor as far as their duration is concerned. The situation has obviously changed several times in the 20 years since they started. The Gulf region's geopolitical climate is different now, entailing global and regional implications. We have to deal with the liberalisation and diversification of the economies in these states. At present, the Gulf states are much more than mere trade partners, as they have an ever-increasing influence on the financial sector and diplomacy, not to mention other areas. Indeed, their influence will continue to grow. This creates a new outlook for the European Union, which understands that cooperation between both regions extends beyond trade. We have shared interests in the areas of international security, the fight against terrorism, diplomatic mediation in the tension zones in the Middle East, regional crisis management, intercultural dialogue and global economic governance. The EU has certain advantages to draw on by comparison with the new players in the Gulf region, provided that political will is shown at the highest level. I voted in favour of this report on trade, economic and financial relations between the EU and the countries of the Gulf Cooperation Council (GCC), namely Saudi Arabia, Bahrain, United Arab Emirates, Kuwait, Qatar and Oman. I agree with the provisions in the text as regards relations between the EU and the Arab countries in the Gulf region, especially in relation to strategic agreements in the areas of energy, science and education. It is also important to achieve a free trade agreement. I believe that it is in the interests of the EU and the Gulf Cooperation Council (GCC) to forge closer relations at all levels, be they political, cultural, commercial or financial. On the matter of this report, for which I was the rapporteur for the Committee on International Trade, I would like to highlight three proposals which I have advocated from the beginning and which have been warmly welcomed by the other members: 1) an increase in the diplomatic presence in the region by setting up an EU delegation in each of the GCC member states, through the European External Action Service (EEAS); 2) the holding of regular Heads of State or Government summits between the EU and the GCC; and, finally, 3) an invitation for the High Representative/Vice-President and the Commissioner for Trade to consider alternative approaches to future trade relations with the GCC countries, in the form of bilateral agreements between the EU and the Gulf States that already feel prepared to enter into further commitments with the EU. Although the latter proposal represents a new EU approach to relations with third countries, I believe that neither the EU nor every one of the GCC countries willing to forge closer relations in all areas can remain hostage to other GCC countries that do not yet feel comfortable to do so. in writing. - (PT) I voted in favour of this report because it argues that the potential for cooperation between the EU and the Gulf region goes beyond the merely commercial sphere. Good relations between these regional blocs can make an important contribution towards safeguarding common interests such as international security, the fight against terrorism, and global economic governance. The recent turmoil and social, political and military unrest in various Muslim-majority countries add to the need for the EU to develop a strategy for the Gulf region and to establish contacts and lasting partnerships with the leading multilateral institution in the region, the Gulf Cooperation Council (GCC). There are obvious security and economic-financial issues that connect both parties, so the EU should increase its efforts and channel resources in order to better raise awareness and seek to complete the draft trade agreement which, I believe, may not only increase trade but also help to bring their respective populations into greater contact. I hope that the reforms that have been undertaken by some of these countries will be consolidated and the Europe can contribute to this process in a positive way. in writing. - (PT) This motion for a Parliament resolution deals with relations between the EU and the Gulf Cooperation Council (GCC), with a view to establishing a strategic partnership involving their member states. Despite the turmoil in certain Arab countries that has been reported recently, the Gulf states have great economic potential and present an excellent opportunity for cooperation with the EU. These countries represent an excellent opportunity for trade not only because they are producers of oil, of which reserves are becoming exhausted, but mainly because they are beginning to invest in alternative energies, and Europe is also known for its expertise in this field. I am therefore pleased that this report has been adopted and I hope that we will soon be able to adopt an agreement that will strengthen the EU's partnerships with the Islamic community. There is no shortage of causes for concern and areas of instability which are making the geopolitical regional context extremely complex: the situation in Palestine, the war in Iraq, the situation in Iran, the recent popular uprisings in several countries, such as Yemen, and the situation in Darfur. In the face of this situation, the EU has been using double standards in their relations with states in this region, which has hindered the resolution of conflicts, negotiations and peace processes. Moreover, it often interferes in the uprisings, without respecting the sovereign laws of the peoples of the region. In this context, this report takes as its background the negotiations that took place 20 years ago to reach a free trade agreement between the EU and the Gulf Cooperation Council (GCC), making these the oldest trade negotiations initiated by the EU, but which have not been concluded to this day. This alone would be reason enough for us not to support the report. However, some of the oral amendments tabled during the vote have made it even more inacceptable, particularly the reference to the position of the UN Security Council on the establishment of an air exclusion zone in Libya, which, as we are aware, is masking the war which is being waged against this country. We are aware that the geopolitical situation of the Gulf region is very complex and includes sensitive and serious issues concerning security and peace. Notable among these are the peace processes in the Middle East, the war in Iraq, the situation in Iran, the popular uprisings in Yemen and the recent developments in Darfur, besides the latest events in North Africa. However, the report notes that 'the Gulf states' sovereign wealth funds account for more than one third of the world total and those funds helped to rescue the global and European financial system'. This was the context in which the negotiations took place 20 years ago to reach a free trade agreement between the EU and the Gulf Cooperation Council (GCC), which were the longest-running non-concluded trade negotiations that the EU has undertaken. The fact is that the EU has been interfering and using double standards in their relations with states in this region, which is hindering the negotiations and even peace processes relating to the sovereign rights of the peoples of the region. Moreover, the resolution adopted by Parliament includes new proposals that do not help the peace process in the region... in writing. - (LT) By voting in favour of this report, I support the demonstrations for democracy and human rights in Bahrain and condemn the government's violent response. The countries of the Gulf Cooperation Council (GCC), Iran, Iraq, Yemen, Oman, the United Arab Emirates, Qatar, Saudi Arabia and Kuwait, currently represent the EU's sixth largest export market and the EU is currently the GCC's main trading partner. Notwithstanding this already intensive level of trade, there is still scope for deepening it, as well as room for greater diversification of trade between the two parties, given the size of the EU market and efforts on the part of GCC member states to diversify their exports. A free trade agreement would also provide new opportunities for technical cooperation and assistance and the conclusion of the EU-GCC FTA would foster closer ties and further diversification. This document restates the EU's opposition to the death penalty and calls for a global moratorium on it; deplores the continuing retention of the death penalty by all GCC member states; therefore invites them to adopt a moratorium on executions; and calls in particular on states practising executions and punishments involving methods such as decapitation, stoning, crucifixion, flagellation or amputation to cease these practices. in writing. - I voted for the report on the EU relations with the Gulf Cooperation Council. I would like to point out my support for the oral amendments introduced by the rapporteur Mr Baudis to update the report in the light of recent developments. It is important to call on all member states of the Gulf Cooperation Council to recognize the continuing popular movement for democratic reform within the wider region with the appeal to the emerging civil society groups to promote the process of genuine peaceful democratic transition within their respective countries. in writing. - (FR) For various reasons, the Persian Gulf region is of strategic importance for the European Union, particularly in terms of energy supply. The European Union wants to enter into closer cooperation with the Gulf Cooperation Council (GCC) - an organisation made up of the six richest nations in the region - with the conclusion of a free trade agreement forming a key component of that process. I voted in favour of this report, which prepares the ground for future cooperation between the Union and the GCC. Covering all of the issues relevant to such a partnership, such as the rights of minorities, women's rights, freedom of conscience and expression, but also support for the Israeli-Palestinian peace process and areas for strategic partnership such as research, education and fossil and renewable fuels, the motion proposed by my colleague, Mr Baudis, has achieved a fairly broad consensus among the political groups. However, recent events in Bahrain have given rise to concerns as to whether the report is sufficiently up-to-date. Goodwill on all sides has resulted in some excellent compromise oral amendments being negotiated, thereby bringing the report up to date and ensuring that months of hard work have not been in vain. I voted in favour of adopting the Baudis report. Mr Baudis' comprehensive report covers all the interesting issues concerning human rights, equal rights for women, freedom of the press and democratisation. The report also takes account of recent changes in the political arena in Bahrain. I believe that it is absolutely vital to condemn the violence which is being used in this conflict. A strategic partnership in many areas, which is highlighted at many points in the report, should make it possible to avoid crises in relations between the EU and the region, and to increase Europe's energy security. The Persian Gulf countries are extremely important players in the peace process. I would therefore like to say how pleased I am that the report was adopted, and I hope that cooperation between the European Union and the Persian Gulf countries will be even more productive in many areas. in writing. - I voted for this report, and particularly welcome the oral amendment adding a new paragraph 7a, which 'calls on all member states of the Gulf Cooperation Council to recognise a continuing popular movement for democratic reform within the wider region and calls for the full engagement with emerging civil society groups to promote a process of genuine peaceful democratic transition, within their own countries, with partners in the region and with the full support of the European Union'. Over the 20 years of trade negotiations between the European Union and the countries of the Gulf Cooperation Council (GCC) the context of the negotiations has changed profoundly and these relations must be able to reach a turning-point. The conclusion of a free trade agreement remains both a political and a commercial priority. The GCC's geopolitical environment is characterised by the emergence of a series of security challenges with global and regional implications that means that a process to liberalise and diversify the basic economic structure of these countries needs to be started up. These countries should be able to continue down the path of cooperation and multilateralism. The European Union therefore has the task of developing a new strategic partnership that is capable of supporting the ongoing regional integration process. Furthermore, it would be desirable for the European External Action Service to open new diplomatic missions in these countries. It would therefore be a good idea for Parliament to encourage a more ambitious EU policy with regard to the GCC. We should be able to step up relations in areas of cooperation, such as the field of scientific research and technology, while continuing to discuss issues such as the protection of religious minorities, the right to work and freedom of opinion. Negotiations between the EU and the Gulf Cooperation Council (GCC) have already been taking place for more than two decades, in an attempt to negotiate a free trade agreement. This puts these among the longest-running non-conluded trade negotiations that the EU has undertaken. Now, in the course of 20 years, the context of the negotiations has changed profoundly. The GCC states have subtantial financial clout in the form of sovereign wealth funds, which amounted to more than USD 1 380 billion in 2009, in other words over 35% of the world total. The GCC member states have become the economic powerhouse for the entire Middle East/North Africa region, representing more than 40% of the national wealth generated in this area and holding 50% of its official currency reserves, in other words USD 1 070 billion. Given the massive financial and economic potential of these countries, we have to make use of the current context if the negotiations are to reach a successful conclusion. in writing. - The EU and the Gulf Cooperation Council have been negotiating a free-trade agreement (FTA) for some 20 years: the longest-running non-concluded trade negotiations that the EU has undertaken. The report underlines that concluding the FTA remains a priority. However, it goes beyond trade relations and also includes the issues of energy, industry and raw materials, R&D and innovation and education. I abstained from voting because the agreement should be drawn up in the context of a political response to the situation in the region. There should be a separate approach to every single country. Let us take Iran as an example. It would be a mistake to include Ahmadinejad's regime in the process of negotiations. More precise geographical or economic clarifications are necessary. in writing. - (LT) I agreed with this resolution on European Union relations with the Gulf Cooperation Council, because the Gulf region is seen today in terms of the emergence of a new global economic hub, whose geopolitical environment makes the Gulf a focus of security challenges that have global and regional implications. Furthermore, the GCC is the EU's sixth largest export market and the EU is currently the GCC's main trading partner and it is necessary to develop and diversify mutual relations. We must make every effort to ensure that cooperation is extended in various areas of economic and technical activity, and this includes enhancing the process of economic development. In addition, strong economic interaction would provide more opportunities to strengthen the EU's regional integration and would create more possibilities for the EU to contribute to increasing the stability of this strategically important region. We must do our utmost to ensure that negotiations between these two regions are finally brought to a close and a free trade agreement is concluded which would guarantee new opportunities for technical cooperation and assistance. in writing. - (LT) Right up until the breakthrough of the wave of democracy in the Arab countries, the European Parliament has constantly been calling on the countries of the Gulf Cooperation Council to improve the situation as regards democracy, the rule of law, and human rights and freedoms. Our Group of the Progressive Alliance of Socialists and Democrats stressed in particular the need for reforms in social policy and the safeguarding of increased freedoms for unions. We firmly opposed executions and the trampling of women's rights. By voting in favour of this report, I support the demonstrations for democracy and human rights in Bahrain and condemn the government's violent response. I support the rapporteur's calls to share with the Gulf countries the EU Member States' experience introducing technologies for extracting renewable energy sources. I also spoke in favour of speeding up negotiations on a free trade agreement between the EU and the countries of the Gulf. There is clear potential for cooperation between these two regions not just on the economy, but also on issues of international security, combating terrorism, diplomatic mediation in Middle Eastern conflicts, intercultural dialogue and global economic governance. The report by Mr Baudis on European Union relations with the Gulf Cooperation Council (GCC) relates to the negotiations for free trade between the EU and the countries of the Persian Gulf. I think that an agreement that facilitates trade and therefore strengthens all the socio-political ties that reintegrate the region into the global context is fundamental for its future stability following the wars of past few years and recent events, as well as in commercial terms. I therefore voted in favour of the report, hoping furthermore for the relationships to be intensified, as this would be of mutual benefit, including in view of a new global governance. I voted in favour of this own-initiative report, which constitutes an appeal by Parliament for the formulation of a more ambitious policy on a strategic partnership between the EU and the Gulf Cooperation Council (GCC) and its member states. The EU and the GCC have been trying to negotiate a free trade agreement for about 20 years. These are among the longest-running non-concluded trade negotiations that the EU has undertaken. However, in the course of 20 years, the context of these negotiations has changed profoundly. In fact, the potential for cooperation between these two regions goes beyond the merely commercial sphere. The two blocs share common interests such as international security, the fight against terrorism, diplomatic mediation in areas of tension in the Middle East, regional crisis management, intercultural dialogue and global economic governance. I voted in favour of this own-initiative report as I believe that Parliament's appeal for the formulation of a more ambitious EU policy in relation to the GCC and its member states is very timely. I hope that the political will that is needed on this matter is felt at the highest level. in writing. - (IT) The free trade agreement between the European Union and the Gulf Cooperation Council (GCC) has been under discussion for around 20 years. Over this period, the financial and geopolitical circumstances of the GCC have changed drastically: security challenges have emerged (such as, Iraq, Iran, Yemen, Islamic terrorism, and piracy) and new commercial players have appeared in the area. At the same time, the GCC member states have become the economic powerhouse of the whole Middle East-North Africa region and are now the main investors in the EU's southern Mediterranean neighbourhood area. The two regions also have common interests on security, combating terrorism, managing the regional crisis and global economic governance. That is why Parliament is today called to formulate a more ambitious cooperation policy with the countries of the GCC. The EU has certain advantages to draw on in comparison with the new players operating in the Gulf, above all in terms of education, scientific research, energy and technology. We cannot allow the opportunities offered by this particular moment in history - as world economic governance is defined and regional balances are reshaped - to pass unfulfilled. The Gulf region is greatly important to the EU, and it is therefore vital to develop a strategy that is aimed at strengthening political, financial, economic, social and cultural ties with the Gulf Cooperation Council (GCC). In view of this, the conclusion of the free trade agreement between the EU and the GCC is a priority. The potential of this cooperation also extends to other areas, such as education, energy and scientific research. I therefore support the appeal made in this House today for the formulation of a more ambitious EU policy in relation to the GCC and its member states, and I hope that the strengthening of dialogue and cooperation between the EU and the GCC will help to promote and consolidate progress with regard to respect for democratic principles and fundamental rights. in writing. - Among the reasons to vote in favour of this text, one should mention the adoption of Amendment 7a (new) that states the following: 'Calls on all member states in the Gulf Cooperation Council to recognise a continuing popular movement for democratic reform within the wider region, and calls for the full engagement with emerging civil society groups to promote a process of genuine peaceful democratic transition, within their own countries, with partners in the region and with the full support of the EU. The free trade agreement between the European Union and the Gulf region is a priority for both parties' interests and will emphasise the importance of their mutual recognition. The presence of the European Union in the region strengthens trade policy, contributing to the development of targeted and effective information on the EU in the Gulf countries. Concluding the agreement in question makes it possible to facilitate increased visibility for the Union by following a strategy of opening new European diplomatic missions in the Gulf states which would encourage political dialogue and make Europe's efforts more effective. This also applies in terms of the EU's energy needs, still largely met by fossil fuels, even though future oil demand will be influenced by a climate policy increasingly focussed on renewable sources. The social and political developments that have taken place in recent years in most Gulf Cooperation Council (GCC) member states encourage the promotion of human rights and the fight against all forms of discrimination, including those based on gender, sexual orientation or religion. A reliable partnership between the EU and the GCC therefore needs to be built, which will favour open markets for goods and the removal of non-tariff barriers. in writing. - The UK Conservative delegation and the ECR Group voted in favour of the Baudis Report on EU-GCC relations, including the extensive oral amendments submitted by the rapporteur today in plenary, as it is important to condemn any disproportionate use of force in Bahrain by the authorities, in particular allegations of the shooting of unarmed peaceful protestors. We accept that the mainly majority Shia community protestors have themselves in some measure also resorted to unacceptable violence and we call on all sides to exercise maximum restraint. Bahrain is a loyal western ally and home to the US Fleet and we welcome the offer of dialogue by the Crown Prince of Bahrain. We accept that under the GCC rules the government of Bahrain is entitled to call in Saudi and Kuwaiti assistance in enforcing law and order, but again foreign forces in Bahrain should respect fundamental human rights, including the right to peaceful demonstration. We hope an EU-FTA can be concluded as soon as possible as economic growth and job creation, particularly amongst the disadvantaged Shia community, will assist in stabilising the island state and reducing social tension. I supported the motion for a resolution which sends a clear signal to our partners in the Arab peninsula. Against the backdrop of extreme economic, social and geopolitical tensions, it was essential that this House reiterate its willingness to review our cooperation agreements in light of the events in the Arab world. We are not suggesting abandoning historic links, but rather adjusting our relations to reflect the realities on the ground and the needs of the people, making respect for the values championed by the Union a prerequisite for developing economic and political links. Dialogue with civil society will also be a key and indispensable feature of each partnership. Whilst progress and reforms must be welcomed, a lot remains to be done in order to set these countries firmly on the road to democracy, respect for human rights and civil liberties. Part of Europe's destiny is being played out in the Near and Middle East. Under the association agreements concluded between the Union and these countries, we now need to find a middle way that is fair to all sides, balancing the pursuit of economic and trade relations against promoting core values. in writing. - (DE) I voted in favour of the report on European Union relations with the Gulf Cooperation Council. As thoroughly explained in the report, due to the many advantages for both contractual parties and after 20 years of negotiations, it is time that we made a targeted effort to push for the conclusion of a free trade agreement. Above all, however, I support the main points of focus for the negotiations stated in the report, which take account of developments in the area of climate change and the obligation in terms of human rights. I am in favour of this appointment because all the legal procedures have been carried out, including a rigorous Curriculum Vitae assessment. The Executive Board of the European Central Bank requires a new member. I have voted in favour of appointing the Belgian candidate, Mr Praet, in view of his acknowledged authority and professional experience in the field of monetary affairs and banking. in writing. - (PT) I support the favourable result of the voting by the Council with regard to the appointment of Mr Praet as an Executive Board Member of the European Central Bank, on the basis of a positive assessment of his Curriculum Vitae and the written responses that he provided to the questionnaire given out to candidates for the post in question. At a pivotal moment in the life of the European institutions, when the European Central Bank, in particular, is required to perform an especially careful and interventionist role in monitoring the sovereign debt crisis, the stability of the euro and economic recovery, I wish the newly appointed Mr Praet every success in his office, and I believe that he will perform the functions for which he has been appointed with dedication and competence. in writing. - (LT) I agreed with this document, because by letter of 18 February 2011 the European Council consulted the European Parliament on the appointment of Peter Praet as a member of the Executive Board of the European Central Bank for a term of office of eight years with effect from 1 June 2011. Parliament's Committee on Economic and Monetary Affairs then proceeded to evaluate the credentials of the nominee, and in carrying out this evaluation, the committee received a CV from the candidate as well as his replies to the written questionnaire that was sent out to him. The committee subsequently held a one-and-a-half-hour hearing with the nominee on 16 March 2011, at which he made an opening statement and then responded to questions from the members of the committee. A favourable opinion was delivered to the European Council on the Council recommendation to appoint Peter Praet as a member of the Executive Board of the European Central Bank. in writing. - I voted for this report which, on the basis of a recommendation from the Committee on Economic and Monetary Affairs, delivers a favourable opinion to the European Council on the Council recommendation to appoint Peter Praet as a member of the Executive Board of the European Central Bank. The European institutions have to be served by the very best. In this instance, the newly appointed Mr Praet comes with an unblemished record and was approved with distinction at the hearing carried out by Parliament's Committee on Economic and Monetary Affairs. I wish him every success for the eight years of his term. I am delighted that Mr Praet has been selected to become a member of the Executive Board of the European Central Bank. As an expert on financial stability and on supervising financial infrastructures and payment systems and as a member of the Management Committee of the Belgian Banking, Finance and Insurance Commission (CBFA), Mr Praet is highly regarded in economic and academic spheres. He also has a wealth of experience that can now be put at the service of the European Union. I voted in favour of the appointment of Dr Praet as an executive committee member of the European Central Bank (ECB) as he has shown that he is an excellent candidate. During the hearing with the candidates held in the Committee on Economic and Monetary Affairs, Dr Praet proved to be the most knowledgeable and competent candidate by a wide margin. In recent years the European Central Bank has shown that it is an essential institution which was capable of managing the crisis and preventing even greater damage being caused. Indeed, beginning with the collapse of Lehman Brothers, the role played by the ECB - independently and separately from national governments - ensured that the extremely serious consequences of the crisis were not devastating. The ECB is and remains a bulwark in defence of the monetary union and the euro. For this reason, it is crucial that the members of its executive committee are equipped with exceptional qualities and experience. I voted in favour of the report on the appointment of Mr Praet to the post of Executive Board Member of the European Central Bank (ECB) for a term of eight years, to begin on 1 June 2011. All of the information presented for this option and which formed the basis for my own decision indicates that the criteria set out in Article 283(2) of the Treaty on the Functioning of the European Union have been met, and show that there is a need for the ECB to be fully independent, in accordance with Article 130 of that treaty, and I therefore welcome the appointment of Mr Praet. I voted in favour of this decision, under which Parliament gives its assent to the Council's recommendation to appoint Mr Praet to the post of Executive Board Member of the European Central Bank. I would like to wish him every success in performing the duties which are entrusted to him. The purpose of the European Banking Authority, which came into being on 1 January 2011 under the Regulation of the European Parliament and of the Council of 24 November 2010, is to guarantee the stability of the financial system, transparency of financial products and markets, and to provide protection for savers and investors. The European Banking Authority has nominated Adam Farkas, an economist from the Hungarian National Bank, to become its Executive Director. The European Parliament has to approve the selection in order for it to be valid. I have voted in favour of the appointment of Mr Farkas. I support the appointment of Mr Farkas to the post of Executive Director of the European Supervisory Authority (European Banking Authority), based on the answers that he gave to the Board of Supervisors of the European Banking Authority (European Banking Authority). If there were a lesson to be learnt from the recent crisis, it would be that we need to reform the institutional supervisory structure by creating European agencies and thus reformulate the entire concept of macro and micro-economic monitoring. The European Banking Authority is the result of that. Confidence in banks having been dealt a severe blow by the global financial crisis, it is important for the markets, and for Europeans in general, to start trusting the solidity and robustness of the banking institutions again and, in particular, regain confidence in the supervisory bodies. That is why the role reserved for this new European Banking Authority is so crucial for the future. Now that Parliament has approved the appointment of the Authority's Executive Director, I hope that he will have an active, prudent and successful term. in writing. - (LT) I agreed with this document, because at its meeting of 17 March 2011, the Committee on Economic and Monetary Affairs heard the candidate selected by the Board of Supervisors of the European Supervisory Authority (European Banking Authority), and it was decided that Adam Farkas fulfils the criteria set out in Article 51(2) of Regulation (EU) No 1093/2010), and the appointment of Adam Farkas as Executive Director of the European Supervisory Authority (European Banking Authority) was also approved. in writing. - I voted for this resolution, which approves the appointment of Adam Farkas as Executive Director of the European Supervisory Authority (European Banking Authority). The recent financial crisis has highlighted major weaknesses in financial supervision, both in individual cases and in relation to the financial system as a whole. Supervision models had a national perspective and did not adapt to the globalisation that has occurred within the financial system, where various financial groups conduct their operations across borders, with the systemic risks that this entails. I believe that the creation of the European Banking Authority is essential in order to achieve an effective supervision model. However, many other steps need to be taken to prevent the truly immoral situations of the recent past, which have damaged economies, shareholders, depositors, taxpayers and the credibility of the system, from reoccurring. I am therefore voting in favour of the choice of Mr Farkas as Executive Director of the European Supervisory Authority, and wish him a term of high quality in all respects. in writing. - (IT) As a member of the Committee on Economic and Monetary Affairs (ECON), I carefully followed the entire process leading to the creation of the European Banking Authority. For this reason, I voted in favour of the appointment of Mr Farkas as its executive director. The European Banking Authority must be put in a position to be able to start carrying out the tasks assigned to it by Parliament some months ago. I sincerely hope that the Authority is provided with the human and economic resources it needs so as to ensure that its supervisory role is implemented seriously and precisely. During the hearing held in the Committee on Economic and Monetary Affairs, the new executive director convinced me and my colleagues of his competence and professionalism, as today's vote shows. An additional positive factor, which will benefit the process of European integration, is that the new executive director comes from a Member State that only recently acceded to the European Union. I voted in favour of the report on the appointment of Mr Farkas to the post of Executive Director of the European Supervisory Authority (European Banking Authority). Mr Farkas was the candidate selected by the Board of Supervisors of the European Supervisory Authority (European Banking Authority) and was heard, in accordance with the established procedures, by the Committee on Economic and Monetary Affairs. All of the data presented for this option, and on which my decision was based, indicates that the criteria laid down within Article 51(2) of Regulation (EU) No 1093/2010 were met, and so I am happy with the appointment of Mr Farkas. Under this resolution, Parliament has approved the appointment of Mr Farkas to the post of Executive Director of the European Supervisory Authority (European Banking Authority). I would like to wish him every success in performing the duties which are entrusted to him. The European Insurance and Occupational Pensions Authority (EIOPA), which was created on 1 January 2011 under the Regulation of the European Parliament and of the Council of 24 November 2010, is tasked with promoting supervisory convergence and advising the European Union institutions on matters pertaining to the regulation and supervision of insurance, reinsurance and occupational pension schemes. The European Insurance and Occupational Pensions Authority has selected the Spaniard Carlos Montalvo, who worked as Acting Secretary General at the forerunner to the new authority, to be its first Executive Director. The European Parliament has to approve the selection in order for it to be valid. I have voted in favour of the appointment of Mr Montalvo. I support the appointment of Mr Montalvo to the post of Executive Director of the European Supervisory Authority (European Insurance and Occupational Pensions Authority), based on his selection by the Board of Supervisors of the European Banking Authority. One of the lessons learned from the crisis was the need to create independent European agencies for monitoring the banks and insurance in the financial markets. These agencies will not replace national supervisory agencies, but will work with them, exercising their mandate for prudence and systemic risk analysis in order to prevent a new crisis of the proportions of the one we are faced with at present from striking European states once more. Now that Parliament has approved the appointment of the Executive Director of the European Supervisory Authority (European Insurance and Occupational Pension Authority), I wish him every success in the important role that he is taking on. in writing. - (LT) I agreed with this document, because at its meeting of 17 March 2011, the Committee on Economic and Monetary Affairs heard the candidate selected by the Board of Supervisors of the European Supervisory Authority (European Insurance and Occupational Pensions Authority), and it was decided that Carlos Montalvo fulfils the criteria set out in Article 51(2) of Regulation (EU) No 1094/2010), and the appointment of Carlos Montalvo as Executive Director of the European Supervisory Authority (European Insurance and Occupational Pensions Authority) was approved. in writing. - I voted for this resolution, which approves the appointment of Carlos Montalvo as Executive Director of the European Supervisory Authority (European Insurance and Occupational Pensions Authority). in writing. - (PT) The recent financial crisis has highlighted major weaknesses in financial supervision, both in individual cases and in relation to the financial system as a whole. Models of supervision have had a national perspective and have not adapted to the globalisation that has occurred within the financial system, in which various financial groups conduct their operations across borders, with the systemic risks that this entails. The creation of a European authority for the insurance and occupational pensions sector is therefore essential in order to achieve an effective supervision model, alongside many other monitoring mechanisms, to be decided on and implemented as a matter of true urgency. I am therefore voting in favour of the choice of Mr Montalvo as Executive Director of the European Supervisory Authority (European Insurance and Occupational Pensions Authority), and I wish him every success in carrying out his office. Today's favourable vote sees us add another important piece to the European supervisory structure that Parliament has felt it so important to support since the start of the current legislature. During the hearing held last week in the Committee on Economic and Monetary Affairs, the new executive director demonstrated his competence and knowledge of the sector and the problems that he will have to deal with. Additionally, I do not think that the fact that the top two positions at the European Insurance and Occupational Pensions Authority (EIOPA) are being filled by people that had the same role in the preceding organisation will be a problem. Indeed, I am confident that the new powers granted to EIOPA will ensure that its managers will be able to carry out their task as well as possible. I voted in favour of the report on the appointment of Mr Montalvo to the post of Executive Director of the European Supervisory Authority (European Insurance and Occupational Pensions Authority). Mr Montalvo was the candidate selected by the Board of Supervisors of the European Banking Authority (European Insurance and Occupational Pensions Authority) and was heard, in accordance with the established procedures, by the Committee on Economic and Monetary Affairs. All of the data presented for this option, and on which my decision was based, indicates that the criteria laid down within Article 51(2) of Regulation (EU) No 1094/2010 were met, and so I am happy with the appointment of Mr Montalvo. Under this motion for a resolution, Parliament has approved the appointment of Mr Montalvo to the post of Executive Director of the European Supervisory Authority (European Insurance and Occupational Pensions Authority). I would like to wish him every success in performing the duties which are entrusted to him. The European Securities and Markets Authority (ESMA), established on 1 January 2011 by the 24 November 2010 regulation of the European Parliament and of the Council, is designed to help maintain the stability of the financial system of the European Union by safeguarding the integrity, transparency, efficiency and orderly functioning of financial markets, and by strengthening investor protection. ESMA has appointed Mrs Ross, a German former economist at the Bank of England, as its first Executive Director. The European Parliament should vote in favour of this nomination in order for it to come into effect. For my part, I voted in favour of Mrs Ross' nomination. Since the financial markets have been badly affected by the crisis, there is an urgent need to restore confidence. To a large extent, this will depend on the role of the supervisory authorities, which will have to carry out their mandates competently and effectively so as to pass on the necessary confidence to investors and companies. It is in this context that the European Securities and Markets Authority has been created, which, while not claiming to replace national supervisory agencies, will have an important part to play in the new European supervisory framework. Therefore, it is important that this agency begins operation soon. Now that Parliament has approved the appointment of the Authority's Executive Director, I wish him a successful term. in writing. - (LT) I agreed with this document, because at its meeting of 17 March 2011, the Committee on Economic and Monetary Affairs heard the candidate selected by the Board of Supervisors of the European Supervisory Authority (European Securities and Markets Authority), and it was decided that Verena Ross fulfils the criteria set out in Article 51(2) of Regulation (EU) No 1095/2010), and the appointment of Verena Ross as Executive Director of the European Supervisory Authority (European Securities and Markets Authority) was also approved. in writing. - I voted for this resolution, which approves the appointment of Verena Ross as Executive Director of the European Supervisory Authority (European Securities and Markets Authority). The creation of the European Financial Markets Authority is essential to achieving an effective supervision model. However, many other steps need to be taken to prevent the truly immoral situations of the recent past, which have damaged economies, shareholders, depositors, taxpayers and the credibility of the system, from recurring. I am therefore voting in favour of the choice of Mrs Ross as Executive Director of the European Securities and Markets Authority, and wish her a term of high quality in all respects. I voted in favour of the appointment of Mrs Ross as Executive Director for a number of reasons. The recent legislative acts we have adopted, or will be called to adopt, grant a huge range of powers in terms of supervision, analysis and evaluation. Just think, for example, of the various technical standards that the authority is asked to evaluate and bring to the attention of the Commission for approval. For this reason, it is important for the European Securities and Markets Authority (ESMA) to be capable of starting work as soon as possible in order to begin carrying out the mandate granted to it by Parliament last year. Lastly, I applaud the fact that a woman has been appointed to one of the highest-profile roles, not only for gender reasons but because of her excellent curriculum vitae. As with the other two authorities, I hope that this one is put in a position - in terms of budget, structures and human capital - to function as well as possible. I voted in favour of the report on the appointment of Mrs Ross to the post of Executive Director of the European Supervisory Authority (European Securities and Markets Authority). Mrs Ross was the candidate selected by the Board of Supervisors of the European Banking Authority (European Securities and Markets Authority) and was heard, in accordance with the established procedures, by the Committee on Economic and Monetary Affairs. All of the data presented for this option, and on which my decision was based, indicates that the criteria laid down within Article 51(2) of Regulation (EU) No 1095/2010 were met, and so I am happy with the appointment of Mrs Ross. Under this motion for a resolution, Parliament has approved the appointment of Mrs Ross to the post of Executive Director of the European Supervisory Authority (European Securities and Markets Authority). I would like to wish her every success in performing the duties which have been entrusted to her. I am voting in favour as there is now greater commitment. However, it is important to maintain the focus on the connection with the Europe 2020 objectives; on an approach based on 'sustainability and responsibility', not simply 'austerity', as the Council is suggesting, and on the new needs arising from the Treaty of Lisbon, without putting existing, successful programmes at risk. Above all, the EU 2012 budget should promote growth and high-quality employment, and help to implement the Europe 2020 Strategy. in writing. - I voted against the Balzani report on General guidelines for the preparation of 2012 budget because it believes that the Europe 2020 Strategy will pull Europe out of the economic downturn, when what the nations of Europe really need is to be freed from the dead hand of EU overregulation and overtaxation. This 2020 Strategy is not a cure for the problems of the economies. In addition, the report claims that European solidarity and economic development will be threatened by a reduction of the budget. The European budget has become an expensive luxury that the citizens and taxpayers of Europe cannot afford. Calling for a small increase or a freeze is derisory - that is why I voted against a freeze - when what is really needed is a sharp cut in the budget to give the taxpayer a break. In the current financial, economic and social crisis, the European institutions are duty-bound to follow the example of Member States in adopting austerity measures. That is why I voted in favour of this report which provides for a strict 2012 budget for the European Parliament. This budget should still enable Parliament to achieve the objectives set by the EU while using 'the least possible resources'. This budget will be established within the context of Europe 2020, a strategy that should help Europe come out of the crisis stronger. in writing. - (LT) I voted in favour of this report. The priority objectives set in the Europe 2020 Strategy (promoting employment, improving public spending on innovation, research and development, meeting our climate change and energy objectives, improving education levels and promoting social inclusion) should help Europe recover from the crisis and come out stronger, through smart, sustainable and inclusive growth. Some consistency must be ensured between achieving these objectives and the funding allocated to them at European and national level. We must endow the EU with the necessary financial means to be able to respond adequately to growing global challenges and to defend and promote its common interests and ensure that the economies of the Member States enjoy a speedy recovery. in writing. - (RO) I voted for Francesca Balzani's report because, in line with this document, I think that the European Union's 2012 budget must be drawn up with the aim of pursuing the Europe 2020 Strategy's targets. In spite of the current economic and financial crisis, it is now important for us to lay the foundations for sound, future economic growth through investments in education, research and development, innovation and SMEs. These areas provide the basis for the EU's progress and competitiveness and must be developed from the perspective of creating jobs and increasing territorial and social cohesion. I want to stress that we must not reduce the funding in these areas and it is vital for us to monitor constantly that the available resources are being managed with the utmost efficiency. I also believe that there is fundamental synergy between national budget priorities and the EU budget. I wish to take this opportunity to welcome President Herman Van Rompuy's efforts as part of the European Semester to tighten EU Member States' discipline by promoting clear targets which are measurable and realistic for every country. Parliament is the most democratic European institution, directly representing EU citizens' interests. This is why I insist that Parliament should be much more actively involved in the European Semester exercise. in writing. - (NL) I cannot endorse the Balzani report. The first reason is the call for the introduction of a type of EU tax. The second reason concerns the economic crisis and the painful interventions being undertaken by Member States. The EU, too, must make efforts to ensure that its budget does not continue to run out of control and that it carries out the necessary cuts. With this in mind, I advocate a dynamic approach to tackling the ever growing gap between annual appropriations and the amounts being paid out. Limiting appropriations would lead to payments and appropriations becoming more closely aligned. I realise that multiannual programmes which are coming to an end because of the 2007-2013 Multiannual Framework will entail an increase in payments. I propose in that regard that, where some increase in payments is inevitable, it is offset by significantly lower appropriations. This also applies to budget lines for which implementation is lagging behind. These measures provide a logical and persuasive step towards a more realistic budget in difficult economic times. I would like to emphasise how important this report is as the European Union's 2012 budget will help revitalise the European economy. At the same time, next year's EU budget must be the main instrument to bring about the European economy's recovery, with great importance being attached to employment, economic governance and growth. I think that the 2012 budget must help implement the EU 2020 Strategy's five objectives: employment, innovation, research and development, climate change and energy, education and social integration. The EU budget is a budget for investment and 2012 is the sixth year in the current 'financial outlook' (2007-2013), with projects rolling out at a regular rate, which results in an increase in payment levels as the work is carried out. In my view, an increase in payment levels is predictable in 2012. I voted in favour of the general guidelines for preparing the 2012 budget. I believe that the Community budget for 2012 should be one of the main tools in helping the EU to recover from the crisis and come out of it stronger, focusing on employment, economic governance and growth. Employment, innovation, research and development, climate change and energy, and training and social inclusion are the five objectives that should guide the drafting of the EU 2012 budget. This will allow Europe to experience intelligent, sustainable and inclusive growth. in writing. - (SV) We share the committee's view that the difficult economic situation across the Union makes it more important than ever to ensure proper implementation of the EU budget, quality of spending and optimal use of existing Community financing. We welcome the call for ambitious proposals for the EU's own resources and believe that the focus should in general be placed on those budget appropriations that are important for achieving results within the Europe 2020 Strategy. We also supported the amendment that called for every increase in a budget line to be matched by a reduction in another line. However, as this amendment was not voted through and, moreover, the adopted text contains the statement that lowering the level of the EU budget could 'harm European solidarity', we have chosen to abstain in the final vote. I voted in favour of the report on the drafting of the 2012 budget as I believe that, given the difficult economic situation throughout the EU, it has never been so important to ensure the proper performance and quality of the budget expenditure and optimal use of existing EU funding. The Community budget should be one of the main tools in helping the EU to recover from the crisis and come out of it stronger, focusing on employment, economic governance and growth. In addition the report threatens with the prejudice a reduction of the budget would have on European solidarity and economic development. The European budget has become an expensive luxury that the citizens and taxpayers of Europe cannot afford. Calling for a small increase or a freeze is derisory when what is really needed is a sharp cut in the budget to give the taxpayer a break. This report sets out the priorities for Parliament to follow in preparing and discussing the 2012 budget, taking into account the start of the trialogue at the end of this month. This report is groundbreaking, given its imminently political content: it seeks to highlight and step up the important discussions that are taking place in the European institutions and the Member States on all items in the economic governance package. It is also aimed at drawing attention to the impact and importance that the 2012 budget may have in meeting the objectives of the EU 2020 Strategy for growth and sustainable job creation across the EU. Parliament is sending an important political message to the European institutions and the Member States about its firm commitment to strengthening economic governance and fulfilling the objectives set out for growth and employment. in writing. - (PT) I agree with the EU 2020 Strategy as it advocates stronger economic governance and the provision of the funds needed to implement its seven key actions. The EU 2020 objectives will only be achieved if there is strong governance and European coordination, and if the Member States make the investment needed to carry out their actions. However, this strategy can only be fully achieved if there is a new multiannual financial framework. This report neglects to mention the importance of cohesion policy even once. It also omits any mention of agriculture. However, about 80% of the budget is for the cohesion policy and agriculture. Young people do not get a single mention in the report either, which is incomprehensible. This is the priority for the current budget proposed by the Group of the European People's Party (Christian Democrats) (PPE). Moreover, young people feature in the five objectives of the Europe 2020 Strategy. The objectives of reducing school dropout levels to below 10% and ensuring that 40% of young people aged between 30 and 34 have a university degree also pertain only to young people. However, I hope that the 2012 budget will contribute to sustainable growth in the EU, enhance competitiveness and promote employment. This is one of those times when the objective of economic and social cohesion should demand a completely different vision and content from the EU budget. At a time when inequalities between the Member States are worsening, the Community budget should be at the service of real convergence. It should promote economic growth, the creation of jobs with rights, the promotion of progress and social welfare, the eradication of poverty and social exclusion, and environmental preservation. At the very least, this would require funds to be doubled, based on a greater contribution from countries with a higher GDP per capita. This should be followed by a fair and balanced distribution of funds, focusing on countries with greater difficulties. We disagree with a budget that focuses on supporting the reconstruction of monopolies and the growing militarisation of the EU, on the liberalisation in numerous sectors of economic activity and the lack of job security, as advocated by the EU 2020 Strategy. This path will accentuate existing economic, social, regional and national differences, and will not resolve the problems of unemployment and poverty. We therefore voted against. Since the beginning of the year, the Committee on Budgets has been drafting the European Parliament's priorities for the 2012 EU budget. Parliament's position, which is necessary for talks with the EU Council, will be formulated on the basis of these priorities. It would appear that this year's conciliation between Parliament and the Council will be even more challenging than was the case in 2010. The Council, which is opposed to any increase in the EU budget, has already announced its own savings plan, which is rather convenient, since it concerns budget lines which have not been fully exploited to date. At the same time, Parliament is in favour of an increase in the 2012 budget, but only in line with the Eurostat inflation rate. The latter is an objective rate which we cannot vote upon, as some people seem to believe. How can the European Parliament justify the proposed increase? Firstly, implementation of the Europe 2020 Strategy, including the twin goals of increasing education and employment levels. Without adequate funding, these goals will remain defunct, and Europe 2020 will follow in the footsteps of the renowned and ineffective Lisbon Strategy. Secondly, the EU budget is already bursting at the seams; the European External Action Service, the Galileo system, the Solidarity Fund and the Globalisation Fund are generating expenditure which it was impossible to predict six years ago, when the current financial perspective was negotiated. While on the subject of rational expenditure, I would also call upon Members of this House to take a critical look at the 'buildings policy', which we cannot afford. One example of this would be the increase in office space announced for Brussels. Here we are at the start of a difficult negotiation between Member States on the 2012 budget while, in the background, the debate is already underway on the post-2013 financial perspectives. At this time of crisis, it will be necessary throughout the budgetary process to reiterate our expectations with regard to European policies. Unlike some Council members who consider the EU to be an additional cost, an expense to be reduced at the risk of pitting current and future policies against each other, Parliament, through the resolution on general guidelines for the preparation of the 2012 budget, has reiterated its vision of the Union as a vector of added value and an ally of Member States in implementing ambitious policies. Furthermore, I voted in favour of the resolution presented by Mrs Balzani because of its consistency and the clear political message it carries, calling for the adoption of a budget that is consistent with the objectives for employment and growth of the EU 2020 Strategy. Finally, I took advantage of the debate in plenary to challenge the Commissioner for Financial Programming and the Budget on the urgent need for a communication on the implementation of new own resources, which, I hope, will carry this debate forward. in writing. - (LT) I agreed with this document, because under the auspices of enhanced European economic governance, the European Semester mechanism and Europe 2020 Objectives, the 2012 budget must boost growth and employment. The Europe 2020 Strategy should help Europe recover from the crisis and come out stronger, through smart, sustainable and inclusive growth based on the five EU headline targets, namely promoting employment, improving the conditions for - and public spending on - innovation, research and development, meeting our climate change and energy objectives, improving education levels and promoting social inclusion, in particular through the reduction of poverty. The difficult economic situation across the Union makes it more important than ever to ensure proper implementation of the EU budget, quality of spending and optimal use of existing Community financing. The EU budget has an instrumental role to play in helping the EU to exit the current economic and financial crisis through its capacity as a catalyst to boost investment, growth and jobs in Europe. in writing. - I welcome this report, which is of the opinion that the EU budget brings added value to national public expenditure when initiating, supporting and complementing investments in those policy areas which are at the core of Europe 2020. The European Parliament believes, moreover, that the EU budget has an instrumental role to play in helping the EU to exit the current economic and financial crisis through its capacity as a catalyst to boost investment, growth and jobs in Europe; takes the view that the EU budget could at least mitigate the effects of current restrictive national budgetary policies while supporting the efforts of national governments; stresses also that, given its redistributive nature, lowering the level of the EU budget may harm European solidarity and have an adverse impact on the pace of economic development in many Member States; believes that a purely 'net contributor'/'net beneficiary' approach does not take due account of spill-over effects between EU countries and therefore undermines common EU policy goals. In order to tackle the current economic and financial crisis it is essential to promote inclusive, sustainable European growth, aligning the European Union's budget with its main objectives. This report identifies a number of guidelines that will help to: promote employment; improve public expenditure on innovation, research and development; meet our climate change and energy objectives; improve education levels; and promote social integration. The European Semester, a new mechanism to strengthen European economic governance, should provide the chance to determine the best way to achieve these goals. It is essential to guarantee a certain level of coherence between the attainment of the results in question and the resources assigned to them at EU and national level, thereby improving synergies between European and domestic public investments. The European budget represents real added value, thanks to its ability to function as a catalyst to boost investment, growth and employment. The appropriations already planned must be kept at a suitable and flexible level of expenditure. Otherwise, their reduction would lead to the failure of the Europe 2020 Strategy. We call on the Commission to develop ambitious proposals for the provision of new own resources, based on a comprehensive impact assessment, in order to bolster competitiveness and economic growth. I am in favour of the report by Mrs Balzani on the guidelines for the 2012 budget which, with the 2013 budget, will be consolidation budgets aimed at reflecting the Member States' spending cutbacks and setting a benchmark for amounts that will be established in the next financial framework. The contribution of the Group of the European People's Party (Christian Democrats) to the guidelines for the 2012 budget was based on the concept of responsibility, which means pursuing the aims of economy, efficiency and effectiveness using as little as possible of the available resources. The 2020 Strategy is based on important priorities - namely research, innovation, development and growth - that were not initially contained in the report by Mrs Balzani, but which have been strongly emphasised by the PPE Group, as well as achieving the employment objectives initially set out. The Union's priorities in the budget require adequate financing and it is also important to ensure flexibility between the expenditure headings in order to more effectively counter the problems linked to the economic crisis, as well as to propose a budgetary framework that includes own resources. The Community budget for 2012 is the main tool for the EU to recover from the crisis and come out of it stronger, focusing on employment, economic governance and growth. The adoption of these general guidelines is an example of this. Employment, innovation, research and development, climate change and energy, training, and social inclusion are the five objectives which should form the focus for the drafting of the EU 2012 budget. Based on these five objectives, the Europe 2020 Strategy should help Europe to recover from the crisis and emerge from it stronger, through 'smart, sustainable and inclusive growth'. We must therefore oppose any attempt to limit the budget allocations for achieving the high-ranking objectives and flagship initiatives of the Europe 2020 Strategy. in writing. - The key requirements for the draft resolution on the EU general budget for 2012 are ensuring sufficient resources for the implementation of the EU-2020 Strategy and enhanced cooperation between European and national budgets. The 2012 EU budget should boost growth and high-quality employment, and start implementing the EU 2020 objectives. The motto for deciding on the EU 2012 budget should therefore be 'sustainability and responsibility' rather than 'austerity'. Although I voted 'for', I would like to stress that the budget should be distributed so that financial resources are used for the benefit of citizens in the Member States and not for the benefit of financial and political groups, as it is currently the case in Latvia, where officials distribute EU funds among their acquaintances and friends! in writing. - (DE) The report on the 2012 budget refers to the Europe 2020 Strategy, which once again contains lofty goals that no one expects to meet. The fact is that the precarious budgetary situation of some Member States that have lived it up in the past has become a financial millstone around the necks of the other Member States in connection with the rescue package. It then often only needs something trivial to tighten the noose. These fundamental requirements make it all the more important not only for the 2012 budget to be correctly executed - in which regard we must not overlook the fact that budgetary control still leaves a great deal to be desired - but also for us to manage our resources in an economical way. The reference here to 'adequate financing' of the Europe 2020 Strategy, when billions from the EU budget are still mysteriously disappearing and available opportunities for potential savings, for example in relation to the jungle of EU agencies or the locations for Parliament, are not utilised, represents a waste of European taxpayers' money. On the basis of this conviction, I voted against the report. in writing. - (DE) The current euro crisis underlines the central importance of a correct and economical budgetary policy. The increase in funds on grounds that this is required for the Europe 2020 Strategy is something I reject, as for one thing the strategy is unachievable and for another it has inappropriate goals: for example the massive increase in the number of academics, when we actually have a shortage of specialist staff. Instead, we should utilise the numerous potential opportunities for savings, whether in relation to the decentralised agencies, the two locations of the European Parliament or the pre-accession aid for Turkey. I therefore voted against this report on the 2012 budget. As every year, we, along with other institutions, will be asked to adopt the EU budget. In view of this, I have voted in favour of the report on the general budget for 2012 because I agree with the main guidelines defined, namely: incentivising funds to promote growth and overcome the economic crisis by following the Europe 2020 Strategy; giving greater consideration to the European Semester as the ideal instrument for coordinating economic policies; not leaving room for differing availability in different sectors but using only the flexibility mechanisms of available funds by establishing a serious and rigorous management of the resources available for the allocation of funds. I voted in favour of the report on general guidelines for the preparation of the 2012 budget. The general principles and targets set out in the report are on the right lines, in emphasising that forthcoming EU budgets must focus on policies to boost employment and national economies (the total EU budget for implementing flagship initiatives up to 2020 is estimated at EUR 1.8 trillion). Nonetheless, it is important to point out at every opportunity that the sine qua non to achieving the targets set in the Europe 2020 Strategy is their endorsement by the Member States. Unfortunately, according to the Commission's findings, national plans to date do not safeguard basic priorities of the strategy, such as increasing employment to 75% in 2020 from its current level of 69%. I voted in favour of this report on the general guidelines for preparing the 2012 budget. This is a budget for 2012 under the auspices of stronger economic governance, the European semester mechanism and the Europe 2020 objectives to encourage employment. Given that the Europe 2020 Strategy should help Europe to recover from the crisis and emerge from it strengthened through smart, sustainable and inclusive growth, based on the EU's five top objectives - namely by promoting employment; improving conditions and expenditure for innovation, research and development; meeting our targets in the areas of climate change and energy; improving levels of education; and promoting social inclusion, in particular by reducing poverty - I agree with the recommendations presented in this report, in order to fully attain these five objectives. I also agree with the rapporteur that there must be consistency between the achievement of these goals and the funding allocated to them, and the new mechanism for enhanced economic governance in the EU should be an opportunity to study how best to accomplish these five objectives. I voted in favour of this report, which sets out the general guidelines for the drafting of the 2012 budget, with a view to the trialogue on this subject, scheduled for 30 March 2011. On that matter, allow me to emphasise the need to properly assess the impact that the budget will have on the achievement of the EU's objectives and the implementation of the EU 2020 Strategy, as well as the role that budgetary policy should play in the area of investment, growth and employment. in writing. - (DE) It was not possible to give a roll-call vote on paragraph 29, as I was actively prevented from doing so by the usher. in writing. - A 2012 budget under the auspices of enhanced European economic governance, the European Semester mechanism and Europe 2020 objectives to boost growth and employment 1. Takes the view that the Europe 2020 Strategy should help Europe recover from the crisis and come out stronger, through smart, sustainable and inclusive growth based on the five EU headline targets, namely promoting employment, improving the conditions for - and public spending on - innovation, research and development, meeting our climate change and energy objectives, improving education levels and promoting social inclusion, in particular through the reduction of poverty; recalls that the Member States themselves have fully endorsed these five targets; 2. Points out that some consistency must be ensured between achieving these objectives and the funding allocated to them at European and national level; insists that EU budgetary policy must be in line with this principle; takes the view that the European Semester, as a new mechanism for enhanced European economic governance, should afford an opportunity to consider how best to deliver on these five headline targets; This report outlines the general guidelines of the European Parliament on the 2012 budget and I believe that the text promotes sustainable growth to help overcome the economic crisis. Its redistributive approach consists of added value to the future public expenditure by Member States. According to financial planning by the Commission, the amount of committed funds will reach the sum of EUR 147.88 billion. In that regard, my country is in favour of strict management of resources in a context of expenditure restraint, especially in administrative costs, in line with the austerity policy implemented in its national budget. I hope now that the redistribution of available resources aimed at optimising their allocation is carried through to the end, in order to counter the effects of the international crisis that we are all experiencing in our daily lives. in writing. - On the budget vote for 2012 (General Guidelines) I voted to freeze the budget and against any indication of additional spending because of the coming into force of the Treaty of Lisbon. I believe the budget set to be adequate to the commitments set out under the Treaty as currently planned. I am not in favour of this report as the final version with the votes on the amendments is manifestly unfair, as it allows migrant workers to remain legally unprotected in some important areas such as social security. The EU should not allow this kind of treatment; when it comes to human rights, the EU should be a model. in writing. - (LT) I voted in favour of this resolution on a single application procedure for a single permit for third-country nationals to reside and work. This document establishes a single application procedure for third-country nationals who wish to be admitted to the territory of a Member State in order to work there, and offers them a secure legal status. This will undoubtedly simplify the often complex administrative procedures for receiving economic migrants. I agree with the rapporteur's position that one of the best ways of combating illegal immigration and undeclared work is to develop balanced legal immigration channels which meet the needs of our labour markets. Economic immigration is a reality on which we must impose order, but it is also a necessity in view of the demographic and economic challenges which the EU will face in the near future. It is important to note that this proposal does not stipulate the conditions for admitting third-country nationals. Member States retain the power to decide these conditions and to set the number of migrants that they wish to admit to their territory for employment purposes. It is time for the European Union to legislate on economic immigration in order to establish an approach common to the 27 Member States. The changes brought about by the Treaty of Lisbon have made this progress possible, and it is now up to us to make it a reality. The European Union, a symbol of human rights around the world, must guarantee fair treatment of third-country nationals residing in its territory and establish an inclusive policy towards them. It has therefore been necessary to harmonise Member States' national laws relating to the admission and residence of those third-country nationals. That is why I voted in favour of this text which should help simplify admission procedures, fight against the unfair competition that takes place at the expense of European workers, and establish better control in the fight against illegal immigration and undeclared work. in writing. - (RO) I voted for this text because I think that the European Union needs uniform administrative procedures for dealing with third-country immigrant workers. Adopting this act will have a significant beneficial impact. It will reduce public sector expenditure, discourage illegal immigration and ensure fair rights for third-country nationals wishing to work in the European Union. Economic immigration is a necessity which must be encouraged in a controlled manner, given the demographic and economic challenges which the European Union is going to face. Let us not forget that the progress made by countries such as the United States, Canada or Australia is due to immigrants. They belong to an extremely dynamic social group which brings additional enthusiasm and a fresh outlook in their approach in their adoptive societies, making the latter more competitive. In this respect, we must ensure that the conditions exist to allow them to work legally and that they have the chance to fulfil their dreams without being obstructed by pointless red tape. I would also like to hope that in the very near future, the issue of access to the entire European Union labour market for citizens from the Member States of Romania and Bulgaria as well will be resolved once and for all. Europe is facing the demographic problem of its aging population, and so it needs to look for manpower, which makes an important contribution to economic development, an increase in competitiveness and the vitality of the European economy. Europe will have to respond to its current and future manpower needs and provide a means to combat the exploitation and discrimination that workers often suffer. By creating a single application procedure for third country nationals who are seeking admission to the territory of a Member State in order to work there, and offering them a secure legal status, this draft directive responds to these needs and also simplifies the often complex administrative process. The power to determine the number of migrants seeking admission to their territory for the purposes of paid employment and the conditions for this admission continue to be the responsibility of the individual Member States. For all the above reasons, I voted in favour of this report. We have been talking for years now about creating a single permit for nationals of third countries who wish to live and work in a Member State. It was a commendable initiative at the beginning, but the text as it is contradicts the stated goals: it is both discriminatory, because the basic principle of equal treatment for all is not respected, and restrictive, since several categories of workers are excluded. Despite the improvements made since December 2010, there is a continued fear of social inequality among nationals of third countries. What is more, by voting in favour of the proposed 'single permit' for third-country nationals, the European right is voting for an immigration policy that is both discriminatory and restrictive. The text as it stands does not provide for equal treatment for all workers in terms of working conditions and social rights. It creates different categories of workers, by nationality and by type of contract, and this is simply unacceptable. We cannot compromise on equal treatment. We should say 'yes' to a common immigration policy, and 'yes' to a genuine single European permit, but we do not want a policy that is restrictive and therefore discriminatory. in writing. - (BG) I voted in favour of the proposal for a single application procedure for a single permit for third-country nationals to reside and work in the territory of a Member State because I think that the growing wave of immigration to the EU needs adequate regulation. The administrative requirements for admitting third-country citizens to work in the EU are excessively complicated and vague. Introducing a single-permit system will help improve the whole procedure, making it more efficient and far cheaper. We should not forget either that creating a single document will make it easier for local authorities to carry out checks on citizens arriving in the EU. Last but not least, I must say how pleased I am that the text voted on was supported by my fellow Members because it is designed to guarantee social and economic rights for immigrant workers, with the aim of avoiding social dumping or unfair competition inside the EU. in writing. - (LT) I voted in favour of this report, because the directive on a single permit for third-country nationals to reside and work should be a general framework directive on rights for third-country workers, because only then will this European legislative act be able to contribute to the European Union goal of a common migration policy. Unfortunately, the position adopted by the European Parliament today on the directive on a single permit to reside and work has not improved the Commission's proposal for this directive. It has not been accepted that immigrant workers from third countries, who arrive here legally and do the same work as European Union workers, should enjoy the same rights and working conditions as local workers. It should be understood that legal migrant workers make a contribution to the EU economy through their work and the taxes and social security contributions they pay, therefore they must be guaranteed the same minimum rights and be treated in the same way in the labour market. I would like to stress that it is impossible to create a two-tier labour market, either within the European Union itself or outside. We cannot allow the creation of an underclass of workers in the EU labour market that faces discrimination and does not enjoy any rights or any guarantees, because this would lead to the erosion of all the social standards that have hitherto been won. Adopting the directive on introducing a single procedure for third-country citizens to obtain a work permit for the EU will simplify considerably the system which is currently decided on by each Member State. Two separate procedures entail a longer period for processing applications and higher administrative costs. This one-stop shop system will make the administrative procedure simpler, less expensive and quicker. In actual fact, issuing a single document will also make it easier to check on people admitted to a Member State and authorised to work there. This document will have the residence permit format common to all Member States. Member States will also be able to decide to introduce an additional document which will be of a purely informative nature. This will help supplement the information contained in the single permit, thereby facilitating monitoring. We are therefore dealing with advantages for every party involved - immigrants, employers and national administrations. Establishing a single application procedure will simplify the often complex administrative procedures for admitting economic migrants. This would provide an adequate response to the labour challenges which the EU is facing and will continue to face. in writing. - (CS) The benefit of the approved directive lies in the fact that it creates a unified approach to handling applications from third country citizens for permits to live and work in a Member State, and provides workers from third countries who are legally residing in the EU with a common set of minimal rights. The horizontal and framework character of the directive is unfortunately violated by the exemptions from the scope of the directive and variations regarding the rights of certain specific population groups. There has been an undermining of the principle of equal treatment for all third country workers legally working in the Union compared to EU citizens. This equality should be an expression of recognition of the benefit migrant workers bring to the EU economy through their work and also through their payment of taxes and social contributions. The accompanying effect should be a restriction on unfair competition, making the practice of illegal employment more difficult and preventing third country workers from becoming victims of exploitation and social exclusion. Contrary to the Commission proposal, it is therefore necessary to ensure that no specific group is excluded from the scope of the directive, and particularly not the group comprising temporary workers. The directive must specify the conditions of entry into the EU and any concrete rights, but it must not create a barrier to a situation where all legal migrant workers can enjoy fair and equal treatment, but, on the contrary, should secure and guarantee such treatment. This report marks a very important step for European Union legal migration legislation as it creates a single application procedure for third-country citizens. I welcome that the text adopted today makes no mention at all of the possibility of a Member State being able to introduce additional documents required by a third-country national to obtain a work permit. In addition, migrants will not become a burden on national social welfare systems because Member States will be able to decide that third-country citizens can have access to the social welfare system only after they have worked for a minimum of six months, while those who have come to study cannot claim these benefits. The one point which must be welcomed in this report is that it defines a set of common measures relating to third-country workers' rights, thereby facilitating the legal migration which the European Union needs. I welcome the call for Member States to produce correlation tables as this will enable us to verify the directive's proper transposition. I voted in favour of this draft report which allows a single residence and work permit for legal immigrants, provides a 'single permit' for third-country nationals and grants them rights similar to those of EU citizens. I agree with this proposal, which is aimed at simplifying administrative procedures and ensuring equal treatment between EU and immigrant workers for a range of social rights, such as access to social security. This measure will facilitate legal immigration when it is necessary in order to meet the needs of the European labour market. I voted against the directive on a 'single permit', because it is inspired by the Bolkestein Directive, which adopted the principle of the country of origin, thereby permitting different treatment of workers in respect of wages, terms, working times, social protection and so forth. The same approach is applied here to workers from 'third countries' outside the European Union. Different treatment has been adopted for European and non-European workers, thereby increasing competition between them and between foreign workers, depending on whether they are seconded or seasonal workers, students or residents. All these differences do is to increase exploitation and uncertainty. Despite moves by European trade unions and the progressive forces in Parliament to obtain full equality of rights for all workers, the text mainly reflects a compromise between the right and the socialists. The future directive will not apply to seconded workers or to students, will allow discrimination based on criteria such as knowledge of the language and will refuse family benefits to families of seasonal workers. Likewise, the call for the UN Convention on the Protection of the Rights of All Migrants and Members of Their Families has been removed. This proposal is aimed at responding to the concerns expressed in the Stockholm programme in order to create flexible immigration policies to support the development and economic performance of the EU. It is thus aimed and simplifying and harmonising the existing standards in the Member States by creating a single application procedure leading to one combined title encompassing both residence and work permit. This should make for a more efficient procedure and bring clear benefits for both employers and third-country nationals who want to immigrate to the territory of the Member States. It will ensure that these migrants have rights and obligations comparable to those of citizens of the EU in terms of working conditions, training and education, recognition of diplomas, social benefits, and so on. At the same time, it allows the lawfulness of their residence and employment to be monitored more easily. I therefore voted in favour of the excellent report presented to us by Mrs Mathieu. The European Parliament has voted in favour of the principle of creating a single work and residence permit for third-country nationals in a Member State. This procedure provides a set of common rights for these workers, particularly with regard to working conditions, such as working time and holidays. The text also sets out the principle of reimbursing pension contributions already made by workers who leave the EU, since they will be unable to receive their pensions after they retire. This text is problematic, however, since it reinforces the 'country of origin' principle for some categories of workers, a principle that was fought by the European left during the time of the famous 'Bolkestein' Directive. This principle creates a kind of two-speed labour market depending on the worker's origin, and contributes to a form of social dumping. There is a contradiction here: do we really want to protect the European social model, and should it exclude non-European workers, or should it take a universalist approach and stop discriminating against workers by giving them different rights? This text does not yet resolve this fundamental issue, which is why I decided to abstain from voting on the text. in writing. - I voted against this report that seeks to establish unfair competition between EU workers and migrant workers coming to Europe. The 'single permit' directive, as amended today by Parliament at first reading, will apply to non-EU nationals seeking to reside and work in a Member State or who already reside legally in an EU country, with the exception of posted workers, seasonal workers, long-term residents and refugees, who will therefore not be covered by its anti-discriminatory provisions It is unacceptable that legal migrants coming to Europe to work are to endure worse working conditions than EU workers doing the same job. Once a migrant enters the EU and starts working, he stops being a migrant and becomes a worker. Therefore, he has the right to be treated as such, like any EU worker and regardless of his country of origin. There can be no exceptions. EU legislation must apply to all workers in the EU, regardless of their country of origin. We have been talking for years now about creating a single permit for nationals of third countries who wish to live and work in a Member State. It was a commendable initiative at the beginning, but the text as it is contradicts the stated goals: it is both discriminatory, because the basic principle of equal treatment for all is not respected, and restrictive, since several categories of workers are excluded. In December 2010, Members of the European Parliament rejected the text for the first time. Despite the improvements made since then, there is a continued fear of social inequality among nationals of third countries. The text as it stands does not provide for equal treatment for all workers in terms of working conditions and social rights. It creates different categories of workers, by nationality and by type of contract, and this is simply unacceptable. We therefore voted against the final draft. We remain in favour of a single European permit, but we do not want a policy that is restrictive and therefore discriminatory. The issue in question in this proposal is the introduction of a one-stage procedure to grant both employment and residency authorisation and the definition of a common set of rights to all nationals of non-EU countries who legally reside and work in the EU. This presupposes the existence of rules which are common to all Member States, something which would put an end to the current differences in approach of the various EU countries and which would make the process of giving legal status to workers quicker, more uniform and more transparent throughout the Union. While the legal migration of labour, and above all qualified labour, helps to fight clandestine working and can improve the competitiveness of the economy and overcome existing shortages, we cannot forget that, during a period of economic crisis and vulnerability where unemployment is growing, labour migration policy must be flexible, as argued by the Commission, but must also be sustainable and reasonable. in writing. - (PT) This report addresses an issue which needs to be discussed with increasing urgency. Indeed, the expected decrease in the number of Europeans making an active contribution requires the EU to open its borders to third-country nationals, so that they can live and work here; otherwise the current social security systems will fail. In 2004, the Hague programme, which focused on the need to combat illegal migration, recognised that legal migration would play a vital role in the economic development of the EU. The Stockholm programme adopted by the Council on 10 and 11 December 2009 acknowledged that the migration of labour can increase competitiveness and economic vitality. I therefore agree with the position expressed in this report on the proposal for a directive of Parliament and the Council on the regulatory amendment which is aimed at implementing a single procedure in order to grant authorisation to third-country nationals legally resident in one of the Member States, taking into account the demographic challenges which Europe is starting to face. Moreover, this is a process of simplification which is more efficient and economical. The proposal for a directive on a single application procedure for a single permit for third-country nationals to reside and work in the territory of a Member State, hinting at alleged improvements in the situation of workers from these countries, may in fact represent an attack on the rights of workers in general. Let us not forget that the proposal had its genesis in the country-of-origin principle established by the notorious Bolkestein Directive, which promoted the increase in inequalities between workers, particularly in terms of wages, and which was ultimately detrimental to all workers due to the pressure to level down working conditions. By attempting to establish disparities and differences in treatment between European workers and third-country workers, this proposal for a directive increases the segregation of immigrant workers and further weakens the situation for all workers, forcing them into a situation of greater instability. Basically, we may be facing an attempt to promote social dumping. In our view it is necessary to strengthen the rights of all workers, including immigrants, seasonal workers and posted workers. We therefore regret that restrictive measures are being insisted upon following the rejection of the first version of this report... The adoption of the report on a single application procedure for a single permit for third-country nationals to reside and work in the territory of a Member State may constitute an attack on the rights of workers in general. The proposal has as its genesis the Bolkestein Directive, which established the country-of-origin principle, promoting an increase in divisions between workers, particularly in terms of wages, and which proved detrimental to all workers. By attempting to establish differences between European workers and third-country workers, this adds to the segregation of immigrant workers, widening differences in treatment and further weakening their living conditions through the vulnerability and instability of their working conditions. This proposal for a directive may promote social dumping and make labour relations more unstable. In view of this, it is necessary to strengthen the rights of all workers, including immigrants, seasonal workers and posted workers. However, the struggle of the workers in many European countries, particularly in Portugal, meant that the proposal for a directive was rejected at the last plenary session of 2010. We regret the insistence on restrictive measures... in writing. - (DE) Although overall it would be good if a residence permit and a work permit could be issued together, the following questions remain unanswered and the following remarks are necessary: 1. Application of the Posting of Workers Directive must take priority and the principle of the application of the social legislation of the country of employment must always be regarded as fundamental. 2. No worker must be employed as legal 'cheap' labour under this measure, as this is damaging to our labour market and it is socially unjust. 3. The countries must carry out more checks in these areas. After the report was initially rejected in plenary, the European right made mistakes in procedural manoeuvres, and has now shamefully contributed to the recognition of a two-speed job market that depends on the worker's origin; this will create social dumping and therefore exert a downward pressure on the level of protection of European workers, which is unacceptable. I therefore voted against the report which is nothing but an attack against the European social model. This text establishes exclusions and unequal treatment in social security, pensions and access to employment and training for legal migrant workers, which runs contrary to my values. in writing. - (LT) The Hague Programme recognised that legal immigration would play an important role in economic development. It was with this in mind that it called on the Commission to submit an action plan to enable the labour market to respond rapidly to the constantly changing demand for manpower from abroad. The Stockholm Programme adopted by the European Council on 10 and 11 December 2009 expressed the view that labour immigration may increase competitiveness and economic vitality. In view of the considerable demographic challenges which the European Union will face in future, with growing demand for manpower, this new multiannual programme calls on Member States to adopt flexible immigration policies in order to support the Union's long-term economic development and performance. The provisions in the proposal have the advantage of conferring better protection on workers from third countries than is currently the case on the basis of international conventions only ratified by certain Member States. I abstained because the proposal does not state who may submit an application - the employer or the employee - and from which State an application may be made, and it was necessary to clarify this important issue. It also failed to stress the requirements of legal certainty and transparency of decision making by national authorities. These decisions have a strong impact on the lives of the people concerned and Member States, and they must therefore be taken in a way which is completely transparent. Any rejection decision must be duly substantiated, transparent and objective. The draft resolution voted in Parliament today on the provision for a single application procedure for the issuance of a permit that would allow third-country nationals to reside and work in the territory of the Union represents a further step towards the harmonisation of national laws of Member States. Establishing the same legal immigration measures in all EU countries, setting out common procedures for those who intend to apply for admission to the territory of a Member State for employment, will allow the EU to meet the needs for workers in domestic labour markets by providing, through the establishment of equal rights, a tool to fight exploitation and discrimination. I believe, nevertheless, that Member States should be allowed, under certain conditions, to set limits to the capacity to accept citizens from non-EU countries and offer them a job in their area. Obviously, the proposal has the aim of combating illegal immigration and clandestine employment, but it can and should be interpreted as a useful contribution to the implementation of the Europe 2020 Strategy, allowing also simpler border control. It has been some 20 years since the European Union established the internal market envisaged by the founding fathers. Its implementation has led to the increasingly advanced integration of a vast area of trade. However, that area still experiences unequal treatment between nationals of a Member State and those from third countries. This difference in treatment is a two-fold problem. It both penalises migrant workers, who do have the high expectations usually brought about by the social rights of Member States, and harms European workers who, faced with unfair competition, suffer from social dumping. The 'single permit' resolution, presented by Mrs Mathieu, specifically targets migrant workers' rights. It simplifies procedures by establishing a single permit for residence and work, and gives foreign workers rights and obligations comparable to those of European workers. The full establishment of the internal market is a powerful tool enabling Europe to return to growth, which is why I supported this text. in writing. - I voted against this report because key paragraphs on posted workers, pension rights and social security were defeated. in writing. - (IT) I voted in favour of this report, which returns to the House for the second time, because I believe that it is a good response to the considerable demographic challenges that the European Union will face in the coming years, establishing a single application procedure for third-country nationals who wish to be admitted to the territory of a Member State for work purposes and offering them a secure legal status. Economic immigration is a reality that must be organised, but it is also a necessity with regard to the democratic and economic challenges which will face the European Union in the near future. Thus, immigration policy must be thought of as an instrument of adjustment regarding our workforce needs, thus contributing to the implementation of the Europe 2020 Strategy. From a technical point of view, the exclusion of seasonal workers and workers transferred within their company is justified by the presentation by the Commission of proposals for specific directives for these workers. However, as regards the exclusion of asylum seekers and persons benefiting from international protection, it is important to emphasise that the existing tools in these areas provide greater protection than the present proposal. Now that this draft directive has been adopted, immigrant workers will have the same rights as national workers, at least in terms of remuneration and dismissal, health and safety in the workplace, working hours and holidays. This proposal is aimed at introducing a procedure to give a single residence and work permit to legal immigrants, and to grant them a common set of rights throughout the EU. It is thus possible to simplify the procedures so that the national authorities can grant a single residence and work permit for legal immigrants, so that they can benefit from a set of rights similar to those of the workers in the Member State where they are living. However, the admission of immigrants for the purposes of work, and the number of admissions, should remain the responsibility of the individual Member State. in writing. - (HU) We can best protect against illegal and irregular immigration if we try to prevent it. We could lend support to people to find a livelihood and social security in their countries of origin, that is, we could eliminate the causes of their emigration. If that is not feasible, we should create legal channels of immigration, which naturally also fulfil the needs of our own labour market. Economic immigration is a real phenomenon these days, which, on the other hand, is also a necessity, since with its help we can more readily defend against demographic and economic challenges. Consequently, we may consider immigration policy a regulatory means by which we can become able to control our labour needs. Through it we give opportunities to third-country immigrants who can legally enter the territory of the EU for the purpose of finding employment. The system of reception procedures would be significantly simplified by the creation of a merged procedure, which would confer the right of residence and employment at the same time. For this reason I, too, voted in favour of this horizontal legislative framework being created as soon as possible. By establishing a single application procedure for third-country nationals seeking to reside and work in the territory of a Member State, and by providing a secure legal status, this proposal for a directive will simplify the often complex administrative steps involved in receiving economic migrants. The existence of a harmonised procedure for issuing a single document that authorises residence and access to the labour market constitutes a significant simplification of the admission system. In addition, the proposal provides for treatment equal to that enjoyed by national workers and therefore has the advantage of giving better protection to third-country workers than they have at present. This status will also help fight against the unfair competition that often results from the absence of a protective legal status for these workers. The text adopted today also includes the two main priorities of the Group of the Alliance of Liberals and Democrats for Europe (ALDE): it removes any reference to additional documents and requests Member States to draw up 'correlation tables' enabling the Commission to verify the transposition of the directive. It is a clear sign of the willingness of the European Parliament to move towards a European legal framework for legal immigration. in writing. - The purpose of this directive is to enable potential immigrants into an EU Member State to obtain work and residence permits via a single procedure. Under the original proposal, non-EU workers would get equal treatment with EU nationals as regards pay and dismissal, health and safety at work and the right to join trade unions. The Employment Committee wants to extend those rights to include equal working time and leave, while clarifying workers' rights to social security and tax benefits. Non-EU workers would also be able to receive their pensions when moving back to their home country on the same terms as nationals of the Member State concerned. What is more, all EU Member States will issue single standard permission for residence and work. I disagree with this because the EU still has an unemployment problem, and therefore voted 'against'. in writing. - (DE) The entry and residence of third-country nationals are an issue, but in the past the rights in relation to these have been extended more and more. Thus, it is now the case that the autochthonous population quite rightly feels increasingly disadvantaged as a result of the access of third-country nationals to social services, specifically in the area of social housing. In the area of economic migration, it is mainly well educated and badly needed workers that move to other States. Whereas in the United States, for example, they do not burden the social system, and in some States they also have to leave once their job comes to an end, through the increasing level of equality with the resident population that they have been afforded in recent years, they constitute an ever greater burden for those States with traditionally well-developed social systems if they remain in the country permanently after losing their jobs and if, as a result of them bringing any family they have to join them, all the relatives have to be supported, too. This proposal is another step in this direction and therefore is to be rejected in the strongest possible terms. I wanted to express my vote against the report in relation to single residence permits for citizens of third countries because today, in the House, some amendments were voted to exclude the requirement for employment as being necessary in order to have access to benefits and social services. It seems to me to be a dangerous lowering of the minimum required standards and it enables a third-country citizen, obviously with a valid residence permit in the EU, to have access to the same working and social conditions as an EU citizen. If a European Union exists, it is to ensure, also, that the inhabitants of Member States that are its citizens can enjoy greater rights and guarantees than are called for in this report. in writing. - (RO) I voted for this resolution because I think that non-EU workers should enjoy the same rights on work conditions as EU citizens, in accordance with the 'Single Permit' Directive. I would like to mention in particular at this point working time, leave and social insurance. The aim of this draft bill is to cut red tape and simplify the procedures for applying for residence and work in an EU Member State, both for migrants and their employers, by means of a combined residence and work permit. The proposal does not specify the conditions for admitting third-country nationals. Member States retain their power to set these admission criteria and the number of migrants they wish to admit to their own country with a view to taking up employment. The new rules will be applied to non-EU citizens already living legally in a Member State or wishing to do so. I voted in favour of Mrs Mathieu's proposal for a directive on the single application procedure for a residence and work permit for third-country nationals. I did so because I think it is important for Europe to equip itself with EU-wide rules to manage the influx of manpower from third countries, both for economic and social reasons. Labour immigration can increase the competitiveness and the vitality of the economy, helping Europe to tackle the future demographic challenge as well as possible. The proposal for a directive calls on the Member States to adopt flexible immigration policies to support the long-term development of the Union. In addition, it will simplify the often complex administrative procedures for receiving migrant workers, while also providing a tool to combat the exploitation and discrimination imposed on some categories of workers. I voted in favour of this Parliament legislative resolution on a proposal for a directive of Parliament and the Council on a single application procedure for a single permit for third-country nationals to reside and work in the territory of a Member State, and a common set of rights for third-country workers who are legally resident in a Member State. This matter is all the more relevant in the current economic and social situation. Indeed, one of the best ways of combating illegal immigration and clandestine working is to develop balanced channels for legal migration which meet the needs of our labour markets, along with the social requirements of successful integration into the host society. The Stockholm programme adopted by the European Council of 10 and 11 December 2009 calls on Member States to adopt immigration policies marked by flexible arrangements to support the development and economic performance of the Union. With this proposal, Parliament wishes to contribute to the implementation of this programme. It introduces, in particular, a single application procedure for third-country nationals wishing to be admitted to the territory of a Member State for employment, by: (i) simplifying the often complex administrative procedures for receiving migrants; (ii) defining an instrument for the prevention of exploitation and discrimination in the workplace; (iii) ensuring that labour markets of Member States will definitely be able to respond to the need for workers, now and in the future. The Directive applies to all citizens admitted to the territory for work and those who were initially admitted for other reasons and who have subsequently obtained a work permit in accordance with the provisions of national or EU law. This proposal, therefore, contributes to promoting a common approach from the 27 Member States with regard to economic migration, which is why I reiterate my vote in favour. in writing. - (RO) Economic immigration is a reality on which we must impose order, but it is also a necessity in view of the demographic and economic challenges which the EU will face in the near future. Immigration policy can be regarded as an instrument for regulating our labour needs, thereby helping to implement the Europe 2020 Strategy. Having a single procedure enabling a single document to be issued authorising residence and access to the labour market marks a considerable simplification of the admission system. The directive will apply not only to any third-country national admitted to the territory of a Member State for employment purposes, but also to all those who were originally admitted for other purposes but who have acquired the right to work there on the basis of national or Community law. Each Member State must lay down the conditions under which social security benefits are granted, as well as the amount of these benefits and the period for which they are granted. I regret that seasonal workers and workers posted within their undertaking are excluded from this directive, but I call on the Commission to table a proposal on this soon. Given the demographic challenges that Europe will face in the future, it is vital that the EU develops a balanced and flexible immigration policy which allows it to meet its labour needs and contribute to the competitiveness and vitality of the economy. The adoption of this directive, which establishes a single application procedure for third-country nationals who wish to be admitted to the territory of a Member State in order to reside and work there, and grants them a common set of rights in areas linked to the work market, will address these concerns head-on, and so it deserves my vote. in writing. - (FR) Today's vote in favour of the directive on a single permit for third-country nationals seeking to reside and work in a Member State is a further step towards achieving a harmonised immigration policy at European level. The idea of combining a residence permit and a work permit is good. It shows that the Union is genuinely committed to promoting legal migration and is not the European fortress that some people believe it to be. To achieve this, it was important for Parliament to support the idea of a single application procedure that is easier and faster for both the employer and the migrant. The European Parliament has also made the right choice by excluding four categories of workers from the field of application: seasonal workers, workers posted within their undertaking, self-employed workers, and seafarers, all of whom are already or will soon be covered by specific directives. Another positive point is the flexibility given to Member States as regards the effective rights of third-country workers. The 27 capitals will have the final say in determining whether or not to grant or withhold unemployment benefits and family allowances, and on the non-allocation of public housing during the first three years of residence. These are simple, common sense measures. in writing. - The directive as it stands excludes a lot of categories such as seasonal workers, intra-corporate transferees, refugees and posted workers, etc. I totally oppose the further segregation into categories of workers and the differential treatment granting some workers and their family members less rights than others. Even if some of these categories are covered by other directives, the example of the Commission proposal on seasonal workers shows that these directives are not sufficient in terms of rights. We should stand for a common framework for all workers, as it would unify the legislation in working places by avoiding fragmenting the workers' situation with the risk of jeopardising the integration of migrants and the cohesion in the EU. Even if very important issues such as the portability of pensions to third countries no longer being conditional on the existence of bilateral agreements have been won thanks to Jean, I cannot help thinking that we should advocate the equal treatment and non discrimination of all workers in the EU. That is why I have abstained. Today's vote represents a step towards the adoption of a single application procedure for third-country nationals seeking to enter European territory and work there. The European Union aims to simplify administrative procedures and to issue a single document for both residence and work permits. I want to emphasise that today's vote does not focus on indiscriminately attracting new workers to our territory, nor is its objective to combat illegal immigration. Every non-EU worker wishing to settle in Europe will still have to get a residence permit first. The proposal adopted today also confirms full observance of the principle of subsidiarity, by setting minimum standards on rights and obligations, but leaving Member States the flexibility and freedom regarding the introduction of procedures in their national legislation and their practical application. The European Union cannot limit the power of Member States in the organisation of social security, and each state must be allowed to establish its own rules in this area. in writing. - (NL) Although the directive on a single application procedure for a residence and work permit is far from being ideal or complete, I voted in favour of it nonetheless. I regret the shortcomings concerning seasonal workers, posted workers, the right to change employer and the right to enter and re-enter, because these subgroups will be protected in other (future) legislation. All in all, this directive is extremely important given that it is the first of its kind to grant a common set of minimum rights (including salary rights, equal treatment at work, pension rights and access to health care) to workers from third countries who are legally resident in Europe, which it does on the basis of equal treatment with national workers of Member States. In addition, the directive provides for a system with a single simplified application procedure for a residence and work permit. This scheme is far from a complete common immigration policy, but in view of increasing immigration flows, the constantly changing demand for foreign labour and the prevention of abuse and discrimination in this regard, this first form of protection is essential. Third-country workers will now receive greater protection than has been the case. Taken as a whole, this was the deciding factor for my 'yes' vote. in writing. - I voted against as I feel that it opens the door to unfair competition to EU workers and low-cost migrant workers coming to the EU. This report is aimed at establishing a single residence and work permit for third-country nationals in a Member State, and thus speed up and make more uniform the admission process, while also reducing its bureaucratic and financial burden. Economic migration is now a reality which should be analysed in view of the development of legal and balanced migration channels to meet the needs of European labour markets. The economic and demographic challenges which Europe is facing mean that a common immigration policy needs to be drawn up for the 27 Member States. The entry into force of the Treaty of Lisbon has established a new legal basis on this matter, the codecision process, and so I believe that it is vital to establish a common and harmonised approach in order to reduce the differences between national laws. Besides what has already been said, the proposal also provides for equal treatment for national workers, creating a secure and protective legal status, since the immigrants participate in the economic activity of the host country. Decisions that have been dismissed should be properly justified and transparent, and the costs should be commensurate with the services that are actually provided. The adoption of this report is a significant step forward in protecting the rights of third-country workers in the EU by granting them a single permit for residence and work. This illustrates the EU's willingness to enhance its attractiveness on the world stage by facilitating conditional access to the European labour market. I am pleased that the procedure for obtaining this permit has been simplified through a one-stop shop system, which will ease administrative procedures for foreign workers. The creation of a single working document represents significant progress in the control and regulation of migration flows from Member States and will enable legal immigration to be monitored more easily. With this text, Parliament has stated that controlled, regulated immigration of workers is beneficial to all. Establishing a common legal framework for European and foreign workers protects our citizens against all forms of unfair competition in the labour market. I voted in favour of this resolution because I support the idea of a Europe that protects its workers while remaining faithful to the principle of free movement of individuals, which is a cornerstone of the European project. I voted in favour of this resolution on the proposal for a directive of the European Parliament and of the Council on consumer rights, which merges four existing Community directives in a single legal instrument. I agree with the rapporteur's opinion that the fragmentary nature of existing legislation deters consumers and undertakings alike from participating in cross-border trade. However, we must be cautious, because due to the nature of this area, it is rather difficult to fully harmonise legislation in the realm of consumer rights, and moreover, this may reduce the level of protection of consumer rights in certain Member States. In the face of recent digital developments, the EU should update consumer rights. This draft directive aims to provide better protection for consumers in all Member States of the European Union by enabling them, in particular, to enjoy an adequate right of withdrawal. Every citizen and consumer should be guaranteed the same rights within the Union. We will thus promote a level of consumerism that satisfies our citizens, who will find it easier to make purchases in other Member States. Furthermore, given that it preserves the vital acquis of French consumer law, such as the 'latent defect' guarantee, and the fact that all methods of payment are free of charge, I believe this new directive to be a step forward. I therefore supported it. in writing. - (LT) I voted in favour of this report which will be reconsidered by the parliamentary committee responsible. This directive is aimed at combining EU legislation regulating consumer rights, safeguarding a high level of consumer protection across all EU Member States and encouraging businesses to provide services and sell goods in other Member States. Currently there remain obstacles to the smooth functioning of the market. Companies are not inclined to trade in other Member States and consumers are unlikely to award contracts due to the different rules that apply to consumer contracts in the Member States. Legislation in force until now set only minimum requirements for the protection of consumer rights, and the Member States were able to apply more stringent measures, thus leading to different legal regimes in the Community. I believe that it is necessary to review this directive again and strengthen its provisions. We must ensure that the same standards of consumer rights protection apply in all EU Member States, enabling us to avoid the inconsistency that currently exists in the internal market, strengthen consumer confidence in the internal market and encourage companies to trade in other Member States. The proposal for a directive on consumer rights presented by the Commission combines four previous directives in a single legislative instrument. It is the result of revision of the acquis related to the consumer, which started in 2004 with the aim of simplifying and completing the existing regulatory framework relating to consumer protection. The current regulatory framework results in significant compliance costs for European companies that wish to operate across borders and have to comply with differing legislations. I believe the fragmentation of legal rules acts as a deterrent both to companies and consumers from buying or selling across borders. The report under discussion aims to achieve necessary balance between a high level of consumer protection and the competitiveness of companies in the insurance market, while at the same time respecting the principle of subsidiarity. Therefore I support the rapporteur's proposals that tend towards a kind of targeted harmonisation, that is to say harmonisation limited to specific aspects of certain contracts such as, in particular, information obligations or the right of withdrawal in remote or off-premises contracts, while managing to maintain a high level of protection for European consumers. I congratulate Mr Schwab for the work done so far. I voted in favour because the Schwab report has the merit of protecting consumers in their cross-border purchases. The text voted today, in fact, proposes guaranteeing a high level of protection for the consumers of the 27 Member States. At the same time, it seeks to protect and support companies, regardless of their size, which can provide goods and services to consumers in Europe without encountering unnecessary legal barriers. By bringing together four directives on this subject, we hope to harmonise the current rules in a more defined manner, avoiding the fragmentation of laws which is very often an obstacle for both consumers and businesses. In this sense, the document could contribute to a better functioning of the internal market by increasing consumer confidence. in writing. - (CS) The approved report sweeps away the fragmentary nature of existing regulations in the area of consumer protection, which ends up discouraging consumers and businesses from getting involved in cross-border trade. Consumers in particular often complain that they cannot make full use of the advantages of the single market, especially in relation to trading over the Internet. In my opinion, the correct response to these complaints is an approved set of common definitions, such as the concept of a consumer, a seller or a distance agreement. Also beneficial is the creation of a list of basic information to be provided by the seller before any kind of consumer contract is concluded, and the unification of the deadline for withdrawing from a contract at 14 days in the case of distance or off-premises contracts, including the creation of a single form for withdrawal from a contract. Unfortunately, in the case of this report we have seen how the left has, at the last minute, failed to support the compromise agreed with the rapporteur, and we have therefore had to put it to the vote. However, that is no disaster in my opinion, and on the contrary it is perhaps an illustration of the fact that the European Parliament works as a political body in which an open and genuine ideological conflict between the European right and the left unfolds. It would be useful if Parliament were presented in this way more often. In October 2008, the Commission submitted a proposal for a directive aimed at bringing together in one text the acquis on consumer protection, which covers four directives on unfair contract terms, certain aspects of sales and guarantees on consumer goods, consumer protection in distance sales and consumer protection in contracts concluded away from business premises. It is worth noting that these directives, which have been subject to revision, provide for minimal harmonisation clauses, which has led many Member States to maintain or adopt stricter rules on consumer protection, creating a fragmented regulatory framework throughout the Community with consequences in terms of the internal market, particularly for businesses and consumers in cross-border transactions. I believe that this legislative text, which was voted upon today, strengthens consumer protection while taking into account the characteristics of the sector, in which complete harmonisation may not always be feasible. I welcome the proposal for the creation of a mutual evaluation system, whereby the Member States must detail why diverging provisions of national law are essential and how they conform with the principle of proportionality and effectiveness. I voted in favour of this report. The objective is very ambitious: it means to create a complete reform of consumer legal protection which addresses the entire subject of contracts and which brings into play the 27 national laws that provide different levels of protection. About a year ago, Prof. Monti said in his report to President Barroso: '...the legislator should find without delay an agreement on the draft directive on consumer rights, in order to ensure a high level of protection for consumers in an integrated retail market'. I fully agree with Prof. Monti. The absence of common rules in various Member States has given way to fragmentation of legal frameworks which is harmful for both consumers and manufacturers and in fact prevents the realisation of a common market. At a time of crisis like the one we are living through globally, Europe cannot afford to let its manufacturers lag behind and its consumers be insufficiently protected. It is therefore a matter of urgency that we come to an equitable common denominator in order to harmonise laws throughout Europe. We must all make an effort to reach an agreement with the Council, even at first reading. Consumer rights are one of the main pillars of the internal market. Their protection and security are vital to greater security in driving the acquisition of goods on a day-to-day basis for cross-border trade and, as a result, for the competitiveness of businesses. In this sense, a balance between consumer rights and the cost that these may impose on businesses is crucial. Moreover, it is important to bear in mind the different national characteristics and the protection that is offered, with due respect for the principle of subsidiarity. I therefore believe that this is an area where, on the one hand, maximum harmonisation may be useful, but, on the other, minimum harmonisation may also be adopted according to the type of contract, as being more appropriate. in writing. - (PT) This draft directive on consumer rights merges the four Community directives in force into a single legislative instrument. On the one hand, it is aimed at ensuring that consumers in all of the 27 Member States have confidence in a high level of consumer protection, and, on the other hand, that businesses, whether large or small, can provide goods and services without unnecessary legal obstacles to consumers in the 27 EU Member States. As for the consumers, this proposal aims to ensure that, no matter where in the EU they make their purchases, they have access to clear information about prices and additional charges before signing a contract. It strengthens consumer protection against late or non-delivery, giving consumers rights in relation to cooling-off periods, returns, refunds, repairs, guarantees and unfair contract terms. On all contracts concluded with consumers, the dealer is required to provide clear information that allows an informed choice. I am pleased with the exemption of the requirement to provide information for contracts that involve 'day-to-day transactions and in which the trader has to deliver the good or provide the service immediately when the contract is concluded', as this avoids an unreasonable administrative burden. This is yet another proposal by the Commission in which the promotion of cross-border trade appears to be the main motivation for exercising legislative initiative. In this case, and due to the fact that this is an unoriginal proposal for 'protecting the interests of consumers', it goes back to arguing that free trade is the be-all and end-all of consumer interests, thus making, once again, a profession of faith in the virtues of the free market. In truth, it is more relevant to the rights and interests of businesses than to those of the consumer. The Commission is advocating a total harmonisation of the rules laid down for consumers. If this harmonisation is not brought about by progress and by taking into account the legislation that is already in place in each country, in practice it could lead to the loss of consumer rights in some Member States where the legislation is more advanced in this field. As this is a first reading, and given that in the course of the debate in the committee it was possible to improve upon the Commission's initial proposal, we hope that it will be able to go even further in defending the rights of consumers. We are at the stage of the first reading of the draft directive on consumer rights, submitted by the Commission. This is focused on the promotion of cross-border trade, based on the principle that free competition is what best serves the interests of consumers. In fact, however, it gives more attention to the rights of corporations than to the rights of consumers. Moreover, the Commission advocated the total harmonisation of the established rules on consumers, without taking into account the legislation that is already in place in each country. This could lead to the loss of consumer rights in some Member States. There has been an intense discussion in Parliament's internal market committee, and it was possible to reach a broad consensus that allowed the initial proposal tabled by the Commission to be changed substantially. However, the conditions seem to be in place to go even further in protecting consumer rights by seeking to influence the negotiations with the Council in a positive way. We therefore agree with the rapporteur's request to return this report to Parliament's internal market committee. in writing. - (DE) Facilitation of cross-border trade by means of uniform rules and at the same time a strengthening of consumer rights, above all in connection with purchasing goods in another Member State, are the reasons why I expressly welcome the 'new' Consumer Protection Directive. The current uncertainty that still remains with regard to the applicable consumer rights deters companies from offering their goods across borders and consumers from ordering these goods, as there is a lack of clarity over what happens in the possible event of withdrawal. A European single market expressly requires the removal of such barriers. The uniform definitions proposed in this report, which among other things harmonise the withdrawal right and rules relating to unfair contract terms in contracts, will create legal certainty and thus increase the appeal of cross-border trade for companies, which will ultimately benefit consumers. Chapter V was not adopted and therefore consumer protection will be applied throughout Europe according to the highest criteria. Referral back to committee is therefore necessary in order to negotiate with the Commission once again. Faced with a text that was more than questionable at the outset, I am delighted that some major progress has been made by the European left. It was indeed absurd to impose on Member States legislation that goes against consumer rights and to force them to revoke some of their national laws that were considered too protective in relation to the directive. However, I voted in favour of deferring the final vote in order to strengthen consumer protection against certain abusive practices, for which the chosen level of protection remains insufficient. In any event, I will not vote in favour of a text that violates the most basic consumer rights. in writing. - (SV) The amendments tabled by the Committee on the Internal Market and Consumer Protection are, unfortunately, of poor quality from a purely legislative perspective, and Chapters II, IV and V are superfluous. Amendment 141 is unreasonable for small and medium-sized enterprises. In the compromise proposals (block II), the restrictions on distance and direct selling are unreasonable and unacceptable. in writing. - The Commission's original proposal for a consumer rights directive was an unwelcome, unnecessary attempt to enforce maximum harmonisation for no apparent reason other that to satisfy those who believe that cultural and legal diversity runs counter to the EU's principles. The proposal would have led to a reduction in consumer rights in various European countries and there was no evidence it would have benefitted the market. The compromise package agreed in the Committee on the Internal Market and Consumer Protection is far from perfect but marks a significant improvement and a base upon which we can build in negotiations with the other institutions. in writing. - (DA) I am pleased that, after more than two years of negotiations in Parliament, we have succeeded in agreeing on a position which both strengthens consumer rights in the EU and makes it easier for enterprises to operate on the internal market. On account of the decision to vote on the amendments in blocks, many of us are unhappy about the fact that we were not able to vote against certain amendments. Allow me to highlight the following cases. Chapters 4 and 5: I would have liked a compromise, with Chapters 4 and 5 being completely removed from the proposal. I know that the Council in particular, but also the European Consumers' Organisation (BEUC) and the Danish Consumer Council, would have preferred that to the compromise we currently have with regard to these two chapters. In this connection, we have to smile at the fact that the Group of the Progressive Alliance of Socialists and Democrats in the European Parliament have chosen to ignore the recommendations of the consumer organisations. Article 22a: I would also have liked to delete the much-criticised Article 22a. It does not make things particularly easy for small and medium-sized enterprises. However, I am more confident than my fellow Liberal Members from Germany that we will probably succeed in amending this provision during the negotiations with the Council. One idea was to bring this article into line with Article 20 of the Services Directive, which would also reduce the risk of contradictory legislation. in writing. - (RO) According to the EU 2020 Strategy, high-quality and environmentally sustainable production is one of the EU's competitive advantages. A high level of consumer protection guarantees high-quality products and improves consumer confidence, thereby making the internal market more effective. I welcome the proposals tabled by the Committee on the Internal Market and Consumer Protection on a new consumer rights directive as they strive to ensure transparency for companies, with the aim of unlocking the potential of cross-border trade in the EU. The new consumer rights regulations include almost every type of sales, in stores, via telephone or online. They reinforce in particular the provisions on international sales, based on the proposals made in the report drafted by my colleague Andreas Schwab. Unlike the four existing consumer protection directives, I think that the new legislation provides added value because it stipulates what kind of information the purchaser must receive from the seller, the delivery terms and the rules applied when the risk lies with the purchaser, not to mention the latter's right to cancel or refuse purchases or the right to have an item repaired or replaced. in writing. - I voted to send this report back to committee because the Commission's response to Parliament's amendments was woefully inadequate. in writing. - (IT) The Commission's proposal aims to improve the functioning of the internal market by reducing trade barriers across borders, but poses problems for both consumers and manufacturers. It should support all efforts aimed at making the internal market more effective and encourage cross-border trade, but Article 38 of the Charter of Fundamental Rights requires that EU policies ensure a high level of consumer protection. It is therefore necessary to aim to increase the minimum level of current harmonisation by applying available best practices. It will be appropriate to develop a European system of liability in the event of non-compliance to improve consumer protection and confidence in the markets. In line with the Europe 2020 Strategy, their high level of protection ensures quality products and at the same time fosters the performance of the internal market. Regarding the rights of consumers, the current minimum regulations allow Member States to adapt European regulations to national principles: we should proceed further in this direction. Unfortunately however, we note that the proposed directive does not take into account new products on the market due to changes taking place in development and innovation, as in the case of digital products. I cast my vote in favour of the report on consumer rights by Mr Schwab because I see the need to simplify and complete the existing legal framework relating to consumer protection. It is essential that consumers of the 27 Member States can rely on a high level of protection and that manufacturers, regardless of their size, can provide their goods and services to consumers in the 27 Member States without having to deal with unnecessary legal barriers. Parliament's action is necessary both to strengthen consumer confidence and to encourage and support manufacturers wishing to engage in cross-border trade. The diversification of rules on consumer rights in Europe is a serious deterrent to manufacturers even in their buying and selling of goods and services across borders. In particular, e-commerce is an area where consumers cannot benefit from the internal market nor from their consumer rights, which is due to the fact that manufacturers in a given sector are reluctant to comply with different rules as they enter a new market and thus run the risk of being sued in another Member State. I voted in favour of the report on consumer rights. The text replaces four existing directives with one, with a view to simplifying and improving the regulation of consumer protection. The added value of the European Union must translate into a clear benefit for consumers by facilitating cross-border online transactions in particular. The proposal for a directive thus seeks to address issues raised by consumer protection rules that differ from one country to the next. Specifically, the text proposes a model withdrawal form for distance contracts and off-premises contracts, and the period of the right of withdrawal is harmonised at 14 days. Similarly, the rules contained in the text would enable consumer rights to be strengthened with regard to information and delivery. in writing. - (DE) In today's vote on the text of the directive on consumer rights, some members of the German Free Democratic Party (FDP) in the European Parliament abstained. The compromise adopted undoubtedly contains many improvements on the original draft from the European Commission. For example, we have succeeded in ensuring that small businesses are not affected by most of the new rules or burdened with additional bureaucracy. However, the text adopted today also contains rules that would heavily burden companies without increasing consumer protection. Article 5, for example, will mean that a company will have to provide very extensive pre-contractual information even when goods are purchased in store. This will hardly benefit consumers, as they can assess the product directly in the shop. Article 22a places companies under obligation, in the case of distance contracts, to supply their goods to customers in any Member State. Such an obligation contradicts the freedom of contract and exposes small and medium-sized enterprises in particular to considerable legal and financial risks. Furthermore, the FDP was unable to succeed in its core demand for the complete deletion of Chapters IV and V of the directive. The FDP calls for these provisions to be amended during the trilogue negotiations with the Council and Commission. This proposal involves the replacement of the four directives currently in force on contracts concluded away from business premises, unfair terms, distance contracts and the sale and guaranteeing of consumer goods into a single piece of legislation. The aim of this draft directive is to increase the confidence and protection of consumers in the purchases that they make in shops or on the Internet, and to reduce the reluctance of businesses to sell in other EU countries. The draft directive on consumer rights is aimed at ensuring that, no matter where in the EU they make a purchase, consumers have access to clear information about prices and additional charges before signing a contract. In general, all contracts are covered, whether a purchase is made in a shop or at a distance, or away from the business premises. This directive will strengthen the internal market. in writing. - The aim is to increase the confidence of shoppers and provide transparency for businesses so as to unleash the potential for growth in cross-border commerce within the EU. The new rules will cover almost all sales made in shops, by phone or online but will particularly strengthen the rules on cross-border transactions. Buyers will know what information they are entitled to receive from the seller, and rules on deliveries will be spelt out. There will also be clear rules on precisely when risk is passed on to consumers as well as on customers' rights to cancel a purchase, change their minds or have a product repaired or replaced. I would like to add that public transport and air transport tickets should be covered by rules on consumer rights. For example, I could cite the case of airBaltic where passengers' rights are being ignored and the company refuses to accept responsibility for poor-quality service. in writing. - (DE) There are indeed a few points that speak in favour of the directive on consumer protection, such as improvement of the obligations to provide information, extension of the withdrawal period and also the increased obligations for sellers to provide protection in the case of online shops. Consumer protection must be increased even more in order to create a foundation of trust between seller and consumer. There are a few reasons why I abstained in the vote, namely that in my opinion inadequate sanctions are provided for, no right of withdrawal is planned in the case of Internet auctions and, above all, the definition of doorstep selling is very vague. in writing. - (DE) This report concerns the bringing together of four different directives on consumer protection and thus contains the acquis communautaire since 2004. In some areas there are simplifications and additions. It is important that any higher standards of protection in the Member States are able to be retained. On the other hand, the bringing together of the directives results in more extensive harmonisation. Therefore, I have abstained from voting. I have voted in favour of the report by Mr Schwab as I believe that the report represents a fair balance between protecting consumers on the one hand, who must be protected from fraud and unorthodox behaviour by manufacturers and third parties, and, on the other, avoiding regulations that are too stringent for manufacturers, by imposing obligations which, given the size of their business and turnover, they sometimes cannot put up with. Take the case of a craftsman who, in theory, can work outside business premises: he cannot be subjected to the same requirements as a large multinational company which manages and concludes thousands of contracts every day. Harmonisation that is focused and balanced, taking into account the peculiarities of the European manufacturing base while preserving consumer protection, is therefore the way forward. I voted in favour because I believe that the codification of consumer rights in a single document is a positive step. It is worth highlighting the reduction of barriers to cross-border trade and commending the attempt to make the internal market more effective and promote cross-border trade through a combination of four directives that are now consolidated into one. The draft directive does contain aspects that can and should be improved, but it is a very positive development in this area nonetheless. The Commission's proposal concerning consumer rights, filed on 8 October 2008, aims to unite the four previous directives in a single instrument on the basis of the principle of 'full harmonisation'. The fragmentation of rules is, in fact, considered a deterrent for both consumers and businesses who buy or sell across borders. Given the situation regarding the consumer acquis, the approach in favour of complete harmonisation in this proposal is not practicable at present. Therefore, it is necessary to correct its scope by making a structural change. In line with the resolution of Parliament and with the statement made in the working document of the Committee for Internal Markets and Consumer Protection in 2009, a new approach based on full harmonisation is preferred, that is to say harmonisation limited to specific aspects of certain contracts while maintaining a high level of consumer protection. Based on the above, I hereby give my favourable vote to ensure ever greater protection of consumer rights. in writing. - (DE) I am pleased with today's decision on consumer protection. We have taken an important decision for Europe's citizens, enterprises and the single market. It is heartening that it was possible to find a sensible approach for a partial standardisation of the multitude of European systems of law. Nevertheless, from an Austrian viewpoint there are a few problematic points which now urgently need to be discussed and clarified in the trilogue negotiations between Parliament, the Council and the Commission: (1) The 'procurement element' must be included in the text. Procurement element means, for example, that if someone asks a beautician to come to his or her house in order to utilise the beautician's services (in other words the person procures the business connection him- or herself), the right of withdrawal should no longer apply. (2) We need to ensure that no additional burdens for SMEs arise, provided that adequate consumer protection is ensured. Ultimately, additional financial and administrative burdens on SMEs would be passed on to customers. (3) Chapters IV and V (liability and unfair terms) should be deleted, because even after lengthy negotiations it was not possible to achieve the desired full harmonisation. Deletion would avoid a standstill and open up the way for new possibilities in the trilogue negotiations. (4) With regard to the welcome rule on Internet scams, a few adjustments still need to be made in order to ensure a balance between consumer protection and the burdening of businesses. in writing. - (DE) I voted in favour of the compromise package on consumer rights negotiated between the groups, because it was possible to introduce some improvements to the directive compared with the Commission's proposal. It is important that the basis of the directive is once again minimum harmonisation and services like those in the health or social sphere are removed from the directive. There was also an improvement in the area of distance selling, where the withdrawal period for consumers has up to now been a week, but under the European Parliament's amendments two weeks would now be provided for. Purchases at trade fairs are now also classed as direct selling. In Austria, a purchase at a trade fair has up to now been treated, from a legal point of view, in the same way as a purchase in a shop. However, some important points still need to be improved. The highest priority in this regard is Chapter V of the directive, with which the Group of the Progressive Alliance of Socialists and Democrats in the European Parliament is completely dissatisfied. We must prevent the list of unfair contract terms from being exhaustive - the Member States should not be prevented from extended their level of consumer protection. Many consumers in Member States with a long tradition of consumer protection would otherwise find their protection worsening. I have therefore also voted for referral back to committee, so that these essential points can also be resolved and improved. in writing. - (FR) A well-protected consumer is a citizen at ease and a sign of maturity in our modern democracies. It is this that makes the directive adopted today important. Not a day passes in which the European consumer, when choosing to make an online purchase or accepting an amendment to a subscription on the telephone, is not faced with a question as to the conformity of the contract he has signed or approved. It is in response to the often unequal relations between professionals and consumers that the European Parliament has opted for a right of withdrawal set at 14 days. This is a clear signal for the same rights to be exercised throughout the Union. It is true enough that the adoption of the Schwab report does not fully satisfy either consumer groups opposed to the principle of full harmonisation or the representatives of small and medium-sized enterprises and chambers of commerce who wanted the legislation to be restricted to boosting e-commerce. The European Parliament has opted for compromise and has not yielded to the siren voices of alarmists. It can take comfort in this choice from the recent European survey, which has shown that 79% of traders surveyed consider that the legislation that has been adopted will have little impact on their foreign sales. in writing. - We, the Greens/EFA, wanted to ensure minimum harmonisation for all EU consumers. This would allow Member States to introduce or maintain higher levels of protection than the EU 'average'. In addition, we wanted to ensure a high level of protection for all consumers. We were of the opinion that a good legislative proposal would be a good example to show citizens that the EU has their interests at its heart. Following much hard negotiation and misunderstanding, we made good improvements to the text, notably the inclusion of digital content, the exclusion of health and social services, the inclusion of legal as well as natural persons and good provisions for withdrawal rights and passing of risk. However, we voted against in IMCO as the flaws remaining were too large. We could not accept a text that would mean a reduction in consumer protection for any EU citizen. The text was not fully subject to minimum harmonisation, and the text of individual Articles was neither clear nor good enough to ensure that there would be no reduction in consumer protection for some EU citizens. After today's vote in the EP, the text is back with the Commission. Europe's task is to protect the interests of citizens and consumers in Europe and today the House finally recognises the just protection of these rights. Until now, consumers have all too often risked being the victim of the market's deceit and fraud, particularly due to their limited knowledge of their rights. With the adoption of this resolution Europe expects all consumers to have clear and precise information, which will enable them to make informed and targeted choices. Greater protection will be given, especially for online sales, and all citizens who have purchased a product which turns out to be different from what they wanted can request a replacement, a price reduction or cancellation of the contract. All contract conditions deemed unfair will be listed in a proper 'black list' and may not be used in any type of contract. Historically, Europe bases its foundation on the single European market. Establishing common guidelines appears, now more than ever, to be a priority for our institutions: only then can you guarantee increasingly freer trade for all European citizens. in writing. - I welcome the implementation of rule 57 with the report returning to the Committee on the Internal Market and Consumer Protection as this will ensure greater consumer protection. The Commission is seeking to simplify and complete the regulatory framework on consumer rights, and it is therefore proposing the fusion of the four existing directives into a single legislative instrument. On the one hand, this proposal envisages giving consumers throughout the 27 Member States a high level of confidence in the protection of their rights, and, on the other hand, envisages that the entities that provide goods and services will reduce the legal and administrative obstacles to cross-border sales. The adoption of this report is another step towards the full achievement of the internal market, since the existing legal fragmentation is a deterrent for both consumers and businesses when they want to conduct cross-border trade. The proposal allows for full harmonisation, aimed at contracts signed away from business premises and distance contracts, particularly transactions carried out online. At the same time, the rapporteur includes flexibility clauses that allow the Member States to maintain a high level of consumer protection. The application of a set of rights and duties for consumers and businesses under a single legal framework will enable a simplified network for the growth of internal market transaction. in writing. - (LT) The new rules intended to renew current EU legislation on consumer rights need to cover all types of purchases, whether they are made over the telephone, online, in a shop or at home. The amendments should boost consumers' confidence when making purchases in other countries and ensure the same conditions for companies, thus fully exploiting the potential of the common market. On the other hand, the new rules must be balanced in such a way that they do not become an intolerable burden for small and medium-sized enterprises. Consumer protection is very important. Only by taking levels of consumer protection seriously, will it be possible to achieve full harmonisation. It is also important for citizens to know their rights. This is a problem throughout Europe, but particularly in my own country. According to data from the Eurobarometer poll, initiated by the European Commission, the vast majority of Lithuanians would like to learn more about their rights as consumers. According to the poll, two-thirds of Lithuanians (66%) believe that the Lithuanian legal system does not provide adequate protection by issuing penalties to companies which deceived or defrauded them. The message is clear. We cannot ignore it. Statistics also demonstrated that people have little confidence in the government and EU information offices - less than 7% of Lithuanians trust these institutions which provide them with correct information and advice on consumer rights. We cannot leave things as they are. The EU must act now. I support this report because communications, infrastructure and electronic services are essential in today's society, and because the European Network and Information Security Agency has done important work, still underway, particularly on cybersecurity. Extending its mandate and responsibilities therefore makes sense. The European Network and Information Security Agency plays a specific role in supporting Member States in their efforts to cooperate in this area at EU level. Information and communications technologies have become key elements in our economy and society as a whole. They are vulnerable to threats which no longer respect national borders, as a result of their interconnection with and interdependency on other infrastructures and the inability to guarantee their security and resilience based on purely national approaches. The report focuses on protecting Europe against cyber attacks and disruptions to IT systems by increasing the level of preparation, security and resilience. I voted for this report as it aims to develop an IT network and data security culture which will benefit citizens, businesses and public sector organisations in the European Union. I believe that the European Network and Information Security Agency's mandate is needed to enable the European Union, Member States and stakeholders to develop a level of preparation and the capacity to prevent and detect network and data security problems, and to respond to them more effectively. Even though the mandate of the European Network and Information Security Agency (ENISA) expires on 13 March 2012, the European Union must still take measures in this area. It was therefore necessary to adopt an extension of the Agency's mandate, which would guarantee coherence and continuity on the issue of network and information security. This explains why I voted in favour of this text. in writing. - (LT) I voted in favour of this report extending the mandate of the European Network and Information Security Agency (ENISA) until the adoption of a new regulation on this agency's revised provisions and principles at work. ENISA was established in 2004 for an initial period of five years, with the main goal of ensuring a high and effective level of network and information security within the Union, thus contributing to the smooth functioning of the internal market. Recent cyber attacks in the Member States are making us rethink and reformulate the Agency's mandate to attain a more flexible response capability and to bolster the Agency's operational efficiency. Giving all EU citizens the opportunity to use digital technology, and ensuring confidence in the Internet and its security, is one of the key objectives of the Digital Agenda for Europe. Once ENISA has been modernised, the latest information will be gathered from European countries, there will be encouragement to share best practices and the European Union and the Member States will be better prepared to prevent, detect and respond more effectively to network and information security problems. in writing. - (BG) I supported Giles Chichester's report on establishing the European Network and Information Security Agency as regards its duration because I think that information and communications technology (ICT) has become the backbone of the European economy and society as a whole. ICT is vulnerable to threats which come from outside national borders and change as the technologies and market evolve. Since ICT is global, interconnected and dependent on another infrastructure, its security and resilience cannot be guaranteed based on purely national and uncoordinated approaches. At the same time, the challenges associated with network and information systems are rapidly evolving. Network and information systems must have effective protection against any kind of intrusion and outages, including attacks carried out by people. I voted in favour of this report since I agree with the need to extend the mandate of the European Network and Information Security Agency. This body, established by the European Union in 2004 for a five-year term, now needs a further extension in order to make it relevant to present-day needs and security risks. Indeed, the increasingly heavy use of computer communication facilitates the work of many, but is often also a danger, especially for children. Precise rules are needed to protect users. However, changes to the regulation require more time, and this is why it is necessary to extend the mandate of the Agency. I decided to vote for this report as I feel it is necessary to extend the mandate of the European Network and Information Security Agency until 2013. This agency was set up for a period of five years in March 2004, which was then extended until March 2012. The main objective was to guarantee effective security for the EU's IT networks. Since we are living in a world which has become increasingly dependent on the Internet, we must increase our awareness of the problem of Internet security as cybercrime is not merely virtual, but has a real impact on our lives. This issue also features on NATO's agenda, resulting in an EU-US working group being set up to tackle IT crime and security, which marks a very important step in protecting the IT infrastructure. I truly believe that we still need the European Network and Information Security Agency. in writing. - I was delighted to vote in favour of the extension of the mandate of the European Network and Information Security Agency (ENISA) until September 2013. This agency was established in 2002 for an initial period of five years. ENISA's mandate is important as it was set by the EU to carry out very specific technical and scientific tasks in the field of information security. It is important to have such an agency in place in order to ensure the smooth functioning of the internal market that concretely affects the daily lives of the citizens and business alike, using broadband, online banking, e-commerce and mobile phones. Given the fact that attacks on information systems are constantly increasing, it is a critical time to have effective security measures in place in order to protect the integrity of Europe's information systems. A top-down EU approach is required to protect the information society sector. Member States cannot do this sufficiently by themselves. It is estimated that the necessary funding for the extension of ENISA's current mandate would be EUR 12.698 million in commitments. Network and information security is a growing concern not only for political decision makers, but for all those who increasingly use it to interact with each other and with the state authorities. The same care and attention that once guided public efforts to prosecute violation of correspondence should now be required for the security of the new forms of communication. These are more sophisticated, and so they need to be monitored constantly and updated continuously. I agree with extending the mandate of the European Network and Information Security Agency by 18 months, as proposed by the Commission and voted upon by the parliamentary committee, so as to allow a rich and fruitful discussion between the European institutions, involving the people, about the challenges, priorities and responsibilities of the agency, and at the same time to avoid the legal vacuum that would be caused if the mandate were not extended. in writing. - (PT) This report focuses on a proposal for a directive of the European Parliament and of the Council amending Regulation (EC) No 460/2004, which established the European Network and Information Security Agency (ENISA). ENISA was created in 2004 with an initial period of five years, and was aimed at supporting the functioning of the internal market by controlling network security and ensuring the flow of information within the EU. With widespread access to computer facilities and the streamlining and flexibility of networks came the first attacks by so-called hackers, jeopardising the security of networks and information. Recently, the world has been shocked by the revelations made by the Wikileaks website. In March 2009, the Commission asked ENISA to support the Member States in their protection against cyber-attacks and disturbances. In July of the same year, the Member States supported the extension of ENISA's mandate. Given that issues linked to network security and the flow of information have a key role in the Digital Agenda for Europe (Europe 2020), I would like to express my agreement with the extension of ENISA's mandate by another 18 months. We recognise the importance of network and information security in the many areas of activity in which these are socially relevant today. However, the mechanisms that ensure this security cannot be decoupled from the political and social context in which they are developed and implemented. In particular, we cannot ignore the fact that the inherent approach for enhancing security and monitoring cyberspace have not always properly ensured that there is respect for the rights, freedoms and guarantees of the public. We believe that it is particularly significant that the EU is funding research programmes of large multinationals which dominate the technologies that allow governments to spy on Internet users, while creating and developing agencies such as ENISA, which will pay for the use of these same technologies. As the Internet is acknowledged to be one of the most important public spaces in the 21st century, it is important to make the most of it, rather than opening the way for the appropriation of this space for economic power, and thus using the benefit of the few, at the expense of the vast majority and its use in the advancement of social progress. The extension of the mandate of the European Network and Information Security Agency (ENISA) and the strengthening of its resources, supposedly in the interests of a higher level of security for information networks within the EU, is part of an approach towards enhancing security which does not always properly respect the rights, freedoms and guarantees of the public. We must beware that a tool for oppressing and repressing the people is not created in the name of greater monitoring of cyberspace. The Internet and its various tools are not in themselves oppressive. The issue that arises is the political and social context in which they are used. In view of this, it is particularly significant that the EU is funding research programmes of the large multinationals which dominate the technologies that allow governments to spy on Internet users, while creating and developing agencies such as ENISA, which will pay for the use of these same technologies. The Internet is recognised as being one of the most important public spaces in the 21st century. However, all this care is not enough to prevent the appropriation of this space, which was created by human knowledge, from serving policies that are subject to economic power and facilitating its private use... in writing. - It is appropriate that we vote on Mr Chichester's report on a day when we have learned that the EU's institutions have been subjected a large-scale cyber attack. Information security is of increasing importance to all our citizens and I was happy to vote in favour of this report. in writing. - (LT) I agreed with this document, because the European Union Presidency's Conference Conclusions at the Ministerial Conference on Critical Information Infrastructure Protection held in Tallinn stress that in order to address new and long-term problems in the future, we need to rethink and reformulate the mandate of the European Network and Information Security Agency (ENISA), to attain a more flexible response capability, to develop skills and competences, and to bolster the Agency's operational efficiency and overall impact. This would render ENISA a permanent asset for each Member State and the European Union at large. The Commission is proposing a Regulation extending the current mandate of the Agency for 18 months to allow sufficient time for debate on a review of the Agency's new provisions. ENISA was established in March 2004 for an initial period of five years by Regulation (EC) No 460/2004[1], with the main goal of ensuring a high and effective level of network and information security within the European Union, and in order to develop a culture of network and information security for the benefit of the citizens, consumers, enterprises and public sector organisations of the European Union, thus contributing to the smooth functioning of the internal market. Regulation (EC) No 1007/2008[2] extended ENISA's mandate until March 2012. The proposed amendment to Regulation (EC) No 460/2004 which established the ENISA (European Network and Information Security Agency) and its duration, can only have my absolute support. I voted in favour of this proposal because I am convinced of the importance of its work regarding the safety of communications, and of putting in place the jurisdiction assigned to it for the fight against cybercrime, as provided by the amendment. In fact, extending its duration will, in my opinion, avoid the risk of a dangerous gap in the law. Well aware that the work carried out by ENISA has significant community interest, I hope it will receive increased resources. in writing. - I voted for this Report on the Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 460/2004 establishing the European Network and Information Security Agency as regards its duration. I welcome the first reading agreement. in writing. - (IT) Information and communication technology (ICT) is now an integral part the economy and society of the European Union. Today, due to the continuing evolution of media and information systems, ICT is increasingly exposed to threats that cannot be addressed effectively at a national level alone. Therefore, let us welcome favourably the Commission's proposal for a radical reform of the European Network and Information Security Agency (ENISA) and the extension of its mandate for another 18 months, which will allow us to overcome the risk of a dangerous legal vacuum. There is no doubt that the proliferation of security requirements involve costs for companies that are active within the EU, resulting in extensive fragmentation and lack of competitiveness in the internal European market. On the other hand, while the dependence on networks and information systems increases, the ability to respond to problems still seems inadequate. ENISA needs, therefore, to carry forward its commitments by adopting strategies designed to identify risks and vulnerabilities related to network and information security, enabling us to identify and deal with the challenges that we will have to face in the near future. The extension of the mandate of the European Network and Information Security Agency (ENISA) by 18 months, as proposed by the Commission, makes perfect sense, as it allows the necessary discussions to be carried out within the European institutions, involving all stakeholders, including the public, about the challenges, priorities and responsibilities of the Agency, and thus avoiding the legal vacuum that would be caused if the mandate were not extended. The security of information networks is a priority for all those who use them. In terms of security, we have to maintain the same attention that was given to communications in the past; these have more advanced technology, so they require extra care. in writing. - (DE) The European Network and Information Security Agency (ENISA) was founded back in 2004. Its job is to ensure network and information security within the EU. It is also tasked with developing a culture of network and information security among citizens, consumers, businesses and public organisations in the European Union. In the context of exercises, as recently carried out against cyber crime, it must be possible to guarantee security in the event an emergency situation. However, the extent to which this is actually feasible in practice is not absolutely clear in my view. I did not vote in favour of the report, as there is a danger that additional costs will be incurred by citizens without there being any tangible benefits. in writing. - (DE) Despite financial crises, the EU has indulged, and continues to do so, in the creation of additional authorities - for every issue and every problem a new agency is set up. Between 2005 and 2009, the budget for the EU agencies more than doubled and the number of employees rose by 65%. The added value they provide is highly questionable, however. The results leave something to be desired and the monitoring of them is inadequate. On average, taxpayers have to pay EUR 579 million per year for the EU agencies. I am very much against the establishment of new agencies. It is unacceptable for taxpayers to finance the officials of the Member States with very cushy jobs in pointless agencies. I therefore voted against the report on establishing the European Network and Information Security Agency. The Commission has more than enough trained officials to take on this task. Europe needs a system that protects computer and information networks; this protection is guaranteed by ENISA, the European Agency for Network and Information Security. Mr Chichester's report is nothing other than a compromise between European institutions, which aims to extend its mandate and increase staff, with greater resources, and to give more importance to the fight against cybercrime so as to ensure better protection of information systems. It is precisely because I think it is important to ensure safety in this area, since we are in the digital age, that I have voted in favour of the regulation. I agree with this amendment to the mandate of the European Network and Information Security Agency (ENISA). The Agency's legislative reform process, which is underway, still needs to be discussed at length, so the Agency's mandate, which expires on 13 March 2010, needs to be extended. In fact, it is necessary to approve an extension that gives enough time for Parliament and the Council to hold a discussion, so that the Agency's work maintains its consistency and continuity. In view of this, I voted in favour of this amendment, which states that the Agency's mandate should be extended until 13 September 2013. The strengthening of networks and information is a matter of great importance. It is therefore vital to ensure that there is enough time for the discussions that form part of the legislative reform process of the European Network and Information Security Agency (ENISA) to be carried out thoroughly, so I voted in favour of the extension of the Agency's mandate until 13 September 2013. in writing. - Following the Ordinary legislative procedure: (first reading) The European Parliament, having regard to the Commission proposal to Parliament and the Council, having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C7-0297/2010), having regard to the opinion of the European Economic and Social Committee of 8 December 2010(1), having regard to Rule 55 of its Rules of Procedure, having regard to the report of the Committee on Industry, Research and Energy, The increasing amount of private information circulating in computer networks around the world daily constitutes a potential threat if it is violated. For this reason, I believe that the text adopted today would help increase the protection of sensitive information, which we need. ENISA, the European Agency responsible for information security, must be given a stronger role in fighting cybercrime, which must go hand in hand with a simplification of administrative procedures. I conclude by reiterating that this is also the position in my country, which wishes to strengthen the resources allocated to the Agency. in writing. - (DE) In 2004, the European Network and Information Security Agency was set up for a period of five years. Its 57 members of staff are concerned with the development of network and information security for citizens, consumers and businesses, and also for public organisations in the European Union. Its tasks included both risk analyses and preventative measures. On account of the continual and constantly faster pace of development of information and communications technologies and their fundamental importance for society and industry, it has been found that there is a need for this agency in future, too. However, for some time I have been calling for a business-based review of the EU agencies. There are already initiatives in place for the review of the system as a whole and I will not vote in favour of extending this agency until a review of this kind has been completed. On 11 March, Japan was struck by one of the most terrible earthquakes it has ever experienced, causing thousands of deaths and disappearances, significant material damage and a nuclear accident of extreme seriousness, affecting the Fukushima power station, which in its turn represents a new threat. The European Union must therefore take steps to supply all the humanitarian, technical and financial aid and support necessary to Japan and the affected regions. That is why I voted in favour of this motion for a resolution. in writing. - (LT) I agreed with this motion for a resolution. Japan has been struck by a natural disaster on a massive scale which also caused a major nuclear accident, the true scale of which has so far been impossible to assess and which will have consequences for people's health and the environment for decades to come. The European Union immediately activated its Civil Protection Mechanism to coordinate its humanitarian, technical and financial aid. This disaster should be seen as a starting point for thoroughly assessing and reconsidering issues surrounding the safety of nuclear energy. With nuclear energy there is not only the issue of the operation of power plants themselves, there is also the question of the storage of waste nuclear fuel that will last for centuries. During the earthquake in Japan, underground facilities for storing waste nuclear fuel were damaged, which would lead us to believe that the hitherto prevalent view that burial is the safest means of neutralising waste is not at all proven, and that waste storage facilities may become a great danger to people's health and the environment. I believe that it is essential to begin active discussions within the EU and at international level to make it possible to ensure the highest standard of waste storage in nuclear power plants already in operation and to seriously consider the benefits of the planned nuclear power plants and assess possible dangers. I voted in favour of this motion for a resolution because it expresses the solidarity of the people of Europe with Japan. Parliament is highlighting the courage of the Japanese in this crisis, the most serious since the Second World War, which has so severely affected their country. Among Japan's friends, Europeans have immediately reported themselves for duty to lend a helping hand to the people afflicted. However, the archipelago is faced with a nuclear problem that is of extreme concern and requires our full attention. It suits Europe to provide all its assistance and expertise to the Japanese authorities in order to prevent a catastrophe of the devastating consequences of which we are unfortunately all too well aware. As a Basque, I would like to express my sympathy for the people of Japan; to say to them that their attitude in the face of disaster, the way they deal with the present and the dignity with which they look to the future are all proof of their greatness. I should like to express my condolences to the families of all those who have died or disappeared. Europe must also continue to lend them all the human and material aid that is needed after they disappear from the news headlines, so that they may once again become what they always were: a great country and a great people. in writing. - (BG) I voted for the motion for a resolution on Japan as I think that it is our duty to show our solidarity with a people which has been hit with a triple misfortune and lost many of its citizens. Unfortunately, the outcome of this tragedy is still unknown. On the other hand, the disaster in Japan, especially the incident at Fukushima and the emergency situation following it, has brought back to the agenda the issue about the need for nuclear energy and its consequences. At the same time, I strongly believe that we should not overdramatise what has happened and abandon nuclear energy in the heat of the emotion. In my view, Europe needs nuclear energy, and a pragmatic approach must be adopted to the issue rather than us rashly deciding to shut down power stations. in writing. - (LT) I voted in favour of this motion for a resolution, because I would firstly like to express my condolences and solidarity with the Japanese people following the natural disaster that claimed many lives and the catastrophe at Fukushima nuclear power plant. Devastated, Japan and its regions need all types of aid and support - humanitarian, financial and technical. I welcome the fact that the European Union immediately activated its Civil Protection Mechanism to coordinate its emergency aid. I would like to draw attention to the fact that the disaster at Fukushima nuclear power plant is forcing us to consider the situation and future as regards European nuclear energy. In the European Parliament we should also discuss and assess the risk posed by nuclear power plants near the European Union's external borders. All European Union Member States should reflect and take action as regards nuclear power plants in their own countries, because of the possible threat radiation poses to the whole of Europe. Immediately following the events in Japan, for instance, Germany shut down its nuclear reactors built before 1980 and, taking into account specialists' research and expertise, is negotiating new alternatives to nuclear energy. I would like to express my solidarity with the Japanese people following the earthquake and the tsunami that occurred in March in northeast Japan. Serious flaws in the operation of nuclear power plants are raising fears of a nuclear disaster and forcing us to rethink nuclear safety standards in Europe. I would like to call for a serious discussion about the need for safe nuclear energy in Europe and about the fact that Europe needs this source of energy. Japan is overwhelmed today. One nuclear accident after another is coming on top of a natural disaster. This crisis is the most serious crisis that Japan has experienced since the Second World War. The victims number tens of thousands, and the material damage is considerable and still difficult to quantify. The European Union must deliver a response equal to the seriousness of the crisis. Japan has urgent need of aid. We urge the Commission to drive and coordinate the European solidarity effort. Europe's action must be clear, rapid and efficient in the short and long term. As regards the Fukushima power station, European unease is legitimate. The European executive must respond to this by asking for a series of crash tests to be carried out in an independent and transparent way on all of Europe's nuclear infrastructure. Finally, we cannot pass by without a collective reflection on our energy policy. On energy saving, renewable energy sources, the energy efficiency criterion, we expect ambitious and conclusive decisions from Europe, as we do on European research, often well below 3% of GDP. I voted for this motion for a resolution as I think that the European Parliament and European Union as a whole must show their solidarity in response to the tragic events which have occurred in Japan. The EU and its Member States must respond promptly in giving the humanitarian aid needed to help the Japanese population overcome the impact of the earthquake. I also believe that it is paramount that the particularly serious nuclear accident caused by this natural disaster is investigated properly so as to avoid the possibility of such incidents occurring in the future. I voted in favour of this motion for a resolution, which shows solidarity with the victims of the earthquake, the tsunami and the nuclear accident that have devastated Japan, and which calls upon the EU and its Member States to extend all possible aid and support needed at a humanitarian, technical and financial level to the regions affected, as a matter of urgency. On 11 March, Japan was hit by a massive earthquake, followed by a tsunami that has caused the greatest nuclear crisis in the country's history, with the Fukushima nuclear plant suffering serious structural damage, and since then having been in imminent danger of triggering a nuclear disaster of major proportions. This disaster has caused thousands of deaths and is the greatest tragedy to take place in Japan since World War II. At this time I would like to join with this House in passing a vote of complete solidarity with the Japanese people, and I would like to express my condolences to the families of the victims and all those who were affected by this disaster of unimaginable proportions. in writing. - (PT) The recent unprecedented natural disaster in Japan has left the international community deeply saddened, and has moved the European institutions not only to an expression of solidarity, but also offers of technical and humanitarian aid. The problems that have occurred at the Fukushima nuclear plant have put the discussion of energy issues at the top of the agenda once again. Indeed, 30% of the energy consumed by the EU is of nuclear origin; there are countries where domestic production is at 80%, such as France, and countries without any nuclear plants, such as Portugal and Austria. Parliament has discussed this issue on several occasions and has concluded that there is a need, despite environmental issues, for the EU and its Member States to encourage and support the generation of so-called 'green energy'. I therefore wholeheartedly support this resolution, which seeks, firstly, to develop a plan for verifying the security of all European nuclear power plants, and, on the other, to significantly increase energy production from renewable sources so that it becomes the main source of energy in the EU. We should also stress the need for energy efficiency and the fulfilment of the EU 2020 objectives. The motion for a resolution is focused on what we believe to be essential at this time: expressing complete solidarity with the Japanese people, especially the victims of the disaster that has struck the country, and their families. The EU should express this solidarity in a concrete way by making available forms of aid which are deemed necessary in the appropriate areas, to be defined and implemented in conjunction with the Japanese authorities. We therefore supported the resolution and voted in favour. Alongside this resolution there are issues relating to nuclear safety, and the lessons to be learnt from what has happened at the Fukushima plant, a subject which we were able to address during the debate. In particular, there is a need to review and, if necessary, adjust redundancies in the security systems in the existing plants in EU Member States. There is also a need to undertake a broad discussion as a society about the energy issue, our present and future needs, and how these can be met. This should be done in a lucid way, with information about the impact, potential and limitations of each of the different types of energy. We voted in favour of solidarity with the Japanese Government following its threefold disaster - the earthquake, the tsunami and the nuclear accident - which has struck the country. In a joint resolution submitted by all of the political groups, Parliament asks the EU and its Member States to extend all possible aid and support needed at a humanitarian, technical and financial level to Japan. The devastating earthquake and tsunami that hit Japan on 11 March caused thousands of deaths and missing persons, along with considerable material damage. The disaster also caused an extremely serious nuclear accident which is affecting the Fukushima nuclear plant and constitutes a new threat. We would therefore like to express our complete solidarity with the victims of this threefold disaster, at a time when the level of human losses and material damage has not yet been fully assessed. By the same token, we would like to highlight the 'mobilisation, courage and determination' of the Japanese people in the face of this disaster, and call upon the EU and its Member States to extend all possible aid and support needed at a humanitarian, technical and financial level to Japan and the regions affected, as a priority. The composure and decorum of the population of Japan is the only consolation in the apocalyptic vision and the media have shown this to the whole world. An endless tragedy in which man's limitations are made most apparent and surprisingly relevant when confronted with the relentless force of nature. Global solidarity and concrete assistance, generously provided, are the right and dutiful response of the international community. Each of us will remember the heroic example of those volunteers - mostly retired firemen - who offered their lives to help put out the fires in the reactors at Fukushima. It represents an example for Japan and for us all, while underlining the need for Europe to adopt a strategy for natural and man-made disasters. As explained, I support the resolution on Japan with conviction. in writing. - (LT) I voted in favour of this motion for a resolution, because the devastating earthquake and the tsunami which struck Japan and the Pacific region on 11 March this year resulted in the death or disappearance of thousands of people and caused considerable material damage. The disaster also caused an extremely serious nuclear accident, which is affecting Fukushima nuclear power plant and constitutes a fresh threat. The Prime Minister of Japan, Naoto Kan, has stated that the country is facing its most serious crisis in 65 years, since the Second World War. At the same time I would like to offer the Japanese people my sympathy and support following this natural disaster and catastrophe which claimed many lives. I am pleased that the European Parliament also expresses its most complete solidarity with the Japanese people and government and presents its sincere condolences to the victims of this threefold disaster, bearing in mind that the human losses and material damage have not yet been fully assessed. It also welcomes the mobilisation, courage and determination of the Japanese people and of the authorities in response to this disaster, and calls on the Union and its Member States, as a priority, to give Japan and the disaster regions all necessary humanitarian, technical and financial aid and support. It is good that the Union immediately activated its Civil Protection Mechanism to coordinate its emergency aid. However, it is becoming clear that the disaster in Japan is forcing us to fundamentally reconsider the issue of nuclear security, and we must strengthen nuclear safety throughout the entire European Union. Today's motion for a resolution to give support to Japan has been voted in unanimously by all political groups in Parliament in order to express our closeness to Japan, the protagonist of the tragic events of 11 March 2011. I supported the resolution because, despite the economic and financial downturn and the instability in North African countries, European institutions should not and cannot fail to support Japan both economically and in terms of humanitarian aid. What occurred has produced and will continue to produce inevitable economic and financial difficulties, creating unavoidable repercussions in the European and world markets. The meeting between the EU and Japan, scheduled for May here in Brussels, can represent the beginning of the collaboration and support which the EU must guarantee in setting itself up as a key partner for reconstruction, helping Japan whether it be with technical assistance in the energy sector or strengthening business relationships aimed at quickly rebuilding this great world power. Moreover, I consider it fitting that the European Ministers of Energy have decided to give priority to safety in European nuclear plants, emphasising the importance of greater European coordination during the modernisation of nuclear facilities. For two weeks now, one of the most serious nuclear accidents in history has been played out in Japan. It is still too early to gauge the full extent of the disaster, but it is evident that, apart from Chernobyl, no place on Earth has yet been stricken by civil nuclear technology. The situation at Fukushima arouses dread and compassion in all of us, and asks questions of our own system for producing nuclear energy. For all that, I find it particularly scandalous that legitimate concerns aroused by this period of crisis should be exploited for partisan ends. It is not a question of banning the debate on nuclear power. As with any issue, and particularly for those of such strategic importance, democratic debate must enable wise solutions to be adopted. Since I do not believe that emotion is a good counsellor, I supported the emergency resolution of the European Parliament. It sends a message of firm support to our Japanese friends without permitting the intrusion of domestic concerns that would not respect the period of decency that is both necessary and indispensable. We should pay the utmost attention and respond urgently to the situation in Japan in the aftermath of the terrible disaster, and provide not only moral, but also economic, humanitarian and political support. We should acknowledge the way in which the Japanese people have conducted themselves and the actions of the rescue and prevention services. Other parts of the world, including Europe, should learn lessons from this disaster. We have areas of seismic activity. Lisbon suffered a great deal of damage as a result of a tsunami centuries ago, as did Messina at a later date and Skopje due to an earthquake 50 years ago. We have been working for years on an early-warning system, and yet we still do not have anything substantial to show for it. We should accelerate work dramatically on this project. Early warnings may prevent unnecessary deaths, and even many thousands of such deaths. in writing. - One of course has to agree with the joint resolution tabled on behalf of the political groups on the triple tragedies in Japan of earthquake, tsunami and nuclear accident and join in expressing Europe's condolences for those who lost their lives in these awful events. However, Japan's appreciation of our sincerity behind this resolution will, I am sure, be tempered - when it is adopted almost unanimously tomorrow - by the actions of Member States that have either at best overreacted and threatened public panic or at worst used the opportunity to impose protectionist measures. The Spanish Government has urged that goods from Japan should be checked carefully for radiation, the Netherlands has cautioned dock workers to handle all containers from Japan with care, France is demanding a check on all goods before being exported from Japan and German customs is demanding random checks for radiation on all goods, including cars, imported from Japan. Most of these restrictions have been imposed on goods that had been produced and left Japanese ports weeks if not months before the earthquake! So much for solidarity! in writing. - (IT) The disaster which has hit Japan owing to an earthquake and a tsunami of surprising proportions has left us all with a sense of profound sorrow at the immense loss of life and substantial damage to property. Let us then, as MEPs, express all our sincere sympathy to the people and government of Japan. Our thoughts and those of all European citizens go out to the thousands of people who will now have to rebuild their lives and their communities. At the same time, we are impressed by the rapid and decisive action of local authorities and emergency services and by the exemplary courage and determination of the Japanese people. Although the EU has already activated its Civil Protection Mechanism by sending experts from Europe to coordinate emergency aid, we also urge Member States, as a priority, to support disaster areas with all the humanitarian, technical and financial help and support they need. Recalling the strong friendship and close political and economic relations that bind the EU to Japan, we are determined to support this country struggling to overcome the challenges it faces, including the threat of a real nuclear catastrophe. I voted in favour of the motion for a resolution expressing the solidarity of members of the European Parliament with the Japanese people and their government after the striking events of recent days. We wish to see the Union and the Member States supply all the humanitarian, technical and financial aid and support necessary to Japan and the affected regions. It is the duty of Parliament to express its solidarity with the Japanese government following its threefold disaster - the earthquake, the tsunami and the nuclear accident - which has struck the country. In this joint resolution submitted by all of the political groups, we call upon the EU and its Member States to extend all possible aid and support needed at a humanitarian, technical and financial level to Japan. The devastating earthquake and tsunami that hit Japan on 11 March caused thousands of deaths and missing persons, along with considerable material damage. The disaster also caused an extremely serious nuclear accident which is affecting the Fukushima nuclear plant and itself constitutes a serious threat. It is also our duty to express our complete solidarity with the Japanese people and their government, and to send our condolences to the victims of this threefold disaster. Faced with the extent of the tsunami and the magnitude of the earthquake on 11 March, I must express my complete solidarity with the victims' families and the people and government of Japan. I should also like to express my full support and my complete admiration to the rescuers and the staff of the Fukushima power station. Fortunately, the European Union was in a position to respond rapidly to the Japanese request, in particular by deploying its 'Civil Protection Mechanism', which is designed to coordinate the actions of the 27 Member States in emergencies at the national, European and international level. By the same token, the Union is ready to provide all its technical expertise in the nuclear arena in order to help Japanese and international experts to take control of the situation in the proximity and in the very heart of the Fukushima power plant. in writing. - (DE) The devastating earthquake and tsunami that hit Japan and the Pacific region on 11 March 2011 resulted in the deaths or disappearance of thousands of people as well as considerable material damage, destroying the livelihoods of many people. This subsequently led to an extremely serious nuclear accident in the Fukushima nuclear power station. According to the statement given by the Japanese Prime Minister, Naoto Kan, the country is facing its most serious crisis in 65 years, since the Second World War. In this motion for a resolution, the European Parliament expresses its solidarity with the Japanese people and presents its sincere condolences to the victims of the disaster. I have therefore voted in favour of this motion for a resolution and very much hope that the situation in Japan can be brought under control and that there will be a global rethink with regard to nuclear energy. in writing. - (LT) We have watched Japan suffer a series of horrific disasters, the likes of which no other country has ever experienced together. An earthquake, a tsunami, an accident in a nuclear power plant - any one of these catastrophes would be a major challenge on their own, but together they have placed an unbearable burden on the shoulders of the country and its citizens. Once the fire that continues to smoulder at Fukushima nuclear power plant has gone out, many questions will need to be answered - could certain disasters have been avoided, and what safety improvements should other nuclear power plants carry out, so that natural disasters do not cause nuclear accidents? All countries using nuclear power should check the safety of their nuclear power plants. Those planning to construct new power stations should examine more closely the dangers they pose. However, at present it is most important for the European Union to show solidarity with the ordinary people of Japan. The resolution on the situation in Japan is therefore crucial. We must provide all the necessary humanitarian, technical and financial support to help people survive now and to reconstruct affected regions in the future as soon as possible. The disastrous earthquake that struck Japan on 11 March cannot pass unnoticed in the eyes of the world; it must be our cue to reflect on the political and socio-economic aspects of the disastrous consequences of the tsunami. Like all my colleagues, in approving this motion for a resolution I express my deepest sympathy to the Japanese people who, with a great sense of civil responsibility, are reacting as best they can to the disaster. I hope and request that the EU will take action to provide humanitarian aid, through its own civil protection services, and propose suitable projects to solve the problem of nuclear contamination through a joint project with the Japanese authorities to try, as far as possible, to restore the situation to normal. On 11 March, Japan and the Pacific region were hit by a devastating earthquake, followed by a tsunami which caused thousands of deaths and missing persons, along with considerable material damage. I voted in favour of this resolution, which expresses solidarity with the victims of the earthquake, the tsunami and the nuclear accident, and I hope that Parliament's call for the EU and its Member States to extend all possible aid and support needed at a humanitarian, technical and financial level to the regions affected, will be heeded with the utmost urgency. At a time when Japan is facing its worst crisis since World War II, following the earthquake and tsunami that devastated the country on 11 March, I would like to join the expression of complete solidarity with the Japanese people and Parliament's call for the EU and its Member States to extend to the affected regions all the help and aid needed at a humanitarian, technical and financial level, as a matter of urgency. The earthquake and the tsunami that struck Japan on 11 March have led to the deaths of many thousands of people (the current count exceeds 27 000 dead and missing), and have caused considerable material damage. Under these conditions, Japan must now deal with a nuclear accident of extreme seriousness. As Japan has not experienced such a crisis since the Second World War, I fully support the resolution of the European Parliament on the situation in that country. I also call upon the EU to provide Japan with all the humanitarian, technical and financial assistance possible, including medical supplies, mattresses, tents, food, experts and specialists in radioactivity and nuclear energy ... I also wish to put on record my fullest solidarity with the Japanese people. I congratulate them on their mobilisation, their courage and their determination in the face of such a disaster. Moreover, given the gravity of the situation in the Fukushima power station, I call on the Japanese Government to demonstrate the fullest transparency and on the Member States of the EU to organise a broad public debate on energy, one that is not solely restricted to nuclear. in writing. - I very much support this resolution that states: '1. Expresses its most complete solidarity with the Japanese people and government and presents its sincere condolences to the victims of this threefold disaster, bearing in mind that the human losses and material damage have not yet been fully assessed; welcomes the mobilisation, courage and determination of the Japanese people and of the authorities in response to this disaster; 2. Calls on the Union and its Member States, as a priority, to give Japan and the disaster regions all necessary humanitarian, technical and financial aid and support and welcomes the fact that the Union immediately activated its Civil Protection Mechanism to coordinate its emergency aid;'. With today's vote I wanted to express solidarity with the Japanese people and its government in the wake of the devastating earthquake, the tsunami and the nuclear accident. Together with my colleagues, we have invited Member States to provide Japan and the affected regions with all necessary support, including humanitarian, technical and financial support, while praising the decision to activate the Civil Protection Mechanism immediately to coordinate emergency aid. The exemplary courage and determination shown by the Japanese people and authorities in addressing the situation should be an example for all, and one more reason for the EU not to abandon this country in the very delicate phase of its complete reconstruction. in writing. - I welcome this resolution as I think we need to support those in Japan and also to learn from this terrible situation. On 11 March the Pacific region, and Japan in particular, was rocked by a devastating earthquake and tsunami. I believe that it is important to mention once again here that natural disasters are increasing in number and intensity, and it is therefore necessary to rethink pre- and post-crisis scenarios at a global level in order to anticipate and provide assistance to the countries affected. At the same time, the natural disaster also caused an extremely serious nuclear accident, which has affected the Fukushima nuclear plant in particular. This event has shown that it is crucial to think about safety conditions at European nuclear plants. I would therefore like to call for a discussion, preceded by a thorough analysis, on how to reduce the devastating effects of a nuclear accident on the regions and people where it occurs. I welcome the EU's willingness to extend all humanitarian, technical and financial aid as a priority, along with the instant activation of the European civil protection mechanism. However, I believe that it is vital to grant this mechanism more logistic and planning resources so that it can become a real mechanism for the protection of the countries affected. My thoughts go out to the victims' families, to the wounded and to all the Japanese people who have been struck by this cataclysm. The courage and dignity of the Japanese people compels admiration and I am pleased that this House has demonstrated its support and its solidarity by means of this resolution. This is the greatest disaster that Japan has experienced since the Second World War, and the catastrophe at Fukushima has shocked us all and forces us to review our approach to nuclear energy. This issue has no bearing, however, despite what some may have us believe by means of a political salvage operation, on the opportunity to continue with the production of nuclear energy, an energy of the future that plays its part in the decarbonisation of our economy and that guarantees our energy independence. The drama of Fukushima requires us above all to strengthen our requirements in the area of nuclear safety. I support the proposals of the Group of the European People's Party (Christian Democrats) for a definition of common safety standards and for greater vigilance within and around nuclear power stations. In this matter, the expertise and performance of the French nuclear industry must serve as an example. From now on, the responsibility rests with the European Union, which must take strong measures to ensure that a nuclear disaster of this magnitude will never happen in Europe. in writing. - (SK) The enormous damage caused by the recent earthquakes and tsunami in Japan will not be cleared up overnight. We must stand ready to provide Japan with concrete practical assistance, even after the media interest has died away. Solidarity is one of the fundamental pillars on which today's Europe rests. It is right that, along with Member State governments and parliaments, the European Parliament too has given a clear signal to our friends in Japan, sorely afflicted as the country is, that we are with them and that they can rely on our help at any time.
Exhibit 10.4   LOGO [g607305ex10_4logo.jpg]       Acceptance Notice/         Pay Proceeds Authorization              Master Loan and Security Agreement Number: 17608-70000 Equipment Security Note Number: 17608-70004 (the “Transaction”) To: Banc of America Leasing & Capital, LLC The undersigned hereby certifies that all property described in the above-referenced Transaction by and between Banc of America Leasing & Capital, LLC, and the undersigned has been furnished, that delivery and installation has been fully completed as required, and that the such property has been irrevocably accepted and is satisfactory in all respects to the undersigned for purposes of the Transaction. We hereby authorize you to disburse the proceeds of this Transaction as follows:   Disburse To:    Amount:   Destination XL Group, Inc.    $ 2,455,806.59    Less Upfront Fee    ($ 104,086.63 )           TOTAL Disbursement    $ 2,351,719.96      Destination XL Group, Inc. (Debtor) By:   /s/ Dennis R. Hernreich   Dennis R. Hernreich Title:   EVP, COO, CFO, Treasurer, Secretary Date:   9/30/13   Pay Proceeds Authorization 4.1.06    Page 1 of 1         LOGO [g607305ex10_4logo.jpg]    Banc of America Leasing & Capital, LLC    Equipment Security Note Number 17608-70004     This Equipment Security Note No. 17608-70004, dated as of September 30, 2013 (this “Equipment Note”), is entered into pursuant to and incorporates by this reference all of the terms and provisions of that certain Master Loan and Security Agreement No. 17608-70000 dated as of July 20, 2007 (the “Master Agreement”), by and between Banc of America Leasing & Capital, LLC (“Lender”) and Destination XL Group, Inc. (“Borrower”). All capitalized terms used herein and not defined herein shall have the respective meanings assigned to such terms in the Master Agreement. If any provision of this Equipment Note conflicts with any provision of the Master Agreement, the provisions contained in this Equipment Note shall prevail. Borrower hereby authorizes Lender to insert the serial numbers and other identification data of the Equipment, dates, and other omitted factual matters or descriptions in this Equipment Note. The occurrence of an “Event of Default,” as defined in the Master Agreement, shall entitle Lender to accelerate the maturity of this Equipment Note and to declare the Prepayment Amount to be immediately due and payable, and to proceed at once to exercise each and every one of the remedies provided in the Master Agreement or otherwise available at law or in equity. All of Borrower’s Obligations under this Equipment Note are absolute and unconditional, and shall not be subject to any offset or deduction whatsoever. Borrower waives any right to assert, by way of counterclaim or affirmative defense in any action to enforce Borrower’s Obligations hereunder, any claim whatsoever against Lender. 1. Equipment Financed; Equipment Location; Grant of Security Interest. Subject to the terms and provisions of the Master Agreement and as provided herein, Lender is providing financing in the principal amount described in Section 2 below to Borrower in connection with the acquisition or financing of the following described Equipment:   Quantity    Description    Serial Number    Cost       See Exhibit A attached hereto    Location of Equipment. The Equipment will be located or (in the case of over-the-road vehicles) based at the following locations:   Location    Address    City    County    State    ZIP          See Exhibit B attached hereto       Borrower has agreed and does hereby grant a security interest in and to the Equipment and the Collateral related thereto, whether now owned or hereafter acquired and wherever located, in order to secure the payment and performance of all Obligations owing to Lender, including but not limited to this Equipment Note, all as more particularly provided in the Master Agreement. Lender’s agreement to provide the financing contemplated herein shall be subject to the satisfaction of all conditions established by Lender and Lender’s prior receipt of all required documentation in form and substance satisfactory to Lender in its sole discretion. 2. Payments. For value received, Borrower promises to pay to the order of Lender, the principal amount of $2,455,806.59, together with interest thereon as provided herein. This Equipment Note shall be payable by Borrower to Lender in 48 consecutive monthly, installments of principal and interest (the “Payments”) commencing on October 30, 2013 (the “Initial Payment”) and continuing thereafter through and including September 30, 2017 (the “Maturity Date”) (collectively, the “Equipment Note Term”). Each Payment shall be in the amount provided below, and due and payable on the same day of the month as the Initial Payment set forth above in each succeeding payment period (each, a “Payment Date”) during Equipment Note Term. All interest hereunder shall be calculated on the basis of a year of 360 days comprised of 12 months of 30 days each. The final Payment due and payable on the Maturity Date shall in any event be equal to the entire outstanding and unpaid principal amount of this Equipment Note, together with all accrued and unpaid interest, charges and other amounts owing hereunder and under the Master Agreement. Interest shall accrue on the entire principal amount of this Equipment Note outstanding from time to time at a fixed rate of 3.1067 percent per annum or, if less, the highest rate of interest permitted by applicable law (the “Interest Rate”), from the Advance Date set forth below until the principal amount of this Equipment Note is paid in full, and shall be due and payable on each Payment Date.   Equipment Security Note 4.1.06    Page 1 of 2    (b) Payment Amount. The principal and interest amount of each Payment shall be $54,473.51. 3. Prepayment The outstanding principal balance of this Equipment Note may be prepaid in whole or part at any time, together with interest and late charges accrued through the date of the prepayment, provided that such prepayment shall be accompanied by a prepayment charge calculated as follows: one percent (1%) of the amount of the prepaid if such prepayment occurs during the period from the date of this Equipment Note to the first anniversary hereof; one-half percent (0.5%) of the amount prepaid if such prepayment occurs during the period commencing on the first day after the first anniversary hereof and continuing through the second anniversary hereof; and no prepayment charge if such prepayment occurs thereafter. Partial prepayments shall be applied against principal installments in their inverse order of maturity. A prepayment charge will not be due if this Equipment Note is refinanced with the Lender. 4. Borrower Acknowledgements. Upon delivery and acceptance of the Equipment, Borrower shall execute this Equipment Note evidencing the amounts financed by Lender in respect of such Equipment and the Payments of principal and interest hereunder. By its execution and delivery of this Equipment Note, Borrower:     (a) reaffirms of all of Borrower’s representations, warranties and covenants as set forth in the Master Agreement and represents and warrants that no Default or Event of Default under the Master Agreement exists as of the date hereof;     (b) represents, warrants and agrees that: (i) the Equipment has been delivered and is in an operating condition and performing the operation for which it is intended to the satisfaction of Borrower; (ii) each item of Equipment has been unconditionally accepted by Borrower for all purposes under the Master Agreement and this Equipment Note; and (iii) there has been no material adverse change in the operations, business, properties or condition, financial or otherwise, of Borrower since August 3, 2013;     (c) authorizes and directs Lender to advance the principal amount of this Equipment Note to reimburse Borrower or pay Vendors all or a portion of the purchase price of Equipment in accordance with Vendors’ invoices therefor, receipt and approval of which are hereby reaffirmed by Borrower; and     (d) agrees that Borrower is absolutely and unconditionally obligated to pay Lender all Payments at the times and in the manner set forth herein.   BANC OF AMERICA LEASING & CAPITAL, LLC     Borrower: DESTINATION XL GROUP, INC. By:   /s/ Patricia Smith-Disu     By:   Printed Name:   Patricia Smith-Disu     Printed Name:   Dennis R. Hernreich Title:   Vice President     Title:     Equipment Security Note 4.1.06    Page 2 of 2    EXHIBIT A TO EQUIPMENT SECURITY NOTE NO. 17608-70004   Company    Division    Type    Asset Type    Invoice    Description    Insrv Date Equipment Location: 2777 Paper Mill Rd. Suite C-3a, Wyomissing, PA 19610 10    9802    ANCHOR    FF-S    A27481-0    Fixtures-Track    9/21/2012 10    9802    ANCHOR    LHI-S    A77244    Fixtures-Safe    11/20/2012 10    9802    ANCHOR    SIGNS    25154    Signs    12/1/2012 10    9802    ANCHOR    EQUIP-S    407087    Music System    2/3/2013 10    9802    ANCHOR    LHI-S    18494473    Video Security System    2/3/2013 Equipment Location: 7 Glenwood Rd, Suite E Clinton, CT 06413 10    9644    OUTLET    FF-S    035464    Fixtures-Display    7/2/2013 10    9644    OUTLET    FF-S    139830    Fixtures-Shelving    7/2/2013 10    9644    OUTLET    FF-S    020565-0    Fixtures-Track    7/2/2013 10    9644    OUTLET    LHI-S    A83437    Fixtures-Safe    7/2/2013 10    9644    OUTLET    SIGNS    26013    Signs    7/2/2013 10    9644    OUTLET    FF-S    I12072533    Fixtures-Furniture    7/2/2013 10    9644    OUTLET    FF-S    I12141295    Fixtures- Furniture    7/2/2013 10    9644    OUTLET    FF-S    300799    Fixtures-Hangers    7/2/2013 10    9644    OUTLET    FF-S    100456 RI    Fixtures-Ladders    7/3/2013 10    9644    OUTLET    FF-S    117716    Fixtures-Display    7/10/2013 Equipment Location: Various 10    9998    Store Distribution    FF-S    52790    Visual    12/30/2012 10    9998    Store Distribution    FF-S    3601935    Visual    12/30/2012 10    9998    Store Distribution    FF-S    3605860    Visual    12/30/2012 10    9998    Store Distribution    FF-S    3608720    Visual    12/30/2012 10    9998    Store Distribution    FF-S    3608440    Visual    12/30/2012 10    9998    Store Distribution    FF-S    42836    Visual    12/30/2012 10    9998    Store Distribution    FF-S    424    Visual    12/30/2012 10    9998    Store Distribution    FF-S    3598810    Visual    12/30/2012 10    9998    Store Distribution    FF-S    20300827    Visual    12/30/2012 10    9998    Store Distribution    FF-S    20300827A    Visual    12/30/2012 10    9998    Store Distribution    FF-S    54346    Visual    12/30/2012 10    9998    Store Distribution    FF-S    54233    Visual    12/30/2012 10    9998    Store Distribution    FF-S    54203    Visual    12/30/2012 10    9998    Store Distribution    FF-S    100700823    Visual    12/30/2012 10    9998    Store Distribution    FF-S    20307173    Visual    12/30/2012 10    9998    Store Distribution    FF-S    M21141    Visual    12/30/2012 10    9998    Store Distribution    FF-S    M21142    Visual    12/30/2012 10    9998    Store Distribution    FF-S    3673804    Visual    12/30/2012 10    9998    Store Distribution    FF-S    01212013    Visual    12/30/2012 10    9998    Store Distribution    FF-S    01212013A    Visual    12/30/2012 10    9998    Store Distribution    FF-S    56400    Visual    12/30/2012 10    9998    Store Distribution    FF-S    56330    Visual    12/30/2012 10    9998    Store Distribution    FF-S    468    Visual    12/30/2012 10    9998    Store Distribution    FF-S    56343    Visual    12/30/2012 10    9998    Store Distribution    FF-S    57113    Visual    8/31/2013 10    9998    Store Distribution    FF-S    468    Visual    8/31/2013 10    9998    Store Distribution    FF-S    56460    Visual    8/31/2013 10    9998    Store Distribution    FF-S    3140656    Visual    8/31/2013 10    9998    Store Distribution    FF-S    57902    Visual    8/31/2013 10    9998    Store Distribution    FF-S    57909    Visual    8/31/2013 10    9998    Store Distribution    FF-S    57873    Visual    8/31/2013 10    9998    Store Distribution    FF-S    57907    Visual    8/31/2013 10    9998    Store Distribution    FF-S    239    Visual    8/31/2013 10    9998    Store Distribution    FF-S    3145386    Visual    8/31/2013 10    9998    Store Distribution    FF-S    4255631 S3    Visual    8/31/2013 Equipment Location: Various 10    9999    Store Distribution    HW-S    70621158    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    70621159    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    144741    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    S7948626    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    145398    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    145879    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    20130557    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    146604    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    146996    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    147095    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    70665855    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    148727    POS Registers    5/5/2013 10    9999    Store Distribution    HW-S    148341    POS Registers    5/5/2013 Equipment Location: 5401 N. May Avenue Suite 700, Oklahoma City, OK 73122 10    99155    DXL    FF-S    37669    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    94548    Fixtures-Mannequins    6/26/2012 10    99155    DXL    FF-S    010891    Fixtures-Chairs    6/26/2012 10    99155    DXL    FF-S    010891BAL    Fixtures-Chairs    6/26/2012 10    99155    DXL    FF-S    37461    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    37668    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    37854    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    37668W    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    0466988-IN    Tailor Shop Equip    6/26/2012 10    99155    DXL    FF-S    0466989-IN    Tailor Shop Equip    6/26/2012 10    99155    DXL    FF-S    0467369-IN    Tailor Shop Equip    6/26/2012 10    99155    DXL    FF-S    2833    Fixtures-Pool Table    6/26/2012 10    99155    DXL    FF-S    4M-18804    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    DI592882    Fixtures-Shoe Fixtures    6/26/2012 10    99155    DXL    FF-S    20535    Fixtures-Shelving    6/26/2012 10    99155    DXL    FF-S    84400    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    111196    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    112147    Fixtures-Display    6/26/2012   Page 1 of 3 Date 10    99155    DXL    FF-S    112302    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    112440    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    8290638    Fixtures-Furniture    6/26/2012 10    99155    DXL    FF-S    029029    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    029519    Fixtures-Display    6/26/2012 10    99155    DXL    FF-S    38107    Fixtures-Display    6/28/2012 10    99155    DXL    FF-S    11793    Fixtures-Lighting    6/29/2012 10    99155    DXL    FF-S    11794    Fixtures-Lighting    6/29/2012 10    99155    DXL    FF-S    11795    Fixtures-Lighting    6/29/2012 10    99155    DXL    FF-S    112690    Fixtures-Display    6/29/2012 10    99155    DXL    SIGNS    957728    Signs    6/30/2012 10    99155    DXL    LHI-S    A73682    Fixtures-Safe    7/9/2012 10    99155    DXL    SIGNS    24629    Signs    7/12/2012 10    99155    DXL    FF-S    030107    Fixtures-Display    7/17/2012 10    99155    DXL    EQUIP-S    897222    Cabling/Phones    7/20/2012 10    99155    DXL    LHI-S    17770655    Video Security System    7/23/2012 10    99155    DXL    LHI-S    17770658    Video Security System    7/23/2012 10    99155    DXL    EQUIP-S    382294    Music System    7/27/2012 10    99155    DXL    SIGNS    24737    Signs    8/16/2012 10    99155    DXL    FF-S    051521    Fixtures    8/21/2012 10    99155    DXL    FF-S    030820    Fixtures-Display    8/31/2012 10    99155    DXL    FF-S    40056    Fixtures-Display    10/12/2012 10    99155    DXL    FF-S    0474246-IN    Tailor Shop Equip    11/2/2012 10    99155    DXL    FF-S    032297    Fixtures-Display    11/21/2012 10    99155    DXL    FF-S    41332    Fixtures-Display    1/10/2013 10    99155    DXL    FF-S    7625    Fixtures-Lighting    3/19/2013 10    99155    DXL    FF-S    034286    Fixtures-Display    3/31/2013 10    99155    DXL    FF-S    035130    Fixtures-Display    5/31/2013 10    99155    DXL    FF-S    31364    Fixtures    5/31/2013 Equipment Location:1298 Worcester Street, Natick, MA 01760 10    99412    DXL    FF-S    84751    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    20537    Fixtures-Shelving    6/26/2012 10    99412    DXL    FF-S    11684    Fixtures-Lighting    6/26/2012 10    99412    DXL    SIGNS    952426    Signs    6/26/2012 10    99412    DXL    FF-S    011015    Fixtures-Chairs    6/26/2012 10    99412    DXL    FF-S    37463    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    37667    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    37853    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    37667W    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    0467694-IN    Tailor Shop Equip    6/26/2012 10    99412    DXL    FF-S    2835    Fixtures-Pool Table    6/26/2012 10    99412    DXL    FF-S    4M-19141    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    DI593334    Fixtures-Shoe Fixtures    6/26/2012 10    99412    DXL    FF-S    20536    Fixtures-Shelving    6/26/2012 10    99412    DXL    FF-S    111712    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    112264    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    112303    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    112441    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    112534    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    8290708    Fixtures-Furniture    6/26/2012 10    99412    DXL    FF-S    029441    Fixtures-Display    6/26/2012 10    99412    DXL    FF-S    11798    Fixtures-Lighting    6/29/2012 10    99412    DXL    FF-S    11799    Fixtures-Lighting    6/29/2012 10    99412    DXL    FF-S    11800    Fixtures-Lighting    6/29/2012 10    99412    DXL    LHI-S    17688641    Video Security System    6/30/2012 10    99412    DXL    LHI-S    17688642    Video Security System    6/30/2012 10    99412    DXL    FF-S    029852    Fixtures-Display    6/30/2012 10    99412    DXL    FF-S    030108    Fixtures-Display    7/17/2012 10    99412    DXL    EQUIP-S    897221    Cabling/Phones    7/20/2012 10    99412    DXL    FF-S    37860    Fixtures-Display    7/23/2012 10    99412    DXL    EQUIP-S    384313    Music System    7/27/2012 10    99412    DXL    FF-S    030202    Fixtures-Display    7/30/2012 10    99412    DXL    EQUIP-S    899313    Cabling/Phones    7/31/2012 10    99412    DXL    FF-S    0469759-IN    Tailor Shop Equip    7/31/2012 10    99412    DXL    FF-S    8377519    Fixtures-Shoe Fixtures    8/6/2012 10    99412    DXL    FF-S    86470    Fixtures-Display    8/13/2012 10    99412    DXL    FF-S    0470517-IN    Tailor Shop Equip    8/17/2012 10    99412    DXL    FF-S    0470520-IN    Tailor Shop Equip    8/17/2012 10    99412    DXL    FF-S    051539    Fixtures    8/22/2012 10    99412    DXL    FF-S    8293022    Fixtures-Furniture    8/24/2012 10    99412    DXL    FF-S    030794    Fixtures-Display    8/31/2012 10    99412    DXL    FF-S    39867    Fixtures-Display    10/3/2012 10    99412    DXL    FF-S    0472999-IN    Tailor Shop Equip    10/10/2012 10    99412    DXL    LHI-S    18522751    Video Security System    11/12/2012 10    99412    DXL    FF-S    032290    Fixtures-Display    11/21/2012 10    99412    DXL    SIGNS    25377    Signs    1/16/2013 10    99412    DXL    FF-S    035111    Fixtures-Display    5/31/2013 10    99412    DXL    FF-S    31331    Fixtures    5/31/2013 10    99412    DXL    EQUIP-S    948605    Cabling/Phones    6/18/2013 Equipment Location: 11711 Princeton Pike, Suite 961, Cincinnati, OH 45246 10    99375    DXL    FF-S    37672    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    8291657    Fixtures-Furniture    7/18/2012 10    99375    DXL    FF-S    030109    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    030110    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    11792    Fixtures-Lighting    7/18/2012 10    99375    DXL    FF-S    98595 RI    Fixtures-Ladders    7/18/2012 10    99375    DXL    FF-S    95610    Fixtures-Mannequins    7/18/2012 10    99375    DXL    FF-S    011160    Fixtures-Chairs    7/18/2012 10    99375    DXL    FF-S    37670    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    37673    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    0468284-IN    Tailor Shop Equip    7/18/2012 10    99375    DXL    FF-S    0468285-IN    Tailor Shop Equip    7/18/2012 10    99375    DXL    FF-S    2839    Fixtures-Pool Table      Page 2 of 3 Date 10    99375    DXL    FF-S    4M-19489    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    Dl594913    Fixtures-Shoe Fixtures    7/18/2012 10    99375    DXL    FF-S    20538    Fixtures-Shelving    7/18/2012 10    99375    DXL    FF-S    85425    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    111848    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    112442    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    112444    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    112531    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    112709    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    112781    Fixtures-Display    7/18/2012 10    99375    DXL    FF-S    029520    Fixtures-Display    7/18/2012 10    99375    DXL    SIGNS    957729    Signs    7/18/2012 10    99375    DXL    EQUIP-S    897223    Cabling/Phones    7/20/2012 10    99375    DXL    LHI    800568    Extinguishers    7/25/2012 10    99375    DXL    FF-S    959230    Fixtures-Hangers    8/2/2012 10    99375    DXL    SIGNS    24706    Signs    8/7/2012 10    99375    DXL    SIGNS    24714    Signs    8/8/2012 10    99375    DXL    FF-S    0470054-IN    Tailor Shop Equip    8/9/2012 10    99375    DXL    FF-S    030387    Fixtures-Display    8/10/2012 10    99375    DXL    EQUIP-S    391649    Music System    8/14/2012 10    99375    DXL    FF-S    051540    Fixtures    8/22/2012 10    99375    DXL    LHI-S    18049246    Video Security System    8/27/2012 10    99375    DXL    LHI-S    18049248    Video Security System    8/27/2012 10    99375    DXL    LHI-S    A75177    Fixtures-Safe    9/23/2012 10    99375    DXL    FF-S    968200    Fixtures-Hangers    10/12/2012 10    99375    DXL    LHI-S    18552936    Video Security System    11/19/2012 10    99375    DXL    FF-S    032309    Fixtures-Display    11/21/2012 10    99375    DXL    FF-S    053786    Fixtures    2/22/2013 10    99375    DXL    FF-S    034283    Fixtures-Display    3/31/2013 10    99375    DXL    FF-S    035110    Fixtures-Display    5/31/2013 10    99375    DXL    FF-S    31326    Fixtures    5/31/2013 Equipment Location: Various 10    99997    Store Distribution    FF-S    293817    Fixtures-Hangers    12/30/2012 10    99997    Store Distribution    FF-S    294451    Fixtures-Hangers    12/30/2012 10    99997    Store Distribution    FF-S    294815    Fixtures-Hangers    12/30/2012 10    99997    Store Distribution    FF-S    295155    Fixtures-Hangers    12/30/2012 10    99997    Store Distribution    FF-S    284624    Fixtures-Hangers    12/30/2012 10    99997    Store Distribution    FF-S    292277    Fixtures-Hangers    12/30/2012 10    99997    Store Distribution    FF-S    293240    Fixtures-Hangers    12/30/2012 As more fully described in the electronic disk provided to Lender by Borrower.   Destination XL Group, Inc. By:     Page 3 of 3 EXHIBIT B EQUIPMENT SECURITY NOTE NO. 17608-70004   STORE   LOCATION    CENTER NAME    ADDRESS1    CITY    ST    ZIP CODE 10   9802    ANCHOR    2777 PAPER MILL RD, SUITE C-3a    WYOMISSING    PA    19610 10   9644    OUTLET    Glenwood Village 7 Glenwood Rd, Suite E    CLINTON    CT    06413 10   9998    Store Distribution    Various          10   9999    Store Distribution    Various          10   99155    DXL    MAY CROSSING 5401 N. MAY AVENUE SUITE 700    OKLAHOMA CITY    OK    73112 10   99412    DXL    Sherwood Plaza 1298 Worcester Street    Natick    MA    01760 10   99375    DXL    TRI-COUNTY TOWNE CENTER 11711 PRINCETON PIKE, SUITE 961    CINCINNATI    OH    45246 10   99997    Store Distribution    Various              Page 1 of 1
Filed Pursuant to Rule 424(b)(5) Registration No. 333-196387 Product Supplement to the Prospectus dated June 27, 2014 and the Prospectus Supplement dated June 27, 2014 Senior Medium-Term Notes, Series C Non-Principal Protected Notes Linked to One or More Equity Securities Bank of Montreal may offer and sell non-principal-protected notes linked to the performance of one or more equity securities (each, an “Underlying Stock”). The notes may be linked to shares of common stock, as well as equity securities of non U.S. issuers issued through depositary arrangements such as American depositary shares (“ADSs”).We refer to the security or securities that are applicable to your notes as the “Underlying Asset.”The payment at maturity on your notes will be based on the performance of the Underlying Asset during the term of your notes.The notes are intended for investors who anticipate that the level of the Underlying Asset will increase (or, in the case of bearish notes, decrease) from its Initial Level to the Final Level on the applicable valuation date or dates.Investors must be willing to forego interest payments on the notes and be willing to accept a return that may be negative, in which case you will receive at maturity less, and possibly significantly less, than your principal. This product supplement describes terms that will apply generally to the notes, and supplements the terms described in the accompanying prospectus supplement and prospectus.A separate term sheet or pricing supplement, as the case may be, will describe the terms that apply specifically to the notes, including any changes to the terms specified below.We refer to these term sheets and pricing supplements generally as “pricing supplements.”If the terms described in the applicable pricing supplement are inconsistent with those described in this product supplement or in the accompanying prospectus supplement or prospectus, the terms described in the applicable pricing supplement will control. Unless otherwise specified in the applicable pricing supplement, we will not make periodic payments of interest on the notes. At maturity, you will receive a payment in excess of the principal amount of your notes if the level of the Underlying Asset increases (or, in the case of bearish notes, decreases).However, if the level of the Underlying Asset decreases (or, in the case of bearish notes, increases), then, depending upon the specific terms of your notes, you may receive an amount that is less than the principal amount of your notes.Your notes may or may not include a “Buffer,” in which case you will lose a portion of your principal amount if the level of the Underlying Asset is less than (or in the case of bearish notes, greater than) a specified level. The notes will not be listed on any securities exchange. Because we have provided only a brief summary of the terms of your notes above, you should read the detailed description of the terms of the notes found in “Summary Information” and “General Terms of the Notes.” Your investment in the notes involves certain risks.We encourage you to read the “Additional Risk Factors Relating to the Notes” section beginning on page PS-5 of this product supplement and in the “Risk Factors” sections beginning on page S-1 of the accompanying prospectus supplement and on page 7 of the accompanying prospectus, so that you may better understand those risks. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy of this product supplement or the accompanying prospectus and prospectus supplement.Any representation to the contrary is a criminal offense. The notes will be our unsecured obligations and will not be savings accounts or deposits that are insured by the United States Federal Deposit Insurance Corporation, the Bank Insurance Fund, the Canada Deposit Insurance Corporation or any other governmental agency or instrumentality or other entity. BMO CAPITAL MARKETS CORP. Product Supplement dated November12, 2014 TABLE OF CONTENTS Summary Information PS-2 Additional Risk Factors Relating to the Notes PS-5 General Terms of the Notes PS-11 Use of Proceeds and Hedging PS-21 Underlying Stock Issuers PS-22 Supplemental Tax Considerations PS-23 Employee Retirement Income Security Act PS-28 Supplemental Plan of Distribution PS-30 PS-1 Table of Contents SUMMARY INFORMATION We refer to the notes we are offering by this product supplement as the “notes.” Each of the notes, including your notes, has the terms described below and under “General Terms of the Notes.”In addition, references to the “accompanying prospectus” mean the accompanying prospectus, dated June27, 2014, as supplemented by the accompanying prospectus supplement, dated June27, 2014, relating to our SeriesC Senior Medium-Term Notes. Underlying Asset: Your notes will be linked to one or more equity securities. Your notes may be linked to a “Basket” of two or more securities. We refer to each security included in a basket as a “Basket Component.” We refer to the issuer of the Underlying Stock as the “Underlying Stock Issuer.” Interest Rate: Unless otherwise specified in the applicable pricing supplement, we will not make periodic payments of interest on the notes. Denominations: Unless otherwise specified in the applicable pricing supplement, the notes will be issued in denominations of $1,000 and integral multiples of $1,000. Payment at Maturity Greater than Principal: If the Final Level (as defined below) of the Underlying Asset exceeds (or in the case of bearish notes, is less than) the Initial Level (as defined below) then, depending upon the terms of your notes, and unless otherwise set forth in the applicable pricing supplement, the payment at maturity will be determined as follows: Principal Amount + (Principal Amount × Percentage Change × Upside Leverage Factor) Your notes may be “Digital Return Notes.”For Digital Return Notes, unless otherwise set forth in the applicable pricing supplement, the payment at maturity will be determined as follows: Principal Amount + (Principal Amount × Digital Return) Your notes may be “Booster Notes.”For Booster Notes, unless otherwise set forth in the applicable pricing supplement, your payment at maturity will be determined as follows: If the Percentage Change is greater than the Booster Percentage (as defined below), then the payment at maturity will equal: Principal Amount + (Principal Amount × Percentage Change) If the Percentage Change is greater than or equal to 0% but less than or equal to the Booster Percentage, then the payment at maturity will equal: Principal Amount + (Principal Amount × Booster Percentage) For each of the above notes, the payment at maturity may be subject to a Maximum Redemption Amount (as defined below).For Digital Return Notes, the payment at maturity will be limited to the return represented by the Digital Return. Payment at Maturity Less than or Equal to Principal: If the Final Level is less than (or in the case of bearish notes, greater than) or equal to the Initial Level, then, unless otherwise described in the applicable pricing supplement, the payment at maturity will equal: Principal Amount + (Principal Amount × Percentage Change × Downside Leverage Factor) However, if the relevant pricing supplement specifies that a “Buffer” is applicable to your notes, then: If the Final Level is greater than or equal to (or in the case of bearish notes, less than or equal to) the Buffer Level (as defined below), then the payment at maturity will equal the principal amount of your notes. PS-2 Table of Contents If the Final Level is less than (or in the case of bearish notes, greater than) the Buffer Level, then the payment at maturity will equal: Principal Amount + [Principal Amount × (Percentage Change + Buffer Percentage) × Downside Leverage Factor] In this case, if the Final Level is less than (or in the case of bearish notes, greater than) the Initial Level (or, if applicable, Buffer Level), then, at maturity, you will receive less than the principal amount of your notes. Percentage Change: Percentage Change will be calculated as follows (and expressed as a percentage): Final Level – Initial Level Initial Level However, if your notes are bearish notes, the Percentage Change will be calculated as follows (and expressed as a percentage): Initial Level – Final Level Initial Level Maximum Redemption Amount: The Maximum Redemption Amount, if applicable, will be specified in the relevant pricing supplement.If a Maximum Redemption Amount applies to your notes, then the payment at maturity will be limited to a percentage that will be set forth in the pricing supplement. Cap: The Cap, if applicable, will be specified in the relevant pricing supplement. If a Cap applies to your notes, the positive Percentage Change in the level of the Underlying Asset will be limited to the Cap. Upside Leverage Factor: As specified in the relevant pricing supplement, if applicable.The Upside Leverage Factor may be less than, equal to or greater than 100%.If the Upside Leverage Factor is less than 100%, you will participate in less than the full upside performance (or in the case of bearish notes, downside performance) of the Underlying Asset.If the Upside Leverage Factor is greater than 100%, you will participate on a leveraged basis in the upside performance (or in the case of bearish notes, downside performance) of the Underlying Asset (subject to any applicable Maximum Redemption Amount). Downside Leverage Factor: As specified in the relevant pricing supplement, if applicable.The Downside Leverage Factor may be less than, equal to or greater than 100%.If the Downside Leverage Factor is less than 100%, you will participate in less than the full downside performance (or in the case of bearish notes, upside performance) of the Underlying Asset.If the Downside Leverage Factor is greater than 100%, you will participate on a leveraged basis in the downside performance (or in the case of bearish notes, upside performance) of the Underlying Asset, and you may lose a greater portion of the principal amount of your investment. Digital Return: A percentage that will be specified in the applicable pricing supplement.If a Digital Return applies to your notes, the return on your investment will be limited to the return represented by the Digital Return. Booster Percentage: A specified percentage increase (or in the case of bearish notes, decrease) in the level of the Underlying Asset.The Booster Percentage, if any, will be set forth in the relevant pricing supplement. Buffer Level: A specified level of the Underlying Asset that is less than (or in the case of bearish notes, greater than) the Initial Level.The Buffer Level, if any, will be expressed as a percentage of the Initial Level and will be set forth in the relevant pricing supplement. Buffer Percentage: A specified percentage that will be set forth in the relevant pricing supplement, if applicable.For example, if the Buffer Level is 90% of the Initial Level, the Buffer Percentage will be 10%. PS-3 Table of Contents Barrier: If so specified in the applicable pricing supplement, the notes will be subject to a Barrier. In such a case, holders of the notes will be subject to possible loss of all or a portion of the principal amount of the notes if the level of the Underlying Asset falls beneath (or in the case of bearish notes, exceeds) a specified Barrier Level during a specified observation period. See “General Terms of the Notes —Payment at Maturity—Payment at Maturity Less than or Equal to Principal—Notes with a Barrier Level.” Initial Level: As specified in the relevant pricing supplement.Unless otherwise specified in the applicable pricing supplement, the Initial Level for a note linked to an Underlying Stock will be the closing price of that Underlying Stock on the applicable pricing date.In the case of a note linked to a Basket, the Initial Level will be set forth in the applicable pricing supplement. Final Level: The closing price of the Underlying Asset on the valuation date (if there is one valuation date applicable to the notes) or the arithmetic average of the closing prices of the Underlying Asset on each of the valuation dates (if there is more than one valuation date applicable to the notes), or any other dates specified in the relevant pricing supplement.In the case of a note linked to a Basket, the Final Level of the Basket will be the value of the Basket on the valuation date, or the arithmetic average of the value of the Basket on each of the valuation dates, as applicable, determined as described in more detail in the section entitled “General Terms of the Notes—Notes Linked to a Basket” in this product supplement. Valuation Date(s): Unless otherwise specified in the relevant pricing supplement, the valuation date, or if there is more than one valuation date, the final valuation date, will be the third trading day prior to the maturity date, subject to postponement as described below. Additional Terms: The applicable pricing supplement for your notes may set forth terms that are additional to, or different from, the terms described in this product supplement. Maturity Date: As specified in the applicable pricing supplement, subject to any prior automatic redemption, if applicable. If the valuation date or the final valuation date, as applicable, is postponed as described below, the maturity date will be postponed by the same number of trading day(s). Automatic Redemption: We may issue notes that are subject to automatic redemption.If your notes are subject to automatic redemption, the pricing supplement will set forth the terms upon which the notes will be redeemed. Clearance and Settlement: DTC Listing: The notes will not be listed on any securities exchange. Calculation Agent: Unless otherwise set forth in the applicable pricing supplement, BMO Capital Markets Corp. will serve as calculation agent for the notes.The calculation agent will make all required determinations as to the amounts payable on the notes. PS-4 Table of Contents ADDITIONAL RISK FACTORS RELATING TO THE NOTES An investment in the notes involves risks.This section describes significant risks relating to the terms of the notes.Before investing in the notes, you should read the following information about these risks, together with the other information contained in or incorporated by reference in the applicable pricing supplement, this product supplement and the accompanying prospectus supplement and prospectus. General Risks Relating to the Notes Your investment in the notes may result in a loss.The notes do not guarantee any return of principal unless otherwise specified in the relevant pricing supplement.The amount payable on the notes at maturity will depend primarily on the Percentage Change in the level of the Underlying Asset from the Initial Level to the Final Level and may be less, and possibly significantly less, than the principal amount.For notes without a buffer, if the Final Level is less than (or, in the case of bearish notes, greater than) the Initial Level, the return on your notes will be less than the principal amount.For notes with a buffer, if the Final Level is less than (or, in the case of bearish notes, greater than) the Buffer Level, the return on your notes will be less than the principal amount.In the case of notes with a Downside Leverage Factor greater than 100%, your notes will participate in the downside performance (or, in the case of bearish notes, upside performance) of the Underlying Asset on a leveraged basis.Depending on the Downside Leverage Factor and the other terms of your notes, you may lose all or a substantial portion of the amount that you invested to purchase the notes. The notes do not pay interest and your return may be lower than the return on a conventional debt security of comparable maturity. Unless otherwise specified in the applicable pricing supplement, there will be no periodic interest payments on the notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity.The yield that you will receive on your notes, which could be negative, may be less than the yield you could earn if you purchased a standard senior debt security of Bank of Montreal with the same maturity date.Your investment may not reflect the full opportunity cost to you when you take into account factors that affect the time value of money. The appreciation potential of the notes may be limited. If your notes are subject to a Maximum Redemption Amount, a Cap, or a Digital Return, they will provide less opportunity to participate in the appreciation (or, in the case of bearish notes, depreciation) of the Underlying Asset than an investment in a security linked to the Underlying Asset providing full participation in the appreciation (or, in the case of bearish notes, depreciation), because the payment at maturity will not exceed the Maximum Redemption Amount or the principal amount plus the Digital Return, as applicable, and the positive Percentage Change in the level of the Underlying Asset will be limited to the Cap, if applicable.Accordingly, your return on the notes may be less than your return would be if you made an investment in a security directly linked to the positive (or, in the case of bearish notes, negative) performance of the Underlying Asset. Owning the notes is not the same as owning the Underlying Asset or a security directly linked to the performance of the Underlying Asset.The return on your notes will not reflect the return you would realize if you actually owned the Underlying Asset or a security directly linked to the performance of the Underlying Asset and held that investment for a similar period.For example, your return on the notes will not reflect the return you would receive if you actually owned the Underlying Asset and received the dividends paid on the Underlying Stock. Your notes may trade quite differently from the Underlying Asset.Changes in the level of the Underlying Asset may not result in comparable changes in the market value of your notes.Even if the level of the Underlying Asset increases (or, in the case of bearish notes, decreases) from the Initial Level during the term of the notes, the market value of the notes prior to maturity may not increase to the same extent.It is also possible for the market value of the notes prior to maturity to decrease while the level of the Underlying Asset increases (or, in the case of bearish notes, decreases). The notes may not have an active trading market.Your notes will not be listed on any securities exchange, and there may be little or no secondary market for your notes.Even if a secondary market for your notes develops, it may not provide significant liquidity.We expect that transaction costs in any secondary market would be high.As a result, the difference between bid and ask prices for your notes in any secondary market could be substantial.If you sell your notes before maturity, you may have to do so at a substantial discount from the issue price, and as a result, you may suffer substantial losses. PS-5 Table of Contents The market value of your notes may be influenced by many unpredictable factors. The following factors, many of which are beyond our control, may influence the market value of your notes: • the level of the Underlying Asset, including, in the case of notes that have a buffer, whether the level of the Underlying Asset trades or closes at a level below (or in the case of bearish notes, above) the Buffer Level; • if your notes are subject to a Maximum Redemption Amount, a Cap, or a Digital Return, your potential return on the notes will be limited; • the volatility of the price of the Underlying Asset; • the dividend rate on the Underlying Stock; • economic, financial, political, military, regulatory, legal and other events that affect the applicable securities markets generally and the U.S. markets in particular, and which may affect the level of the Underlying Asset; • interest rates in the market; and • the time remaining to maturity of the notes. These factors may influence the market value of your notes if you sell your notes before maturity.Our creditworthiness, as represented by our credit ratings or as otherwise perceived in the market will also affect the market value of your notes.If you sell your notes prior to maturity, you may receive less than the principal amount of your notes. Payments on the notes are subject to our credit risk, and changes in our credit ratings are expected to affect the market value of the notes.The notes are our senior unsecured debt securities.As a result, your receipt of interest payments (if applicable) and the amount due on the maturity date are each dependent upon our ability to repay our obligations at that time.This will be the case even if the level of the Underlying Asset increases (or, in the case of bearish notes, decreases) after the pricing date.No assurance can be given as to what our financial condition will be at any time during the term of the notes. If your notes are linked to a Basket, changes in the level of one or more Basket Components may be offset by changes in the level of one or more other Basket Components.Your notes may be linked to a Basket.In such a case, a change in the levels of one or more Basket Components may not correlate with changes in the levels of one or more other Basket Components.The level of one or more Basket Components may increase, while the level of one or more other Basket Components may not increase as much, or may even decrease.The opposite changes may occur in the case of bearish notes.Therefore, in determining the level of the Basket as of any time, increases (or, in the case of bearish notes, decreases) in the level of one Basket Component may be moderated, or wholly offset, by lesser increases or decreases (or, in the case of bearish notes, lesser decreases and increases) in the level of one or more other Basket Components.If the weightings of the applicable Basket Components are not equal, changes in the level of the Basket Components which are more heavily weighted could have a disproportionately adverse impact upon your notes. The amount to be paid at maturity will not be affected by all developments relating to the Underlying Asset. Changes in the level of the Underlying Asset during the term of the notes before or between the relevant valuation date or valuation dates will not be reflected in the calculation of the payment at maturity.The calculation agent will calculate this amount by comparing only the Final Level to the Initial Level (or the Buffer Level, as applicable).No other levels of the Underlying Asset will be taken into account.As a result, you may receive less than the principal amount of your notes, even if the level of the Underlying Asset has increased (or, in the case of bear notes, decreased) at certain times during the term of the notes before decreasing to a level below (or, in the case of bearish notes, increasing to a level above) the Initial Level (or Buffer Level, as applicable) and, if applicable, below (or, in the case of bearish notes, above) the Barrier Level as of the relevant dates. PS-6 Table of Contents We will not hold any shares comprising the Underlying Asset for your benefit.The indenture and the terms governing your notes do not contain any restriction on our ability or the ability of any of our affiliates to sell, pledge or otherwise convey all or any portion of the securities that may comprise the Underlying Asset that we or they may acquire.Neither we nor our affiliates will pledge or otherwise hold any shares for your benefit, including any securities included in an Underlying Asset.Consequently, in the event of our bankruptcy, insolvency or liquidation, any of those shares that we own will be subject to the claims of our creditors generally and will not be available for your benefit specifically. You must rely on your own evaluation of the merits of an investment linked to the Underlying Asset.In the ordinary course of their business, our affiliates may have expressed views on expected movements in any Underlying Asset or its components, and may do so in the future.These views or reports may be communicated to our clients and clients of our affiliates.However, these views are subject to change from time to time.Moreover, other professionals who transact business in markets relating to any Underlying Asset or its components may at any time have significantly different views from those of our affiliates.For these reasons, you are encouraged to derive information concerning the applicable Underlying Asset or its components from multiple sources, and you should not rely solely on views expressed by our affiliates. The Initial Level may be determined after the pricing date of the notes.If so specified in the relevant pricing supplement, the Initial Level will be determined based on the arithmetic average of the closing levels of the Underlying Asset on certain specified dates.One or more of these days may occur on or following the pricing date or the issue date of the notes; as a result, the Initial Level may not be determined, and you may therefore not know such value, until after the issue date.If there are any increases (or in the case of bearish notes, decreases) in the closing levels of the Underlying Asset on any relevant dates used to determine the Initial Level that occur after the pricing date, and such increases (or decreases) result in the Initial Level being higher (or in the case of bearish notes, lower) than the closing level on the pricing date, this may establish higher levels (or in the case of bearish notes, lower levels) that the Underlying Asset must achieve for you to attain a positive return on your investment or to avoid a loss of principal at maturity. Our trading and other transactions relating to the Underlying Asset or its components, futures, options or other derivative products may adversely affect the market value of the notes.As described below under “Use of Proceeds and Hedging,” we or one or more affiliates may hedge our obligations under the notes by purchasing or selling shares included in the Underlying Asset, futures or options relating to the Underlying Asset, or other derivative instruments with returns linked or related to changes in the performance of the Underlying Asset.We or our affiliates may adjust these hedges by, among other things, purchasing or selling those assets at any time.Although they are not expected to do so, any of these hedging activities may adversely affect the market price of the Underlying Asset, and, therefore, the market value of the notes, and the amounts payable at maturity.It is possible that we or one or more of our affiliates could receive substantial returns from these hedging activities, even though the market value of the notes decreases. We or one or more of our affiliates may also engage in trading relating to the Underlying Asset on a regular basis as part of our general broker-dealer and other businesses, for proprietary accounts, for other accounts under management or to facilitate transactions for our customers, including block trades.Any of these activities could adversely affect the level of the Underlying Asset and, therefore, the market value of the notes.We or one or more of our affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or related to changes in the performance of the Underlying Asset.By introducing competing products into the marketplace in this manner, we or one or more of our affiliates could adversely affect the market value of the notes. The inclusion of the underwriting commission and hedging profits, if any, in the original public offering price of the notes and certain hedging costs are likely to adversely affect the price at which you can sell your notes.Assuming no change in market conditions or any other relevant factors, the price, if any, at which BMO Capital Markets Corp. may be willing to purchase the notes in secondary market transactions (if BMO Capital Markets Corp. makes a market in the notes) will be lower than the initial public offering price.The initial public offering price will include, and any price quoted to you is likely to exclude, the underwriting commission paid in connection with the initial distribution.The initial public offering price may also include, and any price quoted to you would be likely to exclude, the hedging profits that we expect to earn with respect to hedging our exposure under the notes.In addition, any such bid price is also likely to reflect a discount to account for costs associated with establishing or unwinding any related hedge transaction such as dealer discounts, mark-ups and other transaction costs.In addition, any such prices may differ from values determined by pricing models used by BMO Capital Markets Corp. PS-7 Table of Contents Our business activities and the business activities of our affiliates may create conflicts of interest.As noted above, we and our affiliates expect to engage in trading activities related to the Underlying Asset or its components that are not for the account of holders of the notes or on their behalf.These trading activities may present a conflict between the holders’ interests in the notes and the interests we and our affiliates will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management.These trading activities, if they influence the level of the Underlying Asset or its components, could be adverse to the interests of the holders of the notes.We and one or more of our affiliates may, at present or in the future, engage in business with the issuers of the equity securities included in an Underlying Asset, including making loans to or providing advisory services to those companies.These services could include investment banking and merger and acquisition advisory services.These activities may present a conflict between our or one or more of our affiliates’ obligations and your interests as a holder of the notes.Moreover, we and our affiliates may have published, and in the future expect to publish, research reports with respect to the Underlying Asset or its components.This research is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the notes.Any of these activities by us or one or more of our affiliates may affect the level of the Underlying Asset or its components and, therefore, the market value of the notes. The calculation agent can postpone the determination of the Final Level if a market disruption event occurs.The determination of the Final Level may be postponed if the calculation agent determines that a market disruption event has occurred or is continuing on any valuation date with respect to the Underlying Asset.If such a postponement occurs, the calculation agent will use the closing level of the Underlying Asset on the first subsequent business day on which no market disruption event occurs or is continuing.In no event, however, will any valuation date be postponed by more than ten trading days.As a result, if a market disruption event occurs or is continuing on a valuation date, the maturity date for the notes could also be postponed, although not by more than ten trading days. If the determination of the level of the Underlying Asset for any valuation date is postponed to the last possible day, but a market disruption event occurs or is continuing on that day, that day will nevertheless be the date on which the level of the Underlying Asset will be determined by the calculation agent.In such an event, the calculation agent will make a good faith estimate in its sole discretion of the level that would have prevailed in the absence of the market disruption event.See “General Terms of the Notes—Market Disruption Events.” As calculation agent, BMO Capital Markets Corp. will have the authority to make determinations that could affect the value of your notes and your payment at maturity.As calculation agent for your notes, BMO Capital Markets Corp. will have discretion in making various determinations that affect your notes, including determining the Final Level, determining whether any market disruption events have occurred, and determining whether certain corporate events have occurred with respect to the Underlying Asset.The exercise of this discretion by BMO Capital Markets Corp. could adversely affect the value of your notes and may present BMO Capital Markets Corp., which is our wholly owned subsidiary, with a conflict of interest. The historical performance of the Underlying Asset or its components should not be taken as an indication of their future performance. The level of the Underlying Asset will determine the amount to be paid on the notes at maturity.The historical performance of the Underlying Asset or its components does not necessarily give an indication of their future performance.As a result, it is impossible to predict whether the level of the Underlying Asset will rise or fall during the term of the notes.The level of the Underlying Asset and its components will be influenced by complex and interrelated political, economic, financial and other factors. Significant aspects of the tax treatment of the notes are uncertain.The tax treatment of the notes is uncertain.We do not plan to request a ruling from the Internal Revenue Service or from any Canadian authorities regarding the tax treatment of the notes, and the Internal Revenue Service or a court may not agree with the tax treatment described in this product supplement. PS-8 Table of Contents If the Underlying Asset is or includes the type of financial asset described under Section 1260 of the Code, while the matter is not entirely clear, unless otherwise specified in the applicable pricing supplement, there exists a substantial risk that an investment in a note is, in whole or in part, a “constructive ownership transaction” to which Section 1260 of the Code applies.If Section 1260 of the Code applies, all or a portion of any long-term capital gain recognized by a United States holder in respect of a note will be recharacterized as ordinary incomeand certain interest charges may apply. See the section entitled “Supplemental Tax Considerations – Supplemental U.S. Federal Income Tax Considerations – Potential Application of Section 1260 of the Code.” The Internal Revenue Service has issued a notice indicating that it and the Treasury Department are actively considering whether, among other issues, a holder should be required to accrue interest over the term of an instrument such as the notes even though that holder will not receive any payments with respect to the notes until maturity and whether all or part of the gain a holder may recognize upon sale or maturity of an instrument such as the notes could be treated as ordinary income.The outcome of this process is uncertain and could apply on a retroactive basis. Please read carefully the sections entitled “Supplemental Tax Considerations” in this product supplement, the section “United States Federal Income Taxation” in the accompanying prospectus and the section entitled “Certain Income Tax Consequences” in the accompanying prospectus supplement.You should consult your tax advisor about your own tax situation. Insurance companies and employee benefit plans should carefully review the legal issues of an investment in the notes. Any insurance company or fiduciary of a pension plan or other employee benefit plan that is subject to the prohibited transaction rules of the Employee Retirement Income Security Act of 1974, as amended, which we call “ERISA,” or the Internal Revenue Code of 1986, as amended (the “Code”), including an IRA or Keogh plan (or a governmental plan to which similar prohibitions apply), and that is considering purchasing the notes with the assets of the insurance company or the assets of such plan, should consult with its counsel regarding whether the purchase or holding of the notes could become a “prohibited transaction” under ERISA, the Code or any substantially similar prohibition in light of the representations a purchaser or holder in any of the above categories is deemed to make by purchasing and holding the notes.These issues are discussed in more detail in the section “Employee Retirement Income Security Act” below. Risks Relating to the Applicable Underlying Stocks You will not have any shareholder rights and will have no right to receive any shares included in the Underlying Asset at maturity.Investing in your notes will not make you a holder of any of the Underlying Stocks. Neither you nor any other holder or owner of the notes will have any voting rights, any right to receive dividends or other distributions or any other rights with respect to any of these securities. No Underlying Stock Issuer will have any role or responsibilities with respect to the notes.No Underlying Stock Issuer will authorize or approve the notes, or be involved in any offering of the notes.No such company will have any financial or legal obligation with respect to the notes or the amounts to be paid to you, including any obligation to take our needs or your needs into consideration for any reason, including taking any corporate actions that might affect the value of the Underlying Stock or the notes.No such company will receive any of the proceeds from any offering of the notes.No Underlying Stock Issuer will be responsible for, or participate in, the determination or calculation of the amounts receivable by holders of the notes. An investment in the notes may be subject to risks associated with non-U.S. securities markets.An Underlying Stock may have been issued by a non-U.S. company or may be listed on a non-U.S. stock exchange, in addition to its U.S. listing.Therefore, the return on the notes may be affected by factors affecting the value of securities in the relevant non-U.S. markets, this involves particular risks.Non-U.S. securities markets may be more volatile than U.S. securities markets, and market developments may affect non-U.S. securities markets differently from the U.S. securities markets.Direct or indirect government intervention to stabilize these non-U.S. securities markets, as well as cross shareholdings among non-U.S. companies, may affect trading prices and volumes in those markets.Also, there is generally less publicly available information in the U.S. about non-U.S. companies than about U.S. companies, and non-U.S. companies are subject to accounting, disclosure, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies. PS-9 Table of Contents Prices of securities of non U.S. companies are subject to political, economic, financial and social factors that may be unique to the particular country.These factors, which could negatively affect the relevant Underlying Stock, include the possibility of recent or future changes in the economic and fiscal policies of non-U.S. governments, the possible imposition of, or changes in, currency exchange laws or other non-U.S. laws or restrictions applicable to non-U.S. companies or investments in non-U.S. equity securities, the possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks of hostility and political instability and the possibility of natural disaster or adverse public health developments in the region.Moreover, the economies of certain foreign countries may differ favorably or unfavorably from the U.S. economy in important respects, such as growth of gross national product, rate of inflation, trade surpluses or deficits, capital reinvestment, resources and self-sufficiency. We do not control any Underlying Stock Issuer and we are not responsible for any disclosure made by any other company.Except to the extent set forth in the applicable pricing supplement, neither we nor any of our affiliates have the ability to control the actions of any Underlying Stock Issuer.We do not assume any responsibility for the adequacy or accuracy of any publicly available information about any of these companies, unless (and only to the extent that) our securities or the securities of our affiliates are represented by that Underlying Stock. We are not responsible for any other issuer’s public disclosure of information on itself or the Underlying Stock, whether contained in SEC filings or otherwise. We will not perform any due diligence procedures with respect to the applicable Underlying Stock Issuer.You should make your own investigation into the applicable Underlying Stock Issuer. You will have limited anti-dilution protection with respect to an Underlying Stock.The calculation agent will make certain adjustments for stock splits, reverse stock splits, stock dividends, extraordinary dividends and other events that affect the applicable issuer’s capital structure, but only in the situations we describe in “General Terms of the Notes—Anti-dilution Adjustments” below.The calculation agent will not be required to make an adjustment for every corporate event that may affect the relevant security.For example, the calculation agent will not make any adjustments for events such as an offering by an Underlying Stock Issuer of equity securities or a tender or exchange offer for less than all outstanding shares of that issuer by a third party.Those events or other actions by the applicable issuer or a third party may nevertheless adversely affect the price of the Underlying Stock, and adversely affect the value of your notes. Additional Risks Relating to Underlying Stocks that Are ADSs The value of the Underlying Stock may not accurately track the value of the common shares of the applicable company.If an Underlying Stock is an ADS, each share of the Underlying Stock will represent shares of the relevant company (an “Underlying Company”).The trading patterns of the ADSs will generally reflect the characteristics and valuations of the underlying common shares; however, the value of the ADSs may not completely track the value of those shares.Trading volume and pricing on the applicable non-U.S. exchange may, but will not necessarily, have similar characteristics as the ADSs.For example, certain factors may increase or decrease the public float of the ADSs and, as a result, the ADSs may have less liquidity or lower market value than the common shares of the Underlying Company. Adverse trading conditions in the applicable non-U.S. market may negatively affect the value of the Underlying Stock.Holders of an Underlying Company’s ADSs may usually surrender the ADSs in order to receive and trade the underlying common shares.This provision permits investors in the ADSs to take advantage of price differentials between markets.However, this provision may also cause the market prices of the Underlying Stock to more closely correspond with the values of the common shares in the applicable non-U.S. markets.As a result, a market outside of the U.S. for the underlying common shares that is not liquid may also result in an illiquid market for the ADSs. Other Risk Factors Relating to the Applicable Underlying Asset The relevant pricing supplement may set forth additional risk factors as to the Underlying Asset that you should review prior to purchasing the notes. PS-10 Table of Contents GENERAL TERMS OF THE NOTES This product supplement and the accompanying prospectus dated June27, 2014 relating to the notes, should be read together.Because the notes are part of a series of our senior debt securities called Senior Medium-Term Notes, SeriesC, this product supplement and the accompanying prospectus should also be read together with the accompanying prospectus supplement, dated June27, 2014.Terms used but not defined in this product supplement have the meanings given them in the accompanying prospectus or accompanying prospectus supplement, unless the context requires otherwise. The notes will be issued in book-entry form through The Depository Trust Company.Owners of beneficial interests in the notes should read the section entitled “Description of the Notes We May Offer—Legal Ownership” in the accompanying prospectus supplement and “Description of the Debt Securities We May Offer—Legal Ownership and Book-Entry Issuance” in the accompanying prospectus. The notes are part of a series of senior debt securities entitled “Senior Medium-Term Notes, SeriesC” that we may issue from time to time under the senior indenture, dated January25, 2010, between Bank of Montreal and Wells Fargo Bank, National Association, as trustee.Terms that apply generally to our medium term notes are described in “Description of the Notes We May Offer” in the accompanying prospectus supplement.The terms described in this document supplement those described in the accompanying prospectus and the accompanying prospectus supplement, and, if the terms described here are inconsistent with those described in those documents, the terms described in this product supplement are controlling. Unless otherwise set forth in the applicable pricing supplement, we will not pay periodic interest payments on the notes.If any payment date, including the maturity date, falls on a day that is not a business day, we will pay the required payment on the first subsequent business day, and no additional interest will accrue on the notes as a result. Payment at Maturity Percentage Change.At maturity, subject to our credit risk as issuer of the notes, you will receive a cash payment that is based on the performance of the Underlying Asset.The payment at maturity will depend upon the Percentage Change of the Underlying Asset.Unless otherwise set forth in the applicable pricing supplement, the Percentage Change will be calculated as follows (and expressed as a percentage): Final Level – Initial Level Initial Level However, if your notes are bearish notes, the Percentage Change will be calculated as follows (and expressed as a percentage): Initial Level – Final Level Initial Level Initial Level.The relevant pricing supplement will set forth the Initial Level of the Underlying Asset.Unless otherwise specified in the relevant pricing supplement, the Initial Level of an Underlying Stock will be its official closing price on the pricing date.The Initial Level may also be the average of the closing prices of the applicable Underlying Stock on two or more days before and/or after the pricing date.In the case of a note linked to a Basket, the Initial Level will be a level specified in the applicable pricing supplement. PS-11 Table of Contents Final Level.Unless otherwise specified in the relevant pricing supplement, the Final Level for any Underlying Stock on any trading day will equal the official closing price, regular way, for the security, on a per-share or other unit basis: · on the principal national securities exchange on which that Underlying Asset is listed for trading on that day; or · if that security is not quoted on any national securities exchange on that day, on any other market system or quotation system that is the primary market for the trading of that Underlying Stock. If the Underlying Stock is not listed or traded as described above, then the closing price for that Underlying Stock on any trading day will be the average, as determined by the calculation agent, of the bid prices (or, in the case of bearish notes, offer prices) for the Underlying Stock obtained from as many dealers in that Underlying Asset selected by the calculation agent, in its sole discretion, as will make those bid prices available to the calculation agent.The number of dealers need not exceed three and may include the calculation agent or any of our other affiliates. In the case of a note linked to a Basket, the Final Level of the Basket will be the value of the Basket on the valuation date, or the arithmetic average of the value of the Basket on each of the valuation dates, as applicable, determined as described in more detail in the section entitled “—Notes Linked to a Basket” in this product supplement. Payment at Maturity in Excess of Principal General.If the Final Level is greaterthan (or in the case of bearish notes, lessthan) the Initial Level, then, at maturity, you will receive an amount equal to: Principal Amount + (Principal Amount × Percentage Change × Upside Leverage Factor) The Upside Leverage Factor represents the extent to which your notes will participate in the upside performance (or in the case of bearish notes, downside performance) of the Underlying Asset.The Upside Leverage Factor may be less than, equal to, or greater than 100%.If the Upside Leverage Factor is less than 100%, your notes will participate in less than the full upside performance (or in the case of bearish notes, downside performance) of the Underlying Asset.If the Upside Leverage Factor is greater than 100%, your notes will participate in the upside performance (or in the case of bearish notes, downside performance) on a leveraged basis.The Upside Leverage Factor will be specified in the relevant pricing supplement, if applicable. Digital Return Notes.Your notes may be “Digital Return Notes.”For Digital Return Notes, unless otherwise set forth in the applicable pricing supplement, if the Final Level is greater than (or in the case of bearish notes, less than) the Initial Level, the payment at maturity will be determined as follows: Principal Amount + (Principal Amount × Digital Return) If your notes are Digital Return Notes, the positive return on your notes will be limited to the Digital Return that will be specified in the applicable pricing supplement. Booster Notes.Your notes may be “Booster Notes.”For Booster Notes, unless otherwise set forth in the applicable pricing supplement, if the Final Level is greater than (or in the case of bearish notes, less than) the Initial Level, the payment at maturity will be determined as follows: If the Percentage Change is greater than (or in the case of bearish notes, less than) the Booster Percentage, then the payment at maturity will equal: Principal Amount + (Principal Amount × Percentage Change) PS-12 Table of Contents If the Percentage Change is greater than (or in the case of bearish notes, less than) or equal to 0% but less than or equal to the Booster Percentage, then the payment at maturity will equal: Principal Amount + (Principal Amount × Booster Percentage) Payment at Maturity Less than or Equal to Principal Notes Without a Buffer.If the Final Level is less than (or in the case of bearish notes, greater than) or equal to the Initial Level, then, unless otherwise described in the applicable pricing supplement, the payment at maturity will equal: Principal Amount + (Principal Amount × Percentage Change × Downside Leverage Factor) In this case, if the Final Level is less than (or in the case of bearish notes, greater than) the Initial Level, then, at maturity, you will receive less than the principal amount of your notes. The Downside Leverage Factor represents the extent to which your notes will participate in the downside performance (or in the case of bearish notes, upside performance) of the Underlying Asset.The Downside Leverage Factor may be less than, equal to, or greater than 100%.If the Downside Leverage Factor is less than 100%, your notes will participate in less than the full downside performance (or in the case of bearish notes, upside performance) of the Underlying Asset.If the Downside Leverage Factor is greater than 100%, your notes will participate in the downside performance (or in the case of bearish notes, upside performance) on a leveraged basis.The Downside Leverage Factor will be specified in the relevant pricing supplement, if applicable.Depending on the Downside Leverage Factor, you may lose all or a substantial portion of the amount that you invested to purchase the notes; however, in no event will you lose more than your initial investment. Notes with a Buffer.If the relevant pricing supplement specifies that a “Buffer” is applicable to your notes, then, if the Final Level less than or equal to (or in the case of bearish notes, greater than or equal to) the Initial Level, but is greater than or equal to (or in the case of bearish notes, less than or equal to) the Buffer Level, then the payment at maturity will equal the principal amount of your notes. However, if the Final Level is less than (or in the case of bearish notes, greater than) the Buffer Level, then the payment at maturity will equal: Principal Amount + [Principal Amount × (Percentage Change + Buffer Percentage) × Downside Leverage Factor] The applicable Buffer Level and Buffer Percentage will be set forth in the applicable pricing supplement. Notes with a Barrier Level.We may issue notes that have a specified “Barrier Level.”For these notes, we will pay an amount at maturity that is less than the principal amount of the notes only if (a) the Final Level is less than (or in the case of bearish notes, greater than) the applicable Initial Level (or, if applicable, Buffer Level), as set forth above, and (b) a “Barrier Event” occurs.A “Barrier Event” will be deemed to occur if the level of the Underlying Asset (as set forth in the applicable pricing supplement) is less than (or in the case of bearish notes, greater than) a Barrier Level during an observation period that will be specified in the applicable pricing supplement.The provisions relating to the Barrier Level, together with any risk factors, will be set forth in the applicable pricing supplement. Notes Linked to a Basket If your notes are linked to a Basket, each Basket Component will be assigned a “Weighting Percentage” that will be set forth in the applicable pricing supplement. The sum of the Weighting Percentages of the Basket Components will equal 100%. The Basket Components may or may not have equal Weighting Percentages. The “Initial Basket Component Level” of each Basket Component will be set forth in the applicable pricing supplement.Unless otherwise set forth in the applicable pricing supplement, the value of any Basket Component on any trading day, including any valuation date, will be its official closing level. PS-13 Table of Contents The Initial Level will be set forth in the applicable pricing supplement.Unless otherwise set forth in the applicable pricing supplement, the “Final Level” will equal the Initial Level multiplied by the Percentage Change.The Percentage Change for notes linked to a Basket will equal the sum of the “Weighted Percentage Change” for each Basket Component.The “Weighted Percentage Change” will be equal to the product of (a) the applicable Weighting Percentage and (b) the percentage change in the value of the Basket Component from its Initial Basket Component Level set on the pricing date to its value on the valuation date.If there is more than one valuation date for your notes, the final value of each Basket Component will be equal to the arithmetic average of the closing values of that Basket Component on each of the valuation dates. When we refer to the level of a Basket during the term of the notes, we are referring to the value that would be determined if the Percentage Change was calculated as of that day. Valuation Date Unless otherwise specified in the relevant pricing supplement, the valuation date (if there is only one valuation date applicable to the notes) or the final valuation date (if there is more than one valuation date applicable to the notes) will be the third trading day before the maturity date specified in the relevant pricing supplement.If the calculation agent determines that a market disruption event occurs or is continuing on any valuation date applicable to the notes, the Final Level will be determined according to the calculation in “—Market Disruption Events” below. Maturity Date Unless otherwise specified in the relevant pricing supplement, the maturity date will be the third scheduled business day following the valuation date or the final valuation date, as applicable, unless that date is not a business day, in which case the maturity date will be the next following business day.The maturity date will be postponed by the same number of trading days as the valuation date or the final valuation date, as applicable, if a market disruption event occurs or is continuing as described above.However, no interest will accrue past the maturity date specified in the relevant pricing supplement. Certain Definitions Business Day.Unless otherwise set forth in the applicable pricing supplement, “business day” means a day of the week other than Saturday or Sunday that is neither a legal holiday nor a day on which banking institutions are authorized or obligated by law or executive order to close in New York City, Toronto, or Montreal. Trading Day.Unless otherwise set forth in the applicable pricing supplement, “trading day” is any day, as determined by the calculation agent, on which trading is generally conducted on the relevant primary U.S. exchange for the applicable Underlying Stock. Automatic Call If so specified in the applicable pricing supplement, your notes will be subject to automatic redemption.The terms relating to any such redemption will be set forth in the applicable pricing supplement. Market Disruption Events If the calculation agent determines that, on a valuation date and/or, if your notes are subject to automatic early redemption, on a call date, a market disruption event has occurred or is continuing with respect to an Underlying Stock, the determination of the Final Level and/or, if applicable, the closing price of the applicable Underlying Stock, may be postponed.If such a postponement occurs, the calculation agent will use the closing price of the Underlying Stock on the first subsequent trading day on which no market disruption event occurs or is continuing.However, in no event will the determination of the Final Level and/or, if applicable, the closing price of the applicable Underlying Stock, be postponed by more than ten trading days. PS-14 Table of Contents If the determination of the Final Level and/or, if applicable, the closing price of the applicable Underlying Stock, is postponed to the last possible day, but a market disruption event for the Underlying Stock occurs or is continuing on that day, that day will be the date on which the Final Level and/or, if applicable, the closing price of the applicable Underlying Stock, will be determined by the calculation agent.In such an event, the calculation agent will make a good faith estimate in its sole discretion of the Final Level and/or, if applicable, the closing price of the applicable Underlying Stock that would have prevailed in the absence of the market disruption event. Any of the following will be a market disruption event: · a suspension, absence or limitation of trading in (i) that security in its primary market, as determined by the calculation agent, or (ii) futures or options contracts relating to that security in the primary market for those contracts, as determined by the calculation agent; · any event that disrupts or impairs, as determined by the calculation agent, the ability of market participants to (i) effect transactions in, or obtain market values for, the security in its primary market, or (ii) effect transactions in, or obtain market values for, futures or options contracts relating to the security in its primary market; · the closure on any day of the primary market for that security on a scheduled trading day prior to the scheduled weekday closing time of that market (without regard to after hours or any other trading outside of the regular trading session hours) unless such earlier closing time is announced by the primary market at least one hour prior to the earlier of (i) the actual closing time for the regular trading session on such primary market on such scheduled trading day for such primary market and (ii) the submission deadline for orders to be entered into the relevant exchange system for execution at the close of trading on such scheduled trading day for such primary market; · any scheduled trading day on which (i) the primary market for that security or (ii) the exchanges or quotation systems, if any, on which futures or options contracts on that security are traded, fails to open for trading during its regular trading session; or · any other event, if the calculation agent determines that the event interferes with our ability or the ability of any of our affiliates to unwind all or a portion of a hedge with respect to the notes that we or our affiliates have effected or may effect as described below under “Use of Proceeds and Hedging” in this product supplement. Anti-dilution Adjustments The Initial Level, and any Initial Basket Component Level, the Buffer Level and any Barrier Level or Call Level, if applicable (each, a “Relevant Level” and collectively, the “Relevant Levels”) will be specified in the applicable pricing supplement.The calculation agent will adjust each Relevant Level if any of the dilution events described below occur with respect to the Underlying Stock. The calculation agent will adjust the Relevant Levels as described below, but only if an event below under this section occurs with respect to the Underlying Stock and only if the relevant event occurs during the period described under the applicable subsection.The Relevant Levels will be subject to the adjustments described below, independently and separately, with respect to the dilution events that affect the Underlying Stock. If more than one anti-dilution event requiring adjustment occurs with respect to the Relevant Levels, the calculation agent will adjust the Relevant Levels for each event, sequentially, in the order in which the events occur, and on a cumulative basis.Therefore, having adjusted the applicable Relevant Levels for the first event, the calculation agent will adjust the applicable Relevant Levels for the second event, applying the required adjustment to the Relevant Levels as already adjusted for the first event, and so on for each event. PS-15 Table of Contents If an event requiring an anti-dilution adjustment occurs, the calculation agent will make the adjustment in an attempt to offset, to the extent practical, any change in the economic position of the holder and us, relative to your note, that results solely from that event.The calculation agent may, in its sole discretion, modify the anti-dilution adjustments set forth in the section as necessary to ensure an equitable result. Stock Splits and Stock Dividends A stock split is an increase in the number of a corporation’s outstanding shares of stock without any change in its stockholders’ equity.When a corporation pays a stock dividend, it issues additional shares of its stock to all holders of its outstanding stock in proportion to the shares they own.Each outstanding share will be worth less as a result of a stock split or stock dividend. If the Underlying Stock is subject to a stock split or receives a stock dividend, then the calculation agent will adjust the Relevant Levels by dividing the prior Relevant Levels before the stock split or stock dividend by an amount equal to:(1) the number of shares of the Underlying Stock outstanding immediately after the stock split or stock dividend becomes effective; divided by (2) the number of shares of the Underlying Stock outstanding immediately before the stock split or stock dividend becomes effective.The Relevant Levels will not be adjusted, however, unless: · in the case of a stock split, the first day on which the Underlying Stock trades without the right to receive the stock split occurs after the pricing date and on or before the applicable valuation date or call date; or · in the case of a stock dividend, the ex-dividend date occurs after the pricing date and on or before the applicable valuation date or call date. The ex-dividend date for any dividend or other distribution with respect to the Underlying Stock is the first day on which the Underlying Stock trades without the right to receive that dividend or other distribution. Reverse Stock Splits A reverse stock split is a decrease in the number of a corporation’s outstanding shares of stock without any change in its stockholders’ equity.Each outstanding share will be worth more as a result of a reverse stock split. If the Underlying Stock is subject to a reverse stock split, then the calculation agent will adjust the Relevant Levels by multiplying the prior Relevant Levels by a number equal to:(1) the number of shares of the Underlying Stock outstanding immediately before the reverse stock split becomes effective; divided by (2) the number of shares of the Underlying Stock outstanding immediately after the reverse stock split becomes effective.The Relevant Levels will not be adjusted, however, unless the reverse stock split becomes effective after the pricing date and on or before the applicable valuation date or call date. Extraordinary Dividends Any distribution or dividend on the Underlying Stock determined by the calculation agent to be a distribution or dividend that is not in the ordinary course of the issuer’s historical dividend practices will be deemed to be an extraordinary dividend.The calculation agent will determine if the dividend is an extraordinary dividend and, if so, the amount of the extraordinary dividend.Each outstanding share will be worth less as a result of an extraordinary dividend. If any extraordinary dividend occurs with respect to the Underlying Stock, the calculation agent will adjust the Relevant Levels to equal the product of:(1) the prior Relevant Levels, times (2) a fraction, the numerator of which is the amount by which the closing price of the Underlying Stock on the trading day before the ex-dividend date exceeds the extraordinary dividend amount and the denominator of which is the closing price of the Underlying Stock on the trading day before the ex-dividend date.The Relevant Levels will not be adjusted, however, unless the ex-dividend date occurs after the pricing date and on or before the applicable valuation date or call date. PS-16 Table of Contents The extraordinary dividend amount with respect to an extraordinary dividend for the Underlying Stock equals: · for an extraordinary dividend that is paid in lieu of a regular quarterly dividend, the amount of the extraordinary dividend per share of the Underlying Stock minus the amount per share of the immediately preceding dividend, if any, that was not an extraordinary dividend for the Underlying Stock; or · for an extraordinary dividend that is not paid in lieu of a regular quarterly dividend, the amount per share of the extraordinary dividend. To the extent an extraordinary dividend is not paid in cash, the value of the non-cash component will be determined by the calculation agent.A distribution on the Underlying Stock that is a stock dividend, an issuance of transferable rights or warrants or a spin-off event and also an extraordinary dividend will result in an adjustment to the Relevant Levels, only as described under “— Stock Splits and Stock Dividends” above, “— Transferable Rights and Warrants” below or “— Reorganization Events” below, as the case may be, and not as described here. Transferable Rights and Warrants If the Underlying Stock Issuer issues transferable rights or warrants to all holders of the Underlying Stock to subscribe for or purchase the Underlying Stock at an exercise price per share that is less than the closing price of the Underlying Stock on the business day before the ex-dividend date for the issuance, then the Relevant Levels will be adjusted by multiplying the prior Relevant Levels by the following fraction: · the numerator will be the number of shares of the Underlying Stock outstanding at the close of business on the day before that ex-dividend date plus the number of additional shares of the Underlying Stock that the aggregate offering price of the total number of shares of the Underlying Stock so offered for subscription or purchase pursuant to the transferable rights or warrants could purchase at the closing price on the trading day before the ex-dividend date, with that number of additional shares being determined by multiplying the total number of shares so offered by the exercise price of those transferable rights or warrants and dividing the resulting product by the closing price on the trading day before that ex-dividend date. · the denominator will be the number of shares of the Underlying Stock outstanding at the close of business on the day before that ex-dividend date plus the number of additional shares of the Underlying Stock offered for subscription or purchase under those transferable rights or warrants. The Relevant Levels will not be adjusted, however, unless the ex-dividend date described above occurs after the pricing date and on or before the applicable valuation date or call date. Reorganization Events If the Underlying Stock Issuer undergoes a reorganization event in which property other than the Underlying Stock—e.g., cash and securities of another issuer—is distributed in respect of the Underlying Stock, then, for purposes of calculating the price of the Underlying Stock, the calculation agent will determine the closing price of the Underlying Stock on the valuation date to equal the value of the cash, securities and other property distributed in respect of one share of the Underlying Stock. If the calculation agent determines that, by valuing such cash, securities and other property, a commercially reasonable result is not achieved, then the calculation agent will, in its sole discretion, substitute another stock for that Underlying Stock. Each of the following is a reorganization event with respect to the Underlying Stock: · the Underlying Stock is reclassified or changed; PS-17 Table of Contents · the Underlying Stock Issuer has been subject to a merger, consolidation or other combination and either is not the surviving entity or is the surviving entity but all the outstanding stock is exchanged for or converted into other property; · a statutory share exchange involving the outstanding stock and the securities of another entity occurs, other than as part of an event described in the two bullet points above; · the Underlying Stock Issuer sells or otherwise transfers its property and assets as an entirety or substantially as an entirety to another entity; · the Underlying Stock Issuer effects a spin-off—that is, issues to all holders of the Underlying Stock equity securities of another issuer, other than as part of an event described in the four bullet points above; · the Underlying Stock Issuer is liquidated, dissolved or wound up or is subject to a proceeding under any applicable bankruptcy, insolvency or other similar law; or · another entity completes a tender or exchange offer for all of the outstanding stock of the Underlying Stock Issuer. Valuation of Distribution Property If a reorganization event occurs with respect to the Underlying Stock, and the calculation agent does not substitute another stock for the Underlying Stock as described in “— Substitution” below, then the calculation agent will determine the applicable closing price on each valuation date so as to equal the value of the property — whether it be cash, securities or other property — distributed in the reorganization event in respect of one share of the Underlying Stock, as the Underlying Stock existed before the date of the reorganization.We refer to the property distributed in a reorganization event as distribution property, a term we describe in more detail below.The calculation agent will not make any determination for a reorganization event, however, unless the event becomes effective (or, if the event is a spin-off, unless the ex-dividend date for the spin-off occurs) after the pricing date and on or before the applicable valuation date or call date. For the purpose of making a determination required by a reorganization event, the calculation agent will determine the value of each type of distribution property, in its sole discretion.For any distribution property consisting of a security, the calculation agent will use the closing price for the security on the relevant date.The calculation agent may value other types of property in any manner it determines, in its sole discretion, to be appropriate.If a holder of the Underlying Stock may elect to receive different types or combinations of types of distribution property in the reorganization event, the distribution property will consist of the types and amounts of each type distributed to a holder that makes no election, as determined by the calculation agent in its sole discretion. If a reorganization event occurs and the calculation agent adjusts the closing price of the Underlying Stock on a valuation date to equal the value of the distribution property distributed in the event, as described above, the calculation agent will make further determinations for later events that affect the distribution property considered in determining the closing price.The calculation agent will do so to the same extent that it would make determinations if the Underlying Stock were outstanding and were affected by the same kinds of events. For example, if the Underlying Stock Issuer merges into another company and each share of the Underlying Stock is converted into the right to receive two common shares of the surviving company and a specified amount of cash, then on each valuation date the closing price of a share of the Underlying Stock will be determined to equal the value of the two common shares of the surviving company plus the specified amount of cash.The calculation agent will further determine the common share component of such closing price to reflect any later stock split or other event, including any later reorganization event, that affects the common shares of the surviving company, to the extent described in “— Anti-Dilution Adjustments” or as described above in this “— Reorganization Events” section as if the common shares were the Underlying Stock.In that event, the cash component will not be redetermined but will continue to be a component of the closing price. PS-18 Table of Contents When we refer to “distribution property”, we mean the cash, securities and other property distributed in a reorganization event in respect of the Underlying Stock. If an adjustment resulting from a prior reorganization had occurred, the “distribution property” will mean the cash, securities and other property distributed in respect of any securities whose value determines the closing price on a valuation date. In the case of a spin-off, the distribution property also includes the Underlying Stock in respect of which the distribution is made. If a reorganization event occurs, the distribution property distributed in the event will be substituted for the Underlying Stock as described above.Consequently, in this product supplement, when we refer to the Underlying Stock, we mean any distribution property that is distributed in a reorganization event in respect of the Underlying Stock.Similarly, when we refer to the Underlying Stock Issuer, we mean any successor entity in a reorganization event. Substitution If the calculation agent determines that a commercially reasonable result is not achieved by valuing distribution property with respect to the Underlying Stock upon becoming subject to a reorganization event, then the calculation agent will, in its sole discretion, substitute another stock for the Underlying Stock.In such case, the adjustments described above in “— Valuation of Distribution Property” will not apply. If the calculation agent so determines, it may choose, in its sole discretion, the stock of a different company listed on a national securities exchange or quotation system as a substitute for the Underlying Stock.For all purposes, the substitute stock will be deemed to be a stock for purposes hereof. The calculation agent will determine, in its sole discretion, each Relevant Level and/or the manner of valuation of the substitute stock.The calculation agent will have the right to make such adjustments to the calculation of the individual stock performance as it determines in its sole discretion are necessary to preserve as nearly as possible our and your relative economic position prior to the reorganization event. Adjustments Relating to ADSs The Underlying Stock may consist of ADSs of the Underlying Company.As a result, for purposes of this section, the calculation agent will consider the effect of any of the relevant events on the holders of the Underlying Stock.For example, if a holder of the Underlying Stock receives an extraordinary dividend, the provisions described in this section would apply to the Underlying Stock. On the other hand, if a spin-off occurs, and the Underlying Stock represents both the spun-off security as well as the existing Underlying Stock, the calculation agent may determine not to effect the anti-dilution adjustments set forth in this section.More particularly, the calculation agent may not make an adjustment (1) if holders of the Underlying Stock are not eligible to participate in any of the events that would otherwise require anti-dilution adjustments as set forth in this section or (2) to the extent that the calculation agent determines that the Underlying Company or the depositary for the ADSs has adjusted the number of common shares of the Underlying Company represented by each share of Underlying Stock so that the market price of the Underlying Stock would not be affected by the corporate event in question. If the Underlying Company or the depository for the ADSs, in the absence of any of the events described in this section, elects to adjust the number of common shares of the Underlying Company represented by each share of Underlying Stock, then the calculation agent may make the appropriate anti-dilution adjustments to reflect such change. The depository for the ADSs may also make adjustments in respect of the ADSs for share distributions, rights distributions, cash distributions and distributions other than shares, rights, and cash. Upon any such adjustment by the depository, the calculation agent may adjust such terms and conditions of the notes as the calculation agent determines appropriate to account for that event. Other Events and Adjustments The calculation agent may make such adjustments to the terms of the notes with respect to any of the events described above, as it deems in its discretion is necessary to ensure an equitable result. With respect to notes linked to a Basket, the adjustments described above shall be used to calculate the market value of the applicable Underlying Stock.See “—Notes Linked to a Basket.” PS-19 Table of Contents Delisting of ADSs or Termination of ADS Facility If the Underlying Stock is an ADS that is no longer listed or admitted to trading on a U.S. securities exchange registered under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), or included in the OTC Bulletin Board Service operated by FINRA, or if the ADS facility between the Underlying Company and the ADS depositary is terminated for any reason, then, on and after the date that the Underlying Stock is no longer so listed or admitted to trading or the date of such termination, as applicable (the “termination date”), the notes will be deemed to be linked to the common shares of the Underlying Company, and the calculation agent will determine the payment at maturity by reference to such common shares.Under such circumstances, the calculation agent may modify any terms of the notes as it deems necessary, in its sole discretion, to ensure an equitable result. On and after the termination date, for all purposes, including the determination of the Final Level, the closing price of the Underlying Company’s common shares on their primary exchange will be converted to U.S. dollars using such exchange rate as the calculation agent, in its sole discretion, determines to be commercially reasonable. Events of Default Unless otherwise specified in the applicable pricing supplement, in case an event of default with respect to the notes shall have occurred and be continuing, the amount declared due and payable on the notes upon any acceleration of the notes will be determined by the calculation agent and will be an amount of cash equal to the amount payable as described under the caption “—Payment at Maturity,” calculated as if the date of acceleration were the valuation date or the final valuation date, as applicable, together with accrued and unpaid interest (if applicable to your notes) through the date of acceleration. If the maturity of the notes is accelerated because of an event of default, we will, or will cause the calculation agent to, provide written notice to the trustee at its New York office, on which notice the trustee may conclusively rely, and to the depositary, of the amount due with respect to the notes as promptly as possible and in no event later than two business days after the date of acceleration. Role of the Calculation Agent The calculation agent will make all determinations regarding the level of the Underlying Asset, business days, market disruption events, any required anti-dilution adjustments, the default amount, and the amount payable on your notes.Absent manifest error, all determinations of the calculation agent will be final and binding on you and us, without any liability on the part of the calculation agent.You will not be entitled to any compensation from us for any loss suffered as a result of any of the above determinations or calculations by the calculation agent. Please note that our affiliate, BMO Capital Markets Corp., is expected to serve as the calculation agent for the notes.We may change the calculation agent for your notes at any time after the date of this product supplement without notice and BMO Capital Markets Corp. may resign as calculation agent at any time upon 60 days written notice to us. Listing Your notes will not be listed on any securities exchange. PS-20 Table of Contents USE OF PROCEEDS AND HEDGING We will use the net proceeds we receive from the sale of the notes for the purposes we describe in the accompanying prospectus and the accompanying prospectus supplement under “Use of Proceeds.” We or our affiliates may also use those proceeds in transactions intended to hedge our obligations under the notes as described below. We or our affiliates expect to enter into hedging transactions involving, among other transactions, purchases or sales of the securities included in or linked to the Underlying Asset, or listed or over-the-counter options, futures and other instruments linked to the Underlying Asset or its components.In addition, from time to time after we issue the notes, we or our affiliates expect to enter into additional hedging transactions and to unwind those we have entered into in connection with the notes.Consequently, with regard to your notes, from time to time we or our affiliates expect to acquire or dispose of securities included in the Underlying Asset or positions in listed or over-the-counter options, futures or other instruments linked to the Underlying Asset or its components. We or our affiliates may acquire a long position in securities similar to the notes from time to time and may, in our or their sole discretion, hold or resell those securities. In the future, we or our affiliates expect to close out hedge positions relating to the notes and possibly relating to other securities or instruments with returns linked to the Underlying Asset or its components.We expect these steps to involve sales of instruments linked to the Underlying Asset or its components on or shortly before the applicable valuation dates.These steps may also involve transactions of the type contemplated above.Notwithstanding the above, we are permitted to and may choose to hedge in any manner not stated above; similarly, we may elect not to enter into any such transactions.Investors will not have knowledge about our hedging positions. We have no obligation to engage in any manner of hedging activity and will do so solely at our discretion and for our own account.No holder of any notes will have any rights or interest in our hedging activity or any positions we or any counterparty may take in connection with our hedging activity. PS-21 Table of Contents UNDERLYING STOCK ISSUERS Each Underlying Stock will be registered under the Exchange Act.Companies with securities registered under the Exchange Act are required to file financial and other information specified by the SEC periodically.This information is filed with the SEC and can be inspected and copied by you at the SEC’s Public Reference Room located at treet, N.E., Washington, D.C. 20549, at prescribed rates.The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.In addition, information filed by the Underlying Stock Issuer with the SEC electronically is available to the public over the Internet at the SEC’s website at http://www.sec.gov.In addition, information about the Underlying Stock Issuer may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated information.We will not independently investigate the accuracy or completeness of any such information. We will set forth summary information about each Underlying Stock Issuer in the applicable pricing supplement, and will also provide recent historical price information relating to the Underlying Asset.You should not rely on any such historic information as an indication of the Underlying Asset’s future performance. PS-22 Table of Contents SUPPLEMENTAL TAX CONSIDERATIONS The following is a general description of certain tax considerations relating to the notes.It does not purport to be a complete analysis of all tax considerations relating to the notes.Prospective purchasers of the notes should consult their tax advisors as to the consequences under the tax laws of the country of which they are resident for tax purposes and the tax laws of Canada and the U.S. of acquiring, holding and disposing of the notes and receiving payments under the notes.This summary is based upon the law as in effect on the date of this product supplement and is subject to any change in law that may take effect after such date. Supplemental Canadian Tax Considerations For a summary of Canadian tax considerations relevant to an investment in the notes, please see the sections entitled “Canadian Taxation” in the accompanying prospectus and the section entitled “Certain Income Tax Consequences—Certain Canadian Income Tax Considerations ” in the accompanying prospectus supplement. With respect to any interest payable on the notes, or any portion of the principal amount of the notes in excess of the issue price, such interest or principal, as the case may be, will not be subject to Canadian Non-Resident withholding tax, unless otherwise specified in the applicable pricing supplement. Supplemental U.S. Federal Income Tax Considerations The following is a general description of certain U.S. tax considerations relating to the notes.It does not purport to be a complete analysis of all tax considerations relating to the notes.Prospective purchasers of the notes should consult their tax advisors as to the consequences under the tax laws of the country of which they are resident for tax purposes and the tax laws of Canada and the U.S. of acquiring, holding and disposing of the notes and receiving payments under the notes.This summary is based upon the law as in effect on the date of this product supplement and is subject to any change in law that may take effect after such date. The following disclosure—including the opinion of Morrison & Foerster LLP—has been prepared without regard to any particular note that you may purchase in the future and, therefore, is provided solely as a matter of general information.You should not rely upon the following disclosure (including the opinion of Morrison & Foerster LLP), or the disclosure under “United States Federal Income Taxation” in the prospectus or “Certain Income Tax Consequences—United States Federal Income Taxation” in the prospectus supplement, with regard to an investment in any particular note because this disclosure (including the opinion of Morrison & Foerster LLP) does not take into account the terms of any particular note or the tax consequences of investing in or holding any particular note unless the pricing supplement applicable to your notes indicates that you may rely on the following disclosure and expressly states that you may rely on the opinion of Morrison & Foerster LLP.Any note that you purchase may have terms that would result in a tax treatment that is significantly different from the treatment described below.Consequently, any tax disclosure relevant to any note you may purchase will be set forth only in the pricing supplement relating to your note, and, unless the pricing supplement indicates otherwise, you should not rely on the tax disclosure below or in the prospectus supplement or prospectus in deciding whether to invest in any note.In addition, this tax disclosure assumes the following for all notes issued off of this product supplement: (i) no periodic payments of interest will be made on the notes; and (ii) there is a significant possibility of a significant loss of principal on an investment in the notes.Moreover, in all cases, you should consult with your own tax advisor concerning the consequences of investing in and holding any particular note you propose to purchase. The following section supplements the discussion of U.S. federal income taxation in the accompanying prospectus and prospectus supplement with respect to United States holders (as defined in the accompanying prospectus).It applies only to those holders who are not excluded from the discussion of U.S. federal income taxation in the accompanying prospectus. You should consult your tax advisor concerning the U.S. federal income tax and other tax consequences of your investment in the notes in your particular circumstances, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws. PS-23 Table of Contents NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES HOW THE NOTES SHOULD BE TREATED FOR U.S. FEDERAL INCOME TAX PURPOSES.AS A RESULT, THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES ARE UNCERTAIN.BECAUSE OF THE UNCERTAINTY, YOU SHOULD CONSULT YOUR TAX ADVISOR IN DETERMINING THE U.S. FEDERAL INCOME TAX AND OTHER TAX CONSEQUENCES OF YOUR INVESTMENT IN THE NOTES, INCLUDING THE APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. We will not attempt to ascertain whether any Underlying Stock Issuer would be treated as a “passive foreign investment company” within the meaning of Section 1297 of the Code or a “U.S. real property holding corporation” within the meaning of Section 897 of the Code.If the issuer of one or more of such stocks were so treated, certain adverse U.S. federal income tax consequences could possibly apply.You should refer to any available information filed with the SEC by each Underlying Stock Issuer and consult your tax advisor regarding the possible consequences to you in this regard. In the opinion of our counsel, Morrison & Foerster LLP, it would generally be reasonable to treat a note with terms described in this product supplement as a pre-paid cash-settled derivative contract in respect of the Underlying Asset or a Basket for U.S. federal income tax purposes, and the terms of the notes require a holder and us (in the absence of a change in law or an administrative or judicial ruling to the contrary) to treat the notes for all tax purposes in accordance with such characterization.If the notes are so treated, subject to the discussion below concerning the potential application of the “constructive ownership” rules under Section 1260 of the Code, a United States holder should generally recognize capital gain or loss upon the sale or maturity of the notes in an amount equal to the difference between the amount a United States holder receives at such time and the United States holder’s tax basis in the notes.In general, a United States holder’s tax basis in the notes will be equal to the price the holder paid for the notes.Capital gain recognized by an individual United States holder is generally taxed at preferential rates where the property is held for more than one year and is generally taxed at ordinary income rates where the property is held for one year or less.The deductibility of capital losses is subject to limitations.The holding period for notes of a United States holder who acquires the notes upon issuance will generally begin on the date after the issue date (i.e., the settlement date) of the notes.If the notes are held by the same United States holder until maturity, that holder’s holding period will generally include the maturity date. It is possible that the Internal Revenue Service could assert that a United States holder’s holding period in respect of the notes should end on the date on which the amount the holder is entitled to receive upon the maturity of the notes is determined, even though the holder will not receive any amounts from us in respect of the notes prior to the maturity of the notes. In such case, a United States holder may be treated as having a holding period in respect of the notes that is one year or less even if the holder receives cash upon maturity of the notes at a time that is more than one year after the beginning of its holding period. Potential Application of Section 1260 of the Code If the Underlying Asset is or includes the type of financial asset described under Section 1260 of the Code (including, among others, any equity interest in pass-thru entities such as ETFs, regulated investment companies, real estate investment trusts, partnerships, and passive foreign investment companies, each a “Section 1260 Financial Asset”), while the matter is not entirely clear, unless otherwise specified in the applicable pricing supplement, there exists a substantial risk that an investment in a note is, in whole or in part, a “constructive ownership transaction” to which Section 1260 of the Code applies.If Section 1260 of the Code applies, all or a portion of any long-term capital gain recognized by a United States holder in respect of a note will be recharacterized as ordinary income (the “Excess Gain”).In addition, an interest charge will also apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have resulted in gross income inclusion for the United States holder in taxable years prior to the taxable year of the sale, exchange, or settlement (assuming such income accrued at a constant rate equal to the applicable federal rate as of the date of sale, exchange, or settlement). PS-24 Table of Contents If an investment in a note is treated as a constructive ownership transaction, it is not clear to what extent any long-term capital gain of a United States holder in respect of the note will be recharacterized as ordinary income.It is possible, for example, that the amount of the Excess Gain (if any) that would be recharacterized as ordinary income in respect of the note will equal the excess of (i) any long-term capital gain recognized by the United States holder in respect of the note and attributable to Section 1260 Financial Assets, over (ii) the “net underlying long-term capital gain” (as defined in Section 1260 of the Code) such United States holder would have had if such United States holder had acquired an amount of the corresponding Section 1260 Financial Assets at fair market value on the original issue date for an amount equal to the portion of the issue price of the note attributable to the corresponding Section 1260 Financial Assets and sold such amount of Section 1260 Financial Assets upon the date of sale, exchange, or settlement of the note at fair market value (and appropriately taking into account any leveraged upside exposure).Alternatively, the Internal Revenue Service may contend that the Excess Gain should not be limited to amounts attributable to a Section 1260 Financial Asset, but should instead apply to all of the Underlying Asset(s).To the extent any gain is treated as long-term capital gain after application of the recharacterization rules of Section 1260 of the Code, such gain would be subject to U.S. federal income tax at the rates that would have been applicable to the net underlying long-term capital gain.United States holders should consult their tax advisors regarding the potential application of Section 1260 of the Code to an investment in the note. Under Section 1260 of the Code, there is a presumption that the net underlying long-term capital gain is zero (with the result that the recharacterization and interest charge described above would apply to all of the gain from the notes that otherwise would have been long-term capital gain), unless the contrary is demonstrated by clear and convincing evidence. Holders will be responsible for obtaining information necessary to determine the net underlying long-term capital gain with respect to the corresponding Section 1260 Financial Assets, as we do not intend to supply holders with such information.Holders should consult with their tax advisor regarding the application of the constructive ownership transaction to their notes and the calculations necessary to comply with Section 1260 of the Code. Alternative Treatments Alternative tax treatments of the notes are also possible and the Internal Revenue Service might assert that a treatment other than that described above is more appropriate.For example, it would also be possible to treat the notes, and the Internal Revenue Service might assert that the notes should be treated, as a single debt instrument.If the notes have a term that exceeds one year, such a debt instrument would be subject to the special tax rules governing contingent payment debt instruments.If the notes are so treated, a United States holder would generally be required to accrue interest currently over the term of the notes even though that holder will not receive any payments from us prior to maturity.In addition, any gain a United States holder might recognize upon the sale or maturity of the notes would be ordinary income and any loss recognized by a holder at such time would be ordinary loss to the extent of interest that same holder included in income in the current or previous taxable years in respect of the notes, and thereafter, would be capital loss.If the notes are treated as a single debt instrument that has a term of no more than one year, the notes would be treated as a single contingent short-term debt instrument, which would also result in tax consequences that are different from those described above. Because of the absence of authority regarding the appropriate tax characterization of the notes, it is also possible that the Internal Revenue Service could seek to characterize the notes in a manner that results in tax consequences that are different from those described above.For example, the Internal Revenue Service could possibly assert that any gain or loss that a holder may recognize upon the sale or maturity of the notes should be treated as ordinary gain or loss. The Internal Revenue Service has released a notice that may affect the taxation of holders of the notes.According to the notice, the Internal Revenue Service and the Treasury Department are actively considering whether the holder of an instrument such as the notes should be required to accrue ordinary income on a current basis, and they sought taxpayer comments on the subject.It is not possible to determine what guidance they will ultimately issue, if any.It is possible, however, that under such guidance, holders of the notes will ultimately be required to accrue income currently and this could be applied on a retroactive basis.The Internal Revenue Service and the Treasury Department are also considering other relevant issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital and whether the special “constructive ownership rules” of Section 1260 of the Code might be applied to such instruments.Holders are urged to consult their tax advisors concerning the significance, and the potential impact, of the above considerations.Unless stated otherwise in the relevant pricing supplement, we intend to treat the notes for U.S. federal income tax purposes in accordance with the treatment described in this product supplement unless and until such time as the Treasury Department and Internal Revenue Service determine that some other treatment is more appropriate. PS-25 Table of Contents Backup Withholding and Information Reporting Please see the discussion under “United States Federal Income Taxation—Backup Withholding and Information Reporting” in the accompanying prospectus for a description of the applicability of the backup withholding and information reporting rules to payments made on your notes. Non-United States Holders The following discussion applies to non-United States holders of the notes.A non-United States holder is a beneficial owner of a note that, for U.S. federal income tax purposes, is a non-resident alien individual, a foreign corporation, or a foreign estate or trust. A non-United States holder will generally not be subject to U.S. federal income or withholding tax for amounts paid in respect of the notes, provided that (i) the holder complies with any applicable certification requirements, (ii) the payment is not effectively connected with the conduct by the holder of a U.S. trade or business, and (iii) if the holder is a non-resident alien individual, such holder is not present in the U.S. for 183 days or more during the taxable year of the sale or maturity of the notes.In the case of (ii) above, the holder generally would be subject to U.S. federal income tax with respect to any income or gain in the same manner as if the holder were a United States holder and, in the case of a holder that is a corporation, the holder may also be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable U.S. income tax treaty) of a portion of its earnings and profits for the taxable year that are effectively connected with its conduct of a trade or business in the U.S., subject to certain adjustments.Payments made to a non-United States holder may be subject to information reporting and to backup withholding unless the holder complies with applicable certification and identification requirements as to its foreign status. As discussed above, alternative characterizations of the notes for U.S. federal income tax purposes are possible.Should an alternative characterization, by reason of change or clarification of the law, by regulation or otherwise, cause payments as to the notes to become subject to withholding tax, we will withhold tax at the applicable statutory rate.The Internal Revenue Service has also indicated that it is considering whether income in respect of instruments such as the notes should be subject to withholding tax.Prospective investors should consult their own tax advisors in this regard. A “dividend equivalent” payment is treated as a dividend from sources within the U.S. and such payments generally would be subject to a 30% U.S. withholding tax if paid to a non-United States holder.Under proposed Treasury Department regulations, payments (including deemed payments) that are contingent upon or determined by reference to actual or estimated U.S. source dividends, with respect to certain equity-linked instruments, whether explicitly stated or implicitly taken into account in computing one or more of the terms of such instruments, may be treated as dividend equivalents. If enacted in their current form, the regulations will impose a withholding tax on payments or deemed payments made on the notes on or after January 1, 2016 that are treated as dividend equivalents.However, the U.S. Treasury Department and Internal Revenue Service have announced that they intend to limit this withholding to equity-linked instruments issued on or after the date that is 90 days after the date of publication in the U.S. Federal Register of final regulations addressing dividend equivalent withholding. If any payments are treated as dividend equivalents subject to withholding, we (or the applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect to amounts so withheld. PS-26 Table of Contents Foreign Account Tax Compliance Act The Foreign Account Tax Compliance Act was enacted on March 18, 2010 and will impose a 30% U.S. withholding tax on certain U.S. source payments, including interest (and OID), dividends, other fixed or determinable annual or periodical gain, profits, and income, and on the gross proceeds from a disposition of property of a type which can produce U.S. source interest or dividends (“Withholdable Payments”), if paid to a foreign financial institution (including amounts paid to a foreign financial institution on behalf of a holder), unless such institution enters into an agreement with the Treasury Department to collect and provide to the Treasury Department substantial information regarding U.S. account holders, including certain account holders that are foreign entities with U.S. owners, with such institution. The legislation also generally imposes a withholding tax of 30% on Withholdable Payments made to a non-financial foreign entity unless such entity provides the withholding agent with a certification that it does not have any substantial U.S. owners or a certification identifying the direct and indirect substantial U.S. owners of the entity. These withholding and reporting requirements generally apply to payments made after June 30, 2014.Account holders subject to information reporting requirements pursuant to the Foreign Account Tax Compliance Act may include holders of the notes.Foreign financial institutions and non-financial foreign entities located in jurisdictions that have an intergovernmental agreement with the United States governing the Foreign Account Tax Compliance Act may be subject to different rules.Holders are urged to consult with their own tax advisors regarding the possible implications of this legislation on their investment in the notes. PS-27 Table of Contents EMPLOYEE RETIREMENT INCOME SECURITY ACT A fiduciary of a pension, profit-sharing or other employee benefit plan subject to the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (each, a “Plan”), should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing an investment in the notes.Among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the Plan, and whether the investment would involve a prohibited transaction under ERISA or the Code. Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as individual retirement accounts, Keogh plans any other plans that are subject to Section 4975 of the Code (also “Plans”), from engaging in certain transactions involving “plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code with respect to the Plan.A violation of these prohibited transaction rules may result in excise tax or other liabilities under ERISA or the Code for those persons, unless exemptive relief is available under an applicable statutory, regulatory or administrative exemption.Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and non-U.S. plans (as described in Section 4(b)(4) of ERISA) (“Non-ERISA Arrangements”) are not subject to the requirements of Section 406 of ERISA or Section 4975 of the Code but may be subject to similar provisions under applicable federal, state, local, non-U.S., or other laws (“Similar Laws”). The acquisition of notes by a Plan or any entity whose underlying assets include “plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) with respect to which we or certain of our affiliates is or becomes a party in interest or disqualified person may result in a prohibited transaction under ERISA or Section 4975 of the Code, unless the notes are acquired pursuant to an applicable exemption.The U.S. Department of Labor has issued five prohibited transaction class exemptions, or “PTCEs”, that may provide exemptive relief if required for direct or indirect prohibited transactions that may arise from the purchase or holding of notes.These exemptions are PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers), PTCE 90-1 (for certain transactions involving insurance company pooled separate accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 95-60 (for transactions involving certain insurance company general accounts), and PTCE 96-23 (for transactions managed by in-house asset managers).In addition, ERISA Section 408(b)(17) and Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities offered hereby, provided that neither the issuer of notes offered hereby nor any of its affiliates have or exercise any discretionary authority or control or render any investment advice with respect to the assets of any Plan involved in the transaction, and provided further that the Plan pays no more and receives no less than “adequate consideration” in connection with the transaction (the “Service Provider Exemption”).Any Plan fiduciary relying on the Service Provider Exemption and purchasing the notes on behalf of a Plan must initially make a determination that (x) the Plan is paying no more than, and is receiving no less than, “adequate consideration” in connection with the transaction and (y) neither we nor any of our affiliates directly or indirectly exercises any discretionary authority or control or renders investment advice with respect to the assets of the Plan which such fiduciary is using to purchase, both of which are necessary preconditions to reliance on the Service Provider Exemption.If we or any of our affiliates provides fiduciary investment management services with respect to a Plan’s acquisition of the notes, the Service Provider Exemption may not be available, and in that case, other exemptive relief would be required as precondition for purchasing the notes.Any Plan fiduciary considering reliance on the Service Provider Exemption is encouraged to consult with counsel regarding the availability of the exemption.There can be no assurance that any of the foregoing exemptions will be available with respect to any particular transaction involving the notes, or that, if an exemption is available, it will cover all aspects of any particular transaction. Because we or our affiliates may be considered to be a party in interest with respect to many Plans, the notes may not be purchased, held or disposed of by any Plan, unless such purchase, holding or disposition is eligible for exemptive relief, including relief available under PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or the Service Provider Exemption, or such purchase, holding or disposition is not otherwise prohibited.Except as otherwise set forth in any applicable pricing supplement, by its purchase of any notes, each purchaser (whether in the case of the initial purchase or in the case of a subsequent transferee) will be deemed to have represented and agreed by its purchase and holding of the notes offered hereby that either (i) it is not and for so long as it holds a note, it will not be a Plan, a Plan Asset Entity, or a Non-ERISA Arrangement, or (ii) its purchase and holding of the notes will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or, in the case of such a Non-ERISA Arrangement, under any Similar Laws. PS-28 Table of Contents In addition, any purchaser that is a Plan or a Plan Asset Entity or that is acquiring the notes on behalf of a Plan or a Plan Asset Entity, including any fiduciary purchasing on behalf of a Plan or Plan Asset entity, will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding of the notes that (a) neither we nor any of our respective affiliates or agents are a “fiduciary” (under Section 3(21) of ERISA, or under any final or proposed regulations thereunder, or with respect to a non-ERISA Arrangement under any Similar Laws with respect to the acquisition, holding or disposition of the notes, or as a result of any exercise by us or our affiliates or agents of any rights in connection with the notes, (b) no advice provided by us or any of our affiliates or agents has formed a primary basis for any investment decision by or on behalf of such purchaser in connection with the notes and the transactions contemplated with respect to the notes, and (c) such purchaser recognizes and agrees that any communication from us or any of our affiliates or agents to the purchaser with respect to the notes is not intended by us or any of our affiliates or agents to be impartial investment advice and is rendered in our or our affiliates’ or agents’ capacity as a seller of such notes and not a fiduciary to such purchaser. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is important that fiduciaries or other persons considering purchasing notes on behalf of or with the assets of any Plan, a Plan Asset Entity or Non-ERISA Arrangement consult with their counsel regarding the availability of exemptive relief under any of the PTCEs listed above, the Service Provider Exemption or the potential consequences of any purchase or holding under Similar Laws, as applicable.Purchasers of notes have exclusive responsibility for ensuring that their purchase and holding of notes do not violate the fiduciary or prohibited transaction rules of ERISA or the Code or any similar provisions of Similar Laws.The sale of any notes to a Plan, Plan Asset Entity or Non-ERISA Arrangement is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by any such Plans, Plan Asset Entities or Non-ERISA Arrangements generally or any particular Plan, Plan Asset Entity or Non-ERISA Arrangement or that such investment is appropriate for such Plans, Plan Asset Entities or Non-ERISA Arrangements generally or any particular Plan, Plan Asset Entity or Non-ERISA Arrangement. PS-29 Table of Contents SUPPLEMENTAL PLAN OF DISTRIBUTION With respect to each note to be issued, we will agree to sell to BMO Capital Markets Corp., and BMO Capital Markets Corp. will agree to purchase from us, the principal amount of the note specified, at the price specified in the applicable pricing supplement, less the indicated underwriting commission.BMO Capital Markets Corp. may also resell the notes to other brokers or dealers in connection with any offering.BMO Capital Markets Corp. or another of our affiliates may repurchase and resell outstanding notes in market-making transactions, with resales being made at prices related to prevailing market prices at the time of resale or at negotiated prices.For more information about the plan of distribution, the distribution agreement and possible market-making activities see “Supplemental Plan of Distribution” in the accompanying prospectus supplement. PS-30
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Exhibit 10.3 CATALENT, INC. 2014 OMNIBUS INCENTIVE PLAN 1. Purpose. The purpose of the Catalent, Inc. 2014 Omnibus Incentive Plan is to provide a means through which the Company and its Affiliates may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors (and prospective directors, officers, employees, consultants and advisors) of the Company and its Affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Affiliates and aligning their interests with those of the Company’s stockholders. Plan. (a) “Absolute Share Limit” has the meaning given such term in Section 5(b) of the Plan. (b) “Affiliate” means any Person that directly or indirectly controls, is controlled by or is under common control with the Company. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any Person means the possession, directly and policies of such Person, whether through the ownership of voting or other (c) “Award” means, individually or collectively, any Incentive Stock Option, Restricted Stock Unit, Other Stock-Based Award and Performance Compensation Award granted under the Plan. (e) “Cause” means, as to any Participant, unless the applicable Award agreement states otherwise, “Cause” as such term may be defined in any employment agreement in effect at the time of the Participant’s termination of employment between the Participant and a Service Recipient, or, if there is no such employment agreement or such term is not defined therein, (i) the Participant’s willful failure to perform duties which is not cured within 15 days following written notice, (ii) the Participant’s conviction or confessing to or becoming subject to proceedings that provide a reasonable basis for the Company to believe that the Participant has engaged in a (x) felony, (y) crime involving dishonesty, or (z) crime involving moral turpitude and which is demonstrably injurious to the Company and its Subsidiaries, (iii) the Participant’s willful malfeasance or misconduct which is demonstrably injurious to the Company and its Subsidiaries, or (iv) breach by the Participant of the material terms of any agreement with the Company or its Subsidiaries, including, without limitation, any non-competition, non-solicitation or confidentiality provisions thereof. For purposes of this definition, no act or failure to act shall be deemed “willful” unless effected by the Participant not in good faith. (f) “Change in Control” means: (i) the acquisition (whether by purchase, merger, consolidation, combination or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% (on a fully diluted basis) of either (A) the then outstanding shares of Common Stock, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such 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; provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (I) any acquisition by the Company or any Affiliate; (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate; or (III) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant); (ii) during any period of twenty-four months, individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, with respect to directors or as a result of any other person other than the Board shall be deemed to be an Incumbent Director; or (iii) the sale, transfer or other disposition of all or substantially all of the assets of the Company to any Person that is not an Affiliate of the Company. or guidance. (h) “Committee” means the Compensation Committee of the Board or subcommittee thereof if required with respect to actions taken to comply with Section 162(m) of the Code in respect of Awards or, if no such Compensation Committee or subcommittee thereof exists, the Board. (i) “Common Stock” means the common stock, par value $0.01 per share, of the Company (and any stock or other securities into which such Common Stock may be converted or into which it may be exchanged).   2 (j) “Company” means Catalent, Inc., a Delaware corporation, and any successor thereto. (k) “Date of Grant” means the date on which the granting of an Award is (l) “Designated Foreign Subsidiaries” means all Affiliates organized under the laws of any jurisdiction or country other than the United States of America that may be designated by the Board or the Committee from time to time. (m) “Detrimental Activity” means any of the following: (i) unauthorized disclosure of any confidential or proprietary information of the Company or its Affiliates; (ii) any activity that would be grounds to terminate the Participant’s employment or service with the Service Recipient for Cause; (iii) whether in writing or orally, maligning, denigrating or disparaging the Company, its Affiliates or their respective predecessors and successors, or any of the current or former directors, officers, employees, shareholders, partners, members, agents or representatives of any of the foregoing, with respect to any of their respective past or present activities, or otherwise publishing (whether in writing or orally) statements that tend to portray any of the aforementioned persons or entities in an unfavorable light; (iv) the breach of any non-competition, non-solicitation or other agreement containing restrictive covenants, with the Company or its Affiliates; or (v) fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion. (n) “Disability” means, as to any Participant, unless the applicable Award agreement states otherwise, “Disability” as such term may be defined in any employment agreement in effect at the time of the Participant’s termination of employment between the Participant and a Service Recipient, or, if there is no such employment agreement or such term is not defined therein, the Participant becomes physically or mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an aggregate of nine (9) months in any twenty-four (24) consecutive month period to perform the Participant’s duties. (o) “Effective Date” means July 29, 2014. (p) “Eligible Director” means a person who is (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, (ii) an “outside director” within the meaning of Section 162(m) of the Code and (iii) an “independent director” under the rules of the NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, or a person meeting any similar requirement under any successor rule or regulation. (q) “Eligible Person” means any (i) individual employed by the Company or an agreement or instrument relating thereto, (ii) director or officer of the Company or an Affiliate, (iii) consultant or advisor to the Company or an Affiliate who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act, or (iv) any prospective employees, directors, officers,   3 consultants or advisors who have accepted offers of employment or consultancy from the Company or one of its Affiliates (and would satisfy the provisions of clauses (i) through (iii) above once he or she begins employment with or providing services to the Company or one of its Affiliates), who, in the case of each of clauses (i) through (iv) above has entered into an Award agreement or who has received written notification from the Committee or its designee that they have been selected to participate in the Plan. Solely for purposes of this Section 2(q), “Affiliate” shall be limited to (1) a Subsidiary, (2) any parent corporation of the Company within the meaning of Section 424(e) of the Code (“Parent”), (3) any corporation, trade or business of which 50% or more of the combined voting power of such entity’s outstanding securities is directly or indirectly controlled by the Company or any Subsidiary or Parent, or (4) any corporation, trade or business which directly or indirectly controls 50% or more of the combined voting power of the outstanding securities of the Company. (r) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule guidance. (s) “Exercise Price” has the meaning given such term in Section 7(b) of the Plan. (t) “Fair Market Value” means, on a given date, (i) if the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there are no such sales on that date, then on the last preceding date on which such sales were reported, (ii) if the Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported, or (iii) if the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by the Committee in good faith to be the fair market value of the Common Stock; provided, however, as to any Awards granted on or with a Date of Grant of the date of the pricing of the Company’s initial public offering, “Fair Market Value” shall be equal to the per share price the Common Stock is offered to the public in connection with such initial public offering. (u) “Immediate Family Members” has the meaning given such term in Section 14(b) of the Plan. (v) “Incentive Stock Option” means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan. (w) “Indemnifiable Person” has the meaning given such term in Section 4(e) of the Plan.   4 (x) “Negative Discretion” means the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award consistent with Section 162(m) of the Code. (y) “Nonqualified Stock Option” means an Option which is not designated by the (z) “Non-Employee Director” means a member of the Board who is not an employee of the Company or any Affiliate. (aa) “NYSE” means the New York Stock Exchange. (bb) “Option” means an Award granted under Section 7 of the Plan. (cc) “Option Period” has the meaning given such term in Section 7(c) of the Plan. (dd) “Other Stock-Based Award” means an Award granted under Section 10 of the Plan. (ee) “Participant” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to the Plan. (ff) “Performance Compensation Award” means any Award designated by the Plan. (gg) “Performance Criteria” means the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goals for a Performance Period with respect to any Performance Compensation Award under the Plan. (hh) “Performance Formula” means, for a Performance Period, the one or more (ii) “Performance Goals” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria. (jj) “Performance Period” means the one or more periods of time of not less than 12 months, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Compensation Award. (kk) “Permitted Transferee” has the meaning given such term in Section 14(b) of the Plan. (ll) “Person” means any individual, entity or group (within the meaning of   5 (mm) “Plan” means this Catalent, Inc. 2014 Omnibus Incentive Plan, as it may be (oo) “Restricted Stock” means Common Stock, subject to certain specified Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan. (pp) “Restricted Stock Unit” means an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan. (qq) “SAR Period” has the meaning given such term in Section 8(c) of the Plan. (rr) “Securities Act” means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance. (ss) “Service Recipient” means, with respect to a Participant holding a given Award, either the Company or an Affiliate of the Company by which the original recipient of such Award is, or following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable. of the Plan. (uu) “Strike Price” has the meaning given such term in Section 8(b) of the Plan. (vv) “Subsidiary” means, with respect to any specified Person: of the total voting power of shares of such entity’s voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (ii) any partnership (or any comparable foreign entity) (A) the sole general which is   6 such Person or Subsidiary of such Person or (B) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). (ww) “Substitute Award” has the meaning given such term in Section 5(e) of the Plan. (xx) “Sub-Plans” means any sub-plan to this Plan that has been adopted by the Board or the Committee for the purpose of permitting the offering of Awards to employees of certain Designated Foreign Subsidiaries or otherwise outside the United States of America, with each such sub-plan designed to comply with local laws applicable to offerings in such foreign jurisdictions. Although any Sub-Plan may be designated a separate and independent plan from the Plan in order to comply with applicable local laws, the Absolute Share Limit shall apply in the aggregate to the Plan and any Sub-Plan adopted hereunder. (yy) “Termination” means the termination of a Participant’s employment or service, as applicable, with the Service Recipient. such Awards. 4. Administration. (a) The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan) or necessary to obtain the exception for performance-based compensation under Section 162(m) of the Code, as applicable, it is intended that each member of the Committee shall, at the time he or she takes any action with respect to an Award under the Plan that is subject to Rule 16b-3 or Section 162(m) of the Code, as applicable, be an Eligible Director. However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan. Participant; (iii) determine the number of shares of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either   7 shall deem appropriate for the proper administration of the Plan; (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan; and (x) adopt Sub-Plans. (c) Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of the Company or any Subsidiary the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Committee herein, and which may be so delegated as a matter of law, except for grants of Awards to Non-Employee Directors. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of the Company or any Subsidiary the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Committee herein, and which may be so delegated as a matter of law, except for grants of Awards to persons (i) who are Non-Employee Directors or otherwise are subject to Section 16 of the Exchange Act or (ii) who are, or who are reasonably expected to be, “covered employees” for purposes of Section 162(m) of the Code. including, without limitation, the Company, any of its Affiliates, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company. (e) No member of the Board, the Committee or any employee or agent of the Company or any Subsidiary (each such person, an “Indemnifiable Person”) shall be with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made under the Plan or any Award agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by   8 the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined as provided below that the Indemnifiable Person is not entitled to be indemnified); provided, that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s fraud or willful criminal act or omission or that or any Subsidiary’s organizational documents. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless. administer the Plan with respect to such Awards. Any such actions by the Board shall be subject to the applicable rules of the NYSE or any other securities quoted. In any such case, the Board shall have all the authority granted to the Committee under the Plan. (a) The Committee may, from time to time, grant Awards to one or more Eligible Persons. (b) Awards granted under the Plan shall be subject to the following limitations: (i) subject to Section 12 of the Plan, no more than 6,700,000 shares of Common Stock (the “Absolute Share Limit”) shall be available for Awards under the Plan; (ii) subject to Section 12 of the Plan, grants of Options or SARs under the Plan in respect of no more than 1,500,000 shares of Common Stock may be made to any individual Participant during any single fiscal year of the Company (for this purpose, if a SAR is granted in tandem with an Option (such that the SAR expires with respect to the number of shares of Common Stock for which the Option is exercised), only the shares underlying the Option shall count against this limitation); (iii) subject to Section 12 of the Plan, no more than the number of shares of Common Stock equal to the Absolute Share Limit may be issued in the aggregate pursuant to the exercise of Incentive Stock Options granted under the Plan; (iv) subject to Section 12 of the Plan, no more than 600,000 shares of Common Stock may be issued in respect of Performance Compensation Awards denominated in shares of Common Stock granted pursuant to Section 11 of the Plan to any individual Participant for a single fiscal year during a Performance Period (or with respect to each single fiscal year in the event a Performance Period extends beyond a single fiscal year), or in the event such share denominated Performance Compensation Award is paid in cash, other securities, other Awards or other property, no more than the Fair Market Value of such shares of Common Stock on the last day of the Performance Period to which such Award relates; (v) the   9 maximum number of shares of Common Stock subject to Awards granted during a single fiscal year to any Non-Employee Director, taken together with any cash fees paid to such Non-Employee Director during the fiscal year, shall not exceed $500,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes); and (vi) the maximum amount that can be paid to any individual Participant for a single fiscal year during a Performance Period (or with respect to each single fiscal year in the event a Performance Period extends beyond a single fiscal year) pursuant to a Performance Compensation Award denominated in cash (described in Section 11(a) of the Plan) shall be $5,000,000. (c) Other than with respect to Substitute Awards, to the extent that an Award expires or is canceled, forfeited, terminated, settled in cash, or otherwise is settled without a delivery to the Participant of the full number of shares of Common Stock to which the Award related, the undelivered shares will again be available for grant. Shares of Common Stock withheld in payment of the exercise price or taxes relating to an Award and shares equal to the number of shares surrendered in payment of any Exercise Price or Strike Price, or taxes relating to an Award, shall be deemed to constitute shares not issued to the Participant and shall be deemed to again be available for Awards under the Plan; provided, however, that such shares shall not become available for issuance hereunder if either (i) the applicable shares are withheld or surrendered following the termination of the Plan or (ii) at the time the applicable shares are withheld or surrendered, it would constitute a material revision of the Plan subject to stockholder approval under any then-applicable rules of the national securities exchange on which the Common Stock is listed. (d) Shares of Common Stock issued by the Company in settlement of Awards may be shares purchased on the open market or by private purchase or a combination of the foregoing. Following the Effective Date, no further awards shall be granted under the 2007 PTS Holdings Corp. Stock Incentive Plan, as amended and restated granted by an entity directly or indirectly acquired by the Company or with which the Company combines (“Substitute Awards”). Substitute Awards shall not be counted against the Absolute Share Limit; provided, that Substitute Awards options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan. Subject to applicable stock exchange requirements, available shares under a stockholder approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock available for issuance under the Plan. 6. Eligibility. Participation in the Plan shall be limited to Eligible Persons.   10 7. Options. (a) General. Each Option granted under the Plan shall be evidenced by an Award agreement, in written or electronic form, which agreement need not be the same for each Participant. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Incentive Stock Option unless the Plan has been approved by the stockholders of requirements of Section 422(b)(1) of the Code, provided that any Option intended (b) Exercise Price. Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price (“Exercise Price”) per share of Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant); provided, however, that in the of all classes of stock of the Company or any Affiliate, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share on the Date of Grant. (c) Vesting and Expiration; Termination. (i) Options shall vest and become exercisable in such manner and on such date or dates or upon such events as determined by the Committee; provided, however, that notwithstanding any such vesting dates or events, the Committee may, in its sole discretion, accelerate the vesting of any Options at any time and for any reason. Options shall expire upon a date determined by the Committee, not to exceed ten years from the Date of Grant (the “Option Period”); provided, that if the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the Option Period shall be automatically extended until the 30th day following the expiration of such prohibition. Notwithstanding the foregoing, in no event shall the Option Period exceed five years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns the Company or any Affiliate.   11 (ii) Unless otherwise provided by the Committee, whether in an Award agreement or otherwise, in the event of (A) a Participant’s Termination by the Service Recipient for Cause, all outstanding Options granted to such Participant shall immediately terminate and expire, (B) a Participant’s Termination due to death or Disability, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for one year thereafter (but in no event beyond the expiration of the Option Period) and (C) a Participant’s Termination for any other reason, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for ninety (90) days thereafter (but in no event beyond the expiration of the Option Period). (d) Method of Exercise and Form of Payment. No shares of Common Stock shall be issued pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. Options which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company (or telephonic instructions to the extent provided by the Committee) in accordance with the terms of the Option accompanied by payment of the Exercise Price. The Exercise Price shall be payable (i) in cash, check, cash equivalent and/or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual issuance of such shares to the Company); provided, that such shares of Common Stock are not subject to any pledge or other security interest; or (ii) by such other method as the Committee may permit in its sole discretion, including without limitation: (A) in other property having a fair market value on the date of exercise equal to the Exercise Price, (B) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise issuable upon the the Exercise Price or (C) a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Exercise Price and all applicable required withholding and any other applicable taxes. Any fractional shares of Common Stock shall be settled in cash. the Company in writing immediately after the date he or she makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock.   12 a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, as it may be amended from time to time, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules which the securities of the Company are listed or traded. (a) General. Each SAR granted under the Plan shall be evidenced by an Award agreement. Each SAR so granted shall be subject to the conditions set forth in (b) Strike Price. Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price (“Strike Price”) per share of Common Stock for each SAR shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant). Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option. (i) A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable in such manner and on such date or dates or upon such events as determined by the Committee; provided, however, that, notwithstanding any such vesting dates or events, the Committee may, in its sole discretion, accelerate the vesting of any SAR at any time and for any reason. SARs shall expire upon a date determined by the Committee, not to exceed ten years from the Date of Grant (the “SAR Period”); provided, that if the SAR Period would expire the SAR Period shall be automatically extended until the 30th day following the expiration of such prohibition. Recipient for Cause, all outstanding SARs granted to such Participant shall or Disability, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for one (1) year thereafter (but in no event beyond the expiration of the SAR Period) and (C) a   13 Participant’s Termination for any other reason, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for ninety (90) days thereafter (but in no event beyond the expiration of the SAR Period). (d) Method of Exercise. SARs which have become exercisable may be exercised by exercised and the date on which such SARs were awarded. being exercised multiplied by the excess of the Fair Market Value of one share of Common Stock on the exercise date over the Strike Price, less an amount equal to any Federal, state, local and non-U.S. income, employment, and any other applicable taxes required to be withheld. The Company shall pay such amount in cash, in shares of Common Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. Any fractional shares of Common Stock shall be settled in cash. (f) Substitution of SARs for Nonqualified Stock Options. The Committee shall have the authority in its sole discretion to substitute, without the consent of the affected Participant or any holder or beneficiary of SARs, SARs settled in shares of Common Stock (or settled in shares or cash in the sole discretion of the Committee) for outstanding Nonqualified Stock Options, provided that (i) the substitution shall not otherwise result in a modification of the terms of any such Nonqualified Stock Option, (ii) the number of shares of Common Stock underlying the substituted SARs shall be the same as the number of shares of Common Stock underlying such Nonqualified Stock Options and (iii) the Strike Price of the substituted SARs shall be equal to the Exercise Price of such Nonqualified Stock Options. 9. Restricted Stock and Restricted Stock Units. (a) General. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award agreement. Each Restricted Stock and Restricted Stock Unit grant shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. (b) Stock Certificates and Book Entry; Escrow or Similar Arrangement. Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions and, if the Committee rather than issued to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute and deliver (in a manner permitted under Section 14(a) of the Plan or as otherwise determined by the Committee) an agreement evidencing an Award of   14 Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award agreement, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock; provided that if the lapsing of restrictions with respect to any grant of Restricted Stock is contingent on satisfaction of performance conditions (other than or in addition to the passage of time), any dividends payable on such shares of Restricted Stock shall be held by the Company and delivered (without interest) to the Participant within fifteen (15) days following the date on which the restrictions on such Restricted Stock lapse (and the right to any such accumulated dividends shall be forfeited upon the forfeiture of the Restricted Stock to which such dividends relate). To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company. (c) Restricted Period; Termination. (i) The Restricted Period with respect to Restricted Stock and Restricted Stock Units shall lapse in such manner and on such date or dates or upon such events such dates or events, the Committee may, in its sole discretion, accelerate the lapse of the Restricted Period at any time and for any reason. or otherwise, in the event of a Participant’s Termination for any reason prior to the time that such Participant’s Restricted Stock or Restricted Stock Units, as applicable, have vested, (x) all vesting with respect to such Participant’s Restricted Stock or Restricted Stock Units shall cease and (y) unvested shares of Restricted Stock and unvested Restricted Stock Units, as applicable, shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination. (d) Issuance of Restricted Stock and Settlement of Restricted Stock Units. upon such expiration, the Company shall issue to the Participant, or his or her beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.   15 (ii) Unless otherwise provided by the Committee in an Award agreement or otherwise, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall issue to the Participant, or his or her beneficiary, without charge, one share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit; provided, however, that the Committee may, in its sole discretion, elect to (i) pay cash or part cash and part shares of Common Stock in lieu of issuing only shares of Common Stock in respect of such Restricted Stock Units or (ii) defer the issuance of shares of Common Stock (or cash or part shares of Common Stock and part cash, as the case may be) beyond the expiration of the Restricted Period if such extension would not cause adverse tax consequences under Section 409A of the Code. If a cash payment is made in lieu of issuing shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units. To the extent provided in an Award agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends (and interest may, at the sole discretion of the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which accumulated dividend equivalents (and interest thereon, if applicable) shall be payable at the same time as the underlying Restricted Stock Units are settled following the release of restrictions on such Restricted Stock Units, and, if such Restricted Stock Units are forfeited, the Participant shall have no right to such dividend equivalent payments. (e) Legends on Restricted Stock. Each certificate, if any, representing Restricted Stock awarded under the Plan, if any, shall bear a legend substantially in the form of the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such shares of Common Stock: TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE CATALENT, INC. 2014 OMNIBUS INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT, BETWEEN CATALENT, INC. AND PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF CATALENT, INC. 10. Other Stock-Based Awards. The Committee may issue unrestricted Common Stock, rights to receive grants of Awards at a future date, or other Awards denominated in Common Stock (including, without limitation, performance shares or performance units), under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts as the Committee shall from time to time in its sole discretion determine. Each Other Stock-Based   16 Award granted under the Plan shall be evidenced by an Award agreement. Each Other Stock-Based Award so granted shall be subject to such conditions not agreement, including, without limitation, those set forth in Section 14(c) of the Plan. 11. Performance Compensation Awards. (a) General. The Committee shall have the authority, at or before the time of grant of any Award, to designate such Award as a Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. The Committee shall also have the authority to make an award of a cash bonus to any Participant and designate such Award as a Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. Notwithstanding anything in the Plan to the contrary, if the Company determines that a Participant who has been granted an Award designated as a Performance Compensation Award is not (or is no longer) a “covered employee” (within the meaning of Section 162(m) of the Code), the terms and conditions of such Award may be modified without regard to any restrictions or limitations set forth in this Section 11 (but subject otherwise to the provisions of Section 13 of the Plan). With regard to a particular Performance Period, the Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goal(s) that is (are) to apply and the Performance Formula. Within the first ninety (90) days of a Performance Period (or, within any other maximum regard to the Performance Compensation Awards to be issued for such Performance in the immediately preceding sentence and record the same in writing. (c) Performance Criteria. The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one or more Affiliates, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing) and shall be limited to the following: (i) net earnings or net income (before or after (iii) net revenue or net revenue growth; (iv) gross revenue or gross revenue growth, gross profit or gross profit growth; (v) net operating profit (before or after taxes); (vi) return measures (including, but not limited to, return on investment, assets, capital, employed capital, invested capital, equity, or sales); (vii) cash flow measures (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital), which may but are not required to be measured on a per share basis; (viii) earnings before or after interest, taxes, depreciation, amortization and/or rent (including EBIT, EBITDA and EBITDAR); (ix) gross or net operating margins; (x) productivity ratios; (xi) share price (including, but not limited to, growth measures and total stockholder return); (xii) expense targets or cost reduction goals, general and administrative expense savings; (xiii) operating efficiency; (xiv) objective measures of customer satisfaction; (xv) working capital targets; (xvi) measures of economic value added or other ‘value creation’ metrics; (xvii) inventory control; (xviii) enterprise value; (xix) sales; (xx) stockholder return; (xxi) client retention; (xxii)   17 competitive market metrics; (xxiii) employee retention; (xxiv) timely completion of new product rollouts; (xxv) timely launch of new facilities; (xxvi) measurements related to a new purchasing “co-op”; (xxvii) objective measures of personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific acquisitions, reorganizations or other corporate transactions or capital-raising transactions, expansions of specific business operations and meeting divisional or project budgets); (xxviii) system-wide revenues; (xxix) royalty income; (xxx) comparisons of continuing operations to other operations; (xxxi) market share; (xxxii) cost of capital, debt leverage year-end cash position or book value; (xxxiii) strategic objectives, development of new product lines and related revenue, sales and margin targets, co-branding or international operations; or (xxxiv) any combination of the foregoing. Any one or more of the Performance Criteria may be stated as a percentage of another Performance Criteria, or used on an absolute or relative basis to measure the performance of the Company and/or one or more Affiliates as a whole or any divisions or administrative departments of the Company and/or one or more Affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. To the extent required under Section 162(m) of the Code, the Committee shall, within the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period. (d) Modification of Performance Goal(s). In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such alterations, the Committee shall have sole discretion to make such alterations without obtaining stockholder approval. Unless otherwise determined by the Committee at the time a Performance Compensation Award is granted, the Committee shall, maximum period allowed under Section 162(m) of the Code), or at any time thereafter to the extent the exercise of such authority at such time would not cause the Performance Compensation Awards granted to any Participant for such Performance Period to fail to qualify as “performance-based compensation” under Section 162(m) of the Code, specify adjustments or modifications to be made to the calculation of a Performance Goal for such Performance Period, based on and in order to appropriately reflect the following events: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) extraordinary nonrecurring items as described in Accounting Standards Codification Topic 225-20 (or any successor pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year; (vi) acquisitions or divestitures; (vii) any other specific, unusual or nonrecurring events, or objectively determinable category thereof; (viii) foreign exchange gains and losses; (ix) discontinued operations and nonrecurring charges; and (x) a change in the Company’s fiscal year.   18 (e) Payment of Performance Compensation Awards. (i) Condition to Receipt of Payment. Unless otherwise provided in the applicable Award agreement, a Participant must be employed by the Company on the last day Compensation Award for such Performance Period. (ii) Limitation. Unless otherwise provided in the applicable Award agreement, a Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) all or some of the portion of such Participant’s Performance Compensation Award has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals. (iii) Certification. Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the amount of each Participant’s Performance Compensation Award actually payable for the Performance Period and, in so doing, may apply Negative Discretion. (iv) Use of Negative Discretion. In determining the actual amount of an individual Participant’s Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion. Unless otherwise provided in the applicable Award agreement, the Committee shall not have the discretion to (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained or (B) increase a Performance Compensation Award above the applicable limitations set forth in Section 5 of the Plan. (f) Timing of Award Payments. Unless otherwise provided in the applicable Award agreement, Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 11. Any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (i) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (ii) with respect to a Performance Compensation Award that is payable in shares of Common Stock, by an amount greater than the appreciation of a share of Common Stock from the date such Award is deferred to the payment date. Any Performance Compensation Award that is deferred and is otherwise payable in shares of Common Stock shall be credited (during the period between the date as of which the Award is deferred and the payment date) with dividend equivalents (in a manner consistent with the methodology set forth in the last sentence of Section 9(d)(ii) of the Plan).   19 dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other (including, without limitation, a Change in Control) that affects the shares of Common Stock, or (b) unusual or nonrecurring events (including, without without limitation, any or all of the following: (i) adjusting any or all of (A) the Absolute Share Limit, or any other limit applicable under the Plan with respect to the number of Awards which may be granted hereunder, (B) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) which may be issued in respect of Awards or with respect to which Awards may be the limitations under Section 5 of the Plan) and (C) the terms of any outstanding Award, including, without limitation, (1) the number of shares of Common Stock or other securities of the Company (or number and kind of other (ii) providing for a substitution or assumption of Awards (or awards of an acquiring company), accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of time (which shall not be required to be more than ten (10) days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate upon the occurrence of such event); and (iii) cancelling any one or more outstanding Awards and causing to be paid to the holders holding vested Awards (including any Awards that would vest as a result of the occurrence of such event but for such cancellation) the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of Common Stock received or to be received by other stockholders of the Company in such event), including without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR, respectively (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor);   20 provided, however, that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment in Incentive Stock Options under this Section 12 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 12 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Any such adjustment shall be conclusive and binding for all purposes. Payments to holders pursuant to clause (iii) above shall be made in cash or, in the sole discretion of the Committee, in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or combination thereof) as such Participant would have been entitled to receive upon the occurrence of the transaction if the Participant had been, immediately prior to such transaction, the holder of the number of shares of Common Stock covered by the Award at such time (less any applicable Exercise Price or Strike Price). In addition, prior to any payment or adjustment contemplated under this Section 12, the Committee may require a Participant to (A) represent and warrant as to the unencumbered title to his Awards, (B) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Common Stock, and (C) deliver customary transfer documentation as reasonably determined by the Committee. 13. Amendments and Termination. discontinue, or terminate the Plan or any portion thereof at any time; provided, shall be made without stockholder approval if (i) such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any the Company may be listed or quoted) or for changes in GAAP to new accounting standards, (ii) it would materially increase the number of securities which may be issued under the Plan (except for increases pursuant to Section 5 or 12 of the Plan), or (iii) it would materially modify the requirements for participation in the Plan; provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary. Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 13(b) of the Plan without stockholder approval. or retroactively (including after a Participant’s   21 Termination); provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore affected Participant; provided, further, that without stockholder approval, any SAR, (ii) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash payment that is greater than the intrinsic value (if any) of the cancelled Option or SAR, and (iii) the Committee may not take any other action which is considered a “repricing” for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted. 14. General. (a) Award Agreements. Each Award under the Plan shall be evidenced by an Award agreement, which shall be delivered to the Participant and shall specify the without limitation, the effect on such Award of the death, Disability or Termination of a Participant, or of such other events as may be determined by the Committee. For purposes of the Plan, an Award agreement may be in any such form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter) evidencing the Award. The Committee need not require an Award agreement to be signed by the Participant or a duly authorized representative of the Company. Company or an Affiliate; provided, that the designation of a beneficiary shall encumbrance. such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as “charitable contributions” for federal income tax purposes;   22 (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “Permitted Transferee”); provided, that the Participant gives descent and distribution, (B) Permitted Transferees shall not be entitled to statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award agreement, that such a registration statement is necessary or appropriate, (C) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise, and (D) the consequences of the Termination of the Participant under the terms of the Plan and the applicable Award agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award agreement. (c) Dividends and Dividend Equivalents. The Committee in its sole discretion may provide a Participant as part of an Award with dividends or dividend equivalents, payable in cash, shares of Common Stock, other securities, other conditions as may be determined by the Committee in its sole discretion, including without limitation, payment directly to the Participant, withholding in additional shares of Common Stock, Restricted Stock or other Awards; provided, that no dividends or dividend equivalents shall be payable in respect of outstanding (i) Options or SARs or (ii) unearned Performance Compensation Awards or other unearned Awards subject to performance conditions (other than or in addition to the passage of time) (although dividends and dividend equivalents may be accumulated in respect of unearned Awards and paid within fifteen (15) days after such Awards are earned and become payable or distributable). (d) Tax Withholding. (i) A Participant shall be required to pay to the Company or any Affiliate, and withhold, from any cash, shares of Common Stock, other securities or other property issuable or deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, shares of Common Stock, other securities or other property) of any required withholding or any other applicable taxes in respect of an Award, its exercise, or any payment or obligations for the payment of such withholding or any other applicable taxes.   23 foregoing withholding liability by (A) the issuance of shares of Common Stock (which are not subject to any pledge or other security interest) owned by the Participant having a Fair Market Value equal to such withholding liability or (B) having the Company withhold from the number of shares of Common Stock Award a number of shares with a Fair Market Value equal to such withholding liability, provided that with respect to shares withheld pursuant to clause (B), the number of such shares may not have a Fair Market Value greater than the minimum required statutory withholding liability. (e) No Claim to Awards; No Rights to Continued Employment; Waiver. No employee of the Company or any Affiliate, or other person, shall have any claim or right in the employ or service of the Company or any Affiliate, nor shall it be Plan or any Award agreement, except to the extent of any provision to the contrary in any written employment contract or other agreement between the Company and its Affiliates and the Participant, whether any such agreement is executed before, on or after the Date of Grant. (f) International Participants. With respect to Participants who reside or work outside of the United States of America and who are not (and who are not expected to be) “covered employees” within the meaning of Section 162(m) of the Code, the Committee may in its sole discretion amend the terms of the Plan and create or amend Sub-Plans or amend outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law (g) Designation and Change of Beneficiary. Each Participant may file with the if any, due under the Plan upon his or her death. A Participant may, from time to time, revoke or change his or her beneficiary designation without the consent of any prior beneficiary by filing a new designation with the   24 Committee. The last such designation received by the Committee shall be thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate. (h) Termination. Except as otherwise provided in an Award agreement, unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with one Service Recipient to employment or service with another Service Recipient (or vice-versa) shall be considered a Termination; and (ii) if a Participant undergoes a Termination of employment, but such Participant continues to provide services to the Company and its Affiliates in a non-employee capacity, such change in status shall not be considered a Termination for purposes of the Plan. Further, unless otherwise determined by the Committee, in the event that any Service Recipient ceases to be an Affiliate of the Company (by reason of sale, divestiture, spin-off, or other similar transaction), unless a Participant’s employment or service is transferred to another entity that would constitute a Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction. (i) No Rights as a Stockholder. Except as otherwise specifically provided in the ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to such person. (j) Government and Other Regulations. (i) The obligation of the Company to settle Awards in shares of Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel (if the Company has requested such an opinion), satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of the Company or any Affiliate issued under the Plan shall be deem advisable under the Plan, the applicable Award agreement, the Federal securities laws, or the rules, regulations and   25 other requirements of the Securities and Exchange Commission, any securities exchange or inter- dealer quotation system on which the securities of the Company are listed or quoted and any other applicable Federal, state, local or non-U.S. laws, rules, regulations and other requirements, and, without limiting legends to be put on certificates representing shares of Common Stock or other securities of the Company or any Affiliate issued under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any Affiliate issued under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject. shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the Participant, the Participant’s acquisition of Common Stock from the Company and/or the Participant’s sale of Common Stock to the public markets, pay to the Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or issued, as applicable), over (B) the respectively) or any amount payable as a condition of issuance of shares of Common Stock (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof. (k) No Section 83(b) Elections Without Consent of Company. No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award agreement or by action of the Committee in writing prior to the making of such election. If a Participant, in connection with the acquisition of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision. (l) Payments to Persons Other Than Participants. If the Committee shall find for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any other person   26 deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor. (m) Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases. (n) No Trust or Fund Created. Neither the Plan nor any Award shall create or be under general law. (o) Reliance on Reports. Each member of the Committee and each member of the than himself. (p) Relationship to Other Benefits. No payment under the Plan shall be taken otherwise specifically provided in such other plan or as required by applicable law. (q) Governing Law. The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the (r) Severability. If any provision of the Plan or any Award or Award agreement   27 (s) Obligations Binding on Successors. The obligations of the Company under the from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company. (t) 409A of the Code. (i) Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of this Plan comply with Section 409A of the Code, and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with this Plan (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A of the Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as separate payments. (ii) Notwithstanding anything in the Plan to the contrary, if a Participant is a no payments in respect of any Awards that are “deferred compensation” subject to Section 409A of the Code and which would otherwise be payable upon the Participant’s “separation from service” (as defined in Section 409A of the Code) shall be made to such Participant prior to the date that is six months after the date of such Participant’s “separation from service” or, if earlier, the Participant’s date of death. Following any applicable six month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day. (iii) Unless otherwise provided by the Committee in an Award agreement or otherwise, in the event that the timing of payments in respect of any Award (that would otherwise be considered “deferred compensation” subject to Section 409A of the Code) would be accelerated upon the occurrence of (A) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “Disability” pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder. (u) Clawback/Forfeiture. Notwithstanding anything to the contrary contained herein, an Award agreement may provide that the Committee may, in its sole discretion, cancel such   28 Award if the Participant has engaged in or engages in any Detrimental Activity. The Committee may also provide in an Award agreement that if the Participant otherwise has engaged in or engages in any Detrimental Activity, the Participant will forfeit any gain realized on the vesting or exercise of such Award, and must repay the gain to the Company. The Committee may also provide in an Award agreement that if the Participant receives any amount in excess of what the Participant should have received under the terms of the Award for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the Participant shall be required to repay any such excess amount to the Company. Without limiting the foregoing, all Awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law. (v) Expenses; Gender; Titles and Headings. The expenses of administering the   29
Listing Report:Supplement No. 84 dated Nov 23, 2012 to Prospectus dated Oct 05, 2012 File pursuant to Rule 424(b)(3) Registration Statement No. 333-147019 Prosper Marketplace, Inc. Borrower Payment Dependent Notes This Listing Report supplements the prospectus dated Oct 05, 2012 and provides information about each loan request (referred to as a "listing") and series of Borrower Payment Dependent Notes (the "Notes") we are currently offering. Prospective investors should read this Listing Report supplement together with the prospectus dated Oct 05, 2012 to understand the terms and conditions of the Notes and how they are offered, as well as the risks of investing in Notes. The following series of Notes are currently being offered: Borrower Payment Dependent Notes Series 661089 The following information pertains to the borrower loan being requested, that corresponds to the series of Notes to be issued upon the funding of the borrower loan, in the event the listing receives commitments to purchase Notes in an amount that equals or exceeds the minimum amount required for the loan to fund. Amount: Prosper Rating: HR
- Produced by Pellegrini and Associates, Inc. | 134 Spring Street New York NY 10012 | (212) 925-5151 Exhibit 99.1350CERT Certification Pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes Oxley Act Pursuant to 18 U.S.C. § 1350, the undersigned officer of BlackRock MuniYield New Jersey Fund, Inc. (the “Registrant”), hereby certifies, to the best of her knowledge, that the Registrant’s Report on Form N-CSR for the period ended July 31, 2009, (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: September 22, 2009 /s/ Anne F. Ackerley Anne F. Ackerley Chief Executive Officer (principal executive officer) of BlackRock MuniYield New Jersey Fund, Inc. Pursuant to 18 U.S.C. § 1350, the undersigned officer of BlackRock MuniYield New Jersey Fund, Inc. (the “Registrant”), hereby certifies, to the best of his knowledge, that the Registrant’s Report on Form N-CSR for the period ended July 31, 2009, (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: September 22, 2009 /s/ Neal J. Andrews Neal J. Andrews Chief Financial Officer (principal financial officer) of BlackRock MuniYield New Jersey Fund, Inc. This certification is being furnished pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, as amended, and 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR with the Securities and Exchange Commission .
Title: Just found out I was to inherit $50k from a relative deceased in 2014, but his stepdaughter stole the trust. Question:Hi folks. This is a long shot since so much time has passed, but I'm curious if anyone knows the best course of action to take. My great-uncle passed away in 2014. He had mentioned, while living, that I was to receive some inheritance when he passed away, but after his passing, I didn't hear anything so figured I wasn't getting anything. Apparently, his stepdaughter disappeared along with all of the money and put his wife into a home, but nothing has been heard of from either of them since. Fast forward to last Sunday, my parents handed me an envelope postmarked for 2014, addressed to me, from the law firm that handled his will. The document enclosed stated that a trust was set up to be distributed to his relatives upon his death, and I was mentioned in there as being assigned an inheritance of $50,000. I know my parents didn't have any ill-intention and meant to give me the envelope a long time ago and forgot about it. My uncle lived and died in Palm Springs, CA. I'm living in Washington State. The last known location of the deceased's wife and stepdaughter is Louisiana. With the amount of time that passed, is there anything I can do to pursue this? Answer #1: >I know my parents didn't have any ill-intention and meant to give me the envelope a long time ago and forgot about it. your parents fucked you good
Title: Phone hacked for revenge porn. Question:Okay, so I had been talking to this girl for two weeks during the summer but I still wasn’t over my ex so I ghosted the girl I was talking to. After doing that, for months, I have gotten texts from multiple numbers harassing me, presumably from the girl. Each time I would block them but they continuously came back with a new number. I also found nails underneath my car a couple weeks after I ghosted her. Apparently my neighbors saw somebody that night and filed a report. They got a description of her and it seemed to match the girl pretty well. Then a month ago, I got a Google notification alerting me of new logins on my social media accounts (Facebook, Twitter, Instagram). I thought it was weird so I immediately changed all my passwords and thought nothing of it. Then a week ago, my car got marked up. It said “Fuck You” with a heart and the first initial of the girl’s name. Now today, I got a text from an anonymous number claiming to be the girl and saying she hacked my accounts and has pictures of my ex and she claims to have already released two. She then sent one pic to my ex so she really does have them. Essentially, assuming it is the girl, she got into my personal accounts, took private pictures, and possibly already put some out. What are my options? Answer #1: Go to the police. That’s your only option.
Exhibit 10.1     STOCK APPRECIATION RIGHTS AWARD   Granted by   Aware, Inc. (the “Company”)   Under the 2001 Nonqualified Stock Plan     This Stock Appreciation Rights (“SARs”) Award is and shall be subject in every respect to the provisions of the Company’s 2001 Nonqualified Stock Plan (the “Plan”), as amended from time to time, which is incorporated herein by reference and made a part hereof.  The holder of this Award (the “Holder”) hereby accepts this Award subject to all the terms and provisions of the Plan and agrees that (a) in the event of any conflict between the terms hereof and those of the Plan, the latter shall prevail, and (b) all decisions under and interpretations of the Plan by the Board or the Committee shall be final, binding and conclusive upon the Holder and his or her heirs and legal representatives.  Capitalized terms used herein but not defined shall have the meanings set forth in the Plan.   This Award shall entitle the Holder to receive a payment upon the “Payment Date” (as defined below) equal to the product of (a) the excess (if any) of the SAR Valuation as of the Payment Date, over the Base SAR Valuation as set forth below, multiplied by (b) the number of SARs granted herein that have vested as of the Payment Date pursuant to the Vesting Schedule set forth below.  Such benefit shall be payable in the form of shares of the Company’s common stock, $0.01 par value per share (“Common Stock”), valued for these purposes at the Fair Market Value of a share of Common Stock on the Payment Date.  SAR Valuation shall mean the Fair Market Value of a share of Common Stock on the applicable date, and “Payment Date” shall mean the earlier to occur of the Termination Date (as defined below) or the Expiration Date (set forth below).  Any SARs granted herein that have not vested as of the Payment Date shall terminate as of the Payment Date, and no payment shall be made with respect to such SARs.   1. Name of Holder:     2. Date of Grant:     3. Expiration Date:     4. Number of SARs granted:     5. Base SAR Valuation:     6. Termination Date:   For an employee of the Company, Termination Date shall mean the later of (a) the date upon which the Holder ceases to be employed by the Company and (b) the date the Holder ceases to provide paid services for the Company.           For a director of the Company who is not an employee of the Company, Termination Date shall mean the date upon which the director ceases to serve on the Board of   7. Vesting Schedule:     8. Tax Withholding.  Any payment made pursuant to this Award shall be subject to withholding for federal, state and local income and employment tax. Unless the Holder has made alternative arrangements satisfactory to the Company with respect to such  withholding amounts, the Company shall withhold from any payment of shares to be made pursuant to this Award a number of shares with an aggregate Fair Market Value equal to the minimum withholding amounts applicable to such payment   IN WITNESS WHEREOF, the parties have executed this Award, or caused this Award to be executed, as of the Date of Grant.     Aware, Inc.                     By:       The undersigned Holder hereby acknowledges receipt of a copy of the Plan and this Award, and agrees to the terms of this Award and the Plan.       Holder         2
Name: 84/620/EEC: Commission Decision of 12 November 1984 on the clearance of the accounts presented by the Kingdom of the Netherlands in respect of expenditure incurred in the 1978 financial year on agricultural products supplied as food aid (Only the Dutch text is authentic) Type: Decision_ENTSCHEID Subject Matter: nan Date Published: 1984-12-12 Avis juridique important|31984D062084/620/EEC: Commission Decision of 12 November 1984 on the clearance of the accounts presented by the Kingdom of the Netherlands in respect of expenditure incurred in the 1978 financial year on agricultural products supplied as food aid (Only the Dutch text is authentic) Official Journal L 325 , 12/12/1984 P. 0058 - 0059+++++( 1 ) OJ NO L 180 , 8 . 8 . 1972 , P . 1 . ( 2 ) OJ NO L 288 , 25 . 10 . 1974 , P . 1 . ( 3 ) OJ NO L 34 , 5 . 2 . 1977 , P . 21 . COMMISSION DECISION OF 12 NOVEMBER 1984 ON THE CLEARANCE OF THE ACCOUNTS PRESENTED BY THE KINGDOM OF THE NETHERLANDS IN RESPECT OF EXPENDITURE INCURRED IN THE 1978 FINANCIAL YEAR ON AGRICULTURAL PRODUCTS SUPPLIED AS FOOD AID ( ONLY THE DUTCH TEXT IS AUTHENTIC ) ( 84/620/EEC ) THE COMMISSION OF THE EUROPEAN COMMUNITIES , HAVING REGARD TO THE TREATY ESTABLISHING THE EUROPEAN ECONOMIC COMMUNITY , HAVING REGARD TO COUNCIL REGULATION ( EEC ) NO 1703/72 OF 3 AUGUST 1972 AMENDING REGULATION ( EEC ) NO 2052/69 ON THE COMMUNITY FINANCING OF EXPENDITURE ARISING FROM THE IMPLEMENTATION OF THE FOOD AID CONVENTION OF 1967 , AND LAYING DOWN RULES FOR THE COMMUNITY FINANCING OF EXPENDITURE ARISING FROM THE IMPLEMENTATION OF THE FOOD AID CONVENTION OF 1971 ( 1 ) , AND IN PARTICULAR ARTICLE 9 ( 3 ) THEREOF , HAVING REGARD TO COUNCIL REGULATION ( EEC ) NO 2681/74 OF 21 OCTOBER 1974 ON COMMUNITY FINANCING OF EXPENDITURE INCURRED IN RESPECT OF THE SUPPLY OF AGRICULTURAL PRODUCTS AS FOOD AID ( 2 ) , HAVING CONSULTED THE EAGGF COMMITTEE , WHEREAS , THE KINGDOM OF THE NETHERLANDS HAS SUPPLIED TO THE COMMISSION THE SUPPORTING STATEMENTS REQUIRED FOR THE CLEARANCE OF THE ACCOUNTS PURSUANT TO ARTICLE 7 OF COMMISSION REGULATION ( EEC ) NO 249/77 OF 2 FEBRUARY 1977 LAYING DOWN DETAILED RULES FOR THE APPLICATION OF REGULATION ( EEC ) NO 2681/74 ( 3 ) ; WHEREAS , UNDER ARTICLE 1 OF REGULATION ( EEC ) NO 249/77 , ONLY THE NET QUANTITIES TAKEN OVER BY THE AID RECIPIENT AT THE POINT OF DELIVERY FIXED BY COMMUNITY REGULATIONS CAN BE FINANCED ; WHEREAS EXPENDITURE IS FINANCED ON THE BASIS OF THE PROVISIONS IN THE MOBILIZATION REGULATIONS FOR EACH OPERATION ACCORDING TO THE RELEVANT RULES ; WHEREAS INSPECTIONS CARRIED OUT HAVE SHOWN THAT PART OF THE EXPENDITURE DECLARED , AMOUNTING TO FL 5 116,96 , DOES NOT SATISFY THE REQUIREMENTS OF THIS PROVISION AND MUST THEREFORE BE DISALLOWED ; WHEREAS THE MEMBER STATE HAS BEEN FULLY INFORMED OF THIS DEDUCTION AND HAS HAD AN OPPORTUNITY TO STATE ITS VIEWS THEREON , HAS ADOPTED THIS DECISION : ARTICLE 1 THE ACCOUNTS OF THE DEPARTMENTS AND AGENCIES EMPOWERED BY THE KINGDOM OF THE NETHERLANDS TO PAY EXPENDITURE INCURRED IN 1978 ON AGRICULTURAL PRODUCTS SUPPLIED AS FOOD AID ARE HEREBY CLEARED AS INDICATED IN THE ANNEX HERETO . ARTICLE 2 THIS DECISION IS ADDRESSED TO THE KINGDOM OF THE NETHERLANDS . DONE AT BRUSSELS , 12 NOVEMBER 1984 . FOR THE COMMISSION POUL DALSAGER MEMBER OF THE COMMISSION ANNEX CLEARANCE OF THE ACCOUNTS OF THE DEPARTMENTS AND AGENCIES IN THE NETHERLANDS EMPOWERED TO PAY EXPENDITURE ARISING FROM FOOD-AID OPERATIONS IN AGRICULTURAL PRODUCTS 1 . FUNDS AVAILABLE AFTER CLEARANCE OF 1977 ACCOUNTS FL 2 534 907,85 2 . ADVANCES AUTHORIZED FOR FOOD-AID OPERATIONS IN 1978 FL 68 560 000,00 3 . TOTAL AVAILABLE TO COVER 1978 EXPENDITURE FL 71 094 907,85 4 . EXPENDITURE EFFECTED IN RESPECT OF 1978 AND RECOGNIZED AS CHARGEABLE TO CHAPTER 92 : FOOD-AID EXPENDITURE FROM THE GENERAL BUDGET OF THE EUROPEAN COMMUNITIES FL 71 689 088,07 5 . FUNDS AVAILABLE AFTER CLEARANCE OF 1978 ACCOUNTS FL - 594 180,22
Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1-OXLEY ACT OF 2002 In connection with the Annual Report of Vidable, Inc., a Nevada corporation, (the “Company”) on Form 10-K for the period ending December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lino Luciani, Chief Executive Officer and Chief Financial Officer of the Company, certify the following pursuant to Section 18, U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Lino Luciani Lino Luciani, President (Chief Executive Officer and Chief Financial Officer) April 16, 2012
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ( X ) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE FISCAL YEAR ENDED MAY 31, 2013 () TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number 0-54205 HUAYUE ELECTRONICS, INC. (Name of Registrant in its Charter) Delaware 20-2188353 (State of Other Jurisdiction of incorporation or organization) (I.R.S. Employer I.D. No.) 51 Huilingxi Road, Zhouhuizheng, Wujin District Changzhou, Jiangsu Province, P.R. China 213022 (Address of Principal Executive Offices) Issuer's Telephone Number: 86-519-83630688 Securities Registered Pursuant to Section 12(b) of the Exchange Act: NONE Securities Registered Pursuant to Section 12(g) of the Exchange Act: COMMON STOCK, $0. (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 406 of the Securities Act.Yes No √_ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes No √_ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes√_No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)Yes√_ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained,to the best of registrant'sknowledge,in definitive proxy or informationstatements incorporatedby referencein Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One) Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company X Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No √_ As of November 30, 2012, the last day of the registrant’s most recent fiscal second quarter, the aggregate market value of the common stock held by non-affiliates was $23,920,413 based upon the closing sale price on November 30, 2012 of $3.00 per share. As of August 28, 2013, there were 31,327,741shares of common stock outstanding. Documents incorporated by reference: NONE PART I FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED In addition to historical information, this Annual Report contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or similar expressions. These forward-looking statements represent Management’s belief as to the future of Huayue Electronics, Inc.Whether those beliefs become reality will depend on many factors that are not under Management’s control.Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Section 1A of this Report, entitled “Risk Factors.” Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. ITEM 1.BUSINESS Huayue Electronics, Inc. is a Delaware corporation that, through a subsidiary, owns all of the registered capital of Changzhou Huayue Electronic Co., Ltd. (“Changzhou Huayue”).Changzhou Huayue was organized in 1999 under the laws of the People’s Republic of China (“PRC”).Changzhou Huayue is engaged in the businesses of developing, producing and selling two major product lines: ● energy efficient lights including high frequency induction lights and LED lights; ● electrolytic capacitors. While revenues in fiscal year 2013 (which ended on May 31, 2013) were split approximately 73%-27% between these two business lines, we anticipate that our future growth will be derived primarily from the lighting business. History of Changzhou Huayue Changzhou Huayue was founded in November, 1999 as a corporation under the laws of the PRC by Mr.Shudong Pan.Initially, Changzhou Huayue was engaged in the business of developing, producing and selling electrolytic capacitors.In 2008, Changzhou Huayue’s management team decided to expand the company’s activities by entering the business of producing and selling high frequency induction lights.Towards this end, Changzhou Huayue leased and outfitted a production facility in Changzhou in 2009. Following its entry into the induction lighting business, Changzhou Huayue obtained the required PRC government certificates and a patent for induction lamps in March, 2009.During the first half of 2010, the company met certification requirements for compliance with international and European Community standards.Changzhou Huayue participated in the drafting of three of the PRC National Induction Lighting Efficiency Standards and acted as the principal drafter of two of them. China’s Standardization Administration finally approved three induction standards in late 2012, which means all regulated corporations and government entities can now procure induction lighting from listed companies. Changzhou Huayue, as one of the principle drafters, was listed on all three and ranked number 1 on one of them. In 2011, Changzhou Huayue added a full line of LED products to further meet global lighting demand. 1 History of Lighting Both LED lights and high frequency induction lights represent the fourth generation of lighting products.The first three generations were incandescent lights, fluorescent lamps and energy-saving lights: ● The incandescent light bulb, invented by Thomas Edison in 1879, creates light by heating a filament inside the tube.The heat makes the filament white hot, producing visible light.Because light is created through heat, about 90% of the energy these lamps produce is in the form of heat or infrared radiation. · In the early 20th Century, conventional fluorescent lights were patented.In these lamps, mercury vapor or another type of gas in the tube, when excited by an electrode, produces invisible ultraviolet light.These light waves hit the white powder coating on the inside of the tube, called phosphors, which then produces white visible light.This method of producing light is more energy efficient than incandescent lighting, producing only about 30% of the heat. · Energy-saving lamps, such as compact fluorescent lights, were developed to replace standard incandescent bulbs, producing the same amount of light with reduced power use and cost.However, the presence of electrodes in conventional fluorescent lights imposes many restrictions on lamp design and performance and limits lamp life. In contrast to traditional lamps, induction lights and LED lights involve neither filaments nor electrodes, and no electrical connection goes on inside the glass tube.Instead, for induction lights, energy is transferred through the glass tube solely by electromagnetic induction.Power to create the light is transferred from outside the glass tube by means of a magnetic field.As with a conventional fluorescent lamp, the power excites mercury or a mercury alloy, producing ultraviolet light which hits the phosphors resulting in visible light. “LED” is the acronym for light emitting diode, the element of LED lighting that transforms electric current into light. Engineers create diodes by pairing a negatively charged semiconductor. When electric power is connected to the diode, the semiconductors are forced into imbalance and release light as electrons jump to a different energy level. Types of Induction Lamps and Our Edge There are two basic types of induction lights:external induction lamps and internal induction lamps.In an external induction lamp, electromagnets are wrapped around a part of the tube.The tube contains mercury atoms which are provided by a pellet of mercury amalgam.High frequency energy from the ballast is sent through wires which are wrapped in a coil around a ferrite inductor.This creates a powerful magnetic force, which excites the mercury atoms.Aswith the other forms of fluorescent lighting, the mercury emits ultraviolet light which hits the phosphors and produces visible light. Internal induction lamps resemble incandescent lights in shape.The bulb contains inert gas, a pellet from a mercury amalgam or alloy, phosphors coating the interior, and a glass tube extending from bottom of the bulb to form a cavity.This test tube-like cavity contains an induction coil wound around a ferrite shaft.The inductor is excited by high frequency electric power from an external ballast.This causes a magnetic field to penetrate the glass and excite the mercury atoms, which emit ultraviolet light.These waves are converted to visible light by the phosphor coating. 2 The induction technology developed by Huayue enables us to make all our induction lamps internal. There are no stand-alone power components attached.In addition, we have achieved universal adaptability in our induction lamps, so customers can simply replace conventional bulbs without changing any part of their electric system. Huayue LED lights and Our Edge The development of LED lighting by Changzhou Huayue was premised on our expectation that the global cost of diodes will decline as demand widens, so that competition in the LED marketplace will be based on the ability of the lamp manufacturer to efficiently assemble high quality lamps.Our research and development efforts, therefore, were focused on techniques to reduce manufacturing cost while maintaining product quality. Changzhou Huayue is not a manufacture of the actual light emitting diodes; but our experience in the capacitor industry has provided us the relationships that allow us to purchase high quality diodes at competitive prices. We incorporate these diodes into our proprietary product design to achieve a balance of high quality and low cost. Advantages of LED and Induction Lighting LED lamps and high frequency induction lamps have a number of advantages over other types of lighting: ● Longer Life Span.Electrodes in incandescent and conventional fluorescent lamps decay, producing less light over time, and are generally the limiting factor in the lives of the light.The average life span of a traditional lamp is no more than one year.By avoiding the use of electrodes, induction lamps and LED lamps can have life spans of up to 60,000 hours. As a result, we are able to offer five year warranties on our products.The extended life reduces the frequency and cost of replacement. It also makes our lamps particularly suitable for locations or structures where servicing and light replacement are difficult. ● High Luminous Efficiency.Electrodes in incandescent or conventional fluorescent lighting give rise to power loss and place limits on the gas pressure and its composition.These restrictions do not apply to electrodeless LED and induction lighting. As a result, the power rating and light output of the lamps can be significantly increased. ● Quick Start.Both LED and induction lights can be started or restarted without pre-heating.Only a low current is necessary to initiate operation.This enables the size of the distribution box to be reduced, lowering the installation cost.Their quick start-up makes both technologies particularly well suited for emergency lighting. ● Automatic Brightness Adjustment.All our products can be designed to incorporate programmable smart cards, which can adjust the level of brightness based on such factors as the time of day or the level of natural light.The lamps can function at any point down to 30% of their capacity, providing significant flexibility. ● Ballast Efficiency.High frequency ballasts operate at around 98% efficiency while 10-15% of the energy is wasted by the ballast in traditional lighting designs.As a result¸ our ballasts reduce energy demand and the related pollution. ● Energy Efficiency.Both technologies can save as much as 75% of the energy that would be used in conventional fluorescent lamps. ● Environmentally Friendly.Induction lights use amalgams (mercury alloys) instead of liquid mercury.This difference reduces the amount of pollution that occurs from the disposal of the lamps. LED lamps do not contain mercury. ● High Lighting Quality.Because they operate at a high frequency, induction lights do not produce glare and do not flicker.This makes them ideal for use in the workplace, avoiding those lighting effects that can cause migraines. LEDs also emit steady light, producing a very limited amount of flickering under steady current. 3 Our Applications Changzhou Huayue, as of 2013, is targeting the commercial/industrial sector with its induction products. Followings are some of our applications: ● High Bay Lighting.Factories with high ceilings often require that the surface brightness of the lighting source be lowered to an indoor natural lighting level.Induction lamps provide a bright, but more pleasant, lighting source than traditional forms of lighting in these plants.Where they have been installed, the accident rate has gone down and less energy is consumed.For these reasons, Chinese factories are increasingly using induction lamps. ● Roadway Lighting.Induction lamps are well suited for the lighting of roadways, particularly in locations where maintenance is difficult.For example, the Nanpu Bridge lighting project used induction lamps, which resulted in a 34% reduction in cost from the original lamps. ● Lighting in Tunnels.Because of their lack of glare, quick start, ability to automatically adjustbrightness, and lower maintenance cost, induction lamps are used in over 100 tunnels in the PRC, such as the Shanghai Waitan Tunnel and all the tunnels on the Wuhan-Guangzhou high-speed railway. ● Lighting for Public Facilities.The ability to adjust the brightness level through programmable smart cards makes induction lamps highly attractive for use in outdoor public locations. Our LED products are particular popular for indoor lighting projects such as public library, hospital and schools. Marketing of our LED products is focused on the domestic and home office sector., Huayue is now actively looking for retail channel both domestically and internationally that will target home/office owners. We believe that LED products will be the engine for our international growth, as our ability to provide quality products at a highly competitive price should permit the Company to penetrate the global market aggressively. Energy Efficient Lighting:Competition The global market for lighting products is dominated by very large multi-national corporations headquartered outside of the PRC, such as Philips, Osram (a subsidiary of Seimens) and General Electric. We believe that, to date, these companies have not made induction lighting a priority.The market for LED lights, on the other hand, is highly competitive as Philips, in particular, has made this market a priority.We believe that Huayue will be able to compete in this market as the cost-effective design of our products will provide us significant price advantages. In addition, our technological advances are protected by 88 patents issued in the PRC. Nevertheless, the multi-national giants have many times the resources of Changzhou Huayue; so the competitive situation could be daunting. 4 For induction lighting, we also have numerous domestic competitors in the market for induction lighting.Most of these companies have targeted the low power segment, as opposed to the high frequency products that are Changzhou Huayue’s focus.We believe that those competitors that have attempted to develop high power induction lighting have encountered serious problems, including low research productivity, unsophisticated product design, unstable quality control, and limited product applicability. Huayue believes it has significant competitive advantages over these local enterprises.Along with having our technology protected by international patents, our products benefit from representing high quality at a low cost.The incorporation of smart cards into our lamps provides constant power control and the ability to automatically adjust brightness.We have the facilities to mass produce 300 watt induction lamps with long lives that do not require frequent maintenance, as demonstrated by our warranties. We also have substantial equity in our brand name.Our electrolytic capacitors achieved widespread domestic popularity and became internationally known through their export to ten countries.Since our entry into the efficient lighting market, we have won a number of awards and have been appointed to serve important industry functions by the PRC government. Huayue further believes that it derives a meaningful distribution and transportation advantages from its location in a central area for lighting companies in the town of Zouqu in Changzhou City.Changzhou City is located in the “Yangtze River Golden Triangle” within drivable distance from twoof the PRC’s largest cities, Shanghai and Nanjing.In addition, the Shanghai-Nanjing Railway, the Shanghai-Nanjing highway and the Beijing-Hangzhou Grand Canal run through the city of Changzhou. Marketing and Distribution Huayue believes that the annual market demand for all types of industrial lighting in China is 400 billion Chinese Renminbi (“RMB”), or $62.7 billion, with the lighting of public facilities and high bays accounting for 300 billion RMB of this amount and the remaining 100 billion RMB relating to the lighting of private property.Huayue has targeted the former segment of this market.The market for induction lighting in the PRC has been estimated to be as large as 100 billion RMB.Our entry into the international market will further expand our sales potential. We recently changed our domestic distribution strategy for induction lights.Prior to fiscal 2012 our target market for lighting products had been end users, to whom our in-house sales staff marketed directly.During fiscal 2012 we added an emphasis on developing customer relationships with regional distributors of lighting products and construction materials.This method has proved successful, being one of the main drivers for our revenue increase.Our sales transactions with distributors are not significantly different than our sales transactions with end users:none of our distributors has been given an exclusive territory, their purchases are based on the same price list as we give to end users, and our revenue recognition policies are the same for each type of sale.However, the relationship with distributors provides us a cost-effective way of expanding the scope of our marketing. The largest contribution to the growth of our sales in fiscal 2013 was our decision to offer installation services along with our lighting products.Customers who contributed more than 42% of our sales in fiscal 2013 took this option.The new program also provides a boost to our profitability, as the gross margin on the installation services has been 55%, compared to the 45% gross margin that we realize on sales of lighting products alone. 5 A growing aspect of our lighting business is our participation in energy management contracts (“EMC”). In this business model, energy efficient equipment is sold to an end user on a payment plan designed to net no cost to the customer: payments by the customer are scheduled to conform to the savings realized from use of the energy efficient equipment.Changzhou Huayue offers this option to customers directly as well as to contractor as part of a broader EMC program.Although an EMC sale results in significantly longer payment terms than a conventional net-90 days sale, profit margins on EMC sales are far higher than on conventional sales, as customers are much less price-resistant in the EMC model. Historically, Changzhou Huayue had exported its electrolytic capacitors and related products to the United States, Europe and other countries in Asia, creating global brand awareness.For our induction lighting products, we have been securing the government approvals necessary to engage in export, and are currently in the process of negotiating terms with prospective international sales agents.Our plan is to price our products sold internationally at a 20% premium to our domestic sales, in order to provide a margin for adverse currency movements. In addition, once we receive approval for international marketing, we will be eligible to purchase receivables insurance that the Chinese government offers for eligible offshore sales.Besides significantly reducing the risk of international sales, the government insurance facilitates receivables financing, which is generally difficult in China. Induction Lighting:Involvement of the PRC Government Changzhou Huayue has enjoyed the support of the PRC government.Leaders within the government as well as specialists from such entities as the Policy Research Center of the Communist Party of China and the Economic Research Office of the State Council visited our site and reviewed our technology in early 2010.That same year, a group of experts recommended that the induction lighting industry and its technology be further developed as a matter of public policy.As a result, the PRC government designated induction lamps as high-efficiency products that would be eligible for preferential policies and subsidies.Among the benefits that we have received from the government’s favorable attitude toward induction lighting are the following: · Having qualified for the Chinese government’s incentive program to promote innovation in technology, Changzhou Huayue currently enjoys a 15% income tax rate (reduced from the standard 25% corporate income tax rate) until 2014, at which time we will be eligible to apply for an extension. · The national government’s policy favoring the use of induction lighting has expanded the market for our products. In cooperation with several of our customers who serve as contractors on projects funded by various governmental ministries and commissions, we have installed induction lamps on the Shengli Oilfield and the Shanghai Middle Ring Highway, and are working on the installation of induction lamps as a part of such projects as Beijing International Airport, Petro China, SinoPec and Saicgroup.Huayue believes that these projects will improve awareness of our brands and expand our market share. Electrolytic Capacitors Changzhou Huayue’s historic business has been the development, manufacture and sale of electrolytic capacitors.This business contributed approximately 80% of our revenues in the year ended May 31, 2010, 44% of our revenue in the year ended May 31, 2011, and 38% of our revenue in the year ended May 3,1 2012.This number has further declined to 27% as our revenue from efficient lighting increase in the year ended May31, 2013. We manufacture the electrolytic capacitors in the same facility in Changzhou as the induction lamps, but in a different workshop.We distribute our capacitors through both domestic retailers in the PRC and international trading companies.Strong sales and performance of this product line in the past have created good will for Changzhou Huayue and established a global brand. 6 Competition in the market for electrolytic capacitors has been particularly intense in recent years.A number of firms have entered the industry, many of which are larger and have technology superior to that of Changzhou Huayue.We have responded by targeting the lower end of the market where we remain competitive on the basis of price, name recognition, and the dependence of clients who have purchased our capacitors in the past.However, given these difficult competitive conditions and the increasing cost of labor, we have determined, as a strategic matter, not to make significant additional investments in this area.Moreover, the technology is fairly developed and only 5% of our product development expenditures over the past three years have related to this business. Raw Materials and Our Suppliers In connection with our induction lighting business, we purchase glass shells, high temperature cables, power supplies, mercury amalgam, and aluminum blocks.The key supplies purchased for our electrolytic capacitors are positive and negative foil. During fiscal year 2013 we significantly revamped our purchasing policies.In the prior year, ended May 31, 2012, Changzhou Huayue purchased 68% of its materials from Shanghai Mahe Electronics Company, Ltd. (“Shanghai Mahe”).Shanghai Mahe did not have any other business relationships with either Changzhou Huayue or any of its affiliates.We also acquired 10% of our materials during the year ended May 31, 2012 from Wujiang Xinfeng Electronics Company, Ltd. (“Wujiang Xinfeng”).Subsequently, management determined that reliance on purchases from Shanghai Mahe and Wujiang Xinfeng posed risks to our productivity.For that reason, during the 2013 fiscal year we adding a number of suppliers such as Anhui Tianchangxinlong , Changzhou Ruiqi Electronics, Yangzhou Ruike, and Jiangsu Baoying. As a result, there was no major reliance on suppliers during the fiscal year ended May 31, 2013. Our Customers Throughout our history, the bulk of our annual sales have been made to a few major customers.However, with the growth in our lighting business, the degree of concentration in our customer list has declined. During the year ended May 31, 2010, when capacitors dominated our sales, our top five customers accounted for 41% of our sales. During the year ended May 31, 2012, when lighting products dominated, the top five non-affiliated customers accounted for 22% of our revenue, with no single non-affiliated customer representing more than 10% of revenue. Sales to a single affiliated company, Changzhou Teweile Energy-saving Lighting Tech Co., Ltd. (“Changzhou Teweile”), produced 48% of our revenue during fiscal 2012.Changzhou Teweile is owned by Li Xinmei, a member of our board of directors and spouse of our CEO.We utilized this conduit for sales during fiscal 2012 because, prior to the date when Huayue became a public company, Changzhou Teweile had developed an important customer base.In the first quarter of fiscal 2012, before we became a public company, we sold approximately $1.4 million in goods to Changzhou Teweile at cost.Since that time, all sales to Changzhou Teweile have been at market prices. For the 2013 fiscal year, there were two significant accounts which together produced 30% of our revenue. These are project-based contracts in Yinchuan and with Muyang Holding Ltd. We do not anticipate any future reliance or repeated sale with these same customers. 7 Intellectual Property We have proprietary rights with respect to our technology.We are currently operating with 88 patents and have 30 new applications pending. We believe that the breadth of description of our patents gives us significant protection. Changzhou Huayue also uses holds registered trademarks for its LED, induction lamp and electrolytic capacitor businesses. Insurance Changzhou Huayue maintains the insurance required by the PRC Labor and Social Security Law.That law mandates that we contribute an amount equal to a percentage of our payroll to several multi-employer welfare programs.The aggregate contribution is approximately 25% of payroll.As a result, as our business expands and our payroll increases, our contributions to these programs will increase proportionately. In addition, we insured certain property against accidents in our commercial insurance policy.The total annual premium on this policy is 658,600 RMB or $105,000. Environmental Considerations Induction lamps, such as those manufactured by Changzhou Huayue, are considered to be highly environmentally friendly and preferable to induction and fluorescent lights on environmental grounds.Because of their longer life spans, induction lamps need to be discarded much less frequently.Moreover, the solid mercury amalgam used in induction lamps can be disposed of with reasonable efforts and does not produce either water or ground pollution. We spent about 800,000 RMB, or $129,000, in the year ended May 31, 2013 on compliance with environmental laws and regulations.Because we have designed our productionwith environmental concerns in mind, we do not expect this amount to increase in the coming years. Employees We currently have a total of 106 employees.Of the overall total, 25 employees are in management.13 employees specialize in research and development and a team of 30 employees are devoted to sales.The remainder of our employees are in production. ITEM 1A. RISK FACTORS Investing in our common stock involves risk. You should carefully consider the risks described below together with all of the other information contained in this Report, including the financial statements and the related notes, before deciding whether to purchase any shares of our common stock. If any of the following risks occurs, our business, financial condition or operating results could materially suffer. In that event, the trading price of our common stock could decline and you may lose all or part of your investment. 8 The market for energy efficient lights is highly competitive, which could adversely affect our sales and financial condition. Several major multi-national enterprises dominate the global market for lighting.These competitors are much larger than we are and have substantially greater financial resources that allow them to be in a better position to withstand changes in the industry.Many also have been in the business for a longer period of time and have greater accumulated experience and higher global name recognition.In addition, our existing competitors may introduce new products based on alternative technologies that may cause us to lose customers which would result in a decline in our sales volume and earnings.It is also likely that new competitors will enter the lighting market in China.These entities may broaden or enhance their offerings to provide a product similar to ours or to compete more effectively with our products.While we currently have advantages over our competitors in certain limited portions of the Chinese market for energy efficient lighting, there can be no assurance we will be able to maintain these advantages over time.The effort necessary to compete effectively - funding acquisitions, hiring new employees, broadening sales efforts and incurring the other costs of marketing expansion - will increase expenses and thus adversely affect our margins.Costs incurred in research and development may also increase.Competition could cause us to lose market share, or increase expenditures or reduce pricing, each of which would have an adverse effect on the results of our operations, cash flows and financial condition. We have been actively engaged in the energy efficient lighting business, the anticipated source of the enterprise’s growth, only since 2009.Unless we effectively manage our growth, we may not be profitable. Although Changzhou Huayue was founded in 1999, until 2009 we were engaged solely in the electrolytic capacitor business, a business that is substantially unrelated to our lighting operations. While we have met with initial success in the development, production and sales of energy efficient lamps, there can be no assurance that this will lead to positive financial results in the future.Management also anticipates a major expansion of the operations carried on by Changzhou Huayue.To achieve the objectives in our business plan, we must hire and train additional personnel and will require new equipment, facilities, information technology and other infrastructure resources.We do not know if we will be able to expand our business rapidly enough or adequately manage this growth.If we do not accurately predict demand for our products, we may have too much or too little production capacity.If growth is not effectively managed, it may have a substantial negative impact on our operations and profitability.Also, improvement may be needed in operational, financial and management controls and our reporting systems and procedures.The complexity of, and intense competition in, this business will cause us to face many challenges, some of which are not foreseeable.If an ongoing source of financing is not available, the ability to continue ongoing operations could be compromised. Our expansion into the international market will require capital investment, which may result in dilution of the equity of our present shareholders or significantly increased borrowing costs. Our business plan contemplates that we will expand our sales both domestically and internationally.To achieve that aim, we will need capital.So our business plan contemplates that we will raise $30 million in capital during the next two years in order to build a new production and sales distribution center and implement our growth strategy.We intend to raise all or a large portion of the necessary funds by selling equity in our company.At present we have no commitment from any source for those funds.We cannot determine, therefore, the terms on which we will be able to raise the necessary amounts.It is possible that we will be required to dilute the value of our current shareholders’ equity in order to obtain the funds.On the other hand, if we are forced to borrow these amounts, our cost of capital will significantly increase.But if we are unable to raise the necessary funds, our growth will be limited, as will our ability to compete effectively. 9 The nature of our receivables and the unavailability of receivables financing in China will restrict our cash flows, and may interfere with our ability to fund growth. Our standard arrangement with customers requires payment for sales 90 days after delivery.In many situations, however, we afford customers much longer to pay.For example, when we provide lamps to contractors working on government construction projects, we respect the government practice of paying only after the entire project is inspected by requiring payment 90 days after actual installation of the lamps.In addition, a growing portion of our business involves entering into energy management contracts with customers or participating in energy management contracts written by contractors, under which the customer is not required to pay until cost savings from the energy efficient lamps are realized.In these and similar circumstances, our collection of receivables will take place over an extended period of time.In the meantime, however, the current efforts of China’s government to restrict bank lending and control monetary expansion prevent us from financing our receivables.As a result, in many cases our cash resources must be used to pay ongoing expenses before the cash revenue arising from those expenses is collected.This situation limits our cash resources and may, in turn, limit our growth and prevent us from taking advantage of opportunities for expansion and market penetration that present themselves. Changes in technology could make our products obsolete or uneconomic. Our proprietary technology for energy efficient induction lamps is a key competitive advantage for us.Certain aspects of our lamps are protected by patents in the PRC.However, new developments in the field of lighting are occurring at a rapid pace, and there can be no assurance that such development will not give rise to a different type of lamp that is superior to those offered by Changzhou Huayue.To the extent that our competitors can take advantage of new technologies, competition in the market for lighting will increase and our revenues could decline. Our inability to protect our trademarks, patent and trade secrets may prevent us from successfully marketing our products and competing effectively. Failure to protect our intellectual property could harm our brands and our reputation, and adversely affect our ability to compete effectively. Further, enforcing or defending our intellectual property rights, including our trademarks, patents, copyrights and trade secrets, could result in the expenditure of significant financial and managerial resources. We produce, market and sell our products under the brand “Huayue” using a number of trademarks that we have registered.We cannot provide any assurance that trademark protection will provide adequate protection for our brands. We regard our intellectual property, particularly our trademarks and trade secrets, to be of considerable value and importance to our business and our success. We rely on a combination of trademark, patent, and trade secrecy laws, and contractual provisions to protect our intellectual property rights. There can be no assurance that the steps taken by us to protect these proprietary rights will be adequate or that third parties will not infringe or misappropriate our trademarks, trade secrets or similar proprietary rights. In addition, there can be no assurance that other parties will not assert infringement claims against us, and we may have to pursue litigation against other parties to assert our rights. Any such claim or litigation could be costly and we may lack the resources required to defend against such claims. In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands, and profitably exploit our products. 10 We currently benefit from the support of the PRC government and would be adversely affected were the government to change its view. The PRC government provides Changzhou Huayue with the benefits of preferential policies.Among the benefits that have had a direct impact on our financial results are grants for technology development and favorable tax rates.Of perhaps even more importance to our overall financial results is the fact that induction lamps are on the government procurement list and the national government has expressed a policy favoring the use of induction lamps in government funded construction projects.Projects initiated by government ministries and commissions have increased the demand for our products.If the government were to change its position on the induction lighting industry in general, or Changzhou Huayue specifically, it would have a material adverse effect on the company. Our electrolytic capacitor business operates at a disadvantage to certain competitors, and we have not make substantial new investments in this activity, making it highly unlikely that it will generate any meaningful growth in the future. The market for electrolytic capacitors in the PRC is highly competitive, and the product is mature.We regard it as a sunset business.40 of our employees work in this area, and workforce turnover and increased labor costs are significant problems.Certain of our competitors have advantages in technology and economies of scale.We have targeted the lower end of the market, where we can continue to compete, but have not, and will not, devote significant additional resources to this business, either for research and development or new facilities.We hope to maintain the absolute levels of revenue and profit of the electrolytic capacitor business, but do not view it as a source of future growth. We may have difficulty establishing adequate management and financial controls in the PRC. The PRC has only recently begun to adopt the management and financial reporting concepts and practices that investors in the United States are familiar with.This is a significant change for Huayue’s management.We currently do not have employees who have the experience necessary to implement the kind of management and financial controls that are expected of a U. S. public company and may have difficulty hiring and retaining such employees in the PRC.If we cannot establish such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards. General economic conditions in the PRC, including difficult credit and construction markets, affect demand for our products. The success of our future sales efforts will to an extent depend on the positive momentum of the Chinese economy and the strength of Chinese public entities and enterprises.Recent actions by the governmental authorities indicate a desire to slow the acceleration of the economy.Also, many observers are predicting a significant drop in commercial real estate prices, which would have a material negative impact on the overall economy.A significant economic slowdown or, more importantly, a recession could substantially hinder our efforts to implement our business plan. Currency fluctuations may adversely affect our operating results. Changzhou Huayue generates revenues and incurs expenses and liabilities in RMB.However, Huayue will report its consolidated financial results in the United States in U.S. Dollars.As a result, our financial results will be subject to the effects of exchange rate fluctuations between these currencies.From time to time, the PRC government may take action to stimulate the Chinese economy that will have the effect of reducing the value of the RMB.In addition, international currency markets may cause significant adjustments to occur in the value of the RMB.Any such events that result in a devaluation of the RMB versus the U.S. Dollar will have an adverse effect on our reported results.We have not entered into agreements or purchased instruments to hedge our exchange rate risks. 11 Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States. The PRC has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital.Although PRC governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals necessary for our operations, and the PRC regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to pay dividends to our shareholders. We cannot determine whether, under the EIT Law, we may be classified as a “resident enterprise” of China. Such classification would likely result in unfavorable tax consequences to us and our non-PRC stockholders.Our inability to make the determination will subject our shareholders to uncertainty regarding whether sale of their shares will subject them to taxation in China. Under the New Income Tax (“EIT”) Law, enterprises established outside the PRC whose “de facto management bodies” are located in the PRC are considered “resident enterprises” and their global income will generally be subject to the uniform 25% enterprise income tax rate. On December 6, 2007, the PRC State Council promulgated the Implementation Regulations on the New Income Tax Law (the “Implementation Regulations”), which define “de facto management bodies” as bodies that have material and overall management control over the business, personnel, accounts and properties of an enterprise. In addition, a recent circular issued by the State Administration of Taxation on April 22, 2009 provides that a foreign enterprise controlled by a PRC company or a PRC company group will be classified as a “resident enterprise” with its “de facto management bodies” located within the PRC if the following requirements are satisfied: i. the senior management and core management departments in charge of its daily operations function mainly in the PRC; ii. its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; iii. its major assets, accounting books, company seals, and minutes and files of its board and shareholders' meetings are located or kept in the PRC; and iv. more than half of the enterprise's directors or senior management with voting rights reside in the PRC. Because the EIT Law, its implementing rules and the recent circular are relatively new, no official interpretation or application of this new “resident enterprise” classification is available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.Because we lack guidance regarding how the PRC tax authorities will interpret and apply the EIT Law, our management has determined that it will not make a decision as to whether Huayue Electronics is a resident enterprise for PRC enterprise income tax purposes unless and until we either plan to remit funds from our Chinese subsidiary to its Delaware shareholder or we plan to pay dividends to the shareholders of our U.S. parent corporation.In either situation, our determination would be based on interpretations of the EIT Law prevailing at that time. 12 If the PRC tax authorities determine that Huayue Electronics is a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow: · First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income.This would mean that any non-China source income would be subject to PRC enterprise income tax at a rate of 25%, the same rate applied to corporate income earned within China.Currently, however, we have no non-China source income. · Second, although under the EIT Law and its implementing rules dividends paid to our non-PRC subsidiary from our PRC subsidiary would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes.Currently, neither our U.S. parent corporation nor our Delaware subsidiary has any significant cash resources or liquid assets.Unless and until our U.S. parent corporation obtains funds from the sale of securities, the funds required to operate our U.S. parent corporation and our Delaware subsidiary must be obtained either from loans by related parties or by dividends paid by our PRC subsidiary.Imposition of a withholding tax on such dividends could interfere with our ability to finance the operations of our U.S. parent and Delaware subsidiary. · Third, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which the PRC will attempt to impose a 10% withholding tax on dividends that Huayue Electronics pays to our non-PRC stockholders. · Finally, it is possible that resident enterprise classification could result in the PRC seeking to tax any gains derived by our non-PRC stockholders from transferring their shares in our company. Although most of our non-PRC shareholders would not be subject to the jurisdiction of the PRC tax authorities, the uncertainty regarding whether they may be liable to pay such a tax could be a burden for some of our shareholders, particularly those who have business or other interests in the PRC. We have limited business insurance coverage. The insurance industry in the PRC is still at an early stage of development. Insurance companies in China offer limited business insurance products.Chinese insurance companies do not, to our knowledge, offer business liability insurance.Other than coverage for certain accidents, we do not have general business liability insurance coverage for our operations.Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time.Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources. Because our funds are held in banks which do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business. Banks and other financial institutions in the PRC do not provide insurance for funds held on deposit.As a result, in the event of a bank failure, we may not have access to funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business. 13 Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiary’s and affiliate’s ability to distribute profits to us or otherwise materially adversely affect us. In October 2005, SAFE issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, generally referred to as Circular 75.Circular 75 required PRC residents to register with the competent local SAFE branch before establishing or acquiring control over an offshore special purpose company, or SPV, for the purpose of engaging in an equity financing outside of China on the strength of domestic PRC assets originally held by those residents. Internal implementing guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach of Circular 75 by (1) purporting to cover the establishment or acquisition of control by PRC residents of offshore entities which merely acquire “control” over domestic companies or assets, even in the absence of legal ownership; (2) adding requirements relating to the source of the PRC resident’s funds used to establish or acquire the offshore entity; covering the use of existing offshore entities for offshore financings; (3) purporting to cover situations in which an offshore SPV establishes a new subsidiary in China or acquires an unrelated company or unrelated assets in China; and (4) making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must be filed in connection with any such registration, notably, the business plan which describes the overseas financing and the use of proceeds.Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital, transfer of shares, mergers and acquisitions, equity investment or creation of any security interest in any assets located in China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible for these filings. Failure to comply with the requirements of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange restrictions. Any such failure could also result in the SPV’s affiliates being impeded or prevented from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the SPV, or from engaging in other transfers of funds into or out of China. We have advised our shareholders who are PRC residents, as defined in Circular 75, to register with the relevant branch of SAFE, as currently required, in connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiary and affiliate. However, we cannot provide any assurances that their existing registrations have fully complied with, and they have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. For example, our present and prospective PRC subsidiary’s and affiliate’s ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 75. We also have little control over either our present or prospective direct or indirect shareholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident shareholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary’s and affiliate’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects. 14 Failure to comply with the U S. Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences. As our ultimate holding company is a U.S. corporation, we are subject to the U.S. Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us. We conduct substantially all of our business through our operating subsidiaries in the PRC. Our operating subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to foreign-invested enterprises. The PRC legal system is based on written statutes, and prior court decisions may be cited for reference but have limited precedential value. Since 1979, a series of new PRC laws and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal system continues to evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. We are a Delaware holding company and most of our assets are located outside of the United States. All of our current operations are conducted in the PRC. In addition, all of our directors and officers are nationals and residents of the PRC. All of the assets of these persons is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, who are not residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts. Courts in China may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national sovereignty, security or the public interest. So it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States. The Company is not likely to hold annual shareholder meetings in the next few years. Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved.The current members of the Board of Directors were appointed to that position by the previous directors.If other directors are added to the Board in the future, it is likely that the current directors will appoint them.As a result, the Company’s shareholders will have no effective means of exercising control over its operations. 15 Our common stock is subject to penny stock rules. Our common stock is subject to Rule 15g-1 through 15g-9 under the Exchange Act, the SEC regulations for “penny stocks.” Penny stocks include any equity security that is not listed on a national exchange and has a market price of less than $5.00 per share, subject to certain exceptions. The regulations impose certain sales practice requirements on broker-dealers which sell penny stock to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or an annual incomes exceeding $200,000 (or $300,000 together with their spouses)). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to the sale. In addition, prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule defined by the SEC relating to the penny stock market must be delivered to the purchaser of such penny stock. This disclosure must include the amount of commissions payable to both the broker-dealer and the registered representative and current price quotations for the common stock. The regulations also require that monthly statements be sent to holders of penny stock that disclose recent price information for the penny stock and information of the limited market for penny stocks. These rules adversely affect the ability of broker-dealers to sell penny stock, and may adversely affect the market liquidity of our common stock if it becomes subject to the penny stock rules. ITEM 1BUNRESOLVED STAFF COMMENTS Not Applicable. ITEM 2.DESCRIPTION OF PROPERTY Changzhou Huayue produces both its induction lamps and electrolytic capacitors at a facility in Changzhou City.This factory has a production base of 15,000 square meters that can generate up to 150 million RMB, or $23.8 million, in revenue per year.This facility is leased, under an agreement with a 60 month term that began in January, 2011 at a monthly rent of 20,000 RMB, or $3,134.We also rent our Research Development Center in Shanghai. We expect that our current facilities will be adequate for our operations for the foreseeable future. ITEM 3.LEGAL PROCEEDINGS None. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 16 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. (a) Market Information Our common stock is currently listed for quotation on the OTCQB Market system under the symbol “HUAY.”Since July 30, 2010, our common stock has been quoted on either the OTCQB Market or the OTC Bulletin Board.The following table sets forth for the respective periods indicated the prices of the common stock, as reported by the OTCQB Market or the OTC Bulletin Board.Such prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions. Bid Quarter Ending High Low August 31, 2011 $ $ November 30, 2011 $ $ February 28, 2012 $ $ May 31, 2012 $ $ August 31, 2012 $ $ November 30, 2012 $ $ February 28, 2013 $ $ May 31, 2013 $ $ (b) Shareholders On August 18, 2013 there were approximately 130 holders of record of our common stock. (c)Dividends Since the Company’s incorporation, no dividends have been paid on our Common Stock. We intend to retain any earnings for use in our business activities, so it is not expected that any dividends on our common stock will be declared and paid in the foreseeable future. (d)Securities Authorized for Issuance Under Equity Compensation Plans The information set forth in the table below regarding equity compensation plans (which include individual compensation arrangements) was determined as of May 31, 2013. 17 Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 0 N.A. 0 Equity compensation plans not approved by security holders 0 N.A. 0 Total 0 N.A. 0 (e)Sale of Unregistered Securities Huayue Electronics did not effect any unregistered sales of equity securities during the quarter ended May 31, 2013. (f) Repurchase of Equity Securities Huayue Electronics, Inc. did not repurchase any of its equity securities that were registered under Section 12 of the Securities Act during the quarter ended May 31, 2013. ITEM 6.SELECTED FINANCIAL DATA Not applicable. 18 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Results of Operations The following data is derived from the Company’s Consolidated Statements of Income and Comprehensive Income for the years ended May 31, 2013 and 2012: For The Years Ended May 31, Change Percentage Change Net sales $ $ 68 % Cost of goods sold 16 % Gross profit % Gross Profit Margin % 39
Exhibit 10.14.1 Connecture, Inc. 18500 W. Corporate Drive Suite 250 Brookfield, WI 53045 December 31, 2013 Mr. James Purko   Re: Bonus Agreement Dear Jamie: In consideration for your work for Connecture, Inc., a Delaware corporation (the “Company”), the Company will pay you a Bonus (as described below) upon the earliest Payment Event (as defined below) to occur after the date of this letter (the “Agreement”), subject to the conditions described herein, so long as you are continuously employed by the Company (or any controlled affiliate) or its successor from the date of this Agreement through the Payment Event. If your continuous employment with the Company (or any controlled affiliate) and its successor terminates for any reason before the Payment Event, you will forfeit any and all rights to the Bonus. Subject to the terms of this Agreement, the Bonus will be paid to you upon the earliest to occur of the following payment events (“Payment Event”): (i) on or within 20 days after the closing of the first public offering of capital stock of the Company that is effected pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, as amended (“IPO”); provided, however if either the Company or the Company’s underwriters determine that payment of the Bonus on or within 20 days after the IPO may jeopardize the success of the IPO or subject the Company to other adverse consequences, the Bonus related to an IPO will be paid on October 1, 2014; (ii) on the closing of a Change of Control (“Change of Control”), as defined in the Connecture, Inc. 2010 Stock Incentive Plan, as may be amended from time to time (the “Plan”); (iii) on or within 20 days after the closing of an equity financing that results in gross proceeds to the Company of at least $20,000,000 (“Financing”); or (iv) October 1, 2014. The amount of the Bonus will depend on which Payment Event triggers the right to payment as follows:   IPO     Change of Control     Financing     October 1, 2014   $ 350,000      $ 250,000      $ 250,000      $ 250,000    The Company will pay the Bonus to you in a single lump sum; provided, however, that if net sale proceeds payable upon a Change of Control are contingent, deferred, or conditional (i.e., escrowed or subject to any earn-out or similar arrangement), then a corresponding portion of the Bonus will be paid to you on the earlier of (x) the date on which such deferred portion is paid so long as you are continuously employed by the Company (or any controlled affiliate) or its successor from the date of this Agreement through such date, or (y) the date your employment is terminated by the Company (or any controlled affiliate) or its successor without Cause (as defined in the Plan). For purposes of this Agreement, an asset sale transaction will not be considered a termination of your employment if you are employed by the successor. Notwithstanding anything to the contrary in this Agreement, if the Payment Event is October 1, 2014, the Company’s obligation to make any Bonus payment will be suspended to the extent and for so long as (x) the making of such Bonus payment would result in a violation or a breach of any covenant contained in any loan or other bona fide agreement to which the Company or any of its subsidiaries is a party or (y) the Company and its subsidiaries do not have a sufficient amount of cash to support the working capital needs of its business, as determined by the Company’s board of directors in its sole discretion, and, in each case, subject to Section 409A of the Code and the Treasury Regulations thereunder; provided, however, that, with respect to any suspended Bonus payment, if at any time after such suspension the conditions in clause (x) and (y) above are both no longer present, then the Company shall make such Bonus payment within 5 business days thereafter. The Bonus may be paid in cash or in kind, or in some combination thereof, as determined by the Company in its sole discretion. All payments under this Agreement will be subject to all applicable tax withholdings. Notwithstanding anything in this Agreement to the contrary, in the event that any portion of any payment to you under this Agreement or otherwise may become subject to the excise tax under Section 4999 of the Internal Revenue Code (the “Code”) or may be nondeductible to the Company (or any affiliate) or its successor under Section 280G of the Code, payment of those amounts shall be contingent upon the Company obtaining the approval of Company stockholders as provided in Section 280G of the Code and the Treasury Regulations thereunder, and the Company is under no obligation to seek such approval. If such stockholder approval is not obtained, then the portion of the payment under this Agreement that would otherwise cause any amount to be nondeductible to the Company or its successor under Section 280G of the Code shall be forfeited and you will have no further claim of right to such amount. This Agreement contains the entire understanding of the Company and you with respect to the subject matter hereof and supersedes any and all prior understandings, written or oral. This Agreement may be amended or otherwise modified only by a written instrument signed by both the Company and you. This Agreement and the rights hereunder will be governed by and construed in all respects in accordance with the laws of the State of Delaware, without regard to its conflict of laws rules. You are not permitted to assign this Agreement or any of your rights hereunder to any other party. You acknowledge that you are an employee “at-will” and the Company may terminate your employment at any time for any reason, with or without cause. You agree that you will sign a release of claims in favor of the Company and its affiliates no later than the date of the first scheduled payment of the Bonus, and no Bonus will be paid if you do not sign the release by that date. Upon payment of the Bonus, or any earlier dissolution or wind-down of the Company, this Agreement will be cancelled and of no further effect. The payments under this Agreement are intended to be exempt from application of Section 409A of the Code. The Company does not guarantee any particular tax treatment of the compensation arrangement in this Agreement. This Agreement may be executed in counterparts which together shall be deemed to constitute one instrument.   - 2 - Please acknowledge your agreement to the foregoing by countersigning this Agreement in the space provided below.   Connecture, Inc. By: /s/ Robert Douglas Schneider Name: Robert Douglas Schneider Title: Chief Executive Officer   Acknowledged and agreed: /s/ James P. Purko James P. Purko [Signature Page to Bonus Agreement]   - 3 -
Exhibit 10.1 AMENDED AND RESTATED SENIOR EXECUTIVE AGREEMENT   THIS AMENDED AND RESTATED SENIOR EXECUTIVE AGREEMENT (the “Agreement”) by and between ON ASSIGNMENT, INC., a Delaware corporation (the “Company”) and PETER T. DAMERIS (“Executive”) is entered into on December 13, 2012. This Agreement amends and restates the Original Agreement (as defined below) and is effective as of the Amended Effective Date (as defined below).   Recitals   A.     The Company and Executive previously entered into that certain Senior Executive Agreement (the “Original Agreement”), dated November 4, 2009 and effective January 1, 2010, pursuant to which Executive currently serves as the Chief Executive Officer and President of the Company.   B.      The Company and Executive wish to enter into an amended and restated agreement, effective December 31, 2012 (the “Amended Effective Date”) pursuant to which Executive will continue his employment as the Chief Executive Officer and President of the Company under the terms and conditions set forth herein. C.    As of the Amended Effective Date, the Original Agreement shall terminate and be superseded by this Agreement. D.    Certain definitions are set forth in Section 4 of this Agreement.   Agreement     1.             Employment.  The Company hereby engages Executive to continue to serve as the Chief Executive Officer and President of the Company, and Executive agrees to continue to serve the Company, during the Service Term (as defined in Section 1(f) hereof) in the capacities, and subject to the terms and conditions, set forth in this Agreement.   (a)           Services.  During the Service Term, Executive, as Chief Executive Officer and President of the Company, shall have all the duties and responsibilities customarily rendered by Chief Executive Officers and Presidents of companies of similar size and nature and as may be reasonably assigned from time to time by the Board (as defined below). Executive will report directly to the Board. Executive will devote his best efforts and substantially all of his business time and attention (except for vacation periods and periods of illness or other incapacity) to the business of the Company and its Affiliates (as defined below). Notwithstanding the foregoing, and provided that such activities do not interfere with the fulfillment of Executive’s obligations hereunder, Executive may (i) serve as an officer, director or trustee of any charitable or non-profit entity; (ii) own a passive investment in any private company and own up to 5% of the outstanding voting securities of any public company; or (iii) with the prior approval of the Board, serve as a director of up to two other companies so long as such companies do not compete with the Company and Executive notifies the Board in advance of accepting any such position. Unless the 1 Company and Executive agree to the contrary, Executive’s place of employment shall be at the Company’s principal executive offices in Calabasas, California; provided, however, that Executive shall be permitted under the terms of this Agreement, upon conditions approved by the Board, to relocate his principal residence to Texas and to perform his duties and responsibilities under this Agreement from such location and commute from time to time to the Company’s principal executive offices so long as such relocation does not materially interfere with Executive’s satisfactory performance of his duties and responsibilities under this Agreement and, provided, further, that Executive will travel to such other locations as may be reasonably necessary in order to discharge his duties and responsibilities hereunder. Executive shall have the right to attend all meetings of the Board and will be nominated for election as a director for each term for which he is eligible to serve during the Service Term. (b)           Salary, Bonus and Benefits.   (i)            Salary and Bonus. During the Service Term, effective from and after January 1, 2013, the Company will pay Executive a base salary (the “Annual Base Salary”) as the Board may designate from time to time, at the rate of not less than $800,000 per annum, payable in accordance with the Company’s normal payroll practices; provided, however, that the Annual Base Salary shall be subject to review by the Board for upward increases (but not decreases) annually during the first quarter of each calendar year of the Service Term, with any such upward increases having retroactive effect to January 1 of the year to which such increases apply. With respect to calendar year 2013 and each calendar year thereafter during the Service Term, Executive will be eligible to receive an annual bonus (the “Annual Bonus”), based on a target bonus opportunity equal to at least 90% of Executive’s Annual Base Salary and a maximum bonus opportunity of 180% of Executive’s Annual Base Salary, as determined by the Compensation Committee of the Board (the “Compensation Committee”) based upon the Company’s achievement of applicable performance goals to be determined by the Compensation Committee. The Annual Bonus, if any, shall be due and payable to Executive, in cash, on or prior to March 15 of the year immediately following that in which such annual bonus is earned (for the avoidance of doubt, this deadline is intended to comply with the “short-term deferral” exemption from the application of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)).   (ii)           Benefits.  During the Service Term, Executive shall be entitled to participate in and shall receive all benefits under pension benefit plans provided by the Company (including without limitation participation in any Company incentive, savings and retirement plans, practices, policies and programs) to the extent applicable generally to other peer executives of the Company.  In addition, during the Service Term, Executive and/or Executive’s family shall be entitled to participate and shall receive all benefits under welfare plans provided by the Company (including without limitation medical prescriptions, dental, disability, employee life, group life, accidental life and travel accident insurance plans and plans) to the extent and on the same basis applicable generally to other peer executives of the Company.  Executive shall be reimbursed for customary travel and other expenses, subject to standard and reasonable documentation requirements.  In addition, Executive will receive a stipend of $450 per month for lease of an automobile and other related expenses during the Service Term, payable in equal monthly increments during the Service Term.  Executive shall be entitled to vacation according to the vacation policy in place for other senior executives of the Company.   2 (iii)         Long-Term Incentive Awards. During the Service Term, Executive shall be eligible to receive grants of awards identified in this Section 1(b)(iii) (the “LTIP Awards”) at the times and subject to the terms and conditions set forth below. Each LTIP Award shall be subject to the terms and conditions of the applicable incentive plan pursuant to which such LTIP Award is granted and shall be set forth in an award agreement between Executive and the Company (each such agreement, an “Award Agreement”). (A)         Tranche A Awards. No later than the ninetieth day of each of calendar years 2013, 2014 and 2015, subject to Executive’s continued employment with the Company through the applicable grant date (subject to Section 1(b)(iii)(E)(3) below) and approval by the Committee, the Company shall grant to Executive performance-vesting restricted stock units (“Tranche A RSUs”) with respect to a number of shares of the Company’s common stock having a fair market value equal to $800,000, determined by dividing $800,000 by the closing price of the Company’s common stock on the first trading day of the calendar year in which the respective Tranche A RSU award is granted; provided, however, that the first Tranche A RSU awarded pursuant to this Section 1(b)(iii)(A) (the “Tranche A RSU #1”) shall be granted on December 31, 2012 with respect to a number of shares of the Company’s common stock having a fair market value equal to $800,000, determined by dividing $800,000 by the closing price of the Company’s common stock on that date.   The performance period applicable to each Tranche A RSU award shall be the calendar year during which the respective Tranche A RSU award is granted, and each Tranche A RSU award shall (1) vest in full on January 4 of the year immediately following the grant year, subject to continued employment through such date, upon the Company attaining positive Adjusted EBITDA over the calendar year during which the respective Tranche A RSU award is granted and (2) be paid within sixty (60) days after vesting; provided, however, that the performance period applicable to Tranche A RSU #1 award shall be the 2013 calendar year and such award shall vest in full on January 4, 2014, subject to continued employment through such date, upon the Company attaining positive Adjusted EBITDA over the 2013 calendar year. Consistent with the foregoing, the terms and conditions of each award of Tranche A RSUs, including the applicable vesting and share delivery conditions, shall be set forth in a RSU Award Agreement to be entered into by the Company and Executive which shall evidence the grant of each award of Tranche A RSUs (the “Tranche A RSU Agreements”). Each award of Tranche A RSUs shall, subject to the provisions of this Section 1(b)(iii)(A), be governed in all respects by the terms of the applicable Tranche A RSU Agreement and the applicable equity incentive plan. (B)         Tranche B Awards. No later than the ninetieth day of each of calendar years 2013, 2014 and 2015, and subject to Executive’s continued employment with the Company through the applicable grant date (subject to grant to Executive performance-vest restricted stock units (“Tranche B RSUs”) with respect to a target number of shares of the Company’s common stock having a fair market value equal to $2,100,000 and a maximum number of shares of the Company’s common stock having a fair market value of $3,150,000, determined by dividing $2,100,000 and $3,150,000, respectively, by the closing price of the Company’s common stock on the first trading day of the calendar year in which the respective Tranche B RSU award is granted.   The performance period applicable to each Tranche B RSU award shall be the calendar year during which the respective Tranche B RSU award is granted. Each Tranche B RSU award shall vest, subject to continued employment, in substantially equal installments on January 4 of each of the year immediately following the grant year and the first and second anniversaries thereof, and shall be paid within sixty (60) days after conditions of each award of Tranche B RSUs, including the applicable vesting and share delivery conditions, shall be set forth in a RSU Award Agreement to be entered into by the Company and 3 Executive which shall evidence the grant of each award of Tranche B RSUs (the “Tranche B RSU Agreements”). Each award of Tranche B RSUs shall, subject to the provisions of this Section 1(b)(iii)(B), be governed in all respects by the terms of the applicable Tranche B RSU Agreement and the applicable equity incentive plan. (C)         Additional Performance Awards. As contemplated in the Original Agreement, subject to Executive’s continued employment with the Company through each such grant date and further subject Section 1(b)(iii)(E)(3) below, the Company shall make the following grants of additional performance awards to Executive under an applicable Company equity incentive plan (the “Additional Grants”): • 2013 Grants. During the first ninety days of calendar year 2013, the Company shall grant to Executive two Additional Grants, each providing the opportunity to earn up to $500,000, payable as soon as practicable after January 2, 2014 and January 2, 2015, respectively, but in no event later than March 15, 2014 and March 15, 2015, respectively. • 2014 Grant. During the first ninety days of calendar year 2014, the Company shall grant to Executive an Additional Grant that provides the opportunity to earn up to $500,000, payable as soon as practicable after January 2, 2015, but in no event later than March 15, 2015. Notwithstanding the foregoing, payment or settlement of Additional Grants, if applicable, may be accelerated as provided in Section 1(b)(iii)(D) and (E) below. Subject to the foregoing requirements, Additional Grants shall be paid at the time of settlement, to the extent earned, in either (i) fully vested, freely transferable shares of Company common stock (subject to limitations on transfer imposed under applicable law) or (ii) if insufficient shares remain under the applicable equity incentive plan at the time of settlement to pay any earned portion of an Additional Grant in shares of Company common stock, then such portion of the Additional Grant shall instead be paid in cash. Upon or prior to making the applicable grant, the Company and Executive shall determine by mutual agreement the performance criteria applicable to the vesting of Additional Grants (selected from performance criteria enumerated in an applicable equity incentive plan) and the Compensation Committee shall, in consultation with Executive, establish in writing performance goals applicable to each Additional Grant based on such performance criteria and determined by reference to the twelve-month performance period beginning on January 1 of the year of grant. Each Additional Grant shall vest, subject to Sections 1(b)(iii)(D) and (E) below, on January 2 of the year immediately following the year in which such Additional Grant is made, subject to Executive’s continued employment through such date, in each case, as to (i) no portion of the award if the applicable performance goals are attained at less than 90% of target, (ii) 80% of the award if the applicable performance goals are attained at 90% of target, (iii) 100% of the award if the applicable performance goals are attained at or above 110% of target, and (iv) a linear pro ration between 80% – 100% of the award if the applicable performance goals are attained between 90% – 110% of target (for example, an Additional Grant shall vest as to 95% of the award upon attainment of 105% of the applicable target). (D)     Corporate Events. Immediately prior to the earliest to occur of a Change in Control (as defined in the 2010 Plan, or any comparable definition in a new equity incentive plan approved by the Company’s stockholders and applicable to the relevant Additional Grant), or a Change of Control (as defined in the Amended and Restated Executive Change of Control Agreement between the Company and Executive, dated December 11, 2008) (together, “Corporate Events”), in any case, occurring during the Service Term, any outstanding and unvested Additional Grants shall vest fully as if all applicable performance targets were fully attained and all service requirements satisfied, and the Additional Grants shall be settled or paid, if applicable, 4 immediately prior to, upon or within fifteen days after the occurrence of such Corporate Event, provided, that to the extent that any Additional Grants constitute “nonqualified deferred compensation” (within the meaning of Code Section 409A), such Additional Grants shall only be paid or settled in connection with the Corporate Event if the Corporate Event constitutes a “change in control event” within the meaning of Code Section 409A, and shall otherwise be paid or settled upon the earliest to occur of (i) the Date of Termination (as defined below), (ii) Executive’s death or Disability, or (iii) the date specified in Sections 1(b)(iii)(C) above, as applicable, subject to Section 1(g) below. In addition, each Tranche A RSU award and Tranche B RSU award shall be governed by the terms and conditions set forth in the applicable award agreement. (E)        Termination of Employment. Each long-term incentive award granted pursuant to Section 1(b)(iii) of the Original Agreement (the “Prior Awards”) that remains outstanding as of Executive’s termination of employment shall be governed by the terms and conditions of the applicable award agreement and the Original Agreement. The following provisions shall govern the LTIP Awards in the event of Executive’s termination of employment: (1)     Termination Without Cause, for Good Reason or Due to Death or Disability. If Executive’s employment with the Company terminates due to his death or Disability or due to a termination by the Company without Cause or by Executive for Good Reason (each as defined below and each, a “Qualifying Termination”), subject to Section 1(g) below, this Section 1(b)(iii)(E)(1) shall govern the Additional Grants, and each Tranche A RSU award and Tranche B RSU award shall be governed by the terms and conditions set forth in the applicable award agreement. Additional Grants that have vested but have not been settled or paid as of the date of a Qualifying Termination shall be settled or paid as soon as practicable after the January 2 immediately following the Date of Termination, but in no event later than the March 15 immediately following such Date of Termination. Additional Grants that have not vested as of the Date of Termination shall remain outstanding and eligible to vest upon the January 2 immediately following the Date of Termination (without the requirement of continued employment beyond such termination) and shall vest on a pro-rated basis upon and be paid as soon as practicable after such January 2 (but in no event later than the March 15 immediately following such Date of Termination), in a manner determined by multiplying amounts that would be earned under such Additional Grant based solely on attainment of the applicable performance objectives by a fraction, the numerator of which equals the number of days Executive was employed by the Company from January 1 of the applicable year of grant through the Date of Termination, and the denominator of which equals 365. (2)    Termination for Cause; Resignation Other Than for Good Reason. If Executive’s employment is terminated by the Company for Cause or due to Executive’s resignation other than for Good Reason, (a) all Additional Grants that have not vested as of the Date of Termination shall terminate, (b) all Additional Grants and have vested prior to the Date of Termination, but have not been settled or paid as of the Date of Termination (if applicable), subject to Section 1(g) below, shall be settled or paid as soon as practicable after the January 2 immediately following the Date of Termination, but in no event later than the March 15 immediately following the Date of Termination and (c) each Tranche A RSU award and Tranche B RSU award shall be governed by the terms and conditions set forth in the applicable award agreement. (3)    Termination of Employment Prior to Grant. If, during the first ninety days of any calendar year in which Executive is entitled to receive a LTIP Award in accordance with Section 1(c)(iii)(A)--(C) above, Executive experiences a Qualifying Termination occurring prior to the date in such calendar year on which any such LTIP Award would otherwise be granted, the LTIP Awards to which Executive is entitled for such calendar year shall instead be granted to Executive as of no later than immediately prior to such Qualifying Termination 5 and shall be administered in accordance 1(c)(iii)(E)(1) above. Except as expressly provided in the immediately preceding sentence, any LTIP Awards that have not been granted as of the Date of Termination shall be forfeited and Executive shall have no further rights or interests in respect of such un-granted LTIP Awards. (4)    Forfeiture of Awards. All Additional Grants that have not vested (a) in the case of a termination of Executive’s employment for Cause or due to Executive’s resignation other than for Good Reason, as of the Date of Termination, shall terminate as of the Date of Termination, (b) in the case of a Qualifying Termination in which such Additional Grants remain unvested as of the January 2 following the Date of Termination (after taking into consideration any vesting that may occur upon or following the Date of Termination as provided above or under any other agreement between Executive and Company), shall terminate as of such January 2, and, in all cases, shall be canceled without payment of consideration therefor. Following settlement or payment of any vested Additional Grants, if applicable, such awards shall terminate and Executive shall have no further rights or interests in respect of such awards. In addition, each Tranche A RSU award and Tranche B RSU award shall be governed by the terms and conditions set forth in the applicable award agreement. (F)    Employment Taxes. Notwithstanding anything contained herein to the contrary, to the extent that any compensation payable hereunder, including without limitation, under any of the LTIP Awards, constitutes “nonqualified deferred compensation” within the meaning of Code Section 409A, the payment of any such compensation may be accelerated, as determined by the Company, to the greatest extent permitted under Treasury Regulation 1.409A-3(j)(4)(vi) to pay any taxes imposed under the Federal Insurance Contribution Act (“FICA”) on such compensation or under Code Section 3401 or corresponding withholding provisions of applicable state, local or foreign tax laws as income tax obligations arising in connection with any such acceleration, including any additional taxes attributable to pyramiding wages and taxes, provided, that the total of any such accelerated payment shall not exceed the applicable FICA and income tax obligations to which such accelerated payments relate. (G)    Payment Dates. With respect to any payment under an LTIP Award that may be made by its terms over a range of dates, the Company shall determine the exact date of payment in its sole discretion and the Executive shall not be able to directly or indirectly designate the calendar year of such payment.   (c)           Termination.   (i)     Events of Termination.  Executive’s employment with the Company shall cease upon:   (A) Executive’s death.   (B) Executive’s voluntary retirement.   (C)        Executive’s “Disability” which means Executive has become disabled   (D)        Termination by the Company by the delivery to Executive of a written notice from the Board or the CEO that Executive has been terminated (“Notice of Termination”) with or without Cause.  “Cause” shall mean: 6   (1)           Executive’s (aa) conviction of a felony; (bb) Executive’s commission of any other material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Subsidiaries; (cc) Executive’s misappropriation of material funds or assets of the Company for personal use; or (dd) Executive’s engagement in unlawful harassment or other discrimination with respect to the employees of the Company or its Subsidiaries;   (2)           Executive’s continued substantial and repeated neglect of his duties, after written notice thereof from the Board, and such neglect has not been cured within thirty (30) days after Executive receives notice thereof from the Board;   (3)           Executive’s gross negligence or willful misconduct in the performance of his duties hereunder that is materially and demonstrably injurious to the Company;   (4)           Executive’s engaging in conduct constituting a breach of Sections 2 or 3 hereof that is not cured in full within fifteen (15) days, and is materially and demonstrably injurious to the Company, after  notice of default thereof, from the Company, as determined by a court of law. In order for the termination to be effective: Executive must be notified in writing (which writing shall specify the cause in reasonable detail) of any termination of his employment for Cause.  Executive will then have the right, within ten days of receipt of such notice, to file a written request for review by the Company.  In such case, Executive will be given the opportunity to be heard, personally or by counsel, by the Board and a majority of the Directors must thereafter confirm that such termination is for Cause.  If the Directors do not provide such confirmation, the termination shall be treated as other than for Cause.  Notwithstanding anything to the contrary contained in this paragraph, Executive shall have the right after termination has occurred to appeal any determination by the Board that such termination was for “Cause” in accordance with the provisions of Section 8(f) hereof.   The delivery by the Company of notice to Executive that it does not intend to renew this Agreement as provided in Section 1(f) shall constitute a termination by the Company without Cause if, at the time of such notice, Executive is willing and able to renew the Agreement and continue providing services on terms and conditions substantially similar to those contained in this Agreement, provided, that in no event shall notice which fulfills the requirements of Section 1(c)(i)(D)(1) , (2) , (3) or (4) above constitute a termination by the Company without Cause. (E)           Executive’s voluntary resignation by the delivery to the Company and the Board of at least thirty (30) days written notice from Executive that Executive has resigned with or without Good Reason.  “Good Reason” shall mean Executive’s resignation from employment with the Company after the occurrence of any one of the following:   (1)           the failure of the Company to pay an amount owing to Executive in   (2)           without Executive’s consent, a relocation of Executive’s principal work location from the Calabasas, California metropolitan area that constitutes a material change in the geographic location at which he must perform services under this Agreement (within the meaning of Code Section 409A); 7 provided, that Executive’s resignation shall only constitute a resignation for “Good Reason” hereunder if (I) Executive provides the Company with written notice setting forth in reasonable detail the facts or circumstances constituting Good Reason within thirty (30) days after Executive becomes reasonably aware of the existence of such facts and circumstances, (or reasonably aware that there is a controversy between the Company’s interpretation of any payment obligation or principal work location requirement of this Agreement and the Executive’s interpretation of same), (II) the Company has failed to cure such facts or circumstances within thirty (30) days after receipt of such written notice, and (III) the date of Executive’s “separation from service” (within the meaning of Code Section 409A(a)(2)(A)(i) of the Code, and Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”) occurs no later than thirty-five (35) days after Executive gives notice of the event constituting Good Reason.   The delivery by Executive of notice to the Company that he does not intend to renew this Agreement as provided in Section 1(f) shall constitute a resignation by Executive without Good Reason unless such notice fulfills the requirements of Section 1(c)(i)(E)(1) or (2) above. For the avoidance of doubt, in no event shall Executive’s ceasing to serve as the President of the Company, whether voluntarily or involuntarily, constitute Good Reason.   (ii)           Date of Termination.  “Date of Termination” means the date on which Executive experiences a Separation from Service.   (iii)         Rights on Termination.   (A)     In the event that termination is by the Company without Cause (including by operation of the last paragraph of Section 1(c)(i)(D) above) or by Executive with Good Reason and Executive experiences a Separation from Service as a result of such termination, subject to Section 1(g) below: (1)    The Company will pay Executive (i) an amount equal to 150% of the Annual Base Salary, payable over a period of eighteen (18) months commencing on the Date of Termination (the “Severance Period”) in substantially equal installments in accordance with Company payroll procedures applicable to senior executives of the Company, as in effect from time to time (but no less often than monthly), provided, that payment of the amounts described in this Section shall not commence until the Company’s first payroll date occurring on or after the 30th day following the Date of Termination (the “First Payroll Date”) and any amounts that would otherwise have been paid prior to the First Payroll Date shall instead be paid on the First Payroll Date, and (ii) a lump sum cash amount, payable on the First Payroll Date, equal to the aggregate premiums that the Company would have paid for basic life insurance, accidental death and dismemberment insurance and long- and short-term disability insurance, each as in effect on the Date of Termination, had Executive remained employed by the Company during the Severance Period (together, “Insurance Benefits”). In addition, during the Severance Period, subject to Executive’s proper election to continue healthcare coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company will pay Executive’s COBRA premiums in respect of COBRA benefits to be provided through third-party insurance maintained by the Company under the Company’s benefit plans in a manner that causes such COBRA benefits to be exempt from the application of Code Section 409A under Treasury Regulation Section 1.409A-1(a)(5), provided, that (x) if any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 8 409A of the Code under Treasury Regulation Section 1.409A-1(a)(5), (y) such amounts would be considered discriminatory under Section 105(h) of the Code, or (z) the Company is otherwise unable to continue to cover Executive under its group health plans (including without limitation, due to Section 2716 of the Public Health Service Act), then, in any such case, an amount equal to each remaining Company payment shall thereafter be paid to Executive in cash or by check in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof); and (2)      All LTIP Awards shall be treated as provided in Section 1(b)(iii)(E)(1) above and all Prior Awards shall be treated as provided in Section 1(b)(iii)(E) above. For purposes of paragraph (e) below, payments of Annual Base Salary, amounts in lieu of Insurance Benefits, COBRA premiums and any vesting of LTIP Awards and Prior Awards following the Date of Termination, in each case, as described in this Agreement, are collectively referred to as “Severance Payments.” In addition, the Company will pay to Executive in a lump-sum the value of any accrued but unused vacation time. No Severance Payments or benefits shall be paid or provided unless Executive has executed and not revoked a release in a form mutually acceptable to both the Company and Executive that is subject to paragraph (e) below.  In addition, the Company agrees that concurrently with Executive’s execution of such release, the Company shall execute a contingent mutual release in a form that is mutually acceptable to both the Company and Executive that is subject to paragraph (e) below. Each payment under Section 1(c)(iii)(A) above shall be treated as a separate payment for purposes of Code Section 409A.   (B)         If the Company terminates Executive’s employment for Cause, or if Executive resigns without Good Reason (including by operation of the last paragraph of Section 1(c)(i)(E)), the Company’s obligations to pay any compensation or benefits under this Agreement and all vesting under all equity awards held by Executive will cease effective as of the Date of Termination, provided, that LTIP Awards shall be treated in accordance with Section 1(b)(iii)(E)(2) above, provided, further, that any Prior Awards that remain outstanding as of Executive’s termination of employment shall be governed by the terms and conditions of the applicable award agreement and the Original Agreement.  Executive’s right to receive any other health or other benefits, if any, will be determined under the provisions of applicable plans, programs or other coverages.   (C)        If Executive’s employment terminates because of  Executive’s death or Disability, then Executive or his estate shall be entitled to any disability income or life insurance payments from any insurance policies (other than any  “key man” life insurance policy) maintained by the Company.  In addition, in the event of such a termination, for a period of twelve (12) months commencing on the Date of Termination, Executive or his estate shall be entitled to payment of an amount equal to 100% of the Annual Base Salary, payable over twelve (12) months from Executive’s death or Disability in approximately equal installments on regular salary payment dates. LTIP Awards shall be treated in accordance with Section 1(b)(iii)(E)(1) above, and any Prior Awards that remain outstanding as of Executive’s termination of employment shall be governed by the terms and conditions of the applicable award agreement and the Original Agreement.   Notwithstanding the foregoing, the Company’s obligation to Executive for Severance Payments shall cease if Executive is found by a court of law to be in material violation of the provisions of Sections 2 or 3 hereof.    9 (d)           Mitigation. The Company’s obligation to continue to provide Executive with the Severance Payments pursuant to Section 1(c)(iii)(A) above and the benefits pursuant to the second sentence of Section 1(c)(iii)(C) above shall cease if Executive becomes employed as a senior executive by a third party.   (e)           Liquidated Damages. The parties acknowledge and agree that damages which will result to Executive for termination by the Company without Cause shall be extremely difficult or impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination.  Executive agrees that, except for such other payments and benefits to which Executive may be entitled as expressly provided by the terms of this Agreement or any applicable benefit plan, such liquidated damages shall be in lieu of all other claims that Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, Executive will execute a contingent mutual release of claims in a form reasonably satisfactory to both the Company and Executive. (f)            Term of Employment. Unless Executive’s employment under this Agreement is sooner terminated as a result of Executive’s termination in accordance with the provisions of Section 1(c) above, Executive’s employment under this Agreement shall be for a term (the “Service Term”) commencing on the Amended Effective Date and ending on the third (3rd) anniversary of the Amended Effective Date; provided, however, that Executive’s employment under this Agreement, and the Service Term, shall be automatically renewed for additional one-year periods commencing on December 31, 2015 and, thereafter, on each successive anniversary of such date unless either the Company or Executive notify the other party in writing within ninety (90) days prior to any such anniversary that it or he desires not to renew Executive’s employment under this Agreement. All references herein to “Service Term” shall include any renewals thereof on or after December 31, 2015. (g) Potential Six-Month Delay. Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any Severance Payments or payments in respect of any LTIP Awards or Prior Awards in connection with a Separation from Service, shall be paid to Executive during the six (6)-month period following his Separation from Service to the extent that the Company reasonably determines that Executive is a “specified employee” (within the meaning of Code Section 409A) at the time of such Separation from Service and that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Code Section 409A(a)(2)(b)(i) Code Section 409A without being subject to such additional taxes, including as a result of Executive’s death), the Company shall pay to Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such six (6)-month period, without interest thereon.   2.             Confidential Information; Proprietary Information, etc.   (a)           Obligation to Maintain Confidentiality. Executive acknowledges that any Proprietary Information disclosed or made available to Executive or obtained, observed or known by Executive as a direct or indirect consequence of his employment with or performance of services for the Company or any of its Affiliates during the course of his performance of services for, or employment with, any of the foregoing Persons (whether or not compensated for such services) and during the period in which Executive is receiving Severance Payments, are the 10 property of the Company and its Affiliates.  Therefore, Executive agrees that he will not at any time (whether during or after Executive’s term of employment) disclose or permit to be disclosed to any Person or, directly or indirectly, utilize for his own account or permit to be utilized by any Person any Proprietary Information or Records for any reason whatsoever without the Board’s consent, unless and to the extent that (except as otherwise provided in the definition of Proprietary Information) the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executive’s acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, as a condition to receipt of the next or final payment of compensation, or at any other time the Company may request in writing (whether during or after Executive’s term of employment), all Records which he may then possess or have under his control. Executive further agrees that any property situated on the Company’s or its Affiliates’ premises and owned by the Company or its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company or its Affiliates and their personnel at any time with or without notice.  Nothing in this Section 2(a) shall be construed to prevent Executive from using his general knowledge and experience in future employment so long as Executive complies with this Section 2(a) and the other restrictions   (b)           Ownership of Property. Executive acknowledges that all inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports and all similar or related information  (whether or not patentable) that relate to the Company’s or any of its Affiliates’ actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by the Company or any of its Affiliates (including any of the foregoing that constitutes any Proprietary Information or Records) (“Work Product”) belong to the Company or such Affiliate and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Company or such Affiliate.  Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and the Company or such Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” Executive hereby assigns and agrees to assign to Company or such Affiliate all right, title and interest, including without limitation, copyright in and to such copyrightable work.  Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after Executive’s term of employment) to establish and confirm the Company’s or its Affiliate’s ownership (including, without limitation, execution of assignments, consents, powers of attorney and other instruments).  Notwithstanding anything contained in this Section 2(b) to the contrary, the Company’s ownership of Work Product does not apply to any invention that Executive develops entirely on his own time without using the equipment, supplies or facilities of the Company or its Affiliates or Subsidiaries or any Proprietary Information (including trade secrets), except that the Company’s ownership of Work Product does include those inventions that:  (i) relate to the business of the Company or its Affiliates or Subsidiaries or to the actual or demonstrably anticipated research or development relating to the Company’s business; or (ii) result from any work that Executive performs for the Company or its Affiliates or Subsidiaries.   (c)           Third Party Information. Executive understands that the Company and its Affiliates will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s and its Affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes.  During the term of Executive’s employment and thereafter, and without in any way limiting the provisions of Sections 2(a) and 2(b) above, Executive shall hold Third Party Information in the strictest 11 confidence and shall not disclose to anyone (other than personnel of the Company or its Affiliates who need to know such information in connection with their work for the Company or its Affiliates) or use, except in connection with his work for the Company or its Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.   (d)           Use of Information of Prior Employers, etc. Executive will abide by any enforceable obligations contained in any agreements that Executive has entered into with his prior employers or other parties to whom Executive has an obligation of confidentiality.   (e)           Compelled Disclosure. If Executive is required by law or governmental regulation or by subpoena or other valid legal process to disclose any Proprietary Information or Third Party Information to any Person, Executive will immediately provide the Company with written notice of the applicable law, regulation or process so that the Company may seek a protective order or other appropriate remedy.  Executive will cooperate fully with the Company and the Company’s Representatives in any attempt by the Company to obtain any such protective order or other remedy.  If the Company elects not to seek, or is unsuccessful in obtaining, any such protective order or other remedy in connection with any requirement that Executive disclose Proprietary Information or Third Party Information, and if Executive furnishes the Company with a written opinion of reputable legal counsel acceptable to the Company confirming that the disclosure of such Proprietary Information or Third Party Information is legally required, then Executive may disclose such Proprietary Information or Third Party Information to the extent legally required; provided, however, that Executive will use his reasonable best efforts to ensure that such Proprietary Information is treated confidentially by each Person to whom it is disclosed.   3.             Nonsolicitation.   (a)           Nonsolicitation. As long as Executive is an employee of the Company or any Affiliate thereof, and for eighteen (18) months thereafter, Executive shall not directly or indirectly through another entity: (i) induce or attempt to induce any employee of the Company or any Affiliate to leave the employ of the Company or such Affiliate, or in any way interfere with the relationship between the Company or any Affiliate and any employee thereof; (ii) hire or employ any person who was an employee of the Company or any Affiliate at any time during the nine (9)-month period immediately preceding the date of such Executive’s termination; (iii) induce or attempt to induce any customer, client, supplier, licensee or other business relation of the Company or any Affiliate to cease doing business with the Company or such Affiliate, or in any way interfere with the relationship between any such customer, client, supplier, licensee or business relation and the Company or any Affiliate; (iv) call on, solicit or service any Person who was a customer or client of the Company or any Affiliate; or (v) call on, solicit or service any Person who was Prospective Client for any purpose which directly or indirectly competes with the business of the Company.  For purposes hereof, a “Prospective Client” means any Person whom the Company or any of its Affiliates has entertained discussions with to become a client or customer at any time during the twelve (12)-month period immediately preceding the date of such Executive’s termination.   (b)           Acknowledgment. Executive acknowledges that in the course of his employment with the Company and its Affiliates, he has and will become familiar with the trade secrets and other Proprietary Information of the Company and its Affiliates. It is specifically recognized by Executive that his services to the Company and its Subsidiaries are special, unique and of extraordinary value, that the Company has a protectable interest in prohibiting Executive as provided in this Section 3, that money damages are insufficient to protect such interests, that there is adequate consideration being provided to Executive hereunder, that such prohibitions are necessary 12 and appropriate without regard to payments being made to Executive hereunder and that the Company would not enter this Agreement with Executive without the restriction of this Section 3. Executive further acknowledges that the restrictions contained in this Section 3 do not impose an undue hardship on him and, since he has general business skills which may be used in industries other than that in which the Company and its Subsidiaries conduct their business, do not deprive Executive of his livelihood.  Executive further acknowledges that the provisions of this Section 3 are separate and independent of the other sections of this Agreement.   (c)           Enforcement, etc.  If, at the time of enforcement of Section 2 or 3 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances as determined by the court shall be substituted for the stated period, scope or area.  Because Executive’s services are unique, because Executive has access to Proprietary Information and for the other reasons set forth herein, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement.  Therefore, without limiting the generality of Section 8(g), in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof.   (d)           Submission to Jurisdiction.  The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in California in any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement in any other court.  The parties hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by   GENERAL PROVISIONS   4.             Definitions.   “Adjusted EBITDA” means earnings before interest, taxes, depreciation and amortization, but excluding gains, losses or expenses associated with all Unusual Items. “Affiliate” of any Person means any other Person which directly or indirectly   “Board” means the Company’s board of directors or the board of directors or similar management body of any successor of the Company.   “Proprietary Information” means any and all data and information concerning the business affairs of the Company or any of its Affiliates and not generally known in the industry in which the Company or any of its Affiliates is or may become engaged, and any other information concerning any matters affecting or relating to the Company’s or its Affiliates businesses, but in any event Proprietary Information shall include, any of the Company’s and its Affiliates’ past, present or prospective business opportunities, including information concerning acquisition 13 opportunities in or reasonably related to the Company’s or its Affiliates businesses or industries, customers, customer lists, clients, client lists, the prices the Company and its Affiliates obtain or have obtained from the sale of, or at which they sell or have sold, their products, unit volume of sales to past or present customers and clients, or any other information concerning the business of the Company and its Affiliates, their manner of operation, their plans, processes, figures, sales figures, projections, estimates, tax records, personnel history, accounting procedures, promotions, supply sources, contracts, know-how, trade secrets, information relating to research, development, inventions, technology, manufacture, purchasing, engineering, marketing, merchandising or selling, or other data without regard to whether all of the foregoing matters will be deemed confidential, material or important.  Proprietary Information does not include any information which Executive has obtained from a Person other than an employee of the Company, which was disclosed to him without a breach of a duty of confidentiality.   “Person” means an individual, a partnership, a limited liability company, a unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.   “Records” means (i) any and all procedure manuals, books, records and accounts; (ii) all property of the Company and its Affiliates, including papers, note books, tapes and similar repositories containing Proprietary Information; (iii) all invoices and commission reports; (iv) customer lists — partial and/or complete; (v) data layouts, magnetic tape layouts, diskette layouts, etc.; (vi) samples; (vii) promotional letters, brochures and advertising materials; (viii) displays and display materials; (ix) correspondence and old or current proposals to any former, present or prospective customer of the Company and its Affiliates; (x) information concerning revenues and profitability and any other financial conditions of the Company and its Affiliates; (xi) information concerning the Company and its Affiliates which was input by Executive or at his direction, under his supervision or with his knowledge, including on any floppy disk, diskette, cassette or similar device used in, or in connection with, any computer, recording devices or typewriter; (xii) data, account information or other matters furnished by customers of the Company and its Affiliates; and (xiii) all copies of any of the foregoing data, documents or devices whether in the form of carbon copies, photo copies, copies of floppy disks, diskettes, tapes or in any other manner whatsoever. “Unusual Items” means (i) restructurings, discontinued operations, extraordinary items or events, and other unusual or non-recurring charges as described in Accounting Principles Board Opinion No. 30 and/or management’s discussion and analysis of financial condition and results of operations appearing or incorporated by reference in the Company’s Form 10-K for the applicable year; (ii) a force majeure or other event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management; (iii) litigation (including attorneys’ fees and other litigation expenses), judgments, settlements; (iv) changes in tax laws or accounting standards required by generally accepted accounting principles or changes in other such laws or provisions affecting reported results; (v) expenses resulting from severance arrangements with terminated employees; (vi) equity-based compensation expenses; (vii) one-time gains or losses from the disposal or sale of assets; and (viii) impairments of goodwill or other intangible assets.    5.             Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class United States mail (postage prepaid, return receipt requested) or sent by reputable overnight courier service (charges prepaid) or by facsimile to the recipient at the address below indicated:   14   If to Executive:           Peter T. Dameris     26745 Malibu Hills Road     Calabasas, California 91301               26745 Malibu Hills Road     Calabasas, California 91301     Attention: General Counsel     Fax No.: (818) 880-0056                       or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.   6.             Executive’s Representations and Warranties.  Executive represents and warrants that he has full authority to enter into this Agreement and fully to perform his obligations hereunder, that he is not subject to any non-competition agreement, and that his past, present and anticipated future activities have not and will not infringe on the proprietary rights of others, including, but not limited to, proprietary information rights or interfere with any agreements he has with any prior employee.  Executive further represents and warrants that he is not obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, which would conflict with or result in a breach of this Agreement or which would in any manner interfere with the performance of his duties for the Company.   7.         Code Section 409A. (a)    General. To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, if the Company determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code and related Department of Treasury guidance, the Company shall work in good faith with Executive to adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to avoid the imposition of taxes under Section 409A of the Code, including without limitation, actions intended to (i) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code, and/or (ii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance; provided, however, that this Section 7(a) shall not create an obligation on the part of the Company to adopt any such amendment, policy or procedure or take any such other action, nor shall the Company have any liability for failing to do so. (b)    Certain Reimbursements. To the extent that any payments or reimbursements provided to Executive hereunder are deemed to constitute compensation to Executive to which Section 409A of the Code would apply, such amounts shall be paid or reimbursed to Executive reasonably promptly, but in no event later than December 31st of the year following the year in which the expense was incurred. affect the payments or expenses that are eligible for payment or 15 reimbursement in any other taxable year, and Executive’s right to such payments or reimbursement of any such expenses shall not be subject to liquidation or      8.     General Provisions.   (a)           Expenses. Each party shall bear his or its own expenses in connection with the negotiation and execution of this Agreement and the consummation of the transactions contemplated by this Agreement.   (b)           Severability.  Whenever possible, each provision of this Agreement   (c)           Complete Agreement. As of the Amended Effective Date, this Agreement and those documents expressly referred to herein embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way, including without limitation, the Original Agreement. Notwithstanding the foregoing, the Original Agreement shall continue to govern the terms and conditions of all compensation and benefits paid, provided or payable thereunder, including without limitation the Prior Awards.   (d)           Counterparts; Facsimile Transmission. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Each party to this Agreement agrees that it will be bound by its own telecopied signature and that it accepts the telecopied signature of each other party to this Agreement.   (e)           Successors and Assigns. Except as otherwise provided herein, this Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable and, provided further that, the rights and obligations of the Company may be assigned to any Affiliate of the Company.   (f)            Choice of Law; Jurisdiction. All questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other other than the State of Delaware.  The parties hereby: (i) submit to the or proceeding arising out of or relating to Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Executive hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agree that a final judgment in any action or 16 proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.   (g)           Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorney’s fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the   (h)           Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive.   (i)            Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company’s chief executive office is located, the time period shall be automatically extended to the business day immediately following, such Saturday, Sunday or holiday.   (j)            Termination. This Agreement shall survive the termination of Executive’s employment with the Company and shall remain in full force and effect after such termination.   (k)           No Waiver. A waiver by any party hereto of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such party would otherwise have on any future occasion.  No failure to exercise nor any delay in exercising on the part of any party hereto, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.   (l)            Insurance.  The Company, at its discretion, may apply for and procure in its own name for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for healthy men of his age.   (m)          Offset.  Whenever the Company or any of its Subsidiaries is obligated to pay any sum to Executive or any Affiliate or related person thereof pursuant to this Agreement, any bona fide debts that Executive or such Affiliate or related person owes to the Company or any of its Subsidiaries may be deducted from that sum before payment, to the greatest extent permitted under applicable law. (n)           Withholding.  The Company and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, provincial, local or foreign withholding taxes, excise taxes, or employment taxes imposed with respect to Executive’s compensation or other payments from the 17 Company or any of its Subsidiaries or Executive’s ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock.   (o)           Insurance and Indemnification.  For the period from the date of this Agreement through at least the tenth anniversary of Executive’s termination of employment from the Company, the Company shall maintain Executive as an insured party on all directors’ and officers’ insurance maintained by the Company for the benefit of its directors and officers on at least the same basis as all other covered individuals and provide Executive with at least the same corporate indemnification as it provides to the peer executives of the Company. (p)     Clawback. To the extent permitted under applicable law, Executive agrees to reimburse the Company for amounts determined by final judicial process to be due to the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.     [THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]     18 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.     ON ASSIGNMENT, INC.       By: /s/ Jeremy Jones     Name: Jeremy Jones   Title:           /s/ Peter T. Dameris     PETER T. DAMERIS           19
Exhibit 10.72 SPLIT-DOLLAR AGREEMENT THIS AGREEMENT, effective as of this 28th day of October, 2009, by and between MasTec, Inc., a Florida corporation, with principal offices and place of business in the State of Florida (hereinafter referred to as the “Corporation”), and Jose Mas, an individual residing in the State of Florida (hereinafter referred to as the “Employee”), WITNESSETH THAT: WHEREAS, the Employee is employed by the Corporation; and WHEREAS, the Employee wishes to provide life insurance protection for his family in the event of his death, under one or more policies of life insurance insuring his life, issued by one or more insurance companies (hereinafter referred to individually as an “Insurer” and collectively as the “Insurers”) that would be subject to this Agreement (hereinafter referred to individually as a “Policy” and collectively as the “Policies”); and WHEREAS, the Corporation is willing to pay the premiums due on the Policies as an additional employment benefit for the Employee, on the terms and conditions hereinafter set forth; and WHEREAS, the Corporation will be the owner of the Policies and, as such, possesses all incidents of ownership in and to the Policies; and WHEREAS, the Corporation wishes to retain such ownership rights, in order to secure the repayment of the amounts which it will pay toward the premiums on the Policies; and WHEREAS, the parties to this arrangement intend to have their income and gift tax consequences determined under economic benefit regime set forth in Section 1.162-22(d) of the Treasury Regulations; and WHEREAS, the Corporation and the Employee previously entered into a Split-Dollar Agreement on March 11, 2005, effective as of August 3, 2004 (the “Prior Agreement”), which was subsequently amended on January 6, 2006, effective as of January 1, 2005, to govern the rights and obligations of the parties with respect to that certain life insurance policy issued by The Hartford Financial Services Group, Inc. insuring the life of the Employee; and WHEREAS, the parties hereto wish to amend and restate the Prior Agreement in its entirety to make it applicable to any and all Policies and to make certain other modifications to the Prior Agreement. contained herein, the parties hereto agree that this Agreement shall serve to amend and restate the Prior Agreement, and any amendments thereto, in their entirety and shall read as follows: 1. Statement of Intention. The parties hereto intend that the income and gift tax consequences of this split-dollar arrangement be governed by the economic benefit regime set forth in Section 1.162-22(d) of the Treasury Regulations. The parties hereto agree to consistently treat this arrangement in accordance with such concepts on all tax returns and other documents filed by them in connection herewith. 2. Purchase of Policies. The Corporation may purchase one or more Policies that will be subject to this Agreement. The Face Amount of Insurance and Death Benefit of any Policies shall be reflected on Exhibit A attached hereto. The parties will take all necessary action to cause the Insurer to issue the Policy, and shall take any further action which may be necessary to cause each Policy to conform to the provisions of this Agreement. The parties hereto agree that the Policies shall be subject to the terms and conditions of this Agreement and of the endorsement to the Policy to be filed with the Insurer. 3. Ownership of Policies. a. The Corporation shall be the sole and absolute owner of each Policy, and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein; provided, however, that in no event shall the Corporation have any right to borrow against or make withdrawals from the Policy. b. Specifically, the Corporation shall have the sole authority to direct the manner in which the Policy Account (as such term is defined in each Policy) established pursuant to the terms of the Policy shall be allocated among the various investment options from time to time available under the Policy and to change such allocation from time to time, as provided for in the Policy. 4. Payment of Premiums. On or before the due date of the Policy premium (as defined in the Policy), or within the grace period provided therein, the Corporation shall pay the full amount of the Planned Periodic Premium (as such term is defined in the Policy) to the Insurer, during the term hereof, and shall, upon request, promptly furnish the Employee evidence of timely payment of such premium. Subject to the acceptance of such amount by the Insurer, the Corporation may also, in its discretion, make additional premium payments on the Policy. The Corporation shall annually furnish the Employee a statement of the amount of income reportable by the Employee for federal, state or local tax purposes, as applicable, as a result of the insurance protection provided to the Employee’s beneficiary hereunder. 5. Designation of Policy Beneficiary/Endorsement. a. Contemporaneously with the execution of this Agreement, the Corporation shall execute a beneficiary designation for each Policy, under the form used by the Insurer for such designations, naming the Corporation as the Policy beneficiary, in order to secure the Corporation’s recovery of the amount due the Corporation hereunder. b. The Employee may select both the settlement option for payment of that portion of the death benefit provided under each Policy to which the Employee is entitled hereunder and the beneficiary or beneficiaries to receive such portion of the death benefit proceeds of the Policy, by specifying the same in a written notice to the Corporation. Upon receipt of such notice, the Corporation shall execute and deliver to the Insurer a change of beneficiary and/or Policy endorsement form necessary to elect the requested settlement option and to designate the requested person, persons or entity as the beneficiary or beneficiaries to receive the death proceeds of the Policy in excess of the amount to which the Corporation is entitled hereunder. The parties hereto agree to take the action necessary to cause the beneficiary designation and settlement election provisions of that portion of each Policy to which the Employee is entitled hereunder to conform to the provisions hereof. The Corporation shall not terminate, alter or amend such election or designation for such portion of any Policy, without the express written consent of the Employee, except as provided in paragraph 9b hereof. 6. Limitations on Corporation’s Rights in Policies. Except as otherwise provided herein, the Corporation shall not sell, assign, transfer, surrender or cancel any Policy, change the beneficiary designation provision of that portion of the Policy to which the Employee is entitled hereunder, nor change the Death Benefit Option thereof without, in any such case, the express written consent of the Employee. 7. Collection of Death Proceeds. a. Upon the death of the Employee, the Corporation shall cooperate with the beneficiary or beneficiaries designated by the Employee to take whatever action is necessary to collect the death benefit provided under each Policy. When the death benefit has been collected and paid as provided herein, this Agreement shall thereupon terminate. b. Upon the death of the Employee, the Corporation shall have the unqualified right to receive a portion of the death benefit under each Policy equal to the greater of (i) the total amount of the premiums paid by the Corporation with respect to that Policy under this Agreement (including any amounts rolled over from any life insurance policies that were subject to the Prior Agreement), or (ii) the then cash value of that Policy (excluding surrender charges or other similar charges or reductions) immediately before the death of the Employee (the “Corporation’s Death Benefit”). The balance of the death benefit provided under each Policy shall be paid directly to the beneficiary or beneficiaries designated by the Corporation at the direction of the Employee, in the manner and in the amount or amounts provided in the beneficiary designation provision of that Policy. In no event exceed proceeds payable as a result of the maturity of that Policy as a death claim. No amount shall be paid from such death benefit to the beneficiary or beneficiaries designated by the Corporation at the direction of the Employee, until the full amount of the Corporation’s Death Benefit under that Policy has been paid to the Corporation. The parties hereto agree that the beneficiary designation provision of each Policy shall conform to the provisions hereof. c. Notwithstanding any provision hereof to the contrary, in the event that, for any reason whatsoever, no death benefit is payable under any Policy upon the death of the Employee and in lieu thereof the Insurer refunds all or any part of the premiums paid for the Policy, the Corporation shall have the unqualified right to retain such premiums. 8. Termination of the Agreement During the Employee’s Lifetime. This Agreement shall terminate, during the Employee’s lifetime, without notice, upon the occurrence of any of the following events: (a) the Corporation’s (i) bankruptcy (with the approval of a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(1)(A)), or (ii) dissolution taxed under Section 331 of the Internal Revenue Code of 1986, as amended (“Code”); or (b) the date of a change in control, within the meaning of Code Section 409A, due to (i) one person, or more than one person acting as a group, acquiring ownership of stock of the Corporation constituting more than 50% of the total fair market value or total voting power of such stock, or (ii) a majority of the Corporation’s board of directors being replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the Corporation’s board of directors prior to the date of such appointment or election. 9. Disposition of the Policies on Termination of the Agreement During the Employee’s Lifetime. a. For sixty (60) days after the date of the termination of this Agreement during the Employee’s lifetime, the Employee shall have the assignable option to purchase each Policy from the Corporation. The purchase price for each Policy shall be the greater of (i) the total amount of the premiums paid by the Corporation with respect to that Policy under this Agreement (including any amounts rolled over from any life insurance policies that were subject to the Prior Agreement), or (ii) the then cash value of the Policy (excluding surrender charges or other similar charges or reductions). Upon receipt of this purchase price, the Corporation shall transfer all of its right, title and interest in and to the Policy purchased by the Employee to the Employee or his assignee, by the execution and delivery of an appropriate instrument of transfer, and this Agreement shall thereupon terminate. b. If the Employee or his assignee fails to exercise the option provided for in Section 9a with respect to any Policy within the sixty (60) day period provided therein, then the Corporation shall be vested with all ownership rights under that Policy, including, without limitation, the right to either maintain, cancel or surrender the Policy at any time. In connection with any cancellation or surrender of any Policy, the Corporation may retain all cash surrender values and other sums payable to the owner of the Policy. In connection with any payment of death proceeds under any Policy if maintained, the Corporation may retain all of the same. The Corporation may name itself and/or its designees as beneficiary under any such Policy and shall enjoy all other ownership rights in the Policy even if not herein specifically enumerated. Neither the Employee, nor any co-insured party, or the heirs or assigns or designated beneficiaries of any of them, nor any person claiming by or through any of the foregoing, shall have any further interest in and to any such Policy whether under the terms hereof or under the terms of the Policy. c. Notwithstanding any other provision of this Agreement, in no event shall the Insured have any personal liability to repay to the Corporation any premiums paid under this Agreement or any other amounts upon termination of this Agreement for any reason (other than the obligation of the Employee to pay the purchase price for any Policy if the Employee elects to purchase the Policy under Section 9a of this Agreement). 10. Insurer Not a Party. The Insurer shall be fully discharged from its obligations under any Policy by payment of the Policy death benefit to the beneficiary or beneficiaries named in the Policy, subject to the terms and conditions of the Policy. In no event shall the Insurer be considered a party to this Agreement, or any modification or amendment hereof. No provision of this Agreement, nor of any modification or amendment hereof, shall in any way be construed as enlarging, changing, varying or in any other way affecting the obligations of the Insurer as expressly provided in any Policy, except insofar as the provisions hereof are made a part of the Policy by the beneficiary designation executed by the Corporation and filed with the Insurer in connection herewith. 11. Assignment by Employee. Notwithstanding any provision hereof to the contrary, the Employee shall have the right to absolutely and irrevocably assign by gift all of his right, title and interest in and to this Agreement and to any Policy to an assignee. This right shall be exercisable by the execution and delivery to the Corporation of a written assignment, in substantially the form attached hereto as Exhibit B, which by this reference is made a part hereof, with respect to each Policy. Upon receipt of such written assignment executed by the Employee and duly accepted by the assignee thereof, the Corporation shall consent thereto in writing, and shall thereafter treat the Employee’s assignee as the sole owner of all of the Employee’s right, title and interest in and to this Agreement and in and to that Policy. Thereafter, the Employee shall have no right, title or interest in and to this Agreement or the assigned Policy, all such rights being vested in and exercisable only by such assignee. 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration. a. The Corporation is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement. b. Claim. A Participant, beneficiary or other person who believes that he or she is being denied a benefit to which he or she is entitled (hereinafter referred to as “Claimant”), or his or her duly authorized representative, may file a written request for such benefit with the President of the Corporation (the “First Level Reviewer”), setting forth his or her claim. Such claim must be addressed to the President of the Corporation, at its then principal place of business. c. Claim Decision. Upon receipt of a claim, the First Level Reviewer shall advise the Claimant that a reply will be forthcoming within a reasonable period of time, but ordinarily not later than ninety days, and shall, in fact, deliver such reply within such period. However, the First Level Reviewer may extend the reply period for an additional ninety days for reasonable cause. If the reply period will be extended, the First Level Reviewer shall advise the Claimant in writing during the initial 90-day period indicating the special circumstances requiring an extension and the date by which the First Level Reviewer expects to render the benefit determination. If the claim is denied in whole or in part, the First Level Reviewer will render a written opinion, using language calculated to be understood by the Claimant, setting forth: (1) the specific reason or reasons for the denial; (2) the specific references to pertinent Plan provisions on which the denial is based; (3) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation as to why such material or such information is necessary; (4) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review; and (5) the time limits for requesting a review of the denial under subparagraph c hereof and for the actual review of the denial under subparagraph d hereof. d. Request for Review. Within sixty days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Secretary of the Corporation (the “Second Level Reviewer”) review the First Level Reviewer’s prior determination. Such request must be addressed to the Secretary of the Corporation, at its then principal place of business. The Claimant or his or her duly authorized representative may submit written comments, documents, records or other information relating to the denied claim, which such information shall be considered in the review under this subparagraph without regard to whether such information was submitted or considered in the initial benefit determination. The Claimant or his or her duly authorized representative shall be provided, documents, records and other information which (i) was relied upon by the First Level Reviewer in making its initial claims decision, (ii) was submitted, considered or generated in the course of the First Level Reviewer making its initial claims decision, without regard to whether such instrument was actually relied upon by the First Level Reviewer in making its decision or (iii) demonstrates compliance by the First Level Reviewer with its administrative processes and safeguards designed to ensure and to verify that benefit claims determinations are made in accordance with governing Plan documents and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants. If the Claimant does not request a review of the First Level Reviewer’s determination within such sixty-day period, he or she shall be barred and estopped from challenging such determination. e. Review of Decision. Within a reasonable period of time, ordinarily not later than sixty days, after the Second Level Reviewer’s receipt of a request for review, it will review the First Level Reviewer’s prior determination. If special circumstances require that the sixty-day time period be extended, the Second Level Reviewer will so notify the Claimant within the initial 60-day period indicating the special circumstances requiring an extension and the date by which the Second Level Reviewer expects to render its decision on review, which shall be as soon as possible but not later than 120 days after receipt of the request for review. In the event that the Second Level Reviewer extends the determination period on review due to a Claimant’s failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall not take into account the period beginning on the date on which notification of extension is sent to the Claimant and ending on the date on which the Claimant responds to the request for additional information. The Second Level Reviewer has discretionary authority to determine a Claimant’s eligibility for benefits and to interpret the terms of the Plan. Benefits under the Plan will be paid only if the Second Level Reviewer decides in its discretion that the Claimant is entitled to such benefits. The decision of the Second Level Reviewer shall be final and non-reviewable, unless found to be arbitrary and capricious by a court of competent review. Such decision will be binding upon the Employer and the Claimant. If the Second Level Reviewer makes an adverse benefit determination on review, the Second Level Reviewer will render a written opinion, using language calculated to be understood by the Claimant, setting forth: based; (3) a statement that the Claimant is entitled to receive, upon request and free information which (i) was relied upon by the Second Level Reviewer in making its decision, (ii) was submitted, considered or generated in the course of the Second Level Reviewer making its decision, without regard to whether such instrument was actually relied upon by the Second Level Reviewer in making its decision or (iii) demonstrates compliance by the Second Level Reviewer with its documents, and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants; and (4) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following the adverse benefit determination on such review. 13. Amendment. This Agreement may not be amended, altered or modified, except by a written instrument signed by the parties hereto, or their respective successors or assigns, and may not be otherwise terminated except as provided herein. 14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Corporation and its successors and assigns, and the Employee, his successors, assigns, heirs, executors, administrators and beneficiaries. 15. Notices. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent or demand is mailed to a party hereto, it shall be sent by United States certified mail, postage prepaid, addressed to such party’s last known address as shown on the records of the Corporation. The date of such mailing shall be deemed the date of notice, consent or demand. 16. Governing Law. This Agreement, and the rights of the parties hereunder, Florida.   IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in duplicate, as of the day and year first above written.       MASTEC, INC.     By:   /s/ C. Robert Campbell       “Corporation” ATTEST:       /s/ Cristina Canales       Assistant Secretary           /s/ Jose R. Mas       “Employee”   EXHIBIT A The following life insurance policy or policies is/are subject to the attached   Insurer:    THE HARTFORD FINANCIAL SERVICES GROUP INC. Insured:    Jose Mas Policy Number:    VL 9340772 Face Amount:    $10,000,000 Date of Issue:    August 3, 2004 EXHIBIT B THIS ASSIGNMENT, dated this      day of             , 20     WITNESSETH THAT: WHEREAS, the undersigned (the “Assignor”) is the Employee under that certain Split-Dollar Agreement between MasTec, Inc., a Florida corporation (the “Company”) and Jose Mas, effective as of October 28, 2009, (the “Split-Dollar Agreement”), which Split-Dollar Agreement confers upon the undersigned certain rights and benefits with regard to one or more policies of insurance insuring the Assignor’s life; and WHEREAS, pursuant to the provisions of said Split-Dollar Agreement, the Assignor retained the right, exercisable by the execution and delivery to the Company of a written form of assignment, to absolutely and irrevocably assign all of the Assignor’s right, title and interest in and to said Split-Dollar Agreement to an assignee; and WHEREAS, the Assignor desires to exercise said right; NOW, THEREFORE, the Assignor, without consideration, and intending to make a gift, hereby absolutely and irrevocably assigns, gives, grants and transfers to JOSE MAS IRREVOCABLE TRUST (the “Assignee”), all of the Assignor’s right, title and interest in and to the Split-Dollar Agreement and said policies of insurance, intending that, from and after this date, the Split-Dollar Agreement be solely between the Company and the Assignee and that hereafter the Assignor shall neither have nor retain any right, title or interest therein.      Jose Mas, Assignor Page 2, EXHIBIT B ACCEPTANCE OF ASSIGNMENT The undersigned Assignee hereby accepts the above assignment of all right, title and interest of the Assignor therein in and to the Split-Dollar Agreement, and the undersigned hereby agrees to be bound by all of the terms and conditions of said Split-Dollar Agreement, as if the original Employee thereunder.   JOSE MAS IRREVOCABLE TRUST DATED                     , 20                                   , Trustee Assignee   Dated                     , 20     CONSENT TO ASSIGNMENT The undersigned Company hereby consents to the foregoing assignment of all of the right, title and interest of the Assignor in and to the Split-Dollar Agreement, to the Assignee designated therein. The undersigned Company hereby agrees that, from and after the date hereof, the undersigned Company shall look solely to such Assignee for the performance of all obligations under said Split-Dollar Agreement which were heretofore the responsibility of the Assignor, shall allow all rights and benefits provided therein to the Assignor to be exercised only by said Assignee, and shall hereafter treat said Assignee in all respects as if the original Employee thereunder.   MASTEC, INC. By:    
EXHIBIT 32.2 Section 1350 Certification In connection with the Quarterly Report of AnythingIT, Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2012 as filed with the Securities and Exchange Commission (the “Report”), I, Gail L. Babitt, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to SS. 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and 2. The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company. Dated: February 1, 2013 /s/ Gail L. Babitt Gail L. Babitt, Chief Financial Officer, principal financial and accounting officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 16.1 OFFICES OF ARSHAD M. FAROOQ, JD, CPA 201 N. Palomares St. Pomona, CA 91767 (909) 238-5361 (909) 972-1672 Fax amfarnou@gmail.com April 5, 2011 Securities and Exchange Commission treet, N.E. Washington D.C. 20549-7561 Dear Sirs/Madams: We have read Atlas Therapeutics Corporation’s statements included under Item 4.01 of its Form 8-K filed on April 5, 2011 and we agree with such statements concerning our firm. /s/ Arshad M. Farooq ARSHAD M. FAROOQ, JD, CPA Pomona, CA
99.1 Press Release dated July 5, 2007. Hyperdynamics Strengthens Financial Position; Company Obtains Significant Cash and is Debt Free Thursday July 5, 9:15 am ET HOUSTON(BUSINESS WIRE)Hyperdynamics Corporation (AMEX:HDY - News) announced today that on June 28, 2007, its board of directors held a special meeting in Bloomfield Hills, Michigan. In the meeting it was announced by the Chairman and Chief Executive Officer, Kent Watts that the entire debt remaining from the 2006 financing with Cornell Capital Partners, LP had been converted to equity and that the company was, in all material respects, debt free. This led to a lengthy discussion of financing options and strategies regarding its short and long-term business plan requirements. One of the top strategies was to modify existing outstanding warrant positions to allow the company to access capital. To enable this short-term financing strategy, the Kent Watts was authorized, at his discretion, to reduce the strike price of certain outstanding warrants from an exercise price of $4 per share to $2.50 per share. The board felt that this could be an immediate catalyst for a significant amount of capital to flow into the company without the need for any new financing at this time. On Friday, June 29, 2007, the decision was made to reduce the exercise price on 3.47MM of unregistered warrants to purchase restricted rule 144 common stock from an exercise price of $4.00 to $2.50 per share. These warrants were originally issued with an exercise price of $2 per share in 2003 and 2004. In April of this year they were extended for two (2) years with an increase in exercise price from $2 to $4 per share. The reduction in the exercise price also triggered a similar reduction in the exercise price of some of the warrants held by Cornell Capital. As a result of this repricing, thus far 2.1 million warrants have been exercised at $2.50 per share resulting in $5.25 million in cash being paid to the Company earlier this week. Additionally, Cornell received another 544,000 warrants for restricted common stock with an exercise price also of $2.50 per share. In addition to the amount already exercised, the Company could receive over $10MM over the next 22 months from the exercise of the remaining unregistered warrants. See the companies 8K filed today for more details. When asked to comment, Kent Watts said, "Being virtually debt free with resources available to timely meet our business plan objectives is a great situation to be in. We have a domestic production plan in process that could deliver sustained operational profits for the first time in our history. At the same time we are preparing new work programs for the exploration of our 31,000 square mile concession off the coast of West Africa." He further stated, "Our story is becoming known and our market is just now starting to understand what we have accomplished, as well as our potential going forward. I would ask all of our shareholders to please read our SEC filings and our press releases and to expect an update on our Guinea operations in the next few days." About Hyperdynamics Hyperdynamics Corporation provides energy for the future by exploring and producing sources of energy worldwide. The company's internationally active oil and gas subsidiary, SCS Corporation, owns rights to explore and exploit 31,000 square miles offshore the Republic of Guinea, West Africa. HYD Resources Corporation focuses on domestic production in proven areas. To find out more about Hyperdynamics Corporation, visit our Website at http://www.hyperdynamics.com. Forward-Looking Statements Statements in this news release are "forward-looking" as defined by the U.S. Securities and Exchange Commission and are based on expectations, beliefs or projections that are subject to numerous risks and uncertainties. Investors are cautioned that these statements are not guarantees of future performance, and actual results could differ materially. Please refer to "Risk Factors" in the company's Form 10-K filed with the SEC.
  Exhibit 10.63     EXECUTION   AMENDMENT NUMBER SEVENTEEN to the MASTER REPURCHASE AGREEMENT Dated as of May 24, 2012, among PENNYMAC CORP., PENNYMAC LOAN SERVICES, LLC and CITIBANK, N.A. This AMENDMENT NUMBER SEVENTEEN (this “Amendment Number Seventeen”) is made this 2nd day of December, 2016, among PENNYMAC CORP. (“Seller”), PENNYMAC LOAN SERVICES, LLC (“Servicer”) and CITIBANK, N.A. (“Buyer”), to the Master Repurchase Agreement, dated as of May 24, 2012, among Seller, Servicer and Buyer, as such agreement may be amended from time to time (the “Agreement”).  Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Agreement. RECITALS WHEREAS, Seller and Buyer have agreed to extend the term of the facility, as more specifically set forth herein; and WHEREAS, as of the date hereof, Seller represents to Buyer that the Seller Parties are in full compliance with all of the terms and conditions of the Agreement and each other Program Document and no Default or Event of Default has occurred and is continuing under the Agreement or any other Program Document. of which are hereby acknowledged, and for the mutual covenants herein contained, the parties hereto hereby agree as follows: Section 1.Amendments.  Effective as of December 2, 2016 (the "Amendment Effective Date"), the Agreement is hereby amended as follows: (a)Section 2 of the Agreement is hereby amended by adding the new definition of “2017 1Q Extension Fee” in the appropriate alphabetical order to read as follows: “2017 1Q Extension Fee” shall have the meaning assigned to it in the Pricing Side Letter. (a)Section 2 of the Agreement is hereby amended by deleting the definition of “Termination Date” in its entirety and replacing it with the following: “Termination Date” shall mean February 2, 2017 or such earlier date on which this Agreement shall terminate in accordance with the provisions hereof or by operation of law.” Section 2.Fees and Expenses.  Seller agrees to pay to Buyer all reasonable out of pocket costs and expenses incurred by Buyer in connection with this Amendment Number Seventeen (including all reasonable fees and out of pocket costs and expenses of the Buyer’s legal counsel) in accordance with Sections 23 and 25 of the Agreement.     Section 3.Condition Precedent. As a condition precedent to the effectiveness of this Amendment Number Seventeen, if not otherwise paid pursuant to Section 2 of Amendment Number Twenty-Four to the NPL Repurchase Agreement, Buyer shall have received from Seller an amount equal to the 2017 1Q Extension Fee in immediately available funds, and without deduction, set-off or counterclaim in accordance with Buyer's Wire Instructions. Section 4.Representations.  Seller hereby represents to Buyer that as of the date hereof, Seller is in full compliance with all of the terms and conditions of the Agreement and each other Program Document and no Default or Event of Default has occurred and is continuing under the Agreement or any other Program Document. Section 5.Binding Effect; Governing Law.  This Amendment Number Twelve shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  THIS AMENDMENT NUMBER SEVENTEEN SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Section 6.Counterparts.  This Amendment Number Seventeen may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Section 7.Limited Effect.  Except as amended hereby, the Agreement shall continue in full force and effect in accordance with its terms.  Reference to this Amendment Number Seventeen need not be made in the Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Agreement, any reference in any of such items to the Agreement being sufficient to refer to the Agreement as amended hereby.     2     IN WITNESS WHEREOF, Seller, Servicer and Buyer have caused this Amendment Number Seventeen to be executed and delivered by their duly authorized officers as of the Amendment Effective Date.   PENNYMAC CORP. (Seller)     By: /s/ Pamela Marsh Name: Pamela Marsh Title: Managing Director, Treasurer     PENNYMAC LOAN SERVICES, LLC, (Servicer)     By: Name: Pamela Marsh Title: Managing Director, Treasurer     CITIBANK, N.A. (Buyer)     By: /s/ Susan Mills Name: Susan Mills Title: Vice President   Citibank, N.A.      
EXHIBIT 32.01 CERTIFICATION OF PRESIDENT PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION -OXLEY ACT OF 2002 In connection with the Quarterly Report of Meritage Futures Fund L.P. (the “Partnership”) on Form 10-Q for the quarter ended September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alper Daglioglu, President and Director of Ceres Managed Futures LLC, the General Partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. By: /s/Alper Daglioglu Name: Alper Daglioglu Title: Presidentand Director of Ceres Managed Futures LLC, General Partner of the registrant Date: November 14, 2013
Name: nan Type: Decision_ENTSCHEID Subject Matter: nan Date Published: 1967-05-09 nan
Exhibit 99.1 Interactive Intelligence Reports 2011 Second-Quarter Operating Results Revenues increase 34 percent; bookings increase 44 percent INDIANAPOLIS, July 25, 2011 Interactive Intelligence Group Inc. (Nasdaq: ININ), a global provider of unified IP business communications solutions, has announced operating results for the three and six months ended June 30, 2011. The company reported revenues of $52.0 million, an increase of 34 percent over the second quarter of 2010. Product revenues were up 34 percent, recurring revenues increased by 35 percent, and services revenues increased 30 percent compared to the same quarter last year. The company reported operating income on a generally accepted accounting principles (GAAP) basis of $5.5 million for the 2011 second quarter, up 18 percent from $4.7 million in the same quarter last year. Non-GAAP* operating income was $7.3 million for the second quarter of 2011, up 29 percent from $5.7 million in the second quarter of 2010. "We are executing on our primary strategic initiatives," said Dr. Donald E. Brown, Interactive Intelligence founder and CEO. "We are moving up-market with more sales to larger customers, rapidly increasing revenues from our cloud-based solutions, successfully expanding our presence internationally, performing well in our targeted vertical markets, and seeing increased interest in our process automation capability. With the soon-to-be-released major enhancement to our flagship Customer Interaction Center™ product, we are well positioned to continue competing effectively in the second half of the year." GAAP net income was $3.8 million, with diluted earnings per share (EPS) of $0.19, compared to $2.5 million, or EPS of $0.13, for the second quarter of 2010. Net income on a non-GAAP basis was $6.3 million, with EPS of $0.32, compared to $5.0 million, or EPS of $0.27, for the same quarter last year. Non-GAAP net income and EPS for the 2011 second quarter exclude purchase accounting adjustments of $496,000, or EPS of $0.03, charges for stock-based compensation of $1.3 million, or EPS of $0.06, and non-cash income tax expense of approximately $727,000, or EPS of $0.04. For the second quarter of 2010, non-GAAP net income and EPS exclude charges for stock-based compensation of $964,000, or EPS of $0.06, and non-cash income tax expense of $1.5 million, or EPS of $0.08. Cash and investment balances as of June 30, 2011 increased to $94.4 million. The company has no debt. First-half 2011 results included the following: - Total revenues of $99.7 million, a 35 percent increase over revenues of $73.8 million in the first half of 2010. - GAAP operating income of $10.4 million, up from $8.6 million for the first half of 2010. - Non-GAAP operating income of $14.0 million, compared to $10.7 million for the first half of 2010. - GAAP net income of $6.9 million, or EPS of $0.35, compared to $4.3 million, or EPS of $0.23, for the first half of 2010. - Non-GAAP net income of $11.8 million, or EPS of $0.59, compared to $9.1 million, or EPS of $0.49, for the same period last year. For the first six months of 2011, non-GAAP net income and EPS exclude charges for purchase accounting adjustment of $1.0 million, or EPS of $0.05, stock-based compensation of $2.6 million, or EPS of $0.13, and non-cash income tax expense of $1.3 million, or EPS of $0.06. For the first half of 2010, non-GAAP net income and EPS exclude charges for stock-based compensation of $2.0 million, or EPS of $0.11, and non-cash income tax expense of $2.8 million, or EPS of $0.15. Additional highlights in the second quarter of 2011 include the following: - Certification by Joint Interoperability Test Command (JITC) for U.S. federal government deployments. - Announcement of the upcoming release of CIC 4.0. - Named by the Indiana Chamber of Commerce as a Best Place to Work. - Inclusion in Gartner’s Contact Center Infrastructure leaders quadrant.** As previously announced on July 5, 2011, the company acquired CallTime Solutions, a partner in the Australia and New Zealand markets to expand sales, support and service capabilities for direct customers and resellers throughout the region. Interactive Intelligence will host a conference call July 25 at 4:30 p.m. Eastern time (EDT) featuring Dr. Brown and the company’s CFO, Stephen R. Head. A live Q&A session will follow opening remarks. To access the teleconference, please dial 1 877.324.1969 at least five minutes prior to the start of the call. Ask for the teleconference by the following name: "Interactive Intelligence second-quarter earnings call." The teleconference will also be broadcast live on the company's investor relations' page at http://investors.inin.com. An archive of the teleconference will be posted following the call. About Interactive Intelligence Interactive Intelligence Group Inc. (Nasdaq: ININ) is a global provider of unified business communications solutions for contact center automation, enterprise IP telephony, and business process automation. The company’s solutions, which can be deployed via an on-premise or hosted model, include vertical-specific applications for insurance and collections. Interactive Intelligence was founded in 1994 and has more than 4,000 customers worldwide. The company is among Software Magazine’s 2010 Top 500 Global Software and Services Suppliers, and Forbes Magazine’s 2010 Best Small Companies in America. It employs approximately 1,000 people and is headquartered in Indianapolis, Indiana. The company has offices throughout North America, Latin America, Europe, Middle East, Africa and Asia Pacific. Interactive Intelligence can be reached at +1 317.872.3000 or info@inin.com; on the Net: www.inin.com. *Non-GAAP Measures The non-GAAP measures shown in this release include revenue which was not recognized on a GAAP basis due to purchase accounting adjustments and exclude non-cash stock-based compensation expense for stock options, the amortization of certain intangible assets related to acquisitions by the company and non-cash income tax expense. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included with the financial information included in this press release. These measures are not in accordance with, or an alternative for, GAAP and may be different from non-GAAP measures used by other companies. Stock-based compensation expense and amortization of intangibles related to acquisitions are non-cash and income tax expense is primarily non-cash. Management believes that the presentation of non-GAAP results, when shown in conjunction with corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends related to the company's results of operations. Further, management believes that these non-GAAP measures improve management's and investors' ability to compare the company's financial performance with other companies in the technology industry. Because stock-based compensation expense, non-cash income tax expense amounts and amortization of intangibles related to acquisitions can vary significantly between companies, it is useful to compare results excluding these amounts. Management also uses financial statements that exclude stock-based compensation expense related to stock options, non-cash income tax amounts and amortization of intangibles related to acquisitions for its internal budgets. **Gartner Inc., Magic Quadrant for Contact Center Infrastructure, Worldwide, Drew Kraus, Steve Blood, Geoff Johnson, June 27, 2011. About Gartner’s Magic Quadrant The Magic Quadrant is copyrighted 2011 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the "Leaders" quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. This release may contain certain forward-looking statements that involve a number of risks and uncertainties. Amongthe factors that could cause actual results to differ materially are the following: rapid technological changes in the industry; the company's ability to maintain profitability; to manage successfully its growth; to manage successfully its increasingly complex third-party relationships resulting from the software and hardware components being licensed or sold with its solutions; to maintain successful relationships with certain suppliers which may be impacted by the competition in the technology industry; to maintain successful relationships with its current and any new partners; to maintain and improve its current products; to develop new products; to protect its proprietary rights adequately; to successfully integrate acquired businesses; and other factors described in the company's SEC filings, including the company's latest annual report on Form 10-K. Interactive Intelligence is the owner of the marks INTERACTIVE INTELLIGENCE, its associated LOGO and numerous other marks. All other trademarks mentioned in this document are the property of their respective owners. ININ-G Contacts: Stephen R. Head Chief Financial Officer Interactive Intelligence +1 317.715.8412 steve.head@inin.com Christine Holley Senior Director of Market Communications Interactive Intelligence +1 317.715.8220 christine.holley@inin.com ### Interactive Intelligence Group, Inc. Condensed Consolidated Statements of Income (in thousands, except per share amounts) Unaudited Three Months Ended Six Months Ended June 30, June 30, Revenues: Product $ Recurring Services Total revenues Costs of revenues: Product Recurring Services Amortization of intangible assets 35 16 70 32 Total cost of revenues Gross profit Operating expenses: Sales and marketing Research and development General and administrative Amortization of intangible assets 9 18 Total operating expenses Operating income Other income (expense): Interest income, net 92 67 Other income (expense) ) 90 ) Total other income (expense) ) ) Income before income taxes Income tax expense Net income $ Net income per share: Basic $ Diluted Shares used to compute net income per share: Basic Diluted Interactive Intelligence Group, Inc. Reconciliation of Supplemental Financial Information (in thousands, except per share amounts) Unaudited Three Months Ended Six Months Ended June 30, June 30, Net income, as reported $ Purchase accounting adjustments: Increase to revenues: Recurring 39 1 98 8 Services 17 1 48 3 Reduction of operating expenses: Customer Relationships 9 18 Technology 35 16 70 32 Non-compete agreements 45 - 90 - Acquisition Costs - - Total 27 61 Non-cash stock-based compensation expense: Cost of recurring revenues 60 91 Cost of services revenues 11 3 36 51 Sales and marketing Research and development General and administrative Total Non-cash income tax expense Non-GAAP net income $ Operating income, as reported $ Purchase accounting adjustments 27 61 Non-cash stock-based compensation expense Non-GAAP operating income $ Diluted EPS, as reported $ Purchase accounting adjustments Non-cash stock-based compensation expense Non-cash income tax expense Non-GAAP diluted EPS $ Interactive Intelligence Group, Inc. Condensed Consolidated Balance Sheets (in thousands) June 30, December 31, (unaudited) Assets Current assets: Cash and cash equivalents $ $ Short-term investments Accounts receivable, net Deferred tax assets, net Prepaid expenses Other current assets Total current assets Long-term investments - Property and equipment, net Deferred tax assets, net Goodwill Intangible assets, net Other assets, net Total assets $ $ Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ $ Accrued compensation and related expenses Deferred product revenues Deferred services revenues Total current liabilities Long-term deferred revenues Other long-term liabilities - Total liabilities Shareholders' equity: Preferred stock - - Common stock Additional paid-in-capital Accumulated other comprehensive loss ) ) Retained earnings (accumulated deficit) ) Total shareholders' equity Total liabilities and shareholders' equity $ $ Interactive Intelligence Group, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, Operating activities: Net income $ $ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other non-cash items Stock-based compensation expense Tax benefits from stock-based payment arrangements ) ) Deferred income tax ) Accretion of investment income ) ) Changes in operating assets and liabilities: Accounts receivable ) Prepaid expenses ) ) Other current assets ) Other assets ) (8
Exhibit 32.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION -OXLEY ACT OF 2002 The undersigned hereby certifies, in his capacity as the Principal Executive Officer and Principal Financial Officer of Europa Acquisition I, Inc.(the “Company”), for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge: (1)The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 12, 2014 /s/Allan Schwartz Allan Schwartz, Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) This certification accompanies each Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: to Commission file number: 000-26073 IMMEDIATEK, INC. (Exact name of registrant as specified in its charter) Nevada 86-0881193 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 3301 Airport Freeway, Suite 200, Bedford, Texas (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (888) 661-6565 Securities registered under Section 12(b) of the Exchange Act: Title of each class None Name of each exchange on which registered None Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.001 (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YesoNox Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YesoNox Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNoo Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesxNoo Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Accelerated filer o Smaller reporting company x Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YesoNox The aggregate market value of the outstanding common stock of the registrant held by non-affiliates of the registrant, computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $1,118,505.For purposes of this computation, all officers, directors and 10% stockholders were deemed to be affiliates.This determination should not be construed as an admission that such officers, directors and 10% stockholders are affiliates. As of December 31, 2012 and March 31, 2013, the issuer had 15,865,641 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Certain information called for by Part III of this form is incorporated by reference to the definitive Information Statement for the registrant to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2012. TABLE OF CONTENTS Page INTRODUCTION 1 FORWARD−LOOKING STATEMENTS 1 PART I 2 Item 1. Description of Business. 2 Item 1A. Risk Factors. 8 Item 2. Properties. 18 Item 3. Legal Proceedings. 18 Item 4. Mine Safety Disclosures. 19 PART II 19 Item 5. Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities. 19 Item 6. Selected Financial Data 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 20 Item 7A. Quantitaive and Qualitative Disclosure About Market Risk. 25 Item 8. Financial Statements and Supplementary Data. 25 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. 25 Item 9A. Controls and Procedures. 25 Item 9B. Other Information. 26 PART III 26 Item 10. Directors, Executive Officers and Corporate Governance. 26 Item 11. Executive Compensation. 26 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 26 Item 13. Certain Relationships and Related Transactions, and Director Independence. 26 Item 14. Principal Accounting Fees and Services. 26 PART IV 26 Item 15. Exhibits, Financial Statement Schedules. 26 SIGNATURES S-1 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1 i Table of Contents INTRODUCTION Unless the context otherwise indicates, all references in this Annual Report on Form 10-K to the “Company,” “Immediatek,” “Officeware,” “DiscLive,” “IMKI Ventures,” “we,” “us,” “our” or “ours” or similar words are to Immediatek, Inc. and its direct, wholly-owned subsidiaries, Officeware Corporation, DiscLive, Inc. or IMKI Ventures, Inc.Accordingly, there are no separate financial statements for Officeware Corporation, DiscLive, Inc. or IMKI Ventures, Inc. TRADEMARKS AND SERVICE MARKS This Annual Report on Form 10-K contains registered trademarks and service marks owned or licensed by entities and persons other than us. MARKET AND INDUSTRY DATA AND FORECASTS Market and industry data and other statistical information and forecasts used throughout this Annual Report on Form 10-K are based on independent industry publications, government publications and reports by market research firms or other published independent sources.Some data also is based on our good faith estimates, which are derived from our review of internal surveys, as well as independent sources.Forecasts are particularly likely to be inaccurate, especially over long periods of time. FORWARD−LOOKING STATEMENTS This Annual Report on Form 10-K and the materials incorporated by reference into this Annual Report on Form 10-K include “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.These forward-looking statements generally can be identified as such because the context of the statement includes words such as “may,” “estimate,” “intend,” “plan,” “believe,” “expect,” “anticipate,” “will,” “should” or other similar expressions.Similarly, statements in this Annual Report on Form 10-K that describe our objectives, plans or goals also are forward-looking statements.These statements include those made on matters such as our financial condition, litigation, accounting matters, our business, our efforts to grow our business and increase efficiencies, our efforts to use our resources judicially, our efforts to implement new financial software, our liquidity and sources of funding and our capital expenditures.All forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of this report.We assume no obligation to update any forward-looking statements.Certain factors that could cause actual results to differ include, among others: · our inability to continue as a going concern; · our history of losses, which may continue; · our inability to utilize the funds received in a manner that is accretive; · our inability to generate sufficient funds from operating activities to fund operations; · difficulties in developing and marketing new products; · our inability to prevent or minimize interruptions in our service and interruptions to customer data access, and any related impact on our reputation; · our inability to retain existing recurring customers and attract new recurring customers; · our inability to execute our growth and acquisition strategy; 1 Table of Contents · our dependence on third-party contractors, platforms, software, websites, and technologies used in the creation and maintenance of the FilesAnywhere service; and · general economic conditions, including among others, continuing unemployment. For a discussion of these and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to “Risk Factors” commencing on page 8. In addition, these forward-looking statements are necessarily dependent upon assumptions and estimates that may prove to be incorrect.Accordingly, while we believe that the plans, intentions and expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these plans, intentions or expectations will be achieved.The forward-looking statements included in this report, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, are expressly qualified in their entirety by the risk factors and cautionary statements discussed in our filings under the Securities Act of 1933 and the Securities Exchange Act of 1934.We undertake no obligation to update any forward-looking statements to reflect future events or circumstance. PART I Item 1. Description of Business. Our History Immediatek was originally organized as a corporation on August 6, 1998, under the laws of the State of Nevada.On June 8, 2006, Immediatek issued and sold to Radical Holdings LP 4,392,286 shares of Series A Convertible Preferred Stock of Immediatek for an aggregate purchase price of $3.0million, or $0.68 per share of SeriesA Convertible Preferred Stock, pursuant to the Securities Purchase Agreement, as amended, by and among Immediatek, Radical Holdings LP and the other parties thereto.As a result, a change in control of Immediatek occurred because Radical Holdings LP became the beneficial owner of 95% of the outstanding securities entitled to vote on matters required or permitted to be submitted to the stockholders of Immediatek.The shares of Series A Convertible Preferred Stock are convertible into 14,563,804 shares of Company common stock. On August 29, 2007, Immediatek formed a wholly-owned subsidiary, IMKI Ventures, Inc., or IMKI Ventures.IMKI Ventures acquired certain assets from a related party on August 31, 2007.The consideration paid for the acquired assets was 60,514 shares of Immediatek common stock.Those acquired assets were developed into an e-commerce product called RadicalBuy, which was launched in part on October 23, 2007.As of September 30, 2010, we determined that it was in the best interest of Immediatek to cease operation of the RadicalBuy product.Prior to October 1, 2007, Immediatek, through its wholly-owned, operating subsidiary, DiscLive, Inc., recorded live content, such as concerts and conferences, and made the recorded content available for delivery to attendees within fifteen minutes after the conclusion of a live event. On October 1, 2007, DiscLive, Inc. ceased retail sales of its products in conjunction with the decision not to further pursue that line of business. It was determined that the Company re-entered the development stage at that time. On July 18, 2008, Immediatek issued and sold to Radical Holdings LP 69,726 shares of Series B Convertible Preferred Stock of Immediatek for an aggregate purchase price of $500,000, or $7.17092619 per share of Series B Convertible Preferred Stock.The shares of Series B Convertible Preferred Stock are convertible into 231,195 shares of Company common stock. On October 13, 2009, Immediatek entered into an Agreement to Amend and Restate Certificates of Designation with Radical Holdings LP. As a result of this agreement, the Company filed amended and restated Certificates of Designation, Rights and Preferences for the Series A and Series B Convertible Preferred Stock which removed a certain portion of the re-pricing mechanism of the convertible feature of the Series A and Series B Preferred Stock. The result of this amendment is that, generally, should the Company issue new equity securities for additional consideration, that issuance will not result in a change to the conversion price of the Series A or Series B Preferred Stock. 2 Table of Contents On December16, 2009, Immediatek, Officeware, Tim Rice, Chetan Jaitly, Radical Holdings LP, and Radical Investments LP entered into a Stock Exchange Agreement.On April 1, 2010, Immediatek, Officeware, Timothy Rice, Chetan Jaitly, Radical Holdings LP, Radical Investments LP, Darin Divinia, Dawn Divinia, Robert Hart, Kimberly Hart, Martin Woodall and Officeware Acquisition Corporation, or the Merger Sub, entered into an Amendment to that Agreement dated December 16, 2009, or, the Merger Agreement.Under the Merger Agreement, Merger Sub, a wholly-owned subsidiary of Immediatek, merged with and into Officeware on April 1, 2010.As a result of such merger, Immediatek became the sole shareholder of Officeware and Officeware shareholders received 12,264,256 shares of Immediatek common stock for all of the outstanding shares of stock of Officeware.Radical Investments LP, an affiliate of Radical Holdings LP, owned 24.6% of the Officeware common stock.Radical Holdings LP owns the Company’s Series A and Series B preferred stock.In addition, subject to the terms and conditions of the Merger Agreement, Immediatek issued and sold, and Holdings, Darin Divinia, Dawn Divinia, Robert Hart, Kimberly Hart and Martin Woodall collectively purchased, 3,066,064 shares of Immediatek common stock for an aggregate purchase price of $1.0 million, or approximately $0.33 per share.Due to the merger, it was determined that Immediatek ceased to be in the development stage as of April 1, 2010. Our Business Our services and products are primarily offered through Officeware.Officeware provides online back-up, file storage and other web-based services for individuals, businesses and governmental organizations.Officeware offers three primary services.First, Officeware operates the website FilesAnywhere.com, primarily designed for individuals and small businesses to allow them to establish a self-service account, enabling them to, among other things, store files on Officeware servers, share and collaborate on documents with other people online, and backup their computers to FilesAnywhere cloud storage.Second, for larger business users, Officeware offers three customized products, called the FilesAnywhere Private Site, Dedicated Server, and Enterprise Server.These corporate offerings are designed to meet the specific requirements of each business customer or organization.The Private Site, Dedicated Server, and Enterprise Server products provide flexible cloud storage and unlimited scalability for users, groups and internet applications, along with client-specific branding and web interfaces, customer data interfaces, and tailored security for mixed corporate environments.Third, Officeware also provides specialized information technology services related to the development of web based databases and data storage on a contract basis for clients. Officeware’s operations are primarily based in Bedford, Texas.Additionally, Officeware has one employee and several consultants performing research and development in India. As a result of services provided to larger business users, our business can depend on one or a few major customers which could potentially expose the Company to concentration of credit risk.Our revenue and receivables are comprised principally of amounts due from customers throughout the United States. Our principal executive offices are located at 3301 Airport Freeway, Suite 200, Bedford, Texas 76021, and our telephone number is (888) 661-6565. Our Strategy At this time, our primary objectives are to successfully grow the user base for the e-commerce products offered through our Officeware subsidiary.Our vision to achieve that objective includes: · Officeware – Increase Users.We are focused on increasing the number of users of the variousonline back-up, file storage and other web-based services for individuals, businesses and governmental organizations offered through Officeware.We may pursue aggressive advertising campaigns or other promotions primarily aimed at new users. · Acquisitions. In addition to the Officeware acquisition which was consummated on April 1, 2010, we may identify and pursue additional potential acquisition candidates to support our strategy of growing and diversifying our business through selective acquisitions. No assurances can be given, however, that we will be successful in identifying any potential targets and, when identified, consummating their acquisition. 3 Table of Contents The Industry We consider ourselves to be part of the larger cloud computing industry.Our particular niche in this industry continues to evolve. Competition There are companies in this industry that have far more financial resources and a larger market share than us. In order to compete with these companies, we will be required to be innovative and create more attractive functions and features.The Internet provides new, rapidly evolving and intensely competitive channels.We expect competition to intensify in the future.The barriers to entry into these channels are relatively low.Current and new competitors can easily launch online sites at a nominal cost using commercially available software or partnering with any one of a number of successful cloud-based computing companies.Our primary competitors include Amazon, Google, Microsoft, EMC, Box.net, Dropbox.com, Sugarsync, Carbonite and others. Developments Developments During 2012 Effective May 18, 2012, Deborah A. Bastian was terminated from the position of Vice President and Chief Financial Officer of Immediatek, Inc., or Immediatek and its subsidiaries.The board of directors of Immediatek appointed Timothy McCrory as Vice President and Chief Financial Officer of Immediatek on May 22, 2012. In March 2012, Mark Cuban, who indirectly owns Radical Investments LP and Radical Holdings LP, made a donation of $40,000 to the organization which facilitates the St. Patrick’s Day parade held annually in Dallas, Texas.In exchange for the donation, Mr. Cuban asked that FilesAnywhere be, and FilesAnywhere was, recognized as a sponsor of the parade.This donation was deemed to be an equity contribution on behalf of Officeware Corporation paid by Immediatek Inc.’s indirect majority shareholder, Mark Cuban. Laws and Governmental Regulation Patent and Copyright Laws.We may become the subject of infringement claims or legal proceedings by third parties with respect to our current or future products if we do not obtain appropriate licenses.Any such claims could be time-consuming, divert management from our daily operations, result in litigation or cause product shipment delays.Moreover, an adverse outcome in litigation or a similar adversarial proceeding could subject us to significant liabilities to third parties or require us to cease the marketing or use of certain products, any of which could have a material adverse effect on our business and operating results. Governmental Regulation – E-Commerce and the Internet.The e-commerce environment is rapidly changing and federal and state regulation relating to the Internet and e-commerce is evolving.Laws and regulations have been enacted in many jurisdictions with respect to the Internet, covering issues such as user privacy, pricing, taxation, content, copyrights, distribution, antitrust and quality of products and services, and other jurisdictions are considering imposing additional restrictions.The interpretation and application of these laws are in a state of flux. These laws may be interpreted and applied inconsistently from country to country and our current policies and practices may not be consistent with those interpretations and applications. Complying with these varying international requirements could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.In addition, we are subject to the possibility of security breaches, which themselves may result in a violation of these laws. Additionally, the growth of e-commerce may trigger the development of stricter consumer protection laws.The adoption of such laws or regulations could reduce the rate of growth of the Internet, which could potentially decrease the usage of our website or could otherwise have a material adverse effect on our business.In addition, applicability to the Internet of existing laws governing issues such as taxation, libel, obscenity and personal privacy is uncertain.Although evolving, the vast majority of these laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies.We do not expect that the costs and effects of compliance with environmental laws will have a material impact upon our business. 4 Table of Contents Intellectual Property. While the Company owns intellectual property and we expect to continue to protect our intellectual property as permitted under the law, we also rely upon the expertise, innovation and know-how of our employees to develop our technologies and services.We have spent approximately $952,429 and $994,580 in 2012 and 2011, respectively, for the research and development of our technologies and services.The following table presents the components of development costs for the years ending December 31, 2012 and 2011. Research and Development Expenses for the years ended December 31, Salaries and benefits $ $ Consulting Software and supplies Total $ $ Employees As of December 31, 2012, we had 26 full-time employees.We are not a party to any collective bargaining agreement with a labor union, and we consider relations with our employees to be good. Series A and Series B Convertible Preferred Stock Below is a summary of the material terms of the Series A and Series B Convertible Preferred Stock and certain restrictions imposed upon the Company. Dividends.The holders of the Series A and Series B Convertible Preferred Stock are not entitled to any preferential dividends.Holders of the Series A and Series B Convertible Preferred Stock, however, are entitled to participate on an as-converted basis in any cash dividends declared and paid on shares of our common stock. Liquidation.Upon our liquidation, dissolution or winding up, an acquisition of us that results in the sale of more than 50% of our outstanding voting power, or the sale or exclusive license of all or substantially all of our assets, the holders of the Series A Convertible Preferred Stock, pari passu with Series B Convertible Preferred Stock are entitled to receive, out of our legally available funds and assets, before any payment is made to any shares of our common stock or other junior stock, an amount per share equal to the greater of: · $0.683015632 per share of Series A Convertible Preferred Stock; and · The amount that the holder of that share of Series A Convertible Preferred Stock would have received had the holder converted that share into shares of our common stock immediately prior to the liquidation event. Upon the liquidation, dissolution or winding up of the Company, including an acquisition of the Company that results in the sale of more than 50% of the outstanding voting power of the Company, or the sale or exclusive license of all or substantially all of the assets of the Company, the holders of the Series B Convertible Preferred Stock, pari passu with Series A Convertible Preferred Stock, will be entitled to receive, out of the legally available funds and assets of the Company, before any payment is made on any shares of Company common stock or other junior stock, an amount per share equal to the greater of: 5 Table of Contents · $7.17092619 per share of Series B Convertible Preferred Stock; and · the amount that the holder of that share of Series B Convertible Preferred Stock would have received had the holder converted that share into shares of Company common stock immediately prior to the liquidation event. If our legally available funds and assets are insufficient to pay the holders of shares of the Series A and Series B Convertible Preferred Stock the full amount to which they are entitled, the holders of the shares of Series A Convertible Preferred Stock and the holders of the shares of Series B Convertible Preferred Stock and the holders of our capital stock that are on parity with the Series A and Series B Convertible Preferred Stock will share ratably in any distribution of our remaining legally available funds and assets. Ranking.The Series A and Series B Convertible Preferred Stock shall, with respect to rights on liquidation, winding up, corporate reorganization and dissolution, rank pari passu with Series A and Series B Convertible Preferred Stock and senior to the shares of Company common stock and other junior stock. Conversion.The shares of Series A and Series B Convertible Preferred Stock are convertible into 14,563,804 and 231,195 shares of our common stock, respectively.An intrinsic value exists for a beneficial conversion feature if the market value of the Company common stock that can be acquired by conversion of the Series A and Series B Convertible Preferred Stock is greater than the carrying value of those shares before issue costs. On June 8, 2006, the Company issued 4,392,286 shares of Series A Convertible Preferred Stock at a per share price of $0.68 to Radical Holdings LP for cash proceeds of $3,000,000.The beneficial conversion feature represents the difference between the fair market value of Company common stock and the conversion price on the date of issuance of the Series A Convertible Preferred Stock, multiplied by the number of shares of common stock that would be received upon conversion.The Company recorded a deemed dividend due to the beneficial conversion price of $3,000,000, which represents the lesser of the proceeds or the value of the beneficial conversion feature. On July 18, 2008, the Company issued 69,726 shares of Series B Convertible Preferred Stock at a per share price of $7.17092619 to Radical Holdings LP for cash proceeds of $500,000.The beneficial conversion feature represents the difference between the fair market value of Company common stock and the conversion price on the date of issuance of the Series B Convertible Preferred Stock, multiplied by the number of shares of common stock that would be received upon conversion.The Company recorded a deemed dividend due to the beneficial conversion price of $205,145, which represents the lesser of the proceeds or the value of the beneficial conversion feature. Voting.The holders of the shares of Series A and Series B Convertible Preferred Stock are entitled to vote on all matters required or permitted to be voted upon by our stockholders.Each holder of a share of Series A or Series B Convertible Preferred Stock is entitled to the number of votes equal to the largest number of full shares of our common stock into which all shares of Series A or Series B Convertible Preferred Stock held by that holder could be converted.Except as required by law on matters requiring class voting, the holders of the Series A and Series B Convertible Preferred Stock and our common stock vote together as a single class. Board of Directors.For so long as any shares of the Series A Convertible Preferred Stock originally issued under the Purchase Agreement remain outstanding, the holders of a majority-in-interest of the shares of the Series A Convertible Preferred Stock originally issued under the Purchase Agreement then outstanding have the right to designate all the persons to serve as directors on our board of directors and our subsidiaries.If the holders of the shares of the Series A Convertible Preferred Stock originally issued under the Purchase Agreement then outstanding choose not to designate any directors, the holders of a majority-in-interest of the shares of the Series A Convertible Preferred Stock originally issued under the Purchase Agreement then outstanding may appoint a designee to serve as an observer at all meetings of our or our subsidiaries’ board of directors and their respective committees. Protective Provisions.Unless the directors designated by the holders of the shares of the Series A Convertible Preferred Stock originally issued under the Purchase Agreement control our board of directors with respect to all actions, for so long as any shares of the Series A Convertible Preferred Stock originally issued under the Purchase Agreement remain outstanding, except where the vote or written consent of the holders of a greater number of our shares is required by law or by our articles of incorporation, and in addition to any other vote required by law or by our articles of incorporation, we cannot, and we shall cause our subsidiaries not to, as applicable, without the prior vote or written consent of the holders of at least 75% of the shares of the Series A Convertible Preferred Stock originally issued under the Purchase Agreement then outstanding: 6 Table of Contents (a)amend our articles or bylaws in any manner that would alter or change any of the rights, preferences, privileges or restrictions of the Series A Convertible Preferred Stock or the shares issuable upon conversion of the Series A Convertible Preferred Stock; (b)reclassify any outstanding securities into securities having rights, preferences or privileges senior to, or on parity with, the Series A Convertible Preferred Stock; (c)authorize or issue any additional shares of capital stock (other than to holders of the Series A Convertible Preferred Stock); (d)merge or consolidate with or into any corporation or other person; (e)sell all or substantially all of our respective assets in a single transaction or series of related transactions; (f)license all or substantially all of our respective intellectual property in a single transaction or series of related transactions; (g)liquidate or dissolve; (h)alter any rights of the holders of the Series A Convertible Preferred Stock or change the size of the board of directors; (i)declare or pay any dividends (other than dividends payable to us or our subsidiaries) on, or declare or make any other distribution, directly or indirectly, on account of, any shares of our common stock now or hereafter outstanding; (j)repurchase any outstanding shares of capital stock; (k)approve or modify by 10% or more the aggregate amount of any annual or other operating or capital budget, or approve or modify by 50% or more any single line item of any such operating or capital budget; (l)increase the salary of any officer or employee or pay any bonus to any officer, director or employee not contemplated in a budget or bonus plan approved by directors designated by the holders of the shares of the Series A Convertible Preferred Stock originally issued under the Purchase Agreement then outstanding; (m)retain, terminate or enter into any salary or employment negotiations or employment agreement with any employee or any future employee; (n)incur indebtedness (other than trade payables) or enter into contracts or leases that require payments in excess of $5,000 in the aggregate; (o)make or incur any single capital expenditure; (p)award stock options, stock appreciation rights or similar employee benefits or determine vesting schedules, exercise prices or similar features; (q)make any material change in the nature of our business or enter into any new line of business, joint venture or similar arrangement; 7 Table of Contents (r)pledge our assets or guarantee the obligations of any other individual or entity; (s) recommend approval of any new equity incentive plan; (t)form or acquire any subsidiary, joint venture or similar business entity; or (u)directly or indirectly enter into, or permit to exist, any material transaction with any affiliate of us, any director or officer or any affiliate of a director or officer, or transfer, pay, loan or otherwise obligate us to give cash, services, assets or other items of value to affiliates, officers or directors or any affiliate of an officer or director or commit to do any of the preceding after June 8, 2006, except for employee compensation or for reimbursement of ordinary business expenses. Registration and Other Rights.The Investor’s Rights Agreement grants Radical Holdings LP certain demand, piggy-back and shelf registration rights and sets forth the procedures pursuant to which those rights may be exercised and effected.The Investor Rights Agreement requires that the Company use its best efforts to have such registration, if any, declared effective by the SEC, and there are no penalties associated with the failure to meet the applicable registration requirements. Available Information We currently are subject to the reporting requirements of the Securities Exchange Act of 1934 and, therefore, we file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission, or the SEC.You may read and copy any document filed by us with the SEC at the SEC’s public reference room at treet, NE, Room 1580, Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m.Please call the SEC at 1-800-SEC-0330 for further information about the operation of the public reference room.The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Our internet web site is www.immediatek.com.We have posted on our web site our Code of Business Conduct and Ethics, which applies to all of our employees and directors and serves as a code of ethics for our principal executive officer, principal financial officer, principal accounting officer, and other persons performing similar functions. Item 1A. Risk Factors. Risks Related to Our Common Stock The trading price of our common stock is likely to be volatile.The trading prices of the securities of technology companies have been highly volatile, and our common stock has a limited trading history. Factors that could affect the trading price of our common stock include: · our small public float; · market conditions in our industry, the industries of our customers and the economy as a whole; · variations in our operating results; · announcements of technological innovations, new or enhanced services, strategic alliances or significant agreements by us or by our competitors; · gain or loss of significant customers; · recruitment or departure of our key personnel; · the volume of shares of our common stock available for public sale, including for sale by affiliates and other stockholders that own substantial amounts of our common stock; and 8 Table of Contents · adoption or modification of regulations, policies, procedures or programs applicable to our business. In addition, if the market for technology stocks or the stock market in general experiences loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business. The trading price of our common stock might also decline as a result of events that affect other companies in our industry even if these events do not directly affect us. Some companies that have had volatile market prices for their securities have had securities class actions filed against them. If a suit were filed against us, regardless of its merits or outcome, it could result in substantial costs and divert management’s attention and resources. This could harm our business, operating results and financial condition.We cannot predict the extent to which investor interest in us will be maintained.Interest in our common stock is necessary for an active, liquid trading market for our common stock.Active trading markets generally result in lower price volatility.The price and trading volumes of our common stock may fluctuate widely due to the limited public market for our common stock. The liquidity of our common stock is affected by its limited trading market.Shares of Immediatek common stock currently are quoted on the OTCQB of the OTC Marketplace under the symbol “IMKI”.There currently is no broadly followed, established trading market for our common stock.An established trading market may never develop or be maintained.Active trading markets generally result in more efficient execution of buy and sell orders.The absence of an active trading market reduces the liquidity of our shares.The trading volume of our common stock, historically, has been limited and sporadic.As a result of this trading activity, the quoted price for our common stock on the OTCQB of the OTC Marketplace is not necessarily a reliable indicator of its fair market value.Further, if we cease to be quoted, holders would find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock, and the market value of our common stock would likely decline. Our common stock may be subject to regulations prescribed by the SEC relating to “penny stock.”The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price (as defined in those regulations) of less than $5.00 per share, subject to certain exceptions.If our common stock meets the definition of a penny stock, it will be subject to these regulations, which impose additional sales practice requirements on broker-dealers who sell these securities to persons other than established customers and accredited investors, which generally are institutions with assets in excess of $5.0 million and individuals with a net worth in excess of $1.0 million or annual income exceeding $200,000 (individually) or $300,000 (jointly with their spouse). The effectiveness of our disclosure and internal controls may be limited.Our disclosure controls and procedures and internal control over financial reporting may not prevent all errors and misrepresentations.In the event that there are errors or misrepresentations in our historical financial statements or the SEC disagrees with our accounting, we may need to restate our financial statements.Although we believe our current controls and procedures are adequate, any system of internal controls can only provide reasonable assurance that all control objectives are met.Some of the potential risks involved could include, among others, errors in management judgments, simple errors or mistakes, willful misconduct regarding controls or misinterpretation.There is no guarantee that controls, once implemented, will prevent or detect all material issues or be effective in future conditions, which could materially and adversely impact our financial results in the future. We do not anticipate paying dividends in the foreseeable future, and the lack of dividends may have a negative effect on the price of our common stock.We have never declared or paid any cash dividends or distributions on our common stock.We currently intend to retain our future earnings, if any, to support operations and to finance expansion and, therefore, do not anticipate paying any cash dividends on our common stock in the foreseeable future.In addition, we cannot declare dividends without the consent of holders of the Series A Convertible Preferred Stock.The lack of dividends may have a negative effect on the value of our common stock. 9 Table of Contents Radical Holdings LP has certain registration rights that have been granted to it as part of its investment.Radical Holdings LP may be able to register its shares without registering shares of other stockholders.Under the Investor’s Rights Agreement entered into on June 8, 2006, in connection with the issuance and sale of the Series A Convertible Preferred Stock, Radical Holdings LP was granted certain registration rights.Radical Holdings LP has demand registration rights, which it can exercise on two occasions under the Investor’s Rights Agreement.If, however, this registration is to be an underwritten public offering, and the underwriter believes that the number of shares proposed to be sold will interfere with the successful marketing of Radical Holdings’ shares, then the shares available for sale will be reduced first for other stockholders and then for Radical Holdings LP to the number of shares the underwriter has specified. Concentrated Ownership Insiders have substantial control over us and are able to influence corporate matters.Radical Holdings LP, Radical Investments LP, our directors and executive officers and their affiliates beneficially own, in the aggregate, approximately 99% of our voting stock. As a result, these stockholders are able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership limits our stockholders’ ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.In addition, Radical Holdings LP has the ability to nominate all of our directors and vote for them.This concentration of ownership may not be in the best interests of all our stockholders. There are restrictive covenants binding upon us that could adversely affect our ability to conduct our operations or engage in other business activities.The terms of the Series A Convertible Preferred Stock and the Investor’s Rights Agreement with Radical Holdings LP contain various restrictive covenants, including, among others, provisions that restrict our ability to: · authorize or issue any additional shares of capital stock (other than to holders of the Series A Convertible Preferred Stock); · declare or pay any dividends (other than dividends payable to us or our subsidiaries) on, or declare or make any other distribution, directly or indirectly, on account of, any shares of our common stock now or hereafter outstanding; · repurchase any outstanding shares of capital stock; · approve or modify by 10% or more the aggregate amount of any annual or other operating or capital budget, or approve or modify by 50% or more any single line item of any such operating or capital budget; · increase the salary of any officer or employee or pay any bonus to any officer, director or employee not contemplated in a budget or bonus plan approved by directors designated by the holders of the shares of the Series A Convertible Preferred Stock originally issued under the Purchase Agreement then outstanding; · retain, terminate or enter into any salary or employment negotiations or employment agreement with any employee or any future employee; · incur indebtedness (other than trade payables) or enter into contracts or leases that require payments in excess of $5,000 in the aggregate; · make or incur any single capital expenditure; · award stock options, stock appreciation rights or similar employee benefits or determine vesting schedules, exercise prices or similar features; 10 Table of Contents · make any material change in the nature of our business or enter into any new line of business, joint venture or similar arrangement; · pledge our assets or guarantee the obligations of any other individual or entity; or · form or acquire any subsidiary, joint venture or similar business entity. Conflicts of Interest.A director who has a conflict of interest with respect to an issue presented to our board will have no legal obligation to abstain from voting upon that issue.We do not have provisions in our bylaws or articles of incorporation that require an interested director to abstain from voting upon an issue, and we do not expect to add provisions in our articles of incorporation and bylaws to this effect.Although each director has a duty of loyalty to us, there is a risk that, should an interested director vote upon an issue in which he or one of his affiliates has an interest, his vote may reflect a bias that could be contrary to our best interests.In addition, even if an interested director abstains from voting, the director’s participation in the meeting and discussion of an issue in which he has, or companies with which he is associated have, an interest could influence the votes of other directors regarding the issue. Risks Related to Our Business and the Industry Our operating results may fluctuate significantly, which makes our future operating results difficult to predict. If our operating results fall below expectations, the price of our common stock could decline.Our annual and quarterly operating results have fluctuated in the past and may fluctuate significantly in the future due to a variety of factors, many of which are outside of our control. Numerous factors may limit our visibility with respect to future business activity, revenues, and operating results, and any forecasts that we may provide of future financial performance will be subject to substantial risks and uncertainties. For example, the general economic downturn has had an adverse effect on our visibility as customers have reevaluated capital spending budgets in light of the adverse economic conditions and their own financial circumstances. The timing of orders and our ability to recognize revenue under generally accepted accounting principles can also influence our visibility with respect to operating results.Some of our orders are conditional upon customer acceptance criteria or successful testing of our products, and orders placed with many of our customers may generally be terminated unilaterally or may be subject to additional conditions. As a result, predicting when orders will translate to revenue, and consequently predicting our future operating results, is extremely difficult. In addition, our quarterly and annual expenses as a percentage of our revenue may be significantly different from our historical or projected rates, and our operating results in future quarters may fall below expectations. In any quarter, a substantial portion of our revenue may be largely attributable to orders from a limited number of customers.For these reasons, comparing our operating results, particularly our gross profit results, on a period-to-period basis may not be meaningful. You should not rely on our past results as an indication of our future performance. In addition to other risk factors listed in this “Risk Factors” section, factors that may affect or result in period-to-period variability in our operating results include: · reductions in customers’ budgets for cloud storage infrastructure purchases and indefinite delays in their budgeting and purchasing cycles, especially given the general economic downturn, could have an adverse effect on our business and operating results because the purchase of our products requires our customers to make strategic and capital investment decisions about their storage infrastructures; · aggressive pricing tactics by our competitors could adversely affect our operating results because we may offer our products at a discount to win new business and maintain existing customers, which could decrease our gross margins; · the length of time between our accepting a new customer and the recognition of revenue from that customer, which can be several quarters because orders may contain terms that do not permit us to recognize revenue until certain conditions have been satisfied; · our ability to develop and introduce in a timely manner, new services, products and product enhancements that meet customer requirements; and 11 Table of Contents · the timing of product releases or upgrades by us or by our competitors, which could have an adverse effect on our revenue if customers delay orders pending the new release or upgrade. We have a history of net losses.We have incurred losses every year since 2002.As of December 31, 2012, our accumulated deficit was $6,367,643.To become profitable, we must be able to generate sufficient revenues from our operating activity and continue to aggressively manage operating expenses.During fiscal 2013, we expect to incur an increase in our expenditures in connection with our expected continued expansion. Additionally, we will continue to invest in our research and development, sales and marketing operations. As a result of these increased expenditures, we will be required to increase our revenue in a corresponding manner in order to achieve profitability. If substantial growth in our revenues does not occur, we may not be able to achieve or maintain profitability in the future.The amount of losses we will incur before achieving profitability, and the time required to reach profitability, are both highly uncertain.As a result, our business could be harmed, and our stock price could decline.No assurances can be given that we will ever achieve profitability. We intend to continue focusing on revenue growth and increasing market penetration and international presence at the expense of profitability by re-investing heavily in our operations.Our chosen strategy is to increase our investments in our marketing, services and sales operations and to continue investing significantly in research and development at the expense of profitability. We believe our decision to continue investing heavily in these operations will be critical to our revenue growth. However, we cannot be assured that this strategy will result in any revenue growth. Even if we achieve significant revenue growth, we may continue to experience net losses and operating losses, similar to those we have incurred historically. Additionally, as long as we pursue this strategy, we may not achieve profitability again or, if achieved, we may not be able to sustain profitability. We face significant competition from a number of established companies, which have offered and may continue to offer substantial pricing discounts and pursue other aggressive competitive tactics in order to attract and maintain customers.We face intense competition from a number of established companies that seek to provide storage solutions similar to our solutions. Currently, these competitors include Amazon, Google, Microsoft, EMC, Box.net, Dropbox.com, Sugarsync, Carbonite and others. Many of these competitors, as well as other potential competitors, have longer operating histories, significantly greater resources, more employees, better name recognition, a larger base of customers and more established customer relations than we have. Consequently, some of these companies have substantial control and influence regarding the acceptance of a particular industry standard or competing technology. In addition, these competitors may also be able to devote greater resources to the development, promotion and sale of products and may be able to deliver competitive products or technologies at a significantly lower initial cost than our products. For example, some of our competitors have offered bundled products and services in order to reduce the initial cost of their storage solution to a customer. Our competitors also may choose to adopt more aggressive pricing policies than we may choose to adopt. For example, some of our competitors have offered their products either at significant discounts or even for free in response to our efforts to market the technological merits and overall cost benefits of our products. Our current or potential competitors may also offer bundled arrangements that include IT solutions that we do not currently offer, but that may be desirable and beneficial features for our current and prospective customers. We also face competition from current and prospective customers that continually evaluate our capabilities against the merits of manufacturing storage products internally. Competition may also arise due to the development of cooperative relationships among our current and potential competitors or third parties, some of which already exist, to increase the ability of their products to address the needs of our prospective customers. Accordingly, it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share. We also have many competitors that have developed competing technologies. We expect our competitors to continue to improve the performance of their current products, reduce their prices and introduce new services and technologies that may offer greater performance and improved pricing compared to our products, any of which could harm our business. In addition, our competitors may develop enhancements to, or future generations of, competitive products that may render our services or technologies obsolete or uncompetitive. These and other competitive pressures may prevent us from competing successfully against current or future competitors. 12 Table of Contents Many of our established competitors have long-standing relationships with key decision makers at many of our current and prospective customers. As a result, we may not be able to compete effectively and maintain or increase our market share.Many of our competitors benefit from established brand awareness and long-standing relationships with key decision makers at many of our current and prospective customers. We expect that our competitors will seek to leverage these existing relationships to discourage customers from purchasing our products. In particular, when competing against us, we expect our competitors to emphasize the importance of data storage retention, the high cost of data storage failure and the perceived risks of relying on products and services from a company with a shorter operating history and less predictable operating results. Additionally, most of our prospective customers have existing storage systems manufactured by our competitors. This gives an incumbent competitor an advantage in retaining the customer because the incumbent competitor already understands the customer’s network infrastructure, user demands and information technology needs. These factors may cause our current or prospective customers to be unwilling to purchase our products and services and instead to purchase the products of our better-known and more established competitors. In the event that we are unable to successfully sell our products and services to new customers, persuade customers of our competitors to purchase our products and services instead, or prevent our competitors from persuading our customers to purchase our competitors’ products, we may not be able to maintain or increase our market share. This would have a negative impact on our future operating results. Our ability to increase our revenue will depend substantially on our ability to attract and retain sales, management and other key personnel, and any failure to attract and retain these employees could harm our future revenues, business, operating results and financial condition.Our ability to increase our revenue will depend substantially on our ability to attract and retain qualified sales personnel. In particular, we anticipate continuing to hire direct sales personnel and our operating plan assumes that we will be able to attract and retain our sales and other key employees. These positions require candidates with specific backgrounds in the storage industry, and competition for employees with this expertise can be intense. In addition, we believe that there are only a limited number of individuals with the specific skills required for many of our sales and other key positions. We have experienced substantial competition in our hiring efforts and also in our retention efforts as our personnel have been frequently recruited by other companies, including our competitors. As a result, we may be unable to identify, hire, or retain qualified individuals. To the extent that we are successful in hiring new employees to fill these positions, we need a significant amount of time to train the new employees before they can become effective and efficient in performing their jobs. As a result of the difficulty in finding and training qualified candidates, it is critical for us to retain the individuals who currently fill these positions. In particular, because competition for highly skilled sales and engineering employees can be intense in our industry, recruitment practices can be aggressive. Substantial groups of our employees in key functional areas such as sales and systems engineers have been targets of aggressive recruiting efforts, which could reoccur and result in a loss of key employees. Many of the employers with whom we compete for talent, or who may target our employee base, are larger with substantially greater resources than we have and may be able to offer compensation packages or other benefits that we do not provide or that are substantially more lucrative than our operating budgets permit. Any loss of our existing or future sales or other key personnel could harm our business, operating results and financial condition. Our future success depends on our ability to attract and retain key management personnel or to quickly fill any management vacancies that may arise. Our management personnel and other key employees can terminate their employment at any time, and our business could suffer if we are unable to replace any departing management personnel or other key employees. Our future success is also dependent upon our ability to attract additional personnel for all other areas of our organization, including our customer services and finance department. Competition for qualified personnel is intense, and we may not be successful in attracting and retaining such personnel on a timely basis, on competitive terms, or at all. If we are unable to attract and retain the necessary technical, sales and other personnel on a cost-effective basis, we may be unable to grow our business and increase our revenue. 13 Table of Contents Our sales cycle can be long and unpredictable, and our sales efforts require considerable time and expense. As a result, our sales are difficult to predict and may vary substantially from quarter to quarter, which may cause our operating results to fluctuate.Our sales efforts involve substantial education of our current and prospective customers about the use and benefits of our products and services, including their technical merits and capabilities and potential cost savings to the organization as compared to the incumbent storage solutions or other storage solutions that our customers or prospective customers may be considering. This education process can be extremely time consuming and typically involves a significant product evaluation process. Despite the substantial time and money that we invest in our sales efforts, we cannot assure you that these efforts will produce any sales. In addition, purchases by our current and prospective customers are frequently subject to their budget constraints, lengthy approval processes, and a variety of unpredictable administrative, processing and other delays, which have become increasingly prevalent during the current economic downturn. Our sales cycle may prevent us from recognizing revenue in a particular quarter, is relatively long and costly, and may not produce any sales, which may cause our operating results to fluctuate and harm our business. Our ability to sell our products is highly dependent on the quality of our customer support and services, and any failure to offer high-quality support and services would harm our business, operating results and financial condition.Once our products and services are purchased, our customers depend on our support organization to resolve any issues relating to our products and services. Our products provide mission-critical services to our customers and a high level of customer support is necessary to maintain our customer relationships. As we grow our business, our ability to provide effective customer support and services will continue to be largely dependent on our ability to attract, train and retain qualified direct customer service personnel. As we continue to expand our operations internationally, our support organization will face additional challenges, including those associated with delivering support, training and documentation in languages other than English. In addition, our sales process is highly dependent on strong referrals from our customers. We believe that communication among our customers is both rapid and frequent. Any failure to maintain high-quality customer support and services, or a market perception that we do not maintain high-quality customer support and services, could harm our reputation, adversely affect our ability to sell our products and services to existing and prospective customers, and could harm our business, operating results and financial condition. If we are unable to protect our intellectual property rights, our competitive position could be harmed and we could be required to incur significant expenses to enforce our rights.We depend on our ability to protect our proprietary technology. We rely on trade secret, patent, copyright and trademark laws and confidentiality agreements with employees and third parties, all of which offer only limited protection. Despite our efforts, the steps we have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, particularly outside of the United States. Further, the rights granted under any of our issued patents or patents that may be issued in the future may not provide us with proprietary protection or competitive advantages, and, as with any technology, competitors may be able to develop similar or superior technologies to our own now or in the future. Protecting against the unauthorized use of our products, trademarks and other proprietary rights is expensive, difficult and, in some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. This litigation could result in substantial costs and diversion of management resources, either of which could harm our business. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than we do. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. 14 Table of Contents Claims by others that we infringe their proprietary rights could harm our business.Third parties could claim that our products or technology infringe their proprietary rights. In addition, we have in the past and may in the future be contacted by third parties suggesting that we seek a license to certain of their intellectual property rights that they may believe we are infringing. We expect that infringement claims against us may increase as the number of products and competitors in our market increases and overlaps occur. In addition, to the extent that we gain greater visibility, we believe that we will face a higher risk of being the subject of intellectual property infringement claims. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim, and could distract our management from our business. Furthermore, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages. A judgment against us could also include an injunction or other court order that could prevent us from offering our products. In addition, we might be required to seek a license for the use of such intellectual property, which may not be available on commercially reasonable terms, or at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not be successful. Any of these events could seriously harm our business. Third parties may also assert infringement claims against our customers, resellers and authorized service providers. Any such claims may require us to initiate or defend protracted and costly litigation on their behalf, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers, resellers and authorized service providers. We may not generate positive returns on our research and development investments.Developing our products is expensive. Our future plans include significant investments in research and development and related product opportunities. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, our ability to generate positive returns on these investments may take several years, if we are able to do so at all. If we do not successfully anticipate market needs and develop products and product enhancements that meet those needs, or if those products do not gain market acceptance, our business, operating results and financial condition could be adversely affected.We compete in a market characterized by rapid technological change, frequent new product introductions, evolving industry standards and changing customer needs. We cannot assure you that we will be able to anticipate future market needs or be able to develop new products or product enhancements to meet those needs in a timely manner, or at all. For example, our failure to develop additional features that our competitors are able to provide could adversely affect our business. In addition, although we invest a considerable amount of money into our research and development efforts, any new products or product enhancements that we develop may not achieve widespread market acceptance. As competition increases in the cloud storage industry and the information technology industry in general, it may become even more difficult for us to stay abreast of technological changes or develop new technologies or introduce new products as quickly as our competitors, many of which have substantially greater financial and engineering resources than we do. Additionally, risks associated with the introduction of new products or product enhancements include difficulty in predicting customer needs or preferences and transitioning existing products to incorporate new technologies. If we are unable to keep pace with rapid industry, technological or market changes or effectively manage the transitions to new products or new technologies, it could harm our business, operating results and financial condition. We may seek to engage in the acquisition of other companies or assets, all or many of which could be viewed negatively, lead to integration problems, disrupt our business, increase our expenses, reduce our cash, cause dilution to our stockholders and harm our financial condition and operating results.In the future, we may seek to acquire companies or assets that we believe may enhance our market position. We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms, if at all. If we do complete acquisitions, we cannot assure you that they will not be viewed negatively by customers, financial markets or investors. In addition, any acquisitions that we make could lead to difficulties in integrating personnel and operations from the acquired businesses and in retaining and motivating key personnel from these businesses. Acquisitions may disrupt our ongoing operations, divert management from day-to-day responsibilities and increase our expenses. Any acquisitions may reduce our cash available for operations and other uses and could result in an increase in amortization expense related to identifiable assets acquired, potentially dilutive issuances of equity securities or the incurrence of debt, any of which could harm our business, operating results and financial condition. 15 Table of Contents We are incurring significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.As a public company, we are incurring significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, as well as rules subsequently implemented by the Securities and Exchange Commission, or the SEC, have imposed various requirements on public companies, including requiring changes in corporate governance practices, and may continue to impose new or modified requirements on public companies. Despite our relatively small size, our management and other personnel are required to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and made some activities more time-consuming and costly, particularly relative to the size of our operations. In addition, Sarbanes-Oxley requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform annual system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section404 of Sarbanes-Oxley. Our testing may not reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with Section404 requires that we incur substantial expenses and expend significant management time on compliance-related issues, especially in light of our small size and limited resources relative to larger public companies.If we are not able to comply with the requirements of Section404, or if deficiencies in our internal control over financial reporting are identified and deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. If we need additional capital in the future, it may not be available on favorable terms, or at all.We may require, or elect to access, additional capital from equity or debt financing in the future to fund our operations, or respond to competitive pressures or strategic opportunities. We may not be able to secure additional financing on favorable terms, or at all. The terms of additional financing may place limits on our financial and operating flexibility. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our Company, and any new securities we issue could have rights, preferences or privileges senior to those of existing or future holders of our common stock. If we are unable to obtain necessary financing on terms satisfactory to us, if and when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited. Interruption or failure of our information technology and communications systems or services provided by our suppliers could impair our ability to effectively provide our products and services, which could damage our reputation and harm our operating results.The availability of our products and services depends on the continuing operation of our information technology and communications systems. Our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems. Any damage to or failure of our systems could result in interruptions in our service, which could reduce our revenue. Our systems are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power losses, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. In addition, our corporate headquarters are located in areas with a high risk of major tornados. The occurrence of a natural disaster or other unanticipated problems at one or more of these locations could result in delays or cancellations of customer orders or the deployment of our products, and lengthy interruptions in our service, any of which could adversely affect our business, operating results and financial condition. 16 Table of Contents If we do not prevent security breaches, we may be exposed to lawsuits, lose customers, suffer harm to our reputation, and incur additional costs.The services we offer involve the transmission of large amounts of sensitive and proprietary information over public communications networks, as well as the processing and storage of confidential customer information. Unauthorized access, computer viruses, accidents, employee error or malfeasance, fraudulent service plan orders, intentional misconduct by computer “hackers”, and other disruptions can occur that could compromise the security of our infrastructure, thereby exposing such information to unauthorized access by third parties and leading to interruptions, delays or cessation of service to our customers. Techniques used to obtain unauthorized access to, or to sabotage systems, change frequently and generally are not recognized until launched against a target. We may be unable to implement security measures in a timely manner or, if and when implemented, these measures could be circumvented as a result of accidental or intentional actions by parties within or outside of our organization. Any breaches that occur could expose us to increased risk of lawsuits, loss of existing or potential customers, harm to our reputation and increases in our security costs. Although we typically require our customers to sign agreements that contain provisions attempting to limit our liability for security breaches, we cannot assure you that a court would enforce any contractual limitations on our liability in the event that one of our customers brings a lawsuit against us as the result of a security breach that they may ascribe to us. The outcome of any such lawsuit would depend on the specific facts of the case and legal and policy considerations that we may not be able to mitigate. In such cases, we could be liable for substantial damage awards that may significantly exceed our liability insurance coverage by unknown but significant amounts, which could seriously impair our financial condition.Additionally, we may decide to negotiate settlements with affected customers regardless of such contractual limitations. The outcome of any such lawsuit would depend on the specific facts of the case and legal and policy considerations that we may not be able to mitigate. In such cases, we could be liable for substantial damage awards that may significantly exceed our liability insurance coverage by unknown but significant amounts, which could seriously impair our financial condition. The laws of some states and countries may also require us to inform any person whose data was accessed or stolen, which could harm our reputation and business.Complying with the applicable notice requirements in the event of a security breach could result in significant costs. We may also be subject to investigation and penalties by regulatory authorities and potential claims by persons whose information was disclosed, even if such person was not actually a customer. Privacy concerns relating to our technology could damage our reputation and deter current and potential users from using our products and services.Since our products and services are web based, we store substantial amounts of data for our customers on our servers (including personal information). Any systems failure or compromise of our security that results in the release of our customers’ data could (i) subject us to substantial damage claims from our customers, (ii) expose us to costly regulatory remediation and (iii) harm our reputation and brand. We may also need to expend significant resources to protect against security breaches. The risk that these types of events could seriously harm our business is likely to increase as we expand our hosting footprint. Regulatory authorities around the world are considering a number of legislative proposals concerning data protection. In addition, the interpretation and application of data protection laws in Europe and elsewhere are still uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data practices, which could have an adverse effect on our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business. Increased Internet bandwidth costs and network failures may adversely affect our operating results.Our success depends in part upon the capacity, reliability, and performance of our network infrastructure, including the capacity leased from our Internet bandwidth suppliers. We depend on these companies to provide uninterrupted and error-free service through their telecommunications networks. Some of these providers are also our competitors. We exercise little control over these providers, which increases our vulnerability to problems with the services they provide. We have experienced and expect to continue to experience interruptions or delays in network service. Any failure on our part or the part of our third-party suppliers to achieve or maintain high data transmission capacity, reliability or performance could significantly reduce customer demand for our services and damage our business. As our customer base grows and their usage of telecommunications capacity increases, we will be required to make additional investments in our capacity to maintain adequate data transmission speeds, the availability of which may be limited or the cost of which may be on terms unacceptable to us. If adequate capacity is not available to us as our customers’ usage increases, our network may be unable to achieve or maintain sufficiently high data transmission capacity, reliability or performance. In addition, our business would suffer if our network suppliers increased the prices for their services and we were unable to pass along the increased costs to our customers. We may be liable for the material that content providers distribute over our network and we may have to terminate customers that provide content that is determined to be illegal, which could adversely affect our operating results and damage our reputation.The law relating to the liability of private network operators for information carried on, stored on, or disseminated through their networks is still unsettled in many jurisdictions. In addition, there are other potential customer activities, such as online gambling and pornography, where we, in our role as an online storage provider, may be held liable as an aider or abettor of our customers. If we need to take costly measures to reduce our exposure to these risks, terminate customer relationships and the associated revenue or defend ourselves against such claims, our financial results could be negatively affected. 17 Table of Contents Government regulation of data networks is largely unsettled, and depending on its evolution, may adversely affect our operating results.We are subject to varying degrees of regulation in each of the jurisdictions in which we provide services. Local laws and regulations, and their interpretation and enforcement, differ significantly among those jurisdictions. These laws can be costly to comply with, can be a significant diversion to management’s time and effort, and can subject us to claims or other remedies, as well as negative publicity. Many of these laws were adopted prior to the advent of the internet and related technologies and, as a result, do not contemplate or address the unique issues that the internet and related technologies produce. Some of the laws that do reference the internet and related technologies have been and continue to be interpreted by the courts, but their applicability and scope remain largely uncertain. In addition, future regulatory, judicial, and legislative changes may have a material adverse effect on our ability to deliver services within various jurisdictions. National regulatory frameworks that are consistent with the policies and requirements of the World Trade Organization have only recently been, or are still being, put in place in many countries. Accordingly, many countries are still in the early stages of providing for and adapting to a liberalized telecommunications market. As a result, in these markets we may encounter more protracted and difficult procedures to obtain any necessary licenses or negotiate interconnection agreements, which could negatively impact our ability to expand in these markets or increase our operating costs in these markets. Concerns about greenhouse gas emissions and the global climate change may result in environmental taxes, charges, assessments or penalties.The effects of human activity on the global climate change have attracted considerable public and scientific attention, as well as the attention of the United States government. Efforts are being made to reduce greenhouse emissions, particularly those from coal combustion by power plants, some of which we may rely upon for power. The added cost of any environmental taxes, charges, assessments or penalties levied on these power plants could be passed on to us, increasing the cost to run our servers. Additionally, environmental taxes, charges, assessments or penalties could be levied directly on us in proportion to our carbon footprint. Any enactment of laws or passage of regulations regarding greenhouse gas emissions by the United States, or any domestic or foreign jurisdiction we perform business in, could adversely affect our operations and financial results. Item 2. Properties. Our corporate headquarters is located at 3301 Airport Freeway, Suite 200, Bedford, Texas 76021.We lease approximately 9,900 square feet at this location.This lease expires on October 31, 2016.We believe this new office location will be suitable for our needs for the foreseeable future.We also lease approximately 270 square feet of space in Dallas, Texas as part of a co-location agreement related to servers we operate.Our one employee in India is able to use office space provided by our third-party contractor in India. Item 3. Legal Proceedings. The Company is involved from time to time in claims, proceedings and litigation, including the following: On June 30, 2011, the Company filed a complaint against Dropbox, Inc. for its unauthorized use of our trademarks and designs in the United States District Court for the Northern District of Texas.The Company has used its marks DROPBOX, FILE DROPBOX and DROPBOX LINKS since early 2004.We allege in the complaint that Dropbox, Inc. has infringed upon these marks and designs and we intend to vigorously pursue our available remedies. From time to time we may become subject to additional proceedings, lawsuits and other claims in the ordinary course of business, including proceedings related to our services, applications and other matters.Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. 18 Table of Contents Item 4. Mine Safety Disclosures. Not applicable. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities. Market Information Shares of Immediatek common stock currently are quoted on the OTCQB of the OTC Marketplace under the symbol “IMKI” and are not currently listed on any exchange.Our shares generally do not trade and the trading price of our shares is not necessarily indicative of the existence of a trading market for our securities or indicative of our value.The following table sets forth, for the periods indicated, the high and low sale prices and bid information, as applicable, of our common stock as reported by OTC Markets Group Inc., for the periods indicated.These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Dividends Paid High Low High Low First Quarter $ $
Name: Directive 2006/93/EC of the European Parliament and of the Council of 12 December 2006 on the regulation of the operation of aeroplanes covered by Part II, Chapter 3 , Volume 1 of Annex 16 to the Convention on International Civil Aviation, second edition (1988) (codified version) (Text with EEA relevance) Type: Directive Subject Matter: technology and technical regulations; deterioration of the environment; air and space transport; transport policy; European Union law Date Published: 2006-12-27 27.12.2006 EN Official Journal of the European Union L 374/1 DIRECTIVE 2006/93/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 12 December 2006 on the regulation of the operation of aeroplanes covered by Part II, Chapter 3 , Volume 1 of Annex 16 to the Convention on International Civil Aviation, second edition (1988) (codified version) (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 80(2) thereof, Having regard to the proposal from the Commission, Having regard to the Opinion of the European Economic and Social Committee (1), After consulting the Committee of the Regions, Acting in accordance with the procedure laid down in Article 251 of the Treaty (2), Whereas: (1) Council Directive 92/14/EEC of 2 March 1992 on the limitation of the operation of aeroplanes covered by Part II, Chapter 2, Volume 1 of Annex 16 to the Convention on International Civil Aviation, second edition (1988) (3) has been substantially amended several times (4). In the interests of clarity and rationality the said Directive should be codified. (2) The application of noise emission standards to civil subsonic jet aeroplanes has significant consequences for the provision of air transport services, in particular where such standards limit the useful life of aeroplanes operated by airlines. (3) Council Directive 89/629/EEC of 4 December 1989 on the limitation of noise emission from civil subsonic jet aeroplanes (5) limits the addition to the civil air registers of Member States of aeroplanes that comply only with the standards specified in Part II, Chapter 2, Volume 1 of Annex 16 to the Convention on International Civil Aviation, second edition (1988). That Directive specifies that the limitation on addition is only a first stage. (4) Owing to the problem of growing congestion at Community airports, it is essential to ensure that the best use is made of existing facilities. This will only be possible if environmentally acceptable aeroplanes are used. (5) The work undertaken by the Community in cooperation with other international bodies indicates that measures to limit the operation of aeroplanes which do not comply with the standards of Chapter 3 of Annex 16 must follow any non-addition rule in order for this to be of environmental benefit. (6) Common rules for this purpose should be introduced on a reasonable time-scale to ensure a harmonised approach throughout the Community, supplementing existing rules. This is particularly important in view of the recent trend towards progressive liberalisation of European air traffic. (7) Aeroplane noise should be reduced, taking into account environmental factors, technical feasibility and economic consequences. (8) It is appropriate to regulate the operation of civil subsonic jet aeroplanes which appear on Member States' registers and comply with the standards of Chapter 3 of Annex 16. (9) Member States should lay down rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive. Those penalties should be effective, proportionate and dissuasive. (10) This Directive should be without prejudice to the obligations of the Member States relating to the time-limits for transposition into national law of the Directives set out in Annex I, Part B, HAVE ADOPTED THIS DIRECTIVE: Article 1 1. The objective of this Directive is to regulate the operation of civil subsonic jet aeroplanes as specified in Article 2. 2. This Directive shall apply to aeroplanes with a maximum take-off mass of 34 000 kg or more or with a certified maximum internal accommodation for the aeroplane type in question consisting of more than nineteen passenger seats, excluding any seats for crew only. Article 2 1. Member States shall ensure that all civil subsonic jet aeroplanes operating from airports situated in their territory comply with the standards specified in Part II, Chapter 3, Volume 1 of Annex 16 to the Convention on International Civil Aviation, second edition (1988). 2. The territory referred to in paragraph 1 shall not include the overseas departments referred to in Article 299(2) of the Treaty. Article 3 1. Member States may grant exemptions from Article 2 for aeroplanes of historical interest. 2. Any Member State granting exemptions under paragraph 1 shall inform the competent authorities of the other Member States and the Commission of the fact and of the grounds for its decision. 3. Every Member State shall recognise the exemptions granted by another Member State in respect of aeroplanes entered on the registers of the latter. 4. In individual cases, Member States may permit the temporary use, at airports situated in their territory, of aeroplanes which cannot be operated on the basis of the other provisions of this Directive. This exemption should be limited to: (a) aeroplanes whose operations are of such an exceptional nature that it would be unreasonable to withhold a temporary exemption; (b) aeroplanes on non-revenue flights for the purposes of alterations, repair or maintenance. Article 4 Member States shall communicate to the Commission the texts of the provisions of national law which they adopt in the field governed by this Directive. Article 5 Member States shall lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that those rules are implemented . The penalties provided for must be effective, proportionate and dissuasive. The Member States shall notify those provisions to the Commission and shall notify it without delay of any subsequent amendment affecting them. Article 6 1. Directive 92/14/EEC is hereby repealed, without prejudice to the obligations of the Member States relating to the time-limits for transposition into national law of the Directives set out in Annex I, Part B. 2. References made to the repealed Directive shall be construed as being made to this Directive and should be read in accordance with the correlation table in Annex II. Article 7 This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. Article 8 This Directive is addressed to the Member States. Done at Strasbourg, 12 December 2006. For the European Parliament The President J. BORRELL FONTELLES For the Council The President M. PEKKARINEN (1) OJ C 108, 30.4.2004, p. 55. (2) Opinion of the European Parliament of 10 February 2004 (OJ C 97 E, 22.4.2004, p. 67) and Council Decision of 14 November 2006. (3) OJ L 76, 23.3.1992, p. 21. Directive as last amended by Commission Regulation (EC) No 991/2001 (OJ L 138, 22.5.2001, p. 12). (4) See Annex Î, Part A. (5) OJ L 363, 13.12.1989, p. 27. ANNEX I Part A Repealed Directive with its successive amendments Council Directive 92/14/EEC (OJ L 76, 23.3.1992, p. 21) Council Directive 98/20/EC (OJ L 107, 7.4.1998, p. 4) Commission Directive 1999/28/EC (OJ L 118, 6.5.1999, p. 53) Commission Regulation (EC) No 991/2001 (OJ L 138, 22.5.2001, p. 12) Part B List of time-limits for transposition into national law (referred to in Article 6) Directive Time-limit for transposition 92/14/EEC 1 July 1992 98/20/EC 1 March 1999 1999/28/EC 1 September 1999 ANNEX II CORRELATION TABLE Directive 92/14/EEC This Directive Article 1(1) and (2) Article 1(1) and (2) Article 1(3) ” Article 2(1) ” Article 2(2) Article 2(1) Article 2(3) Article 2(2) Article 2(4) ” Articles 3 and 4 ” Article 5(1) ” Article 5(2) Article 3(1) Articles 6 and 7 ” Article 8 Article 3(4) Article 9(1) Article 3(2) Article 9(2) Article 3(3) Articles 9a and 9b ” Article 10(1) ” Article 10(2) Article 4 ” Article 5 (1) ” Article 6 ” Article 7 Article 11 Article 8 Annex ” ” Annex I ” Annex II (1) Article 2 of Council Directive 98/20/EC.
EXHIBIT 10.1   FIRST AMENDMENT TO REVOLVING CREDIT AND GUARANTY AGREEMENT   THIS FIRST AMENDMENT TO REVOLVING CREDIT AND GUARANTY AGREEMENT (this “Amendment”) is dated as of September 23, 2005 and is entered into by and among NEWPAGE CORPORATION, a Delaware corporation (the “Borrower”), NEWPAGE HOLDING CORPORATION, a Delaware corporation (“Holdings”), CERTAIN FINANCIAL INSTITUTIONS listed on the signature pages hereto (the “Lenders”), GOLDMAN SACHS CREDIT PARTNERS L.P. (“GSCP”), as Joint Lead Arranger, Joint Bookrunner and Co-Syndication Agent, UBS SECURITIES LLC, as Joint Lead Arranger, Joint Bookrunner and Co-Syndication Agent, WACHOVIA CAPITAL MARKETS, LLC, as Co-Syndication Agent, BANK OF AMERICA, N.A., as Documentation Agent, JPMORGAN CHASE BANK, N.A., as Collateral Agent (“Collateral Agent”), and GSCP, as Administrative Agent (“Administrative Agent”) and, for purposes of Section IV hereof, the CREDIT SUPPORT PARTIES listed on the signature papers hereto, and is made with reference to that certain REVOLVING CREDIT AND GUARANTY AGREEMENT dated as of May 2, 2005 (as amended through the date hereof, the “Credit Agreement”) by and among Borrower, Holdings, the subsidiaries of Borrower named therein, Lenders, Co-Syndication Agents, Documentation Agent, Collateral Agent and Administrative Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement after giving effect to this Amendment.   RECITALS   WHEREAS, the Credit Parties have requested that Requisite Lenders agree to amend certain provisions of the Credit Agreement as provided for herein; and   WHEREAS, subject to certain conditions, Requisite Lenders are willing to agree to such amendment relating to the Credit Agreement.     SECTION I.    AMENDMENTS TO CREDIT AGREEMENT   1.1                               Amendments.   A.    Section 1.1 of the Credit Agreement is hereby amended by amending and restating the definition of “Issuing Bank” in its entirety as follows:   “Issuing Bank” means (i) JP Morgan Chase Bank, N.A., with respect to any Letter of Credit issued hereunder by JP Morgan Chase Bank, N.A. and (ii) Wachovia Bank, National Association, with respect to any Letter of Credit issued hereunder by Wachovia Bank, National Association, in each case together with its respective successors and assigns in such capacity. References to the “Issuing Bank” under this Agreement or any other Credit Document shall mean either or both of JP Morgan Chase Bank, N.A. and Wachovia Bank, National Association, as applicable.     B.    Section 1.1 of the Credit Agreement is hereby further amended by amending and restating the definition of “Swing Line Lender” in its entirety as follows:   “Swing Line Lender” means Wachovia Bank, National Association, in its capacity as Swing Line Lender hereunder, together with its permitted successors and assigns in such capacity.   C.    Section 1.1 of the Credit Agreement is hereby further amended by amending and restating the definition of “Swing Line Sublimit” in its entirety as follows:   “Swing Line Sublimit” means the lesser of (i) $25,000,000, and (ii) the aggregate unused amount of Revolving Commitments then in effect.   D.    Section 2.3(b)(ii) of the Credit Agreement is hereby amended by amending and restating the first sentence in its entirety and adding a new second sentence thereafter as follows:   (ii)                                  Whenever NewPageCo desires that Swing Line Lender make a Swing Line Loan, NewPageCo shall deliver to Swing Line Lender and Administrative Agent a Funding Notice no later than 12:00 p.m. (New York City time) on the proposed Credit Date. Unless Swing Line Lender has received notice from the Administrative Agent to the contrary, Swing Line Lender shall be entitled to rely on any certification from NewPageCo contained in any Funding Notice to the effect that the conditions precedent to the issuance of any requested Swing Line Loan have been satisfied in full, including, without limitation, that after giving effect to the making of such Swing Line Loan, the Total Utilization of Revolving Commitments would not exceed the lesser of (1) the Revolving Commitments then in effect and (2) the Borrowing Base then in effect.   E.    Section 2.3(b)(iii) of the Credit Agreement is hereby amended by amending and restating the first sentence in its entirety as follows:   Unless Swing Line Lender has received notice from Administrative Agent that the conditions precedent to the making of any requested Swing Line Loan have not been satisfied in full, then Swing Line Lender shall make the amount of its Swing Line Loan available to Administrative Agent by no later than 2:00 p.m. (New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, at Administrative Agent’s Principal Office.   F.    Section 2.3(b) of the Credit Agreement is hereby amended by adding a new paragraph (vii) immediately after paragraph (vi) as follows:   (vii)                           Upon the request by Swing Line Lender to have a Revolving Loan made for the purpose of repaying any Refunded Swing Line Loan pursuant to the immediately preceding paragraph (iv) or the request by Swing Line Lender to have Lender purchase a participation in any unpaid Swing Line Loans pursuant to the immediately preceding paragraph (v), unless Swing Line Lender has received notice from the Administrative Agent that the conditions precedent under Section 3.2 were not satisfied in full at the time   2   that the Swing Line Loan was made to NewPageCo to which such Refunded Swing Line Loan relates or to which such participation in any unpaid Swing Line Loans relates, Swing Line Lender shall be deemed to have satisfied the condition of possessing a good faith belief that all conditions precedent under Section 3.2 have been satisfied for purposes of the immediately preceding paragraph (vi).   G.    Section 2.4(a) of the Credit Agreement is hereby amended to add the following sentence at the end thereof:   NewPageCo shall have the right to select the Issuing Bank for each Letter of Credit it requests.   H.    Section 2.4(b) of the Credit Agreement is hereby amended to add the   Unless the Issuing Bank has received notice from the Administrative Agent to the contrary, the Issuing Bank shall be entitled to rely on any certification from NewPageCo contained in any Issuance Notice to the effect that the conditions precedent to the issuance of any requested Letter of Credit have been satisfied in full, including, without limitation, that after giving effect to such issuance, the Total Utilization of Revolving Commitments would not exceed the lesser of (1) the Revolving Commitments then in effect and (2) the Borrowing Base then in effect.   I.    Section 2.7(b) of the Credit Agreement is hereby amended by amending and restating the second sentence contained therein in its entirety as follows:   The Register, as in effect at the close of business on the preceding Business Day, shall be available for inspection by NewPageCo, any Lender or any Issuing Bank at any reasonable time and from time to time upon reasonable prior notice.   J.    Section 3.2(a)(i)of the Credit Agreement is hereby deleted and replaced with a new paragraph (i) as follows:   (i)                                     Administrative Agent shall have received a fully executed and delivered Funding Notice or Issuance Notice, as the case may be, and (A) in the case of any Swing Line Loan, Swing Line Lender shall also have received such fully executed and delivered Funding Notice with respect to such Swing Line Loan and (B) in the case of any Letter of Credit, the applicable Issuing Bank shall also have received such fully executed and delivered Issuance Notice with respect to the issuance of such Letter of Credit;   K.    Section 9 of the Credit Agreement is hereby amended by adding a new Section 9.3 to read as follows:   9.3.                              Appointment of Collateral Agent as “Fondé de Pouvoir”. Without prejudice to the foregoing, each Secured Party hereby irrevocably appoints and authorizes JPMorgan Chase Bank, N.A. (and any successor acting as Collateral Agent) to act as the person holding the power of attorney (fondé de pouvoir) (in such capacity “Attorney”) of the Secured Parties as contemplated under Article 2692 of the Civil Code of Quebec, and   3   to enter into, to take and to hold on their behalf, and for their benefit, any hypothec, and to exercise such powers and duties which are conferred upon the Attorney under any hypothec. Moreover, without prejudice to such appointment and authorization to act as the person holding the power of attorney as aforesaid, each Secured Party hereby irrevocably appoints and authorizes JPMorgan Chase Bank, N.A. (and any successor acting as Collateral Agent) (in such capacity, the “Custodian”) to act as agent and custodian for and on behalf of the Secured Parties to hold and to be the sole registered holder of any bond which may be issued under any hypothec, the whole notwithstanding Section 32 of the Act respecting the special powers of legal persons (Quebec) or any other applicable law. In this respect: (i) the Custodian shall keep a record indicating the names and addresses of, and the pro rata portion of the obligations and indebtedness secured by any pledge of any such bond and owing to each Secured Party, and (ii) each Secured Party will be entitled to the benefits of any charged property covered by any hypothec and will participate in the proceeds of realization of any such charged property, the whole in accordance with the terms hereof. Each of the Attorney and the Custodian shall: (a) have the sole and exclusive right and authority to exercise, except as may be otherwise specifically restricted by the terms hereof, all rights and remedies given to the Attorney and the Custodian (as applicable) pursuant to any hypothec, bond, pledge, applicable laws or otherwise, (b) benefit from and be subject to all provisions hereof with respect to the Collateral Agent mutatis mutandis, including, without limitation, all such provisions with respect to the liability or responsibility to and indemnification by the Secured Parties, and (c) be entitled to delegate from time to time any of its powers or duties under any hypothec, bond, or pledge on such terms and conditions as it may determine from time to time. Any person who becomes a Secured Party shall be deemed to have consented to and confirmed: (i) the Attorney as the person holding the power of attorney as aforesaid and to have ratified, as of the date it becomes a Secured Party, all actions taken by the Attorney in such capacity, and (ii) the Custodian as the agent and custodian as aforesaid and to have ratified, as of the date it becomes a Secured Party, all actions taken by the Custodian in such capacity.   L.    Section 10.3(a) of the Credit Agreement is hereby amended by amending and restating the last sentence contained therein in its entirety as follows:   Anything contained herein to the contrary notwithstanding, neither Administrative Agent nor Swing Line Lender shall have any liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof and neither Administrative Agent nor any Issuing Bank shall have any liability arising from confirmations of the amount of the Letter of Credit Usage   M.    Section 10.7 is hereby amended by (i) amending the title to such Section to read “Successor Administrative Agent” and (ii) deleting the last two sentences contained therein.   N.    Section 11.5(c)(iii) of the Credit Agreement is hereby deleted and replaced with a new paragraph (iii) as follows:   4   (iii)                               amend, modify, terminate or waive any obligation of Lenders relating to the purchase of participations in Letters of Credit as provided in Section 2.4(e) or any other provision relating to Letter of Credit Usage or Letters of Credit without the written consent of   SECTION II.    CONDITIONS TO EFFECTIVENESS   This Amendment shall become effective as of the date hereof only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the “First Amendment Effective Date”):   A.    Execution. Administrative Agent shall have received a counterpart signature page of this Amendment duly executed by each of the Credit Parties and Requisite Lenders.   B.    Necessary Consents. Each Credit Party shall have obtained all material consents necessary or advisable in connection with the transactions contemplated by this Amendment.   C.    Other Documents. Administrative Agent and Lenders shall have received such other documents, information or agreements regarding Credit Parties as Administrative Agent or Collateral Agent may reasonably request, including, without limitation, the issuance of a new Swing Line Note payable to the order of Wachovia Bank, National Association in the original principal amount of $25,000,000 to replace the existing Swing Line Note payable to the order of GSCP in the original principal amount of $15,000,000.   SECTION III.    REPRESENTATIONS AND WARRANTIES   In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, each Credit Party which is a party hereto represents and warrants to each Lender that the following statements are true and correct in all material respects:   A.    Corporate Power and Authority. Each Credit Party, which is party hereto, has all requisite power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the “Amended Agreement”) and the other Credit Documents.   B.    Authorization of Agreements. The execution and delivery of this Amendment and the performance of the Amended Agreement and the other Credit Documents have been duly authorized by all necessary action on the part of each Credit Party.   C.    No Conflict. The execution and delivery by each Credit Party of this Amendment and the performance by each Credit Party of the Amended Agreement and the other Credit Documents do not and will not (i) violate (A) any provision of any law,   5   statute, rule or regulation, or of the certificate or articles of incorporation or partnership agreement, other constitutive documents or by-laws of Holdings, Borrower or any Credit Party or (B) any applicable order of any court or any rule, regulation or order of any Governmental Authority, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any Contractual Obligation of the applicable Credit Party, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this Section III.C., could reasonably be expected to have a Material Adverse Effect, (iii) except as permitted under the Amended Agreement, result in or require the creation or imposition of any Lien upon any of the properties or assets of each Credit Party (other than any Liens created under any of the Credit Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of stockholders or partners or any approval or consent of any Person under any Contractual Obligation of each Credit Party, except for such approvals or consents which will be obtained on or before the First Amendment Effective Date and except for any such approvals or consents the failure of which to obtain will not have a Material Adverse Effect.   D.    Governmental Consents. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be this Amendment and the performance by Borrower and Holdings of the Amended Agreement and the other Credit Documents, except for such actions, consents and approvals the failure to obtain or make could not reasonably be expected to result in a Material Adverse Effect or which have been obtained and are in full force and effect.   E.    Binding Obligation. This Amendment and the Amended Agreement have been duly executed and delivered by each of the Credit Parties party thereto and each constitutes a legal, valid and binding obligation of such Credit Party to the extent a party thereto, enforceable against such Credit Party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors’ rights generally and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).   F.    Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Amended Agreement are and will be true and correct in all material respects on and as of the First Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically   G.    Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Default.   6   SECTION IV.    ACKNOWLEDGMENT AND CONSENT   Each Domestic Subsidiary listed on the signature pages hereto and Holdings are referred to herein as a “Credit Support Party” and collectively as the “Credit Support Parties”, and the Credit Documents to which they are a party are collectively referred to herein as the “Credit Support Documents”.   Each Credit Support Party hereby acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment. Each Credit Support Party hereby confirms that each Credit Support Document to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guarantee or secure, as the case may be, to the fullest extent possible in accordance with the Credit Support Documents the payment and performance of all “Obligations” under each of the Credit Support Documents to which is a party (in each case as such terms are defined in the applicable Credit Support Document).   Each Credit Support Party acknowledges and agrees that any of the Credit Support Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment. Each Credit Support Party represents and warrants that all representations and warranties contained in the Amended Agreement and the Credit Support Documents to which it is a party or otherwise bound are true and correct in all material respects on and as of the First   Each Credit Support Party acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Credit Support Party is not required by the terms of the Credit Agreement or any other Credit Support Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other Credit Support Document shall be deemed to require the consent of such Credit Support Party to any future amendments to the Credit Agreement.   SECTION V.    MISCELLANEOUS   A.    Reference to and Effect on the Credit Agreement and the Other Credit Documents.   (i)     On and after the First Amendment Effective Date, each reference in the Credit Agreement to “this Amendment”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Credit Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Amendment.   7   (ii)     Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed.   (iii)     The execution, delivery and performance of this Amendment shall not constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of any Agent or Lender under, the Credit Agreement or any of the other Credit Documents.   B.    Headings. Section and Subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.   C.    Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.   D.    Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so together shall constitute but 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.     8         NEWPAGE CORPORATION                 By: /s/ Linda Sheffield         Name: Linda Sheffield       Title: Treasurer                 NEWPAGE HOLDING CORPORATION                 By:         Name: Linda Sheffield       Title: Treasurer                 CHILLICOTHE PAPER INC.     WICKLIFFE PAPER COMPANY                 By:         Name: Linda Sheffield       Title: Treasurer                 ESCANABA PAPER COMPANY     LUKE PAPER COMPANY     RUMFORD PAPER COMPANY     NEWPAGE ENERGY SERVICES LLC     UPLAND RESOURCES, INC.                 By: /s/ Peter H. Vogel, Jr.         Name: Peter H. Vogel, Jr.       Title: President & CEO                 RUMFORD COGENERATION, INC.     RUMFORD FALLS POWER COMPANY                 By:                       GOLDMAN SACHS CREDIT PARTNERS L.P.,     as Administrative Agent, Joint Lead Arranger, Joint Bookrunner, Co-Syndication Agent, and a Lender                 By: /s/ Robert Schatzman          Robert Schatzman        Authorized Signatory                             as Collateral Agent, an Issuing Bank and a Lender                       By:           Name: Peter S. Predun         Title: Vice President                       UBS SECURITIES LLC,       as Joint Lead Arranger, Joint Bookrunner and Co-Syndication Agent                         By: /s/ Daniel W. Ladd III           Name: Daniel W. Ladd III         Title: Managing Director                     By: /s/ Francisco Pinto-Leite           Name: Francisco Pinto-Leite         Title: Director and Counsel           Region Americas Legal                               WACHOVIA BANK, NATIONAL ASSOCIATION, as an Issuing Bank, Swingline Lender and a Lender                                 By: /s/ Thomas Grabosky           Name: Thomas Grabosky         Title: Director           WACHOVIA CAPITAL MARKETS, LLC,       as Co-Syndication Agent                                  By:           Name: Thomas Grabosky         Title: Director                                 as Documentation Agent and as a Lender                                  By: /s/ Jang S. Kim           Name: Jang S. Kim         Title: Vice President                         LENDERS:                   as a Lender                         By: /s/ Wilfred V. Saint               Name: Wilfred V. Saint             Title: Director               Banking Products               Services, US                                           By: /s/ Joselin Fernandes               Name: Joselin Fernandes             Title: Associate Director               Banking Products               Services, US                                     WELLS FARGO FOOTHILL, LLC                                     By: /s/ Eunnie Kim         Name: Eunnie Kim         Title: Vice President         GE CAPITAL                 By: /s/ James Miller         Name: James Miller       Title: Duly Authorized Signatory                         THE CIT GROUP/BUSINESS CREDIT, INC.                 By: /s/ Evelyn Kusold         Name: Evelyn Kusold       Title: AVP                         FARM CREDIT SERVICES OF MISSOURI, PCA                 By: /s/ Lee Fuchs         Name: Lee Fuchs       Title: Vice President, Capital Markets                         ISRAEL DISCOUNT BANK OF NEW YORK                 By: /s/ Ron Bongiovanni         Name: Ron Bongiovanni       Title: Senior Vice President             By: /s/ Andy Balta         Name: Andy Balta       Title: Vice President                         SIEMENS FINANCIAL SERVICES, INC.                 By: /s/ Frank Amodio         Name: Frank Amodio       Title: Vice President - Credit         LASALLE BUSINESS CREDIT, LLC                 By: /s/ Steven Friedlander         Name: Steven Friedlander       Title: SVP                     NATIONAL CITY BANK                 By: /s/ Jack Koch         Name: Jack Koch       Title: Account Officer                     SENIOR DEBT PORTFOLIO     By: Boston Management and Research        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE SENION INCOME TRUST     By: Eaton Vance Management        As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE INSTITUTIONAL SENIOR LOAN FUND            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President         EATON VANCE CDO III, LTD.            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President                     COSTANTINUS EATON VANCE CDO V, LTD.            As Investment Advisor                 By: /s/ Michael B. Botthoff         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE CDO VI, LTD.            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President                     GRAYSON & CO.            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President                     BIG SKY SENIOR LOAN FUND, LTD.            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President         THE NORINCHUKIN BANK, NEW YORK BRANCH     Through State Street Bank and Trust Company, N.A. as Fiduciary Custodian            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President                     BIG SKY III SENIOR LOAN TRUST            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President                         EATON VANCE     VT FLOATING-RATE INCOME FUND            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE     LIMITED DURATION INCOME FUND            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President         EATON VANCE     SENIOR FLOATING-RATE TRUST            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE FLOATING-RATE     INCOME TRUST            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE SHORT DURATION     DIVERSIFIED INCOME FUND            As Investment Advisor                 By:         Name: Michael B. Botthof       Title: Vice President  
Name: Commission Regulation (EC) No 1282/2003 of 17 July 2003 concerning tenders notified in response to the invitation to tender for the export of rye issued in Regulation (EC) No 935/2003 Type: Regulation Subject Matter: trade policy; plant product Date Published: nan Avis juridique important|32003R1282Commission Regulation (EC) No 1282/2003 of 17 July 2003 concerning tenders notified in response to the invitation to tender for the export of rye issued in Regulation (EC) No 935/2003 Official Journal L 180 , 18/07/2003 P. 0046 - 0046Commission Regulation (EC) No 1282/2003of 17 July 2003concerning tenders notified in response to the invitation to tender for the export of rye issued in Regulation (EC) No 935/2003THE COMMISSION OF THE EUROPEAN COMMUNITIES,Having regard to the Treaty establishing the European Community,Having regard to Council Regulation (EEC) No 1766/92 of 30 June 1992 on the common organisation of the market in cereals(1), as last amended by Regulation (EC) No 1104/2003(2),Having regard to Commission Regulation (EC) No 1501/95 of 29 June 1995 laying down certain detailed rules for the application of Council Regulation (EEC) No 1766/92 on the granting of export refunds on cereals and the measures to be taken in the event of disturbance on the market for cereals(3), as last amended by Regulation (EC) No 1163/2002(4), as amended by Regulation (EC) No 1324/2002(5), and in particular Article 7 thereof,Whereas:(1) An invitation to tender for the refund for the export of rye to certain third countries was opened pursuant to Commission Regulation (EC) No 935/2003(6).(2) Article 7 of Regulation (EC) No 1501/95 allows the Commission to decide, in accordance with the procedure laid down in Article 23 of Regulation (EEC) No 1766/92 and on the basis of the tenders notified, to make no award.(3) On the basis of the criteria laid down in Article 1 of Regulation (EC) No 1501/95 a maximum refund should not be fixed.(4) The measures provided for in this Regulation are in accordance with the opinion of the Management Committee for Cereals,HAS ADOPTED THIS REGULATION:Article 1No action shall be taken on the tenders notified from 11 to 17 July 2003 in response to the invitation to tender for the refund for the export of rye issued in Regulation (EC) No 935/2003.Article 2This Regulation shall enter into force on 18 July 2003.This Regulation shall be binding in its entirety and directly applicable in all Member States.Done at Brussels, 17 July 2003.For the CommissionFranz FischlerMember of the Commission(1) OJ L 181, 1.7.1992, p. 21.(2) OJ L 158, 27.6.2003, p. 1.(3) OJ L 147, 30.6.1995, p. 7.(4) OJ L 170, 29.6.2002, p. 46.(5) OJ L 194, 23.7.2002, p. 26.(6) OJ L 133, 29.5.2003, p. 45.
EXHIBIT 10(d)   INDEMNIFICATION AGREEMENT   THIS INDEMNIFICATION AGREEMENT is entered into as of this          day of                 , 2004, by and between United Rentals, Inc., a Delaware corporation (the “Company”), and                                                 RECITALS   A. The Company is aware that because of the increased exposure to litigation costs, talented and experienced persons are increasingly reluctant to serve or continue serving as directors and officers of corporations unless they are protected by comprehensive liability insurance and indemnification.   B. The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors and officers with adequate guidance regarding the proper course of action.   C. The Board of Directors of the Company (the “Board”) has concluded that, in order to retain and attract talented and experienced individuals to serve as officers and directors of the Company and its subsidiaries and to encourage such individuals to take the business risks necessary for the success of the Company and its subsidiaries, the Company should contractually indemnify its officers and directors, and the officers and directors of its subsidiaries, in connection with claims against such officers and directors in connection with their services to the Company and its subsidiaries, and has further concluded that the failure to provide such contractual indemnification could be detrimental to the Company, its subsidiaries and stockholders.   NOW, THEREFORE, the parties, intending to be legally bound, hereby agree as follows:   1. Definitions.   (a) Agent. “Agent” with respect to the Company means any person who is or was a director, officer, employee or other agent of the Company or a Subsidiary of the Company; or is or was serving at the request of, for the convenience of, or to represent the interests of, the Company or a Subsidiary of the Company as a director, officer, employee or agent of another entity or enterprise; or was a director, officer, employee or agent of a predecessor corporation (or other predecessor entity or enterprise) of the Company or a Subsidiary of the Company, or was a director, officer, employee or agent of another enterprise at the request of, for the convenience of, or to represent the interests of such predecessor.   (b) Expenses. “Expenses” means all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees, costs of investigation and related disbursements) incurred by the Indemnitee in connection with the investigation, settlement, defense or appeal of a Proceeding covered hereby or the establishment or enforcement of a right to indemnification under this Agreement.   (c) Proceeding. “Proceeding” means any threatened, pending, or completed claim, suit or action, whether civil, criminal, administrative, investigative or otherwise.   (d) Subsidiary. “Subsidiary” means any corporation or other entity of which more than 10% of the outstanding voting securities or other voting interests is owned directly or indirectly by the Company, and one or more other Subsidiaries, taken as a whole.   2. Maintenance of Liability Insurance.   (a) The Company hereby covenants and agrees with Indemnitee that, subject to Section 2(b), the Company shall obtain and maintain in full force and effect directors’ and officers’ liability insurance (“D&O Insurance”) in reasonable amounts as the Board of Directors shall determine from established and reputable insurers. In no event shall the terms of such D&O Insurance be less favorable to Indemnitee than the terms generally applicable to the Company’s executive officers and directors generally. (b) Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines in good faith that the premium costs for such insurance are (i) disproportionate to the amount of coverage provided after giving effect to exclusions, and (ii) substantially more burdensome to the Company than the premiums charged to the Company for D&O Insurance currently in effect.   3. Mandatory Indemnification. The Company shall defend, indemnify and hold harmless Indemnitee:   (a) Third Party Actions. If Indemnitee is a person who was or is a party, or is threatened to be made a party, to any Proceeding (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was or is claimed to be an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, or by reason of the fact that Indemnitee personally guaranteed any obligation of the Company at any time, against any and all Expenses and liabilities or any type whatsoever (including, but not limited to, legal fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) incurred by such person in connection with the investigation, defense, settlement or appeal of such Proceeding, so long as the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or Proceeding, had no reasonable cause to believe such person’s conduct was unlawful.   (b) Derivative Actions. If Indemnitee is a person who was or is a party, or is threatened to be made a party, to any Proceeding by or in the right of the Company by reason of the fact that he is or was an Agent of the Company, or by reason of anything done or not done by him in any such capacity, against any and all Expenses and liabilities of any type whatsoever (including, but not limited paid in settlement) incurred by him in connection with the investigation, defense, settlement or appeal of such Proceeding, so long as the Indemnitee opposed to the best interests of the Company; except that no indemnification under this subsection shall be made, and Indemnitee shall repay all amounts previously advanced by the Company, in respect of any claim, issue or matter for which such person is judged in a final, non-appealable decision to be liable to the Company by a court of competent jurisdiction due to willful misconduct in the performance of his duties to the Company, unless and only to the extent that the court in which such Proceeding was brought or the Court of Chancery of Delaware shall determine that Indemnitee is fairly and reasonably entitled to indemnity.   (c) Actions Where Indemnitee Is Deceased. If Indemnitee is a person who was or is a party, or is threatened to be made a party, to any Proceeding by reason of the fact that he is or was an Agent of the Company, or by reason of anything done or not done by him in any such capacity, and prior to, during the pendency of, or after completion of, such Proceeding, the Indemnitee shall die, then the Company shall defend, indemnify and hold harmless the estate, heirs and legatees of the Indemnitee against any and all Expenses and liabilities incurred by or for such persons or entities in connection with the investigation, defense, settlement or appeal of such Proceeding on the same basis as provided for the Indemnitee in Sections 3(a) and 3(b) above.   The Expenses and liabilities covered hereby shall be net of any payments by D&O Insurance carriers or others.   4. Partial Indemnification. If Indemnitee is found under Section 3, 6 or 9 hereof not to be entitled to indemnification for all of the Expenses relating to a Proceeding, the Company shall indemnify the Indemnitee for any portion of such Expenses not specifically precluded by the operation of such Section 3, 6 or 9.   5. Indemnification Procedures; Mandatory Advancement of Expenses.   (a) Promptly after receipt by Indemnitee of notice to him or her of the commencement or threat of any Proceeding covered hereby, Indemnitee shall notify the Company of the commencement or threat thereof, provided that any failure to so notify shall not relieve the Company of any of its obligations hereunder.   2 (b) If, at the time of the receipt of a notice pursuant to Section 5(a) above, the Company has D&O Insurance in effect, the Company shall give prompt notice of the Proceeding or claim to its insurers in accordance with the procedures set forth in the applicable policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay all amounts payable as a result of such Proceeding in accordance with the terms of such policies.   (c) Indemnitee shall be entitled to retain one or more counsel from time to time selected by it in its sole discretion to act as its counsel in and for the investigation, defense, settlement or appeal of each Proceeding. The Company shall not waive any privilege or right available to Indemnitee in any such Proceeding.   (d) The Company shall bear all fees and Expenses (including invoices for advance retainers) of such counsel, and all fees and Expenses invoiced by other persons or entities, in connection with the investigation, defense, settlement or appeal of each such Proceeding. Such fees and Expenses are referred to herein as “Covered Expenses.”   (e) Until a determination to the contrary under Section 6 hereof is made, the Company shall advance all Covered Expenses in connection with each Proceeding. If required by law, as a condition to such advances, Indemnitee shall, at the request of the Company, agree to repay such amounts advanced if it shall ultimately be determined by a final order of a court that Indemnitee is not entitled to be indemnified by the Company by the terms hereof or under applicable law.   (f) Each advance to be made hereunder shall be paid by the Company to Indemnitee within 10 days following delivery of a written request therefor by Indemnitee to the Company.   (g) The Company acknowledges the potentially severe damage to Indemnitee should the Company fail timely to make such advances to Indemnitee.   6. Determination of Right to Indemnification.   (a) To the extent Indemnitee has been successful on the merits or otherwise in defense of any Proceeding, claim, issue or matter covered hereby, Indemnitee need not repay any of the Expenses advanced in connection with the investigation, defense or appeal of such Proceeding.   (b) If Section 6(a) is inapplicable, the Company shall remain obligated to indemnify Indemnitee, and Indemnitee need not repay Expenses previously advanced, unless the Company, by motion before a court of competent jurisdiction, obtains an order for preliminary or permanent relief suspending or denying the obligation to advance or indemnify for Expenses.   (c) Notwithstanding a determination by a court that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, Indemnitee shall have the right to apply to the Court of Chancery of Delaware for the purpose of enforcing Indemnitee’s right to indemnification pursuant to this Agreement.   (d) Notwithstanding any other provision in this Agreement to the contrary, the Company shall indemnify Indemnitee against all Expenses incurred by Indemnitee in connection with any Proceeding under Section 6(b) or 6(c) and against all Expenses incurred by Indemnitee in connection with any other Proceeding between the Company and Indemnitee involving the interpretation or enforcement of the rights of Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims and/or defenses of Indemnitee in any such Proceeding were frivolous or made in bad faith.   7. Certificate of Incorporation and By-Laws. The Company agrees that the Company’s Certificate of Incorporation and By-laws in effect on the date hereof shall not be amended to reduce, limit, hinder or delay (i) the rights of Indemnitee granted hereby, or (ii) the ability of the Company to indemnify Indemnitee as required hereby. The Company further agrees that it shall exercise the powers granted to it under its Certificate of Incorporation, its By-laws and by applicable law to indemnify Indemnitee to the fullest extent possible as required hereby.   8. Witness Expenses. The Company agrees to compensate Indemnitee for the reasonable value of his or her time spent, and to reimburse Indemnitee for all Expenses (including attorneys’ fees and travel costs) incurred by   3 him or her, in connection with being a witness, or if Indemnitee is threatened to be made a witness, with respect to any Proceeding, by reason of his or her serving or having served as an Agent of the Company.   9. Exceptions. Notwithstanding any other provision hereunder to the contrary, the Company shall not be obligated pursuant to the terms of this Agreement:   (a) Claims Initiated by Indemnitee. To indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense (other than Proceedings under Section 6(b) or Section 6(c) or brought to establish or enforce a right to indemnification under this Agreement or the provisions of the Company’s Certificate of Incorporation or By-laws unless a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such Proceeding were not made in good faith or were frivolous).   (b) Unauthorized Settlements. To indemnify Indemnitee under this Agreement for any amounts paid in settlement of a Proceeding covered hereby without the prior written consent of the Company to such settlement.   10. Non-exclusivity. This Agreement is not the exclusive arrangement between the Company and Indemnitee regarding the subject matter hereof and shall not diminish or affect any other rights which Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or By-laws, under other agreements, or otherwise.   11. Continuation After Term. Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as a director or Agent of the Company and the benefits hereof shall inure to the benefit of the heirs, executors and administrators of Indemnitee.   12. Interpretation of Agreement. This Agreement shall be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law.   13. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, provisions of the Agreement shall not in any way be affected or impaired thereby, and to the fullest extent possible, the provisions of this Agreement shall be construed or altered by the court so as to remain enforceable and to provide Indemnitee with as many of the benefits contemplated hereby as are permitted under law.   14. Counterparts, Modification and Waiver. This Agreement may be signed in counterparts. This Agreement constitutes a separate agreement between the Company and Indemnitee and may be supplemented or amended as to Indemnitee only by a written instrument signed by the Company and Indemnitee, with such amendment binding only the Company and Indemnitee. All waivers must be in a written document signed by the party to be charged. No waiver of any of the provisions of this Agreement shall be implied by the conduct of the parties. A waiver of any right hereunder shall not constitute a waiver of any other right hereunder.   15. Notices. All notices, demands, consents, requests, approvals and other deemed to have been properly given if hand delivered (effective upon receipt or when refused), or if sent by a courier freight prepaid (effective upon receipt or when refused), in the case of the Company, at the addresses listed below, or to such other addresses as the parties may notify each other in writing.   To Company:    United Rentals, Inc.      Five Greenwich Office Park      Greenwich, CT 06830      Attention: Legal Department   To Indemnitee: At the Indemnitee’s residence address and facsimile number on the records of the Company from time to time.   4 16. Evidence of Coverage. Upon request by Indemnitee, the Company shall provide evidence of the liability insurance coverage required by this Agreement. The Company shall promptly notify Indemnitee of any change in the Company’s D&O Insurance coverage.   accordance with the internal laws of the State of Delaware.   IN WITNESS WHEREOF, the parties hereto have entered into this Indemnification Agreement effective as of the date first above written.   UNITED RENTALS, INC. By     Name:     Title:     INDEMNITEE: Name:             5
Title: Military housing with black mold issues Question:Good afternoon all, and thank you in advance for any help. We are located in Biloxi, Mississippi and we have housing through the USAF base located here. The housing is privatized out through a Hunt Companies corporation, and they are supposed to provide coverage for all maintenence and repairs. Currently there seems to be an epidemic of black mold flourishing in a large majority of the housing, and apparently this has been affecting some individuals since the homes were built in 2009. However despite the number of cases and evidence, the management will not fix the issue, and instead wipes away the mold growing. They have been promising a fix, but have not followed through with anything. I know at least one resident paid for a mold inspection out of pocket, and the outcome was they were released from their housing contract. I wanted to know if there was a legal action I and/or other residents may take to force the Hunt corporation to actually fix the problem. Thank you again, and please let me know if I need to add any clarifying information. Answer #1: Hahaha hahaha. Okay, I'm sorry. What you gotta do, right, is let them come into your house, take apart your ceiling on 2 or 3 separate occasions, letting you to stay in that show home on the corner for weeks at a time while they get unremovable duct putty all over your floor and counter during the repair process. And get paint on your carpet. And leave screws and nails in random places... and grossly trash the bathroom that you keep clean and made cleaner with the idea that the people working on your home would appreciate it, but unless gratitude = urine all over your toilet that didn't work out. This and other things will occur over the course of 2 or so years, year 2 being the one where you think the problem, perhaps, has finally been remedied. Only you won't know for sure until the following summer when the problem begins anew. Just be a squeaky wheel and involve your command. Also, we're probably neighbors.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.20549 SEC FILE NO. FORM 12b-25 000-54057 CUSIP NUMBER NOTIFICATION OF LATE FILING 50062A107 (Check one): [] Form 10-K [] Form 20-F [] Form 11-K [X] Form 10-Q [] Form 10-D [] Form N-SAR [] Form N-CSR For Period Ended:September 30, 2011 [] Transition Report on Form 10-K [] Transition Report on Form 20-F [] Transition Report on Form 11-K [] Transition Report on Form 10-Q [] Transition Report on Form N-SAR For the Transition Period Ended Nothing in this form shall be construed to imply that the Commission has verified any information contained herein. If the notification relates to a portion of the filing checked above, identify the Item(s) to which the notification relates: PART I - REGISTRANT INFORMATION KORE NUTRITION INCORPORATED Full Name of Registrant N/A Former Name if Applicable 9701 Wilshire Blvd., Suite 1000 Address of Principal Executive Office (Street and Number) Beverly Hills, CA90212 City, State and Zip Code PART 11 - RULES 12b-25(b) AND (c) If the subject report could not be filed without unreasonable effort or expense and the registrant seeks relief pursuant to Rule 12b-25(b), the following should be completed.(Check box if appropriate). (a) The reasons described in reasonable detail in Part III of this form could not be eliminated without unreasonable effort or expense; [X] (b) The subject annual report, semi-annual report, transition report on Form 10-K, Form 10-KSB, Form 20-F, 11-K or Form N-SAR, or portion thereof, will be filed on or before the fifteenth calendar day following the prescribed due date; or the subject quarterly report of transition report on Form 10-Q, or portion thereof will be filed on or before the fifth calendar day following the prescribed due date; and (c) The accountant's statement or other exhibit required by Rule 12b-25(c) has been attached if applicable. PART III - NARRATIVE The Registrant is unable to file, without unreasonable effort and expense, its Form 10-Q Quarterly Report for the period ended March 31, 2011 because its unaudited financial statements for that period have not been completed.As a result, the Registrant's auditors have not yet had an opportunity to complete their review of the unaudited financial statements. It is anticipated that the Form 10-Q Quarterly Report, along with the unaudited financial statements, will be filed on or before the 5th calendar day following the prescribed due date of the Registrant's Form10-Q. PART IV — OTHER INFORMATION Name and telephone number of person to contact in regard to this notification Jeffrey Todd (310) 860-6167 (Name) (Area Code) (Telephone Number) Have all other periodic reports required under Section 13 or 15(d) of the Securities Exchange Act of 1934 or Section 30 of the Investment Company Act of 1940 during the preceding 12 months or for such shorter period that the registrant was required to file such report(s) been filed ? If answer is no, identify report(s) [X]Yes []No Is it anticipated that any significant change in results of operations from the corresponding period for the last fiscal year will be reflected by the earnings statements to be included in the subject report or portion thereof ? []Yes [X]No If so, attach an explanation of the anticipated change, both narratively and quantitatively, and, if appropriate, state the reasons why a reasonable estimate of the results cannot be made. KORE NUTRITION INCORPORATED (Name of Registrant as Specified in Charter) has caused this notification to be signed on its behalf by the undersigned hereunto duly authorized. Date November 14, 2011 By /s/ Jeffrey Todd Name: Jeffrey Todd Title: Chief Executive Officer and Director 2
Title: Someone messaging me saying my name( persona) was Trademarked and I cant use it. Question:To be clear i'm not currently selling anything, but I was hoping to grow this profile on youtube over the years. I'm just curious what grounds they have and I have. The persona name is "HighTv". I take documentation of my medical/recreation Marijuana grows and put them online. This person also named "HighTv" on Instagram contacted me saying I couldn't use the name because its Trademarked. They had the ™ next to their name. I found a 'word mark, service mark' on the [Us Patent and trademark office](https://www.uspto.gov/trademark) site that matches. I tried to do research and ended up with what i believe to be an incorrect analyst, could someone help correct it? Does this trademark protect all uses of the name "HighTv" or just uses of that black and white image? Does a 'word mark' that is also a 'service mark' define a name for an organization(brand) or just a 'logotype'? Does this person have a ™ next to their name because they haven't yet registered or are waiting to be confirmed by the USPTO, Is that how this works? Thanks for any help guys I appreciate it! Answer #1: They probably just want your username without paying you for it. Tell them to fork up some $$ if you want to sell it.
Exhibit 10.6   23 December, 2010   Credit Suisse AG Shipfinance St. Alban-Graben 1-3 4002 Basel Switzerland Attn. Mrs Carla Vogel-Sforzini Fax: +41 61 266 79 39   RE:         Extension of Forbearance Period in connection with Events of Default under Credit Suisse AG Facility and the Master Agreement dated December 7, 2007.   Reference is hereby made to (a) the Loan Agreement dated 07 December 2007 made between (i) Claremont Shipping Corp. and Yorkshire Shipping Corp. as joint and several Borrowers (the “Borrowers”), (ii) Credit Suisse AG as Lender and Swap Bank (the “Lender”) relating a term loan facility of US$40,000,000 as supplemented by an amendment letter dated 19 March 2008, a waiver letter dated 24 March 2009, an extension of waiver letter dated 22 December 2009, a supplemental agreement dated 8 January 2010, an extension of waiver letter dated 31 March 2010 and a further waiver letter dated 21 April 2010 (together the “Loan Agreement”), (b)the Master Agreement dated 07 December 2007 made between the Borrowers and the Lender (the “Master Agreement”), (c) the Letter Agreement dated as of September 30, 2010 (the “Forbearance Letter”) whereby the Lender agreed subject to the conditions therein to forbear from exercising any of the rights or remedies arising from the Specified Events of Default as provided therein and (d) the Letter Agreement dated as of November 12, 2010 (the “First Forbearance Extension Letter”)whereby you agreed subject to the conditions therein to a Forbearance Extension Period ending as of December 29 ,2010. Capitalized terms defined in the Loan Agreement, the Master Agreement, the Forbearance Letter or the First Forbearance Extension Letter and not otherwise defined herein are used herein as therein defined, as applicable.   In order to allow time for TBS International, plc and its affiliates to work with their various lenders, including you, towards a mutually agreeable solution on their outstanding indebtedness, we request that you extend the Forbearance Extension Period set forth in the First Forbearance Extension Letter until the earlier of (i) the occurrence of a Forbearance Termination Event and (ii) 12:01 am on February 1, 2011 (the “Amended Forbearance Extension Period”).     By counter-signing this letter, you agree to forbear from exercising any of the rights or remedies arising solely from the Specified Events of Default (which shall include (in addition those identified in the Forbearance Letter and the First Forbearance Extension Letter) defaults arising from the suspension of payments by TBS International, public limited company and its affiliates of certain scheduled principal installments owing in respect of Indebtedness of such persons during the Amended Forbearance Extension Period, as more particularly described on Schedule 1 hereto) on the terms set forth in the Forbearance Letter and the First Forbearance Extension Letter, as modified by the terms above.   As a condition to your agreement TBS International, plc will provide you with the evidence that similar such agreement has been obtained from any other lenders including (but not limited to) those listed in the Schedule 1.         Very truly yours,               TBS INTERNATIONAL, PLC         By: /s/ Ferdinand V. Lepere     Name: Ferdinand V. Lepere     Title: Senior Executive Vice President               Claremont Shipping Corp.         By:                       Yorkshire Shipping Corp.         By:                     Acknowledged and Agreed,                 CREDIT SUISSE AG,     As Lender and Swap Bank         By: /s/ John Hafelfinger   /s/ Carla Vogel Sforzini   Name: John Hafelfinger   Carla Vogel Sforzini   Title: Managing Director   Assistant Vice President   [Signature Page to CS Second Extended Forbearance Letter]     Schedule 1   Facility   Principal Amount   Date           Bank of America Facility, as amended and restated on March 26, 2008   $ 9,500,000   December 31, 2010           AIG Facility dated as of December 7, 2007   $ 1,750,000   January 1, 2011           DVB Facility dated as of January 16, 2008   $ 2,608,000   January 25, 2011  
Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing Exhibit 99-B.8.70 FIRST AMENDMENT TO SERVICES AGREEMENT This Amendment is dated as of the 15th day of August, 2007 between Pacific Investment Management Company LLC (“PIMCO”), ING Life Insurance and Annuity Company, ReliaStar Life Insurance Company (together as “ING”) and PA Distributors LLC (collectively, the “Parties”). WHEREAS , the Parties entered into a Services Agreement effective May 1, 2004 (the “Agreement”) and desire to further amend said Agreement in the manner hereinafter set forth; NOW THEREFORE , the Parties hereby amend the Agreement in the following form: 1. ING USA Annuity and Life Insurance Company (“ING USA”) and its Separate Accounts is added as a Party to the Agreement; 2. ReliaStar Life Insurance Company of New York (“RLIC of NY”) and its Separate Accounts is added as a Party to the Agreement; Except as provided herein, the terms and conditions contained in the Agreement shall remain in full force and effect. IN WITNESS WHEREOF , the Parties hereto have caused this instrument to be executed by their duly authorized signatories as of the date and year first above written. Pacific Investment Management Company LLC ING Life Insurance and Annuity Company By: By: Name: Name: Michael C. Eldredge Title: Title: Vice President ReliaStar Life Insurance Company PA Distributors LLC By: By: Name: Name: Title: Title: ING USA Annuity and Life Insurance Company ReliaStar Life Insurance Company of New York By: By: Name: Name: Title: Title: 1 of 1
  Exhibit 10.64 [gdsi_ex1064000.jpg]     [gdsi_ex1064001.jpg]     [gdsi_ex1064002.jpg]     [gdsi_ex1064003.jpg]     [gdsi_ex1064004.jpg]     [gdsi_ex1064005.jpg]     [gdsi_ex1064006.jpg]     [gdsi_ex1064007.jpg]     [gdsi_ex1064008.jpg]    
NATIONWIDE MUTUAL FUNDS Nationwide Enhanced Income Fund Supplement dated June 8, 2011 to the Summary Prospectus dated March 1, 2011 Capitalized terms and certain other terms used in the supplement, unless otherwise defined in this supplement, have the meanings assigned to them in the Summary Prospectus. Effective immediately, an account that is subject to an Automatic Asset Accumulation Plan may be opened to purchase Class A shares with no minimum investment, so long as each monthly purchase is at least $50. PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
Name: Council Regulation (EEC) No 460/79 of 5 March 1979 on direct cooperation between the competent bodies in the Member States regarding the downgrading of quality wines produced in specified regions Type: Regulation Subject Matter: information technology and data processing; consumption; beverages and sugar; information and information processing; technology and technical regulations Date Published: nan Avis juridique important|31979R0460Council Regulation (EEC) No 460/79 of 5 March 1979 on direct cooperation between the competent bodies in the Member States regarding the downgrading of quality wines produced in specified regions Official Journal L 058 , 09/03/1979 P. 0001 - 0003 Finnish special edition: Chapter 3 Volume 10 P. 0196 Greek special edition: Chapter 03 Volume 24 P. 0251 Swedish special edition: Chapter 3 Volume 10 P. 0196 Spanish special edition: Chapter 03 Volume 16 P. 0045 Portuguese special edition Chapter 03 Volume 16 P. 0045 COUNCIL REGULATION (EEC) No 460/79 of 5 March 1979 on direct cooperation between the competent bodies in the Member States regarding the downgrading of quality wines produced in specified regions THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, Having regard to Council Regulation (EEC) No 337/79 of 5 February 1979 on the common organization of the market in wine (1), and in particular Article 64 (2) thereof, Having regard to the proposal from the Commission, Whereas pursuant to Article 64 (2) of Regulation (EEC) No 337/79 the necessary measures should be adopted to ensure uniform application of the Community provisions in the wine sector, particularly as regards wines covered by Council Regulation (EEC) No 338/79 of 5 February 1979 laying down special provisions relating to quality wines produced in specified regions (2) ; whereas Article 16 (6) of Regulation (EEC) No 338/79 lays down that a quality wine produced in a specified region may be downgraded at the marketing stage only where the properties of the quality wine psr in question have deteriorated or altered as a result of a change noted during ageing, storage or transport; Whereas it is therefore appropriate that the downgrading of a quality wine psr on the territory of a Member State other than that in which it originated should be carried out by a competent body of the Member State of origin ; whereas, to that end, direct cooperation should be ensured between the bodies responsible in the Member States for the supervision of the production and marketing of quality wines psr ; whereas it is necessary to lay down the rules for such cooperation ; whereas, however, in order to simplify the administrative task of the Member States, it should be possible for the competent body of the Member State on whose territory a small quantity of the quality wine psr in question is located to downgrade this quantity itself; Whereas, to facilitate the task of the Member States, cooperation between the bodies responsible for the supervision of the production and marketing of quality wines psr should be coordinated in accordance with the rules laid down by Council Regulation (EEC) No 359/79 of 5 February 1979 on direct cooperation between the bodies designated by Member States to verify compliance with Community and national provisions in the wine sector (3); Whereas certain administrative and technical questions relating to direct cooperation between the competent bodies of different Member States must be settled in accordance with Community rules ; whereas detailed rules of application must therefore be adopted; Whereas the possibility should be provided for of amending the arrangements for downgrading, taking account of a report to be drawn up by the Commission on the basis of the experience acquired in the implementation of this Regulation, HAS ADOPTED THIS REGULATION: Article 1 This Regulation lays down measures regarding the relations which exist between the bodies assigned by the Member States to supervise the production and marketing of quality wines psr and the Commission with a view towards governing the downgrading of quality wines psr provided for in Article 16 (6) of Regulation (EEC) No 338/79. Article 2 1. Where the characteristics of a quality wine psr have deteriorated in such a way that the wine is liable to be downgraded, the competent body of the (1)OJ No L 54, 5.3.1979, p. 1. (2)OJ No L 54, 5.3.1979, p. 48. (3)OJ No L 54, 5.3.1979, p. 136. Member State on whose geographical territory such quality wine psr is located shall inform the competent body in the Member State of origin, which shall have the exclusive right of downgrading the quality wine psr in question. In addition to the exchange of information: - samples may be sent to an official laboratory in the Member State of origin, - a qualified expert from the Member State of origin may assist with the checks, - various Member States may participate in concerted examinations, - checks may be made on the keeping of the documents and on the references in the registers required under Article 53 of Regulation (EEC) No 337/79. However, where the quality wine psr in question has undergone a compulsory official analytical and organoleptic examination in the Member State of origin, this exchange of information shall be supplemented by the sending of a sample of the quality wine psr in question ; where the quality wine psr is in a container of 60 litres or less, the sample shall bear the label under which the wine was marketed. 2. The competent body in receipt of a request shall inform the competent body making the request of its decision on the downgrading of the wine as soon as possible. 3. Where the total quantity of the wine in question does not exceed two hectolitres the competent authority of the Member State on whose geographical territory is located a quality wine psr, the properties of which have altered in such a way that it is liable to be downgraded, may itself decide to downgrade the wine in question. 4. Any natural or legal person or group of persons affected by a decision within the meaning of paragraph 2 or 3 may request the competent body of the Member State on whose geographical territory the quality wine psr is located that the decision be reviewed. Provided that it considers that the request for review is warranted, this body shall request the competent body of the Member State in which the quality wine psr originated to review its decision or shall itself review the decision, in the case specified in paragraph 3. 5. Cooperation between the competent bodies referred to in this Article shall take place in accordance with the rules laid down in Regulation (EEC) No 359/79. Article 3 1. Detailed rules for implementing this Regulation shall be adopted as regards: - exchange of information, bearing in mind the need to proceed rapidly, - sampling and dispatch of samples by the competent body making the request and also acceptance of responsibility for their costs of analysis by that body, - acceptance of responsibility by the competent body making the request for the expenses incurred by a qualified expert in a Member State other than that in whose service he is employed. 2. Each Member State shall notify the Commission by 30 April 1979 at the latest which bodies are authorized to downgrade a quality wine psr. The Commission shall publish the names and addresses of the competent bodies in conjunction with the detailed rules of application. 3. Member States which have downgraded quality wines psr in any one year shall, by 31 March of the following year at the latest, forward to the Commission and the Member States in which such quality wines psr originated a communication setting out the quantities of each of the downgraded quality wines psr. Article 4 The Council, acting by a qualified majority on a proposal from the Commission, shall decide, before 30 April 1981 and taking account of a report to be drawn up by the Commission on the basis of the experience acquired in the implementation of this Regulation, on any amendments to be made to this Regulation. Article 5 This Regulation shall enter into force on the third day following its publication in the Official Journal of the European Communities. It shall apply as from 1 May 1979, except for Article 3 (2) thereof which shall apply as from its entry into force. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 5 March 1979. For the Council The President P. MEHAIGNERIE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported):October 18, 2011 CHECKPOINT SYSTEMS, INC. (Exact name of Registrant as specified in its Articles of Incorporation) Pennsylvania 001-11257 22-1895850 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) One Commerce Square, 2005 Market Street, Suite 2410, Philadelphia, Pennsylvania (Address of principal executive offices) (Zip Code) 856-848-1800 (Registrant’s telephone number, including area code) N/A (Former name or address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): £ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) £ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) £ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) £ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 7.01 Regulation FD Disclosure. On October18, 2011, Checkpoint Systems, Inc. (the “Company”) issued a press release reporting that it is providing details of an expanded global SG&A and manufacturing restructuring plan, updating financial guidance for the full year 2011 and providing financial guidance for the third quarter 2011.This press release is filed as Exhibit99.1 to this Form 8-K and is incorporated herein by reference. In accordance with General Instructions B.2 and B.6 of Form 8-K, the foregoing information, including Exhibit99.1, shall not be deemed “filed” for the purposes of Section18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. ITEM 9.01Financial Statements and Exhibits Press release dated October 18, 2011 by Checkpoint Systems, Inc. announcing the restructuring plan SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Checkpoint Systems, Inc. Date: October 20, 2011 By: /s/John R. Van Zile Name: John R. Van Zile Title: Sr. VP, General Counsel and Secretary
FIRST AMENDMENT TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Amendment”) is made and entered into by and between Washington Prime Group Inc., an Indiana corporation (the “Company”), and Robert P. Demchak (“Executive”), effective as of February 21, 2017. WHEREAS, the Company and Executive are parties to an amended and restated employment agreement, dated as of January 31, 2017, effective as of January 1, 2017 (the “Employment Agreement”) (capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Employment Agreement); and WHEREAS, the Company and Executive now desire to amend the Employment Agreement to reflect Executive’s continued employment on the terms and subject to the 1. Terms of Employment.    Section 2(b)(iii)(A) and (B) of the Employment Agreement are hereby deleted in their entirety and replaced as follows: “(A)    2017 Performance Award Grant. On the date on which 2017 annual equity awards are granted to the Company’s senior executives, the Executive shall receive a grant of performance stock units of the Company (“PSUs”) issued under the 2014 Plan (the “2017 PSU Award”). The target number of PSUs granted to the Executive shall be determined by dividing Two Hundred Fifty Thousand Dollars ($250,000) by the Fair Market Value of the Company’s Common Stock on the date of grant. For purposes of this Agreement, “Fair Market Value” means the closing price per share of the Common Stock on the applicable date for purposes of such determination hereunder, as reported on the New York Stock Exchange. The PSUs shall be subject to the terms and conditions of the 2014 Plan and a Performance Stock Unit Award Agreement (the “2017 PSU Award Agreement”), which 2017 PSU Award Agreement shall be substantially in the form of agreements relating to annual performance-based awards granted to other executives of the Company, with such changes therein that are necessary to conform the Executive’s 2017 PSU Award Agreement to the terms of this Section 2 and the terms set forth on Schedule A annexed hereto, and other changes therein as the Committee deems appropriate, provided that no terms of the 2017 PSU Award Agreement shall be inconsistent with the terms of this Agreement. The actual number of PSUs earned may range from 0% to 150% of the target number, based on achievement of the applicable performance criteria over a three-year performance period, as will be established by the Committee in its sole discretion, subject to the terms and conditions of the 2014 Plan. During the period following grant and prior to settlement, dividend equivalents will accrue with respect to the number of PSUs that actually vest at the end of the applicable performance period pursuant to the 2017 PSU Award corresponding to the amount of any dividends paid by the Company to the Company’s shareholders for the applicable dividend payment dates. Such dividend equivalents will be paid to the Executive at the time the PSU is settled. Except as otherwise provided in this Agreement or the applicable award agreement, to receive vested PSUs (and the related dividend equivalents), the Executive must be employed through the end of the applicable performance and vesting period, and be in continued compliance with the provisions of Section 8 of this Agreement. 1 (B)    2017 Time-Based Award Grant. On the date on which 2017 annual equity receive a grant of RSUs, issued under the 2014 Plan (the “2017 RSU Award”, and together with the 2017 PSU Award, the “2017 Award”). The number of RSUs to be issued shall be determined by dividing Two Hundred Fifty Thousand Dollars grant. The RSUs shall be subject to the terms and conditions of the 2014 Plan and a Restricted Stock Unit Award Agreement (the “2017 RSU Award Agreement”; and, together with the 2017 PSU Award Agreement, the “2017 Award Agreements”), which shall be substantially in the form of agreements relating to annual time-based awards granted to other executives of the Company, with such changes therein that are necessary to conform the Executive’s 2017 RSU Award Agreement to the terms of this Section 2 and other changes therein as the Committee deems appropriate, provided that no terms of the 2017 RSU Award Agreement shall be inconsistent with the terms of this Agreement. Vesting of the RSUs that comprise the 2017 RSU Awards shall be time-based and shall vest (and be settled on such vesting date) in three equal tranches of RSUs on each anniversary of the date of grant, subject to the Executive’s continued employment with the Company through each vesting date and his continued compliance with the provisions of Section 8 of this Agreement. During the period prior to vesting, dividend equivalents will be paid with respect to the RSUs granted pursuant to the 2017 RSU Award corresponding to the amount of any dividends paid by the Company to the Company’s shareholders for the applicable dividend payment date. Such dividend equivalents will be paid to the Executive when the corresponding dividend is paid to the Company’s stockholders.” 2.    Acknowledgement. Executive hereby acknowledges and agrees that nothing in this Amendment shall constitute “Good Reason” under the Employment Agreement. 3.    Entire Agreement. Except as otherwise provided herein, the Employment Agreement shall remain unaltered and of full force and effect. 2                             ROBERT P. DEMCHAK   /s/ Robert P. Demchak   WASHINGTON PRIME GROUP INC.     By:   /s/ Mark E. Yale     Name:   Mark E. Yale     Title:   [Signature Page - R. Demchak First Amendment to Amended and Restated Employment Agreement] 3 Schedule A 2017 Grants The 2017 RSU Grant shall be $150,000 in grant-date fair value and shall vest in three equal annual installments. The target value of the 2017 PSU Grant shall be $150,000 and shall include the following terms: • PSUs tied to a three-year prospective TSR relative to the Company's retail REIT peer group. • Payout Schedule: WPG 3-Year TSR %-ile Rank Earned Share Units (% of Target) <30th Percentile 0% 30th Percentile 25% 40th Percentile 50% 50th Percentile 75% 60th Percentile 100% 70th Percentile 125% 80th Percentile 150% Number of earned share units is linearly interpolated for performance between levels. • Payouts limited to 100%% of target if absolute TSR is negative. 4
REGISTRATION RIGHTS AGREEMENT   This Registration Rights Agreement (this “Agreement”) is made and entered into as of March 12, 2014, between OptimizeRx Corporation, a Nevada corporation (the “Company”) and each of the several purchasers signatory hereto (each such purchaser, a “Purchaser” and, collectively, the “Purchasers”).   This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and each Purchaser (the “Purchase Agreement”).   The Company and each Purchaser hereby agrees as follows:   1. Definitions   Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:   “Advice” shall have the meaning set forth in Section 6(d).   “Effectiveness Date” means, with respect to the Initial Registration Statement required to be filed hereunder, the 90th calendar day following the Filing Date (or, in the event of a “full review” by the Commission, the 120th calendar day following the Filing Date) and with respect to any additional Registration Statements which may be required pursuant to Section 3(c), the 90th calendar day following the date on which an additional Registration Statement is required to be filed hereunder.   “Effectiveness Period” shall have the meaning set forth in Section 2(a).   “Event” shall have the meaning set forth in Section 2(b).   “Event Date” shall have the meaning set forth in Section 2(b).   “Filing Date” means, with respect to the Initial Registration Statement required hereunder, the 30th calendar day following the date hereof and, with respect to any additional Registration Statements which may be required pursuant to Section 3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.   to time of Registrable Securities.   “Indemnified Party” shall have the meaning set forth in Section 5(c).   “Indemnifying Party” shall have the meaning set forth in Section 5(c).       “Initial Registration Statement” means the initial Registration Statement filed   “Initial Shares” means a number of Registrable Securities equal to the lesser of (i) the total number of Registrable Securities and (ii) one-third of the number of issued and outstanding shares of Common Stock that are held by non-affiliates of the Company on the day immediately prior to the filing date of the Initial Registration Statement.   “Losses” shall have the meaning set forth in Section 5(a).   “Plan of Distribution” shall have the meaning set forth in Section 2(a).   statement in reliance upon Rule 430A promulgated by the Commission pursuant to Securities covered by a Registration Statement, and all other amendments and material incorporated by reference or deemed to be incorporated by reference in such Prospectus.   “Registrable Securities” means (i) all Shares, or (ii) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company).   “Registration Statement” means the registration statement required to be filed hereunder and any additional registration statements contemplated by Section 3(c), including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective deemed to be incorporated by reference in such registration statement. 2         “Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(a).   “SEC Guidance” means (i) any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff and (ii) the Securities Act.   2. Shelf Registration   (a)                 On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all or such maximum portion of the Registrable Securities as permitted by SEC Guidance (provided that the Company shall use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities) that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. The Registration registration shall be on another appropriate form in accordance herewith) and shall contain substantially the “Plan of Distribution” attached hereto as Annex A. Subject to the terms of this Agreement, the Company shall use commercially reasonable efforts to cause a Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement have been sold, or may be sold without volume restrictions pursuant to Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. New York City time on a Trading Day. The Company shall immediately notify the Holders via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. New York City time on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424. Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement shall be reduced by Registrable Securities represented by Shares applied to the Holders on a pro rata basis based on the total number of unregistered Shares held by such Holders. 3     (b)                 If: (i) the Initial Registration Statement is not filed on or prior to its Filing Date, or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within 15 Trading Days after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, or (iv) as to, in the aggregate among all Holders on a pro-rata basis based on their purchase of the Securities pursuant to the Purchase Agreement, a Registration Statement registering for resale all of the Initial Shares is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days (which need not be consecutive calendar days) during any 12-month period, or (vi) after the effective date of a Registration Statement, the Company is does not keep current with its Exchange Act reporting requirements for a period of twelve purposes of clause (i) and (iv) the date on which such Event occurs, and for purpose of clause (ii) the date on which such five Trading Day period is exceeded, and for purpose of clause (iii) the date which such 15 Trading Days is exceeded, and for purpose of clause (v) the date on which such 10 or 15 calendar day period, as applicable, is exceeded and for purpose of clause (vi) the date on which such failure occurs being referred to as “Event Date”), then, in aggregate (not to exceed 6% of the aggregate, in total) purchase price paid by such Holder pursuant to the Purchase Agreement for any unregistered Registrable Securities then held by such Holder. If the Company fails to pay any partial liquidated damages pursuant to this Section in full within ten Trading Days after the date payable, the Company will pay interest thereon at a rate of 8% shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event. 4         (a)                 Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex B (a “Selling Shareholder Questionnaire”) not less than five Trading Days prior to the Filing Date.   (b)                 (i) The Company shall prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.   (c)                 If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.   (d)                 The Company shall notify the Holders of Registrable possible (and, in the case of (i)(A) below, not less than one Trading Day prior writing no later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement; and (C) with same has become effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or (vi) of the occurrence or existence of any pending corporate development with Company to allow continued availability of a Registration Statement or Prospectus, provided, however, in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company. 5     (e)                 The Company shall use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.   (f)                  The Company shall furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system need not be furnished in physical form.   (g)                 Subject to the terms of this Agreement, the Company hereby Registrable Securities covered by such Prospectus and any amendment or 3(d). 6     (h)                 The Company shall cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as requested by any such Holder, and such broker-dealer shall pay the filing fee required by such filing within two (2) Business Days of request therefor.   (i)                   Prior to any resale of Registrable Securities by a Holder, the Company shall use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.   (j)                  If requested by a Holder, the Company shall cooperate with such Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.   (k)                 Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, the Company shall prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(k) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(b), for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12 month period. 7     (l)                   The Company shall comply with all applicable rules and regulations of the Commission.   (m)               The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.   without limitation, fees and expenses of the Company’s counsel and auditors) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (D) if not previously paid by the Company in connection with an Issuer Filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders. 8     5. Indemnification.   (a)                 Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and 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 each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, shareholders, partners, agents and employees (and any other Persons with a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based information relates to such Holder or such Holder’s proposed method of in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the prior to the receipt by such Holder of the Advice contemplated in Section 6(d). The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.   not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that such information relates to such Holder’s proposed method of in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto or (ii) in the case of In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. 9     (c)                 Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have prejudiced the Indemnifying Party.   and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. 10     Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is judicially determined to be not entitled to indemnification hereunder.   (d)                 Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in   considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required 11     Indemnified Parties.   6. Miscellaneous.   Holder of any of their respective obligations under this Agreement, each Holder damages, shall be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not adequate.   (b)                 No Piggyback on Registrations; Prohibition on Filing Other Registration Statements. Neither the Company nor any of its security holders of the Company in any Registration Statements other than the Registrable Securities. The Company shall not file any other registration statements (other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company's stock option or other employee benefit plans) until all Registrable Securities are registered pursuant to a Registration Statement that is declared effective by the Commission. The prohibitions of this Section 6(b) shall not be applicable to any registration rights obligations the Company may have or will have with broker-dealers in connection with the offering to Holders.   (c)                 .Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to a Registration Statement.   (d)                 Discontinued Disposition. By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will promptly as it practicable. The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 12     (e)                 Piggy-Back Registrations. If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its the Securities Act) or their then equivalents relating to equity securities to equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen days after the date of the delivery of such notice, any such Holder shall so request in writing, the Registrable Securities such Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 6(e) that are eligible for resale without volume or manner of sale restrictions pursuant to Rule 144 promulgated by the Commission pursuant to the Securities Act or that are the subject of a then effective Registration Statement.   (f)                  Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of a majority of the then outstanding Registrable Securities (including, for this purpose any Registrable Securities issuable upon exercise or conversion of any Security). If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(f).   (g)                 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.   the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement.   (i)                   No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as set forth on Schedule 6(i), neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full. 13     (j)                  Execution and Counterparts. This Agreement may be executed considered one and the same agreement and shall become effective when 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 executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.   (k)                 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.   (l)                   Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.   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.   only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.   (o)                 Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.   14       OPTIMIZERX CORPORATION     By:__________________________________________ Name: Title:          [SIGNATURE PAGE OF HOLDERS FOLLOWS]   15   [SIGNATURE PAGE OF HOLDERS]     Name of Holder: __________________________   Signature of Authorized Signatory of Holder: __________________________   Name of Authorized Signatory: _________________________   Title of Authorized Signatory: __________________________   16   Annex A   Plan of Distribution   sell any or all of their securities covered hereby on the OTC Bulletin Board, securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities: solicits purchasers; facilitate the transaction; its account; exchange; registration statement of which this prospectus is a part; security; whether through an options exchange or otherwise; ·a combination of any such methods of sale; or The Selling Stockholders may also sell securities under Rule 144 under the than under this prospectus. Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions markup or markdown in compliance with FINRA IM-2440. 17   Stockholders may enter into hedging transactions with broker-dealers or other securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to broker-dealers that in turn may sell these securities. The Selling Stockholders financial institutions or create one or more derivative securities which require financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the the aggregate, would exceed eight percent (8%). incident to the registration of the securities. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to underwriter or coordinating broker acting in connection with the proposed sale of the resale securities by the Selling Stockholders. which the securities may be resold by the Selling Stockholders without rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state the applicable state or an exemption from the registration or qualification requirement is available and is complied with. 18   Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and purchases and sales of securities of the common stock by the Selling Stockholders or any other person. We will make copies of this prospectus 19   Annex B OPTIMIZERX CORP.ORPORATED Selling Securityholder Notice and Questionnaire The undersigned beneficial owner of common stock (the “Registrable Securities”) of OptimizeRx Corp., a Nevada corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement. Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related prospectus. NOTICE The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement. The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate: QUESTIONNAIRE 1.Name. (a) Full Legal Name of Selling Securityholder   (b) Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:   (c) Full Legal Name of Natural Control Person (which means a natural person who securities covered by this Questionnaire):   20   2. Address for Notices to Selling Securityholder: Telephone: Fax: Contact Person:   3. Broker-Dealer Status: (a) Are you a broker-dealer? Yes No (b) If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company? Yes No Note: If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement. (c) Are you an affiliate of a broker-dealer? Yes No (d) If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities? Yes No Note: If “no” to Section 3(d), the Commission’s staff has indicated that you 4. Beneficial Ownership of Securities of the Company Owned by the Selling Securityholder. Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreement. 21   (a) Type and Amount of other securities beneficially owned by the Selling Securityholder: 5. Relationships with the Company: hereof at any time while the Registration Statement remains effective. contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus. duly authorized agent. Date: Beneficial Owner:   By: Name: Title:   PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO THE COMPANY 22        
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the references to our firm in the Post-Effective Amendment to the Registration Statement onFormN-1AofAdvisors Series Trustandtothe use of our report dated November 25, 2009 on the financial statements and financial highlights of Rigel U.S. Equity Large Cap Growth Fund, a series of Advisor Series Trust.Such financial statements and financial highlights appear in the 2009 Annual Report to Shareholders which is incorporated by reference into the Statement of Additional Information. /s/ TAIT, WELLER & BAKER
Name: Commission Regulation (EC) No 1131/2004 of 18 June 2004 establishing the standard import values for determining the entry price of certain fruit and vegetables Type: Regulation Date Published: nan 19.6.2004 EN Official Journal of the European Union L 219/1 COMMISSION REGULATION (EC) No 1131/2004 of 18 June 2004 establishing the standard import values for determining the entry price of certain fruit and vegetables THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to Commission Regulation (EC) No 3223/94 of 21 December 1994 on detailed rules for the application of the import arrangements for fruit and vegetables (1), and in particular Article 4(1) thereof, Whereas: (1) Regulation (EC) No 3223/94 lays down, pursuant to the outcome of the Uruguay Round multilateral trade negotiations, the criteria whereby the Commission fixes the standard values for imports from third countries, in respect of the products and periods stipulated in the Annex thereto. (2) In compliance with the above criteria, the standard import values must be fixed at the levels set out in the Annex to this Regulation, HAS ADOPTED THIS REGULATION: Article 1 The standard import values referred to in Article 4 of Regulation (EC) No 3223/94 shall be fixed as indicated in the Annex hereto. Article 2 This Regulation shall enter into force on 19 June 2004. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 18 June 2004. For the Commission J. M. SILVA RODRà GUEZ Agriculture Director-General (1) OJ L 337, 24.12.1994, p. 66. Regulation as last amended by Regulation (EC) No 1947/2002 (OJ L 299, 1.11.2002, p. 17). ANNEX to the Commission Regulation of 18 June 2004 establishing the standard import values for determining the entry price of certain fruit and vegetables (EUR/100 kg) CN code Third country code (1) Standard import value 0702 00 00 052 70,4 999 70,4 0707 00 05 052 111,0 999 111,0 0709 90 70 052 90,3 999 90,3 0805 50 10 388 68,2 508 51,4 528 64,4 999 61,3 0808 10 20, 0808 10 50, 0808 10 90 388 84,5 400 113,7 404 108,5 508 71,2 512 75,4 524 65,1 528 67,6 720 75,1 804 94,3 999 83,9 0809 10 00 052 292,2 624 221,0 999 256,6 0809 20 95 052 404,4 400 372,7 616 272,4 999 349,8 0809 30 10, 0809 30 90 052 135,3 624 175,1 999 155,2 0809 40 05 052 102,5 624 225,5 999 164,0 (1) Country nomenclature as fixed by Commission Regulation (EC) No 2081/2003 (OJ L 313, 28.11.2003, p. 11). Code 999 stands for of other origin.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-21719 INVESTMENT MANAGERS SERIES TRUST (Exact name of registrant as specified in charter) 803 W. Michigan Street Milwaukee, WI 53233 (Address of principal executive offices) (Zip code) Constance Dye Shannon UMB Fund Services, Inc. 803 W. Michigan Street Milwaukee, WI 53233 (Name and address of agent for service) (414) 299-2295 Registrant's telephone number, including area code Date of fiscal year end: November 30 Date of reporting period:November 30, 2012 Item 1. Report to Stockholders. The registrant’s semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows: Zacks All-Cap Core Fund (Class A:CZOAX) (Class C: CZOCX) Zacks Market Neutral Fund (Class A:ZMNAX) (Class C:ZMNCX) Zacks Small-Cap Core Fund (ZSCCX) ANNUAL REPORT November 30, 2012 www.zacksfunds.com Zacks All-Cap Core Fund Zacks Market Neutral Fund Zacks Small-Cap Core Fund a series of Investment Managers Series Trust Table of Contents Shareholder Letter 1 Fund Performance and Summary 5 Schedules of Investments 8 Statements of Assets and Liabilities 22 Statements of Operations 24 Statements of Changes in Net Assets 26 Statement of Cash Flows 29 Financial Highlights 30 Notes to Financial Statements 35 Report of Independent Registered Public Accounting Firm 42 Supplemental Information 43 Expense Example 47 This report and the financial statements contained herein are provided for the general information of the shareholders of the Zack All-Cap Core Fund, the Zacks Market Neutral Fund, and the Zacks Small-Cap Core Fund.This report is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective prospectus. Shareholder Letter Performance as of November 30, 2012 Average Annual Total Returns One Year One Year Since Inception1 Since Inception1 Ticker With Sales Load Without Sales Load With Sales Load Without Sales Load Zacks All-Cap Core Fund Class A CZOAX 6.11% 12.58% 2.41% 3.28% Russell 3000 Index2 n/a 15.95% n/a 4.02% Gross Expense Ratio3: 2.03% Zacks Market Neutral Fund Class A ZMNAX -4.06% 1.78% -3.30% -1.97% Citigroup 3-Month T-Bill Index2 n/a 0.07% n/a 0.22% Gross Expense Ratio3: 4.52% One Year One Year Since Inception1 Since Inception1 With Sales Load Without Sales Load With Sales Load Without Sales Load Zacks Small-Cap Core Fund ZSCCX n/a 17.33% n/a 6.02% Russell 2000 Index2 n/a 13.09% n/a 0.96% Gross Expense Ratio3:229.27% The performance data quoted here represents past performance and past performance is not a guarantee of future results.Investment return and principal value will fluctuate so that an investor’s shares when redeemed may be worth more or less than their original cost.Current performance may be lower or higher than the performance information quoted.To obtain performance information current to the most recent month-end, please call 1-888-453-4003. 1. The inception date of the Zacks All-Cap Core Fund (formerly known as the Zacks Multi-Cap Opportunities Fund) is December 5, 2005.The inception date of the Zacks Market Neutral Fund is July 24, 2008.The inception date of the Zacks Small-Cap Core Fund is June 30, 2011. 2. The Russell 3000 Index is a broadly diversified and unmanaged index that tracks the performance of approximately 3,000 of the largest publicly-traded U.S. stocks. The Citigroup 3-Month T-Bill Index consists of equal dollar amounts of three-month Treasury bills that are purchased at the beginning of each of three consecutive months. As each bill matures, all proceeds are rolled over or reinvested in a new three-month bill. Index returns reflect the reinvestment of all distributions.The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe.The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index.It is not possible to invest directly in an index. 3. Zacks Investment Management, Inc. has contractually agreed to waive a portion of its advisory fees and/or assume certain expenses so that Total Annual Fund Operating Expenses for each Fund do not exceed 1.65% with respect to Class A Shares for the Zacks All-Cap Core Fund and the Zacks Market Neutral Fund and does not exceed 1.39% for the Zacks Small-Cap Core Fund. A 2.00% redemption fee may apply for Fund Shares redeemed within 30 days of purchase.The maximum sales charge for Class A Shares of each Fund is 5.75%.The performance returns reflect a fee waiver in effect and without the fee waiver, returns would have been reduced. Performance of Fund classes will differ. The Zacks Funds are distributed by IMST Distributors, LLC.This material must be preceded or accompanied by a current prospectus. 1 Dear Shareholders: We are pleased to provide the annual report for the Zacks Market Neutral Fund, Zacks All-Cap Core Fund and the Zacks Small-Cap Core Fund for the one year period ending November 30, 2012. During the past year the firm has maintained its investment methodology of using earnings estimate revisions in the investment process which seeks to generate returns in excess of the funds’ benchmarks. Market Neutral Fund The Zacks Market Neutral Fund put in a respectable showing for the one year period. The 1.78% net return compares favorably to the Citigroup 3-month T-Bill benchmark, which returned 0.07% for the same period. In the first half of 2012 equities were much more sensitive to earnings data than they were in the second half of 2012. Market catalyst in the second half of 2012 were headline driven (i.e. Political and fiscal uncertainty), which led to the Funds underperformance due to our process which identifies opportunity based on fundamentals. This type of investment environment produced a high degree of correlation among U.S. stocks and asset classes in general. Zacks continues to maintain complete market neutrality striving to avoid even the slightest exposures. This strategy tends to do well relative to its benchmark in market environments that are dictated by corporate earnings and fundamentals which was evident in the performance during the first half of the year. We will continue to execute our market neutral process where we are long stocks with improving fundamentals and short stocks with deterioration fundamentals. All-Cap Core Fund The Zacks All-Cap Core Fund, net of fees and expenses, returned 12.58 % for the year. The fund trailed its Benchmark, the Russell 3000, which returned 15.95 %. Similar to the Market Neutral Fund, equity selection is based on both earnings and fundamental models. Thus, the first half of the year produced stronger returns than the second half. We continue to believe that identifying companies that have high scores within our ranking methodology, possess distinct competitive advantages, receive consistent upward earnings and revenue estimate revisions and have improving fundamentals, will allow us to generate excess risk adjusted returns relative to our benchmark over full market cycles. Small-Cap Core Fund Zacks Small-Cap Core Fund handily beats 17.33% compared to its benchmark the Russell 2000 which returned 13.09%. 2 The period was marked by financial and political uncertainties in both the US and abroad. The timely actions of central banks in the US and Europe, and expectations for steady improvement in the US economy, kept the markets relatively calm. If the market gains more confidence that the US economy will continue on its growth path, and the central banks remain supportive of the markets, increased risk appetite on part of investors would continue to produce better returns for small-cap stocks. Conclusion The overall U.S. financial market backdrop remains positive. Valuations remain attractive for stocks, the world economy appears headed towards more growth, and the risks from event-driven politics appear to be falling away. We remain bullish on U.S. equities in 2013, as equities remain attractive based on relative valuations compared to bonds. Sincerely, Ben Zacks Mitchell Zacks Portfolio Co-Manager Portfolio Co-Manager Zacks Funds Zacks Funds 3 Risks and Other Considerations The views expressed in this report reflect those of the portfolio managers only through the report period as stated on the cover. These views are subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any kind. The material may also contain forward looking statements that involve risk and uncertainty, and there is no guarantee they will come to pass. Investment Risk. An investment in the Funds is subject to risks, and you could lose money on your investment. There can be no assurance that a Fund will achieve its investment objective. Equity Risk. A principal risk of investing in the Funds is equity risk, which is the risk that the value of the securities held by a Fund will fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by a Fund participate, or factors relating to specific companies in which a Fund invests. Risks of Mid-Cap and Small-Cap Companies. The securities of small-cap or mid-cap companies may be subject to more abrupt or erratic market movements and may have lower trading volumes or more erratic trading than securities of larger companies or the market averages in general. In addition, such companies typically are subject to a greater degree of change in earnings and business prospects than are larger, more established companies. Income and Distribution Risk. The income that shareholders receive from a Fund through annual distributions is based primarily on the dividends and interest the Fund earns from its investments. Dividend payments a Fund receives can vary widely and there is no guarantee that they will be paid at all. Foreign Investment Risk. Although the Funds will limit their investment in securities of foreign issuers to ADRs and Canadian issuers, a Fund’s investment in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. Adverse political, economic or social developments could undermine the value of a Fund’s investments or prevent a Fund from realizing the full value of its investments. Short Sales Risk.As part of its investment strategies, the Zacks Market Neutral Fund will sell stocks short.There are risks involved in selling stock short including the possibility that the Fund may not be able to close out a short position at a particular time or at a particular price.The Fund’s loss on a short sale is limited only by the maximum attainable price of the security (which could be limitless) less the price the Fund paid for the security at the time it was borrowed. Please refer to the prospectus for more complete risk information.In addition to the risks described, there are certain other risks related to investing in the Funds. These risks are described further in the Prospectus and Statement of Additional Information. Past Performance is no guarantee of future results. Performance shown represents that of the Fund’s Class A Shares at NAV. 4 Zacks All-Cap Core Fund FUND PERFORMANCE AND SUMMARY at November 30, 2012 This graph compares a hypothetical $10,000 investment in the Fund’s Class A shares, made at its inception and including payment of the maximum sales charge of 5.75%, with a similar investment in the Russell 3000 Index. Results include the reinvestment of all dividends and capital gains. Results for the Fund’s Class C shares would be different. The Russell 3000 Index is a broad representation of the U.S. equity market. The index does not reflect expenses, fees or sales charge, which would lower performance. The index is unmanaged and is not possible to invest in an index. Average Annual Total Returns as of November 30, 2012 Share Class One Year Three Years* Five Years* Since Inception* (12/5/05) Unadjusted for sales charges or CDSC Class A 12.58% 10.58% -0.15% 3.28% Class C 11.72% 9.75% -0.88% 2.51% Adjusted for the maximum sales charge or CDSC Class A 6.11% 8.42% -1.33% 2.41% Class C 10.72% 9.75% -0.88% 2.51% Russell 3000 Index 15.95% 11.80% 1.67% 4.02% *AnnualizedReturn The performance data quoted here represents past performance and past performance is not a guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or less than their original cost.Current performance may be lower or higher than the performance information quoted and may be obtained by calling 1-888-453-4003 or by visiting www.zacksfunds.com. Gross and net expense ratios for Class A shares are 2.03% and 1.66% respectively, and for the Class C shares are 2.78% and 2.41% respectively, which are the amounts stated in the current prospectus.The Advisor has contractually waived fees through April 1, 2015 (when it will automatically renew for an additional one year period.) Total returns adjusted for the maximum sales charge or CDSC reflect payment of the maximum sales charge of 5.75% for Class A shares and the contingent deferred sales charge of 1.00% for Class C shares if redeemed within 12 months of purchase and 0.50% if Class C shares are redeemed during months 13-18. The total returns of individual share classes will differ due to varying sales charges and expenses between the classes. Returns reflect the reinvestment of distributions made by the Fund, if any. The deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares is not reflected in the total returns Shares redeemed within 30 days of purchase will be charged 2.00% redemption fee. The Advisor has waived fees or expenses; absent such waivers, the Fund's returns would have been lower. 5 Zacks Market Neutral Fund FUND PERFORMANCE AND SUMMARY at November 30, 2012 This graph compares a hypothetical $10,000 investment in the Fund’s Class A shares, made at its inception and including payment of the maximum sales charge of 5.75%, with a similar investment in the Citigroup 3 Month T-Bill Index. Results include the reinvestment of all dividends and capital gains. Results for the Fund’s Class C shares would be different. The Citigroup 3 Month T-Bill Index consists of equal dollar amounts of three-months Treasury bills that are purchased at the beginning of each of three consecutive months. As of each bill matures, all proceeds are rolled over or reinvested in a new three-month bill. It is not possible to invest directly in an index.Performance for the Citigroup 3 Month T-Bill Index is not available from 7/24/08 (the Fund’s inception date). For that reason, performance for the benchmark is shown from July 31, 2008. The index does not reflect expenses, fees or sales charge, which would lower performance. The index is unmanaged and is not possible to invest in an index. Average Annual Total Returns as of November 30, 2012 Share Class One Year Two Years* Three Years* Since Inception* (7/24/08) Unadjusted for sales charges or CDSC Class A 1.78% 2.98% 1.76% -1.97% Class C 1.07% 2.22% 1.03% -2.68% Adjusted for the maximum sales charge or CDSC Class A -4.06% -0.04% -0.22% -3.30% Class C 0.07% 2.22% 1.03% -2.68% Citigroup 3 Month T-Bill Index 0.07% 0.08% 0.09% 0.22% * Annualized Return The performance data quoted here represents past performance and past performance is not a guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or less than their original cost.Current performance may be lower or higher than the performance information quoted and may be obtained by calling 1-888-453-4003 or by visiting www.zacksfunds.com. Gross and net expense ratios for Class A shares are 4.52% and 4.22% respectively, and for the Class C shares are 5.27% and 4.97% respectively, which are the amounts stated in the current prospectus.The Advisor has contractually waived fees through April 1, 2015. Total returns adjusted for the maximum sales charge or CDSC reflect payment of the maximum sales charge of 5.75% for Class A shares and the contingent deferred sales charge of 1.00% for Class C shares if redeemed within 12 months of purchase and 0.50% if Class C shares are redeemed during months 13-18. The total returns of individual share classes will differ due to varying sales charges and expenses between the classes. Returns reflect the reinvestment of distributions made by the Fund, if any. The deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares is not reflected in the total returns Shares redeemed within 30 days of purchase will be charged 2.00% redemption fee. The Advisor has waived fees or expenses; absent such waivers, the Fund's returns would have been lower. 6 Zacks Small-Cap Core Fund FUND PERFORMANCE AND SUMMARY at November 30, 2012 This graph compares a hypothetical $10,000 investment in the Fund, made at its inception with a similar investment in the Russell 2000 Index.Results include reinvestment of all dividends and capital gains. The Russell 2000 Value measures the performance of the small-cap value segment of the U.S. equity universe. This Index does not reflect expenses, fees or sales charge, which would lower performance. This Index is unmanaged and it is not possible to invest in this Index. Total Returns as of November 30, 2012 One Year Since Inception* 6/30/11 Zacks Small-Cap Core Fund 17.33% 6.02% Russell 2000 Index 13.09% 0.96% *Annualized Return The performance data quoted here represents past performance and past performance is not a guarantee of future results.Investment return and principal will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.Current performance may be lower or higher than the performance quoted and may be obtained by calling 1-888-453-4003 or by visiting www.zacksfunds.com. Gross and Net Expense Ratio for the Fund are 229.27% and 1.39% which are the amounts stated in the current prospectus as of the date of this report.The contractual fee waivers are in effect through April 1, 2015, and it may be terminated by the Trust’s Board of Trustees. Returns reflect the reinvestment of distributions made by the Fund and do not reflect the deduction of taxes a shareholder would pay on the Fund distributions or the redemption of Fund shares. Shares redeemed within 30 days of purchase will be charged 2.00% redemption fee. The Fund's advisor has waived fees or expenses; absent such waivers, the Fund's returns would have been lower. 7 Zacks All-Cap Core Fund SCHEDULE OF INVESTMENTS As of November 30, 2012 Number of Shares Value COMMON STOCKS – 98.0% CONSUMER DISCRETIONARY – 9.5% Ethan Allen Interiors, Inc. $ Home Depot, Inc. Macy's, Inc. Mattel, Inc. MDC Holdings, Inc. Ross Stores, Inc. Scholastic Corp. Time Warner, Inc. Ulta Salon Cosmetics & Fragrance, Inc. Walt Disney Co. CONSUMER STAPLES – 13.9% Coca-Cola Co. Colgate-Palmolive Co. Dr. Pepper Snapple Group, Inc. Energizer Holdings, Inc. H.J. Heinz Co. Hain Celestial Group, Inc.* Hershey Co. Ingredion, Inc. Kimberly-Clark Corp. Kroger Co. McCormick & Co., Inc. Wal-Mart Stores, Inc. ENERGY – 9.9% Apache Corp. Chevron Corp. Clean Energy Fuels Corp.* Ensco PLC - Class A Exxon Mobil Corp. Marathon Oil Corp. Oil States International, Inc.* Royal Dutch Shell PLC - ADR Schlumberger Ltd. FINANCIALS – 14.8% American Express Co. Ares Capital Corp. BlackRock, Inc. 8 Zacks All-Cap Core Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value COMMON STOCKS (Continued) FINANCIALS (Continued) Citigroup, Inc. $ East West Bancorp, Inc. Hospitality Properties Trust - REIT Jones Lang LaSalle, Inc. JPMorgan Chase & Co. Marsh & McLennan Cos., Inc. MetLife, Inc. Rayonier, Inc. - REIT Travelers Cos., Inc. U.S. Bancorp HEALTH CARE – 12.6% Air Methods Corp.* Amgen, Inc. Bio-Reference Labs, Inc.* Community Health Systems, Inc.* Hanger, Inc.* McKesson Corp. Merck & Co., Inc. Myriad Genetics, Inc.* Perrigo Co. Pfizer, Inc. Sirona Dental Systems, Inc.* Teva Pharmaceutical Industries Ltd. - ADR Watson Pharmaceuticals, Inc.* INDUSTRIALS – 7.8% A.O. Smith Corp. Applied Industrial Technologies, Inc. Cintas Corp. Flowserve Corp. Hubbell, Inc. - Class B MasTec, Inc.* Middleby Corp.* Snap-on, Inc. United Parcel Service, Inc. - Class B Wabtec Corp. INFORMATION TECHNOLOGY – 18.5% 3D Systems Corp.* 9 Zacks All-Cap Core Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value COMMON STOCKS (Continued) INFORMATION TECHNOLOGY (Continued) Akamai Technologies, Inc.* $ Apple, Inc. Broadcom Corp. - Class A eBay, Inc.* EMC Corp.* FEI Co. Google, Inc. - Class A* IAC/InterActiveCorp International Business Machines Corp. Mentor Graphics Corp.* Microsemi Corp.* Nuance Communications, Inc.* QUALCOMM, Inc. RADWARE Ltd.* Sourcefire, Inc.* Splunk, Inc. Teradata Corp.* TIBCO Software, Inc.* MATERIALS – 4.0% Ashland, Inc. Barrick Gold Corp. Monsanto Co. PPG Industries, Inc. TELECOMMUNICATION SERVICES – 3.1% AT&T, Inc. Vodafone Group PLC - ADR UTILITIES – 3.9% American States Water Co. California Water Service Group Northeast Utilities Pinnacle West Capital Corp. Westar Energy, Inc. TOTAL COMMON STOCKS (Cost $21,578,480) 10 Zacks All-Cap Core Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value EXCHANGE-TRADED FUNDS – 0.7% SPDR S&P Regional Banking ETF $ TOTAL EXCHANGE-TRADED FUNDS (Cost $201,987) Principal Amount SHORT-TERM INVESTMENTS – 1.1% $ UMB Money Market Fiduciary Fund, 0.01%1 TOTAL SHORT-TERM INVESTMENTS (Cost $299,571) TOTAL INVESTMENTS – 99.8% (Cost $22,080,038) Other Assets in Excess of Liabilities – 0.2% Total Net Assets – 100.0% $ ADR – American Depository Receipt PLC – Public Limited Company REIT – Real Estate Investment Trust * Non-income producing security. 1 The rate is the annualized seven-day yield at period end. See accompanying Notes to Financial Statements. 11 Zacks All-Cap Core Fund SUMMARY OF INVESTMENTS As of November 30, 2012 Security Type/Sector Percent of Total Net Assets Common Stocks Information Technology 18.5% Financials 14.8% Consumer Staples 13.9% Health Care 12.6% Energy 9.9% Consumer Discretionary 9.5% Industrials 7.8% Materials 4.0% Utilities 3.9% Telecommunication Services 3.1% Total Common Stocks 98.0% Exchange-Traded Funds 0.7% Short-Term Investments 1.1% Total Investments 99.8% Other Assets in Excess of Liabilities 0.2% Total Net Assets 100.0% See accompanying Notes to Financial Statements. 12 Zacks Market Neutral Fund SCHEDULE OF INVESTMENTS As of November 30, 2012 Number of Shares Value COMMON STOCKS – 86.0% CONSUMER DISCRETIONARY – 16.8% Dick's Sporting Goods, Inc.1 $ Foot Locker, Inc.1 Grupo Televisa S.A.B. - ADR1 Leggett & Platt, Inc.1 Lennar Corp. - Class A1 Lowe's Cos., Inc.1 Macy's, Inc.1 Mattel, Inc.1 Polaris Industries, Inc.1 Ross Stores, Inc.1 TJX Cos., Inc.1 VF Corp.1 Whirlpool Corp.1 CONSUMER STAPLES – 9.9% Coca-Cola Co.1 Green Mountain Coffee Roasters, Inc.*1 H.J. Heinz Co.1 Hain Celestial Group, Inc.*1 Hershey Co.1 Ingredion, Inc.1 Kroger Co.1 ENERGY – 0.8% Tenaris S.A. - ADR1 FINANCIALS – 4.4% Hospitality Properties Trust - REIT1 Rayonier, Inc. - REIT1 SLM Corp.1 U.S. Bancorp1 HEALTH CARE – 13.1% Abbott Laboratories1 Amgen, Inc.1 Bio-Rad Laboratories, Inc. - Class A*1 Community Health Systems, Inc.*1 Cyberonics, Inc.*1 — Express Scripts Holding Co.*1 1 McKesson Corp.1 13 Zacks Market Neutral Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value COMMON STOCKS (Continued) HEALTH CARE (Continued) Merck & Co., Inc.1 $ Orthofix International N.V.*1 Teva Pharmaceutical Industries Ltd. - ADR1 Thermo Fisher Scientific, Inc.1 UnitedHealth Group, Inc.1 INDUSTRIALS – 15.6% Celadon Group, Inc.1 Deere & Co.1 Deluxe Corp.1 Granite Construction, Inc.1 Healthcare Services Group, Inc.1 IDEX Corp.1 Kirby Corp.*1 Snap-on, Inc.1 Teledyne Technologies, Inc.*1 Textainer Group Holdings Ltd.1 UniFirst Corp.1 Union Pacific Corp.1 United Parcel Service, Inc. - Class B1 United Technologies Corp.1 W.W. Grainger, Inc.1 INFORMATION TECHNOLOGY – 17.3% Apple, Inc.1 Broadridge Financial Solutions, Inc.1 Check Point Software Technologies Ltd.*1 EMC Corp.*1 Fair Isaac Corp.1 Google, Inc. - Class A*1 Intel Corp.1 International Business Machines Corp.1 Liquidity Services, Inc.*1 Nuance Communications, Inc.*1 Procera Networks, Inc.*1 QUALCOMM, Inc. 1 Symantec Corp.*1 Synopsys, Inc.*1 TIBCO Software, Inc.*1 Total System Services, Inc. 1 14 Zacks Market Neutral Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value COMMON STOCKS (Continued) INFORMATION TECHNOLOGY (Continued) Trimble Navigation Ltd.*1 $ MATERIALS – 4.5% Eastman Chemical Co. 1 Harry Winston Diamond Corp.*1 Packaging Corp. of America1 TELECOMMUNICATION SERVICES – 2.6% AT&T, Inc. 1 Vodafone Group PLC - ADR1 UTILITIES – 1.0% NorthWestern Corp. 1 TOTAL COMMON STOCKS (Cost $27,562,406) EXCHANGE-TRADED FUNDS – 0.8% iShares Russell 2000 Value Index Fund1 TOTAL EXCHANGE-TRADED FUNDS (Cost $267,776) Principal Amount SHORT-TERM INVESTMENTS – 14.8% $ UMB Money Market Fiduciary Fund, 0.01%1,2 TOTAL SHORT-TERM INVESTMENTS (Cost $5,556,749) TOTAL INVESTMENTS – 101.6% (Cost $33,386,931) Liabilities in Excess of Other Assets – (1.6)% ) TOTAL NET ASSETS – 100.0% $ Number of Shares SECURITIES SOLD SHORT – 87.3% COMMON STOCKS – 83.4% CONSUMER DISCRETIONARY – 18.4% ) AutoZone, Inc.* ) 15 Zacks Market Neutral Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value SECURITIES SOLD SHORT (Continued) COMMON STOCKS (Continued) CONSUMER DISCRETIONARY (Continued) ) Bravo Brio Restaurant Group, Inc.* $ ) ) Chipotle Mexican Grill, Inc.* ) ) Deckers Outdoor Corp.* ) ) Family Dollar Stores, Inc. ) ) Finish Line, Inc. - Class A ) ) Johnson Controls, Inc. ) ) Kohl's Corp. ) ) Lululemon Athletica, Inc.* ) ) National CineMedia, Inc. ) ) New Oriental Education & Technology Group - ADR ) ) Nordstrom, Inc. ) ) NVR, Inc.* ) ) Ralph Lauren Corp. ) ) Staples, Inc. ) ) Thomson Reuters Corp. ) ) CONSUMER STAPLES – 9.4% ) Campbell Soup Co. ) ) Cia de Bebidas das Americas - ADR ) ) Hormel Foods Corp. ) ) Kellogg Co. ) ) Monster Beverage Corp.* ) ) Post Holdings, Inc. ) ) Safeway, Inc. ) ) Sanderson Farms, Inc. ) ) ENERGY – 1.4% ) Cameco Corp. ) ) McMoRan Exploration Co.* ) ) Targa Resources Corp. ) ) FINANCIALS – 3.4% ) American International Group, Inc.* ) ) Banco Santander S.A. - ADR ) ) MSCI, Inc.* ) ) HEALTH CARE – 12.5% ) Alere, Inc.* ) 16 Zacks Market Neutral Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value SECURITIES SOLD SHORT (Continued) COMMON STOCKS (Continued) HEALTH CARE (Continued) ) Align Technology, Inc.* $ ) ) AstraZeneca PLC - ADR ) ) Baxter International, Inc. ) ) Becton, Dickinson and Co. ) ) Health Management Associates, Inc. - Class A* ) ) Owens & Minor, Inc. ) ) Quest Diagnostics, Inc. ) ) Sanofi - ADR ) ) Valeant Pharmaceuticals International, Inc.* ) ) WellPoint, Inc. ) ) INDUSTRIALS – 15.8% ) AECOM Technology Corp.* ) ) Albany International Corp. - Class A ) ) Canadian National Railway Co. ) ) CLARCOR, Inc. ) ) Colfax Corp.* ) ) CSX Corp. ) ) Donaldson Co., Inc. ) ) Eaton Corp. ) ) EMCOR Group, Inc. ) ) Fastenal Co. ) ) Forward Air Corp. ) ) General Dynamics Corp. ) ) Heartland Express, Inc. ) ) Pitney Bowes, Inc. ) ) Republic Services, Inc. ) ) Rockwell Collins, Inc. ) ) INFORMATION TECHNOLOGY – 15.9% ) Arris Group, Inc.* ) ) Autodesk, Inc.* ) ) Cognizant Technology Solutions Corp. - Class A* ) ) Dell, Inc. ) ) Fairchild Semiconductor International, Inc.* ) ) Gartner, Inc.* ) ) Harris Corp. ) ) Infosys Ltd. - ADR ) ) Jabil Circuit, Inc. ) ) Logitech International S.A. ) 17 Zacks Market Neutral Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value SECURITIES SOLD SHORT (Continued) COMMON STOCKS (Continued) INFORMATION TECHNOLOGY (Continued) ) Microchip Technology, Inc. $ ) ) SAIC, Inc. ) ) SAP A.G. - ADR ) ) Skyworks Solutions, Inc.* ) ) Solera Holdings, Inc. ) ) Taiwan Semiconductor Manufacturing Co., Ltd. - ADR ) ) VeriSign, Inc.* ) ) MATERIALS – 3.7% ) Buckeye Technologies, Inc. ) ) Domtar Corp. ) ) International Flavors & Fragrances, Inc. ) ) Scotts Miracle-Gro Co. - Class A ) ) TELECOMMUNICATION SERVICES – 1.9% ) America Movil S.A.B. de C.V. - ADR ) ) Telefonica S.A. - ADR ) ) Windstream Corp. ) ) UTILITIES – 1.0% ) Exelon Corp. ) TOTAL COMMON STOCKS (Proceeds $31,650,724) ) EXCHANGE-TRADED FUNDS – 3.9% ) Materials Select Sector SPDR Fund ) ) Powershares QQQ Trust Series 1 ) ) SPDR S&P Metals & Mining ETF ) ) SPDR S&P Pharmaceuticals ETF ) TOTAL EXCHANGE-TRADED FUNDS (Proceeds $1,472,911) ) TOTAL SECURITIES SOLD SHORT (Proceeds $33,123,635) $ ) ADR – American Depository Receipt PLC – Public Limited Company REIT – Real Estate Investment Trust * Non-income producing security. 1 Long security positions with a value of $38,111,463 have been segregated in connection with securities sold short. 2 The rate is the annualized seven-day yield at period end. See accompanying Notes to Financial Statements. 18 Zacks Market Neutral Fund SUMMARY OF INVESTMENTS As of November 30, 2012 Security Type/Sector Percent of Total Net Assets Common Stocks Information Technology 17.3% Consumer Discretionary 16.8% Industrials 15.6% Health Care 13.1% Consumer Staples 9.9% Materials 4.5% Financials 4.4% Telecommunication Services 2.6% Utilities 1.0% Energy 0.8% Total Common Stocks 86.0% Exchange-Traded Funds 0.8% Short-Term Investments 14.8% Total Investments 101.6% Liabilities in Excess of Other Assets (1.6)% Total Net Assets 100.0% See accompanying Notes to Financial Statements. 19 Zacks Small-Cap Core Fund SCHEDULE OF INVESTMENTS As of November 30, 2012 Number of Shares Value COMMON STOCKS – 98.9% CONSUMER DISCRETIONARY – 18.1% Big 5 Sporting Goods Corp. $ Carriage Services, Inc. 52 Churchill Downs, Inc. Culp, Inc. Fisher Communications, Inc. Flexsteel Industries, Inc. Global Sources Ltd.* Interval Leisure Group, Inc. Isle of Capri Casinos, Inc.* Journal Communications, Inc. - Class A* LIN TV Corp. - Class A* Luby's, Inc.* Marine Products Corp. Papa John's International, Inc.* Saga Communications, Inc. - Class A Shiloh Industries, Inc. Shoe Carnival, Inc. Standard Motor Products, Inc. Stein Mart, Inc.* CONSUMER STAPLES – 3.5% Farmer Bros Co.* Fresh Del Monte Produce, Inc. Prestige Brands Holdings, Inc.* Revlon, Inc. - Class A* ENERGY – 0.9% CVR Energy, Inc.* Delek U.S. Holdings, Inc. FINANCIALS – 26.7% Baldwin & Lyons, Inc. - Class B Calamos Asset Management, Inc. - Class A Credit Acceptance Corp.* Donegal Group, Inc. - Class A Eagle Bancorp, Inc.* EMC Insurance Group, Inc. Epoch Holding Corp. Fidelity Southern Corp. Financial Institutions, Inc. 20 Zacks Small-Cap Core Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value COMMON STOCKS (Continued) FINANCIALS (Continued) First Defiance Financial Corp. $ GAMCO Investors, Inc. - Class A Global Indemnity PLC* Investors Bancorp, Inc. JMP Group, Inc. KCAP Financial, Inc. Lakeland Financial Corp. Merchants Bancshares, Inc. MetroCorp Bancshares, Inc.* 44 ProAssurance Corp. Safety Insurance Group, Inc. Sterling Financial Corp. United Fire Group, Inc. Washington Trust Bancorp, Inc. HEALTH CARE – 5.5% National Healthcare Corp. Select Medical Holdings Corp.* SurModics, Inc.* Utah Medical Products, Inc. INDUSTRIALS – 24.5% Amerco, Inc. American Railcar Industries, Inc.* American Woodmark Corp.* Apogee Enterprises, Inc. 1 Astronics Corp. - Class B* 23 Barrett Business Services, Inc. CAI International, Inc.* CDI Corp. Columbus McKinnon Corp.* Cubic Corp. DXP Enterprises, Inc.* Federal Signal Corp.* Generac Holdings, Inc. GP Strategies Corp.* H&E Equipment Services, Inc. Hurco Cos., Inc.* 58 Kadant, Inc.* Kimball International, Inc. - Class B 63 LB Foster Co. - Class A 21 Zacks Small-Cap Core Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value COMMON STOCKS (Continued) INDUSTRIALS (Continued) Lydall, Inc.* $ 77 NACCO Industries, Inc. - Class A On Assignment, Inc.* 98 Patrick Industries, Inc.* Pike Electric Corp.* Powell Industries, Inc.* Rollins, Inc. Steelcase, Inc. - Class A Sypris Solutions, Inc. Textainer Group Holdings Ltd. TRC Cos., Inc.* U.S. Ecology, Inc. UniFirst Corp. INFORMATION TECHNOLOGY – 16.0% Aeroflex Holding Corp.* Agilysys, Inc.* Bel Fuse, Inc. - Class B Daktronics, Inc. DSP Group, Inc.* Electronics for Imaging, Inc.* EPIQ Systems, Inc. ePlus, Inc.* Exar Corp.* Guidance Software, Inc.* IntraLinks Holdings, Inc.* Move, Inc.* Oplink Communications, Inc.* PC-Tel, Inc. PDF Solutions, Inc.* Pervasive Software, Inc.* SS&C Technologies Holdings, Inc.* Syntel, Inc. Virtusa Corp.* MATERIALS – 2.5% Chase Corp. Landec Corp.* Tredegar Corp. 22 Zacks Small-Cap Core Fund SCHEDULE OF INVESTMENTS – Continued As of November 30, 2012 Number of Shares Value COMMON STOCKS (Continued) UTILITIES – 1.2% Southwest Gas Corp. $ TOTAL COMMON STOCKS (Cost $1,252,805) Principal Amount SHORT-TERM INVESTMENTS – 3.8% $ UMB Money Market Fiduciary Fund, 0.01%1 TOTAL SHORT-TERM INVESTMENTS (Cost $49,589) TOTAL INVESTMENTS – 102.7% (Cost $1,302,394) Liabilities in Excess of Other Assets – (2.7)% ) TOTAL NET ASSETS – 100.0% $ PLC – Public Limited Company * Non-income producing security. 1 The rate is the annualized seven-day yield at period end. See accompanying Notes to Financial Statements. 23 Zacks Small-Cap Core Fund SUMMARY OF INVESTMENTS As of November 30, 2012 Security Type/Sector Percent of Total Net Assets Common Stocks Financials 26.7% Industrials 24.5% Consumer Discretionary 18.1% Information Technology 16.0% Health Care 5.5% Consumer Staples 3.5% Materials 2.5% Utilities 1.2% Energy 0.9% Total Common Stocks 98.9% Short-Term Investments 3.8% Total Investments 102.7% Liabilities in Excess of Other Assets (2.7)% Total Net Assets 100.0% See Accompanying Notes to Financial Statements. 24 Zacks Funds STATEMENT OF ASSETS AND LIABILITIES As of November 30, 2012 All-Cap Core Fund Market Neutral Fund Assets: Investments in securities, at value (cost $22,080,038 and $33,386,931) $ $ Cash — Cash deposited with broker for securities sold short — Receivables: Fund shares sold — Investment securities sold Dividends and interest Prepaid expenses Total assets Liabilities: Securities sold short, at value (proceeds $0 and $33,123,635) — Dividends and interest on securities sold short — Payables: Investment securities purchased — Fund shares redeemed — Advisory fees Distribution plan (Note 6) Auditing fees Fund accounting fees Transfer agent fees and expenses Custody fees Fund administration fees Trustees' fees and expenses Chief Compliance Officer fees Due to Custodian — Accrued other expenses Total liabilities Net Assets $ $ Components of Net Assets: Capital (par value of $0.01 per share with an unlimited number of shares authorized) $ $ Accumulated net investment income (loss) ) Accumulated net realized loss on investments and securities sold short ) ) Net unrealized appreciation on: Investments Securities sold short — Net Assets $ $ Maximum Offering Price per Share: Class A: Net assets applicable to shares outstanding $ $ Shares of beneficial interest issued and outstanding Redemption price per share $ $ Maximum sales charge (5.75% of offering price)* Maximum offering price per share $ $ Class C: Net assets applicable to shares outstanding $ $ Shares of beneficial interest issued and outstanding Offering and redemption price per share** $ $ * On sales of $50,000 or more, the sales charge will be reduced. ** Class C Shares of the Fund are subject to a Contingent Deferred Sales Charge (“CDSC”) of 1.00% on any shares sold within 12 months of owning them and 0.50% during months 13-18. See accompanying Notes to Financial Statements. 25 Zacks Funds STATEMENT OF ASSETS AND LIABILITIES As of November 30, 2012 Small-Cap Core Fund Assets: Investments in securities, at value (cost $1,302,394) $ Receivables: Investment securities sold Dividends and interest From Advisor Prepaid expenses Total assets Liabilities: Payables: Investment securities purchased Distribution plan (Note 6) Auditing fees Offering costs Fund administration fees Fund accounting fees Transfer agent fees and expenses Custody fees Trustees' fees and expenses Chief Compliance Officer fees Accrued other expenses Total liabilities Net Assets $ Components of Net Assets: Capital (par value of $0.01 per share with an unlimited number of shares authorized) $ Accumulated net investment income Accumulated net realized gain on investments Net unrealized appreciation on investments Net Assets $ Shares of beneficial interest issued and outstanding Offering and redemption price per share $ See accompanying Notes to Financial Statements. 26 Zacks Funds STATEMENT OF OPERATIONS For the Year Ended November 30, 2012 All-Cap Core Fund Market Neutral Fund Investment Income: Dividends (net of foreign withholding taxes of $2,963 and $823) $ $ Interest 68 Total investment income Expenses: Advisory fees Distribution fees - Class C (Note 6) Distribution fees - Class A (Note 6) Fund administration fees Fund accounting fees Transfer agent fees and expenses Registration fees Custody fees Auditing fees Shareholder reporting fees Legal fees Trustees' fees and expenses Chief Compliance Officer fees Miscellaneous Insurance fees Dividends on securities sold short and interest expense (net of foreign withholding taxes of $0 and $2,303) — Total expenses Less: Advisory fees waived ) ) Net expenses Net investment income (loss) ) Realized and Unrealized Gain (Loss) on Investments and Securities Sold Short: Net realized gain (loss) on: Investments Securities sold short 1 ) Total net realized gain Net change in unrealized appreciation/depreciation on: Investments ) Securities sold short — Total net change in unrealized appreciation/depreciation Net realized and unrealized gain on investments and securities sold short Net Increase in Net Assets from Operations $ $ See accompanying Notes to Financial Statements. 27 Zacks Funds STATEMENT OF OPERATIONS For the Year Ended November 30, 2012 Small-Cap Core Fund Investment Income: Dividends $ Interest 5 Total investment income Expenses: Fund administration fees Registration fees Fund accounting fees Transfer agent fees and expenses Custody fees Audit fees Offering costs Legal fees Advisory fees Trustees' fees and expenses Chief Compliance Officer fees Shareholder reporting fees Miscellaneous Distribution fees (Note 6) Insurance fees Total expenses Less: Advisory fees waived ) Less: Other expenses absorbed ) Net expenses Net investment income Realized and Unrealized Gain (Loss) on Investments Net realized gain on investments Total net realized gain Net change in unrealized appreciation/depreciation on investments Total net change in unrealized appreciation/depreciation Net realized and unrealized gain on investments Net Increase in Net Assets from Operations $ See accompanying Notes to Financial Statements. 28 Zacks Funds STATEMENTS OF CHANGES IN NET ASSETS All-Cap Core Fund1 Year Ended November 30, 2012 Year Ended November 30, 2011 Increase in Net Assets from: Operations: Net investment income (loss) $ $ ) Net realized gain on investments Net change in unrealized appreciation/depreciation on investments ) Net increase in net assets resulting from operations Capital Transactions: Net proceeds from shares sold: Class A Class C Cost of shares redeemed: Class A* ) ) Class C** ) ) Net increase (decrease) from capital transactions ) Total increase in net assets Net Assets: Beginning of year End of year $ $ Accumulated net investment income $ $