Exhibit 10.1
 
 
SECURITIES PURCHASE AGREEMENT

by and among

HARBINGER GROUP INC.,

QUANTUM PARTNERS LP,

DDJ HIGH YIELD FUND,

GENERAL MOTORS HOURLY-RATE EMPLOYES PENSION TRUST – 7N1H,

GENERAL MOTORS SALARIED EMPLOYES PENSION TRUST – 7N1I,

STICHTING PENSIOENFONDS HOOGOVENS,

CATERPILLAR INC. MASTER RETIREMENT TRUST,

J.C. PENNEY CORPORATION, INC. PENSION PLAN TRUST,

STICHTING BEWAARDER INTERPOLIS PENSIOENEN GLOBAL HIGH YIELD POOL,

STICHTING PENSIOENFONDS VOOR FYSIOTHERAPEUTEN,

HOUSTON MUNICIPAL EMPLOYEES PENSION SYSTEM,

UAW RETIREE MEDICAL BENEFITS TRUST,

DDJ DISTRESSED AND SPECIAL SITUATIONS FUND, L.P.,

RUSSELL INVESTMENT COMPANY - RUSSELL GLOBAL OPPORTUNISTIC CREDIT FUND,

DDJ CAPITAL MANAGEMENT GROUP TRUST - HIGH YIELD INVESTMENT FUND,

and

JHL CAPITAL GROUP MASTER FUND L.P.

August 1, 2011

 
This Securities Purchase Agreement contains a number of representations and
warranties which the Company and the Purchasers have made to each other. The
assertions embodied in those representations and warranties are qualified by
information in a confidential disclosure letter that the Company and the
Purchasers have exchanged in connection with signing the Securities Purchase
Agreement. The disclosure letter contains information that has been included in
the general prior public disclosures of the Company, as well as additional
non-public information. While we do not believe that this non-public information
is required to be publicly disclosed by the Company under the applicable
securities laws, that information does modify, qualify and create exceptions to
the representations and warranties set forth in the Securities Purchase
Agreement. In addition, these representations and warranties were made as of the
date of the Securities Purchase Agreement. Information concerning the subject
matter of the representations and warranties may have changed since the date of
the Securities Purchase Agreement, which subsequent information may or may not
be fully reflected in the public disclosures of the Company. Moreover,
representations and warranties are frequently utilized in Securities Purchase
Agreements as a means of allocating risks, both known and unknown, rather than
to make affirmative factual claims or statements. Accordingly, ONLY THE PARTIES
TO THIS AGREEMENT SHOULD RELY ON THE REPRESENTATIONS AND WARRANTIES AS CURRENT
CHARACTERIZATIONS OF FACTUAL INFORMATION ABOUT THE COMPANY OR THE PURCHASERS.
 
 
 

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TABLE OF CONTENTS

Page
  

SECURITIES PURCHASE AGREEMENT 1      
1.
Definitions
2
     
2.
Authorization, Purchase and Sale of Shares
13
 
2.1
Authorization, Purchase and Sale
13
 
2.2
Closing
13
       
3.
Representations and Warranties of the Company
14
 
3.1
Organization and Power
14
 
3.2
Capitalization
14
 
3.3
Authorization
16
 
3.4
Registration Requirements
16
 
3.5
No Conflict
16
 
3.6
Consents
17
 
3.7
Permits
17
 
3.8
SEC Reports; Financial Statements
17
 
3.9
Litigation
20
 
3.10
Absence of Certain Changes
20
 
3.10
Absence of Certain Changes
20
 
3.11
Compliance with Law
21
 
3.12
Intellectual Property
21
 
3.13
Employee Benefits
22
 
3.14
Labor Relations
23
 
3.15
Taxes
24
 
3.16
NYSE
25
 
3.17
Investment Company Act
25
 
3.18
Brokers
25
 
3.19
Subsidiaries
26
 
3.20
Environmental Matters
26
 
3.21
Assets
27
 
3.22
Insurance
28
 
3.23
Material Contracts
28
 
3.24
Right of First Refusal; Stockholders Agreement; Voting and Registration Rights
29
 
3.25
Anti-Takeover Statutes
30
 
3.26
No Additional Understandings
30
 
3.27
Spectrum and F&G.
30
 
3.28
No Other Representations and Warranties
34
       
4.
Representations and Warranties of the Purchasers
34
 
4.1
Organization
34
 
4.2
Authorization
34

 
 
 

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4.3
No Conflict
35
 
4.4
Consents
35
 
4.5
Brokers
35
 
4.6
Purchase Entirely for Own Account
35
 
4.7
Investor Status
35
 
4.8
Securities Not Registered
36
 
4.9
Financing
36
 
4.10
Equity Securities of the Company
36
 
4.11
Indebtedness
36
       
5.
Covenants
36
 
5.1
Regulatory Approval
36
 
5.2
Shares Issuable Upon Conversion
38
 
5.3
Commercially Reasonable Efforts; Further Assurances; Notification
38
 
5.4
Standstill
38
 
5.5
Participation Rights
40
 
5.6
Hedging Restrictions
42
 
5.7
Form 8-K.
43
 
5.8
Tax Characterization.
43
 
5.9
Confidential Information
43
 
5.10
Amendment to Certificate of Designation.
44
 
5.11
Most Favored Nation Status
44
6.
Conditions Precedent
45  
6.1
Conditions to the Obligation of the Purchasers to Consummate the Closing
45
 
6.2
Conditions to the Obligation of the Company to Consummate the Closing
45
       
7.
Additional Covenants
46        
6.2
Conditions to the Obligation of the Company to Consummate the Closing
46
       
8.
Transfer Restrictions
 46      
9.
Legends; Securities Act Compliance
 46      
10.
Indemnification; Survival
  47  
10.1
Company Indemnification
47
 
10.2
Survival of Representations and Warranties
48
 
10.3
Purchaser Indemnification
48
 
10.4
Limitations
48
 
10.5
Procedures
48
 
10.6
Additional Limitations
49
 
10.7
Exclusive Remedies
49

 
ii
 

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11.
Termination
49
 
11.1
Conditions of Termination
49
 
11.2
Effect of Termination
49
       
12.
Miscellaneous Provisions
50
 
12.1
Public Statements or Releases
50
 
12.2
Interpretation
50
 
12.3
Notices
50
 
12.4
Severability
54
 
12.5
Governing Law; Jurisdiction; WAIVER OF JURY TRIAL
54
 
12.6
Specific Performance
54
 
12.7
Delays or Omissions; Waiver
55
 
12.8
Fees; Expenses
55
 
12.9
Assignment
55
 
12.10
No Third Party Beneficiaries
56
 
12.11
Counterparts
56
 
12.12
Entire Agreement; Amendments
56
 
12.13
Freedom to Pursue Opportunities
57
 
12.14
No Person Liability of Directors, Officers, Owners, Etc
57
 
12.15
Nature of Purchasers' Obligations and Rights
57

 
Annexes
 
Annex A
Shares and Purchasers

 
Exhibits

Exhibit A
Form of Certificate of Designation

Exhibit B
Form of Registration Rights Amendment and Joinder

Exhibit C
Form of Tag-Along Agreement

Exhibit D
Form of Legal Opinion

Exhibit E
Form of Amendment to Certificate of Designation

 
 
iii

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 INDEX OF DEFINED TERMS

Term
 
Section
Agreement
 
Preamble
Basket Amount
 
10.4
Capitalization Date
 
3.2(a)
Certificate of Designation
 
Recitals
Change
 
1
Closing
 
2.2(a)
Closing Date
 
2.2(a)
Company
 
Preamble
Company Annual Report
 
3.8(a)
Company Financial Statements
 
3.8(c)
Company Indemnified Parties
 
10.3
Company Indemnified Party
 
10.3
Company Intellectual Property
 
3.12(c)
Company SEC Filings
 
3.8(a)
Confidential Information
 
5.9(a)
Consent
 
3.6
Contracts
 
3.23(a)(v)
Convertible Preferred Stock
 
Recitals
DDJ Purchasers
 
Preamble
DGCL
 
Recitals
Disclosure Letter
 
3
DTC
 
9(b)
Environmental Permits
 
3.20(a)(i)
ERISA Affiliate
 
3.13(d)
Existing Certificate of Designation
 
Recitals
Existing Series A Preferred Stock
 
Recitals
Existing Series A Transaction Agreements
 
Recitals
First Amendment to the Certificate of Designation
 
5.10
Foreign Benefit Plans
 
3.13(f)
Form S-4
 
3.8(a)
GAAP
 
3.8(c)
Indemnified Party
 
10.5
Indemnifying Party
 
10.5
Insurance Regulatory Authorities
 
5.1(b)
JHL Purchaser
 
Preamble
Law
 
3.5
Laws
 
3.5
Leased Real Property
 
3.21(b)
Lien
 
3.5
Material Contract
 
3.23(a)

 
 
iv

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Term  
Section
New York Court
 
12.5(b)
NYSE
 
3.16(a)
F&G Financial Statements
 
3.8(f)
Preferred Stock
 
3.2(a)
Protected Information
 
5.1(b)
Purchaser Adverse Effect
 
4.3
Purchaser Indemnified Parties
 
10.1
Purchaser Indemnified Party
 
10.1
Registration Rights Agreement
 
Recitals
Registration Rights Amendment and Joinder
 
Recitals
Rule 144
 
4.8(a)
Securities Exercise Notice
 
5.5(b)(ii)
Securities Participation Amount
 
5.5(a)
Securities Participation Right
 
5.5(a)
Securities Participation Rights Notice
 
5.5(b)(i)
Share
 
2.1
Share Purchase Price
 
2.1
SFM
 
5.7
Shares
 
2.1
Soros Purchaser
 
Preamble
Spectrum Financial Statements
 
3.8(e)
Spectrum SEC Reports
 
3.27(o)
Standstill Period
 
5.4(a)
Survival Period
 
10.2
Tag-Along Agreement
 
Recitals
Third Party Intellectual Property
 
3.12(c)
Zap.Com Financial Statements
 
3.8(d)
Zap.Com SEC Reports
 
3.8(b)

 
v

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SECURITIES PURCHASE AGREEMENT
 
SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated August 1, 2011, by and
among Harbinger Group Inc., Delaware corporation (the “Company”), Quantum
Partners LP, a Cayman Islands exempted limited partnership (the “Soros
Purchaser”), JHL Capital Group Master Fund L.P., a Cayman Islands exempted
limited partnership (the “JHL Purchaser”), DDJ High Yield Fund, an entity
organized under the laws of the Province of Ontario, Canada, General Motors
Hourly-Rate Employes Pension Trust – 7N1H, a trust maintained by General Motors
Corporation, a Delaware corporation, General Motors Salaried Employes Pension
Trust – 7N1I, a trust maintained by General Motors Corporation, Stichting
Pensioenfonds Hoogovens, a Dutch pension plan regulated by the Dutch Central
Bank, Caterpillar Inc. Master Retirement Trust, a trust maintained by
Caterpillar, Inc., a Delaware corporation, J.C. Penney Corporation, Inc. Pension
Plan Trust, a trust maintained by J.C. Penney Corporation, Inc., a Delaware
corporation, Stichting Bewaarder Interpolis Pensioenen Global High Yield Pool, a
Dutch tax transparent pool of assets, Stichting Pensioenfonds voor
Fysiotherapeuten, a Dutch pension plan regulated by the Dutch Central Bank,
Houston Municipal Employees Pension System, a pension plan organized pursuant to
Texas government code, UAW Retiree Medical Benefits Trust, a trust consisting of
three separate employees' beneficiary associations, DDJ Distressed and Special
Situations Fund, L.P., a Delaware limited partnership, Russell Investment
Company - Russell Global Opportunistic Credit Fund, a Massachusetts business
trust, and DDJ Capital Management Group Trust - High Yield Investment Fund, a
trust maintained by The Bank of New York Mellon, a New York State chartered
bank, as trustee (collectively, the “DDJ Purchasers”).

WHEREAS, on May 13, 2011, the Company issued 280,000 shares of Series A
Participating Convertible Preferred Stock, par value $0.01 per share, of the
Company (the “Existing Series A Preferred Stock”) for a purchase price of $1,000
per share thereof;

WHEREAS, in connection with the issuance of the Existing Series A Preferred
Stock, the Company, certain of the Harbinger Affiliates (as defined below) and
the purchasers of the Existing Series A Preferred Stock entered into a
Securities Purchase Agreement, a Registration Rights Agreement (as amended and
supplemented by the Registration Rights Amendment and Joinder (as defined
below), the “Registration Rights Agreement”), a Corporate Opportunities
Agreement, a Tag-Along Agreement, and the Certificate of Designation of Series A
Participating Convertible Preferred Stock of Harbinger Group Inc. (the “Existing
Certificate of Designation”), in each case dated as of May 12, 2011
(collectively, the “Existing Series A Transaction Agreements”);

WHEREAS, the Company has authorized the issuance and sale of 75,000 shares of
Series A-2 Participating Convertible Preferred Stock, par value $0.01 per share,
of the Company (the “Convertible Preferred Stock”), the rights, preferences and
privileges of which are to be set forth in a Certificate of Designation, in the
form attached hereto as Exhibit A (the “Certificate of Designation”), which
shares of Convertible Preferred Stock shall be convertible into authorized but
unissued shares of Common Stock (as defined below);
 
 
 

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WHEREAS, subject to the terms and conditions set forth herein, the Company
desires to issue and sell to the several Purchasers, and the several Purchasers
desire to purchase from the Company, the Shares (as defined below);

WHEREAS, the Board (as defined below) has (i) determined that it is in the best
interests of the Company and its stockholders, and declared it advisable, to
enter into this Agreement and the other Transaction Agreements (as defined
below) to which the Company is a party providing for the transactions
contemplated hereby and thereby in accordance with the General Corporation Law
of the State of Delaware (the “DGCL”), upon the terms and subject to the
conditions set forth herein, and (ii) approved the execution, delivery and
performance of this Agreement and the other Transaction Agreements to which the
Company is a party and the consummation of the transactions contemplated hereby
and thereby in accordance with the DGCL upon the terms and conditions contained
herein and therein;

WHEREAS, each Purchaser has approved the execution, delivery and performance of
this Agreement and the other Transaction Agreements to which it is a party and
the consummation of the transactions contemplated hereby and thereby in
accordance with applicable law upon the terms and conditions contained herein
and therein; and

WHEREAS, as a condition to the consummation of the transactions contemplated
hereby, on the Closing Date the Purchasers, the Company and/or certain of the
Harbinger Affiliates and holders of Existing Series A Preferred Stock will enter
into (i) an amendment and joinder to the Registration Rights Agreement in the
form attached as Exhibit B hereto (the “Registration Rights Amendment and
Joinder”), and (ii) the Amended and Restated Tag-Along Side Letter in the form
attached as Exhibit C hereto (the “Tag-Along 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:

“Accreting Dividends” shall have the meaning set forth in the Certificate of
Designation.

“Acquisition Date” means July 9, 2009.

“Additional Permitted Preferred Stock” shall have the meaning set forth in the
Certificate of Designation.

 “Affiliate” means, with respect to any Person, any other Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by or
is under common control with, such specified Person.  Notwithstanding the
foregoing, (i) none of the Company, its Subsidiaries or its other controlled
Affiliates, nor any Harbinger Affiliates shall be considered Affiliates of any
Purchaser, (ii) no Purchaser shall be considered an Affiliate of any Portfolio
Company in which such Purchaser or any of its Affiliates have made a debt or
equity investment (provided, however, that for purposes of Sections 5.4 and 5.6
hereof, a Purchaser shall be considered an Affiliate of any such Portfolio
Company if such Portfolio Company has received material confidential information
regarding the Company or any of its Subsidiaries  from such
 
 
2

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Purchaser or any of its Affiliates in violation of Section 5.10 (disregarding
for this purpose clause (v) of Section 5.10(a)), and (iii) no Purchaser shall be
considered an Affiliate of any other Purchaser or any of such other Purchaser's
Affiliates; provided, however, that a Portfolio Company shall be deemed to be an
Affiliate of a Purchaser if such Purchaser, directly or indirectly, encouraged,
directed or caused such Portfolio Company to take any action that would have
been prohibited by the terms of this Agreement if such Portfolio Company had
been an Affiliate of such Purchaser but for clause (ii) of this definition.

“Agreement” shall have the meaning set forth in the preamble.

“Antitrust Laws” means the HSR Act and any foreign antitrust Laws.

 “Basket Amount” shall have the meaning set forth in Section 10.4.

“Beneficially Own,” “Beneficially Owned,” or “Beneficial Ownership” shall have
the meaning set forth in Rule 13d-3 of the rules and regulations promulgated
under the Exchange Act; provided, however, that, other than for purposes of the
definition of “Hedging Agreement”,  a Person will be deemed to be the beneficial
owner of any security which may be acquired by such Person whether within
60 days or thereafter, upon the conversion, exchange or exercise (without giving
effect to any provision governing such security that would limit, reduce or
otherwise restrict the conversion, exchange or exercise features of such
security) of any rights, options, warrants or similar securities to subscribe
for, purchase or otherwise acquire such security; provided, further, that for
purposes of Section 5.4, the Convertible Preferred Stock shall be deemed to be
convertible at any time notwithstanding the limitations on conversion thereof
contained in SECTION 5 of the Certificate of Designation.

“Benefit Plans” with respect to any Person shall mean each material “employee
benefit plan” (within the meaning of Section 3(3) of ERISA), and all stock
purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation,
employee loan and all other employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA (including any
funding mechanism therefor now in effect or required in the future as a result
of the transaction contemplated by this Agreement or otherwise), whether formal
or informal, oral or written, legally binding or not, under which any employee
of such Person or its Subsidiaries has any present or future right to benefits
or which are contributed to, sponsored by or maintained by the Person or any of
its Subsidiaries.

“Board” shall mean the Board of Directors of the Company.

“Business Day” shall mean any day, other than a Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in the State of New York are authorized or
required by Law or other governmental action to close.

“Capitalization Date” shall have the meaning set forth in Section 3.2(a).

“Certificate of Designation” shall have the meaning set forth in the recitals.
 
 
3

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“Closing” shall have the meaning set forth in Section 2.2.

“Closing Date” shall have the meaning set forth in Section 2.2.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Common Stock” shall mean the Common Stock, par value $0.01 per share, of the
Company, or any other shares of capital stock into which the Common Stock shall
be reclassified or changed.

“Company” shall have the meaning set forth in the preamble.

“Company Annual Report” shall have the meaning set forth in Section 3.8(a).

“Company Change in Control Event” means any transaction or series of
transactions (as a result of a tender offer, merger, consolidation,
reorganization or otherwise) that results in, (i) the sale, lease, exchange,
conveyance, transfer or other disposition (for cash, shares of stock, securities
or other consideration) of all or substantially all of the property or assets of
the Company and its Subsidiaries (taken as a whole) to any Person or “group”
(within the meaning of Section 13(d)(3) of the Exchange Act) (including any
liquidation, dissolution or winding up of the affairs of the Company, or any
other distribution made, in connection therewith); (ii) any Person or “group”
(within the meaning of Section 13(d)(3) of the Exchange Act) becoming the
ultimate Beneficial Owner, directly or indirectly, of 35% or more of the voting
power of the Voting Stock of the Company other than a Harbinger Affiliate or any
Purchaser (aggregated with its Affiliates); provided, that such event shall not
be deemed a Change of Control so long as one or more Harbinger Affiliates shall
Beneficially Own more of the voting power of the Voting Stock of the Company
than such person or group; or (iii) the Continuing Directors ceasing to
constitute a majority of the members of the Board.  For purposes of this
definition, (x) any direct or indirect holding company of the Company shall not
itself be considered a Person for purposes of clause (ii) above or a “person” or
“group” for purposes of clause (ii) above, provided that no “person” or “group”
(other than the Harbinger Affiliates or another such holding company)
Beneficially Owns, directly or indirectly, more than 50% of the voting power of
the voting stock of such company, and a majority of the voting stock of such
holding company immediately following it becoming the holding company of the
Company is Beneficially Owned by the Persons who Beneficially Owned the voting
power of the Voting Stock of the Company immediately prior to it becoming such
holding company and (y) a Person shall not be deemed to have beneficial
ownership of securities subject to a stock purchase agreement, merger agreement
or similar agreement until the consummation of the transactions contemplated by
such agreement.

“Company Financial Statements shall have the meaning set forth in
Section 3.8(c).

“Company Indemnified Party” shall have the meaning set forth in Section 10.3.

“Company Intellectual Property” shall have the meaning set forth in
Section 3.12(c).

“Company Option” shall mean an option to acquire shares of Common Stock that was
issued under any Company Stock Plan.
 
 
4

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“Company SEC Filings” shall have the meaning set forth in Section 3.8(a).

“Company Stock Plans” shall mean the plans listed on Section 1.2 of the
Disclosure Letter.

“Company Voting Stock” shall mean securities of any class or kind ordinarily
having the power to vote generally for the election of Directors of the Company
or its successor (including the Common Stock and the Convertible Preferred
Stock).

“Confidential Information” shall have the meaning set forth in Section 5.9(a).

“Consent” shall have the meaning set forth in Section 3.6.

“Continuing Directors” means, as of any date of determination, any member of the
Board who was: (x) a member of the Board on the Closing Date; (y) nominated for
election or elected pursuant to any of the Transaction Agreements, or (z)
nominated for election or elected to such Board with the approval of the
Harbinger Affiliates or a majority of the Continuing Directors who were members
of such Board at the time of such nomination or election.

“Contracts” shall have the meaning set forth in Section 3.23(a)(v).

“control” (including the terms “controlling” “controlled by” and “under common
control with”) with respect to any Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.  For the avoidance of doubt, as of the date hereof (but
without precluding a different determination as of any date subsequent to the
date hereof dependent on the relevant facts and circumstances at such time), the
Company shall not be considered to control Spectrum.

“Conversion Shares” shall mean the shares of Common Stock issuable upon the
conversion of the Convertible Preferred Stock as provided for in the Certificate
of Designation.

“Convertible Preferred Stock” shall have the meaning set forth in the recitals.

“DDJ Purchasers” shall have the meaning set forth in the preamble.

 “DGCL” shall have the meaning set forth in the recitals.

“Director” means any member of the Board.

“Disclosure Letter” shall have the meaning set forth in Section 3.

“DTC” shall have the meaning set forth in Section 9(b).

 “Environmental Law” shall mean any and all Laws relating to the protection of
the environment (including ambient air, surface water, groundwater or land) or
natural resources and any other Laws concerning human exposure to Hazardous
Substances.

“Environmental Permits” shall have the meaning set forth in Section 3.20(a)(i).
 
 
5

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“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

“ERISA Affiliate” shall have the meaning set forth in Section 3.13(d).

“Equity Securities” shall mean, with respect to any Person, (i) shares of
capital stock of, or other equity or voting interest in,  such Person, (ii)  any
securities convertible into or exchangeable for shares of capital stock of, or
other equity or voting interest in, such Person, (iii) options, warrants, rights
or other commitments or agreements to acquire from such Person, or that
obligates such Person to issue, any capital stock of, or other equity or voting
interest in, or any securities convertible into or exchangeable for shares of
capital stock of, or other equity or voting interest in, such Person,
(iv) obligations of such Person to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other similar agreement
or commitment relating to any capital stock of, or other equity or voting
interest (including any voting debt) in, such Person and (v) the capital stock
of such Person.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
all of the rules and regulations promulgated thereunder.

“Existing Certificate of Designation” shall have the meaning set forth in the
recitals.

 “Existing Series A Preferred Stock” shall have the meaning set forth in the
recitals.

 “Existing Series A Transaction Agreements” shall have the meaning set forth in
the recitals.

“F&G” shall mean Fidelity & Guaranty Life Holdings, Inc., a Delaware corporation
(f/k/a Old Mutual U.S. Life Holdings, Inc.).

“F&G Purchase Agreement” shall mean the First Amended and Restated Stock
Purchase Agreement, dated as of February 17, 2011, between OM Group (UK) Limited
and Harbinger F&G.

“F&G Financial Statements” shall have the meaning set forth in Section 3.8(f).

“First Amendment to the Certificate of Designation” shall have the meaning set
forth in Section 5.10.

“Foreign Benefit Plans” shall have the meaning set forth in Section 3.13(f).

“Form S-4” shall have the meaning set forth in Section 3.8(a).

“GAAP” shall have the meaning set forth in Section 3.8(c).

“Governmental Entity” shall mean any United States or non-United States federal,
state or local government, or any agency, bureau, board, commission, department,
tribunal or instrumentality thereof or any court, tribunal, or arbitral or
judicial body.
 
 
6

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“Harbinger Affiliate” shall mean any of Philip A. Falcone, Harbinger Capital
Partners, or any limited partnership, limited liability company, corporation or
other entity that controls, is controlled by, or is under common control with
Philip A. Falcone or Harbinger Capital Partners (other than the Company and its
Subsidiaries).

“Harbinger Capital Partners” shall mean Harbinger Capital Partners LLC and
Harbinger Capital Partners II LP, collectively.

“Harbinger F&G” shall mean Harbinger F&G, LLC (f/k/a Harbinger OM, LLC).

“Hazardous Substance” shall mean any substance, material or chemical that is
characterized or regulated under any Environmental Law as “hazardous,” a
“pollutant,” “waste,” a “contaminant,” “toxic” or words of similar meaning or
effect, or that could result in liability under any Environmental Law, and shall
include petroleum and petroleum products, polychlorinated biphenyls, lead,
crystalline silica and asbestos.

“Hedging Agreement” shall mean any swap, forward or option contract or any other
agreement, arrangement, contract or transaction that hedges the direct economic
exposure to a decline in value resulting from ownership by any Person of the
Common Stock, the Convertible Preferred Stock or the equity securities of any
Subsidiary of the Company that are traded on a national securities exchange,
regardless of whether any such agreement, arrangement, contract or transaction
is to be settled by delivery of securities, in cash or otherwise; provided,
however, that, for the avoidance of doubt, in no event shall an agreement
providing for (i) the direct Transfer of Common Stock or Convertible Preferred
Stock actually Beneficially Owned by such Person or (ii) transactions involving
an index-based portfolio of securities that includes Common Stock or common
equity securities of any Subsidiary (provided that the value of such Common
Stock or common equity securities of any Subsidiary, as applicable, in such
portfolio is not more than 10% of the total value of the portfolio of
securities, or if the value of such Common Stock or common equity securities of
any Subsidiary, as applicable, is more than 10% of the total value of the
portfolio of securities, then such transaction was not entered into for purposes
of hedging such Common Stock or common equity securities of a Subsidiary, as
applicable) be deemed a “Hedging Agreement” hereunder.

“Hedging Limitation Period” shall mean the period from the date hereof until the
earlier of (i) the twelve (12) month anniversary of the Closing or (ii) the
occurrence of a Specified Breach Event.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and all of the rules and regulations promulgated thereunder.

 “Indemnified Party” shall have the meaning set forth in Section 10.5.

“Indemnifying Party” shall have the meaning set forth in Section 10.5.

 “Insurance Regulatory Authorities” shall have the meaning set forth in
Section 5.1(b).

“Insurance Subsidiaries” shall have the meaning set forth in the F&G Purchase
Agreement.
 
 
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“Intermediate Holding Company Subsidiary” shall mean any Subsidiary of the
Company that is a holding company that holds equity interests in two (2) or more
Portfolio Companies engaged in unrelated lines of business; provided, however,
that (w) Spectrum shall not be considered an Intermediate Holding Company
Subsidiary, (x) the reinsurance and insurance businesses shall be considered to
be a single line of business, (y) any Portfolio Company that operates in more
than one (1) Specified Industry shall be an Intermediate Holding Company
Subsidiary and (z) any Portfolio Company that operates in only one (1) Specified
Industry shall not be an Intermediate Holding Company Subsidiary.

“Intellectual Property” shall mean all U.S. or foreign intellectual property,
including (i) patents, trademarks, service marks, trade names, domain names,
other source indicators and the goodwill of the business symbolized thereby,
copyrights, works of authorship in any medium, designs and trade secrets,
(ii) applications for and registrations of such patents, trademarks, service
marks, trade names, domain names, copyrights and designs (“Registered
Intellectual Property”), (iii) inventions, processes, formulae, methods,
schematics, technology, know-how, computer software programs and applications,
and (iv) other tangible or intangible proprietary or confidential information
and materials.

“JHL” shall have the meaning set forth in Section 5.7.

“JHL Purchaser” shall have the meaning set forth in the preamble.

“Knowledge” shall mean, with respect to the Company, the knowledge of any of the
Persons set forth on Section 1.1 of the Disclosure Letter.  Such individuals
will be deemed to have “knowledge” of a particular fact or other matter if
(i) such individual has or at any time had actual knowledge of such fact or
other matter or (ii) a prudent individual would be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably diligent review concerning the existence thereof with each employee
of the Company or any of its Subsidiaries who reports directly to such
individual and who (x) has responsibilities or (y) would reasonably be expected
to have actual knowledge of circumstances or other information, in each case,
that would reasonably be expected to be pertinent to such fact or other matter.
Notwithstanding the foregoing, the Company will be deemed to have knowledge of
any fact or matter of which an officer of the Company has received written
notice (whether in hard copy, digital or electronic format).

“Law” shall have the meaning set forth in Section 3.5.

“Leased Real Property” shall have the meaning set forth in Section 3.21(b).

“Legal Proceeding” shall mean any action, suit, litigation, petition, claim,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, or investigation by or
before, or otherwise involving, any court or other Governmental Entity or
arbitral body.

“Liability” shall mean any liability, obligation or commitment of any kind
(whether accrued, absolute, contingent, matured, unmatured or otherwise and
whether or not required to be recorded or reflected on a balance sheet prepared
in accordance with GAAP).
 
 
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“Lien” shall have the meaning set forth in Section 3.5.

“Losses” shall mean any and all actions, causes of action, suits, claims,
liabilities, losses, damages, penalties, judgments, costs and out-of-pocket
expenses in connection therewith (including reasonable attorneys’ fees and
expenses), it being agreed that Losses may include any losses that any Person
deciding any dispute in respect thereof (whether a court, jury or other Person)
may determine are recoverable, including if so determined to be recoverable,
losses that represent diminution in value.

“Material Adverse Effect” shall mean any fact, circumstance, event, change,
effect, occurrence or development (each, a “Change”) that, individually or in
the aggregate with all other Changes, has a material adverse effect on or with
respect to the business, operations, assets (including intangible assets),
liabilities, results of operation or financial condition of the Company and its
Subsidiaries taken as a whole, provided, however, that a Material Adverse Effect
shall not include any Change (by itself or when aggregated or taken together
with any and all other Changes) (i) generally affecting the industries in which
the Company and its Subsidiaries operate or economic conditions in the United
States (including changes in the capital or financial markets generally);
(ii) resulting from any outbreak or escalation of hostilities or acts of war or
terrorism, political instability or other national or international calamity,
crisis or emergency, or any governmental or other response to any of the
foregoing, in each case whether or not involving the United States;
(iii) resulting from changes (or proposed changes) in Law or GAAP (or
authoritative interpretations thereof); (iv) resulting from changes in the
market price or trading volume of the Company’s or Spectrum’s securities or from
the failure of the Company or any of its Subsidiaries to meet projections,
forecasts or estimates (it being understood that the causes underlying such
failure may be considered in determining whether a Material Adverse Effect has
occurred or would reasonably be expected to occur); (v) acts of God (including
earthquakes, storms, fires, floods and natural catastrophes), (vi) effects
relating to or arising from the announcement of the execution of this Agreement
or the Existing Series A Transaction Agreements or the transactions contemplated
hereby or thereby or the identity of any Purchaser or a Purchaser’s Affiliates,
including the loss of any customers, suppliers or employees; (vii) effects
resulting from compliance with the terms and conditions of this Agreement or any
other Transaction Agreement to which the Company is a party by the Company or
any of its Subsidiaries or consented to in writing by a Purchaser, (viii) the
seasonality of the business of the Company or any of its Subsidiaries, or
(ix) any breach of this Agreement by a Purchaser, except to the extent that,
with respect to clauses (i), (ii), (iii), (iv) and (v), the impact of such
Changes is disproportionately adverse to the Company and its Subsidiaries.  For
purposes of Sections 3.8(f), 3.8(g) and 3.27(q),it is expressly agreed that with
respect to the historical financial statements of F&G referenced therein, no
error or omission or alleged error or omission therein will be considered in
determining whether a Material Adverse Effect has occurred unless and then only
to the extent such error or omission would have or would reasonably be expected
to result in a Fair Market Value (as defined in the Indenture) of F&G as of May
13, 2011 that is less than $350 million and would otherwise constitute a
Material Adverse Effect (and then only to the extent the Fair Market Value of
F&G as of May 13, 2011 is less than $350 million).

“Material Contracts” shall have the meaning set forth in Section 3.23(a).
 
 
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“New York Court” shall have the meaning set forth in Section 12.5(b).

“Notes” shall mean the Company’s 10.625% Senior Secured Notes due 2015.

“NYSE” shall have the meaning set forth in the Section 3.16(a).

“Participation Rights Fraction” shall mean, in the case of any Purchaser, a
fraction, the numerator of which is the product of (A) the number of shares of
Common Stock held by such Purchaser on a fully-diluted basis from either the
Shares or the Common Stock issuable on conversion of the Shares, as of such
date, multiplied by (B) 0.75, and the denominator of which is the number of
shares of Common Stock then outstanding on a fully-diluted basis, as of such
date.

“Permitted Liens” means, (a) local, state and federal Laws, including, without
limitation, zoning or planning restrictions, and utility lines, easements,
permits, covenants, conditions, restrictions, rights-of-way, oil, gas or mineral
leases of record and other restrictions or limitations on the use of real
property or irregularities in title thereto, which do not materially impair the
value of such properties or the continued use of such property for the purposes
for which the property is currently being used by the Company or any Subsidiary,
(b) Liens for Taxes not yet due and payable, that are payable without penalty or
that are being contested in good faith and for which adequate reserves have been
recorded on the Company Financial Statements, (c) Liens for carriers’,
warehousemen’s, mechanics’, repairmen’s, workers’ and similar Liens incurred in
the ordinary course of business, consistent with past practice, in each case for
sums not yet due and payable or due but not delinquent or being contested in
good faith by appropriate proceedings and for which adequate reserves have been
recorded on the Company Financial Statements, (d) Liens incurred in the ordinary
course of business, consistent with past practice, in connection with workers’
compensation, unemployment insurance and other types of social security or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return of money bonds
and similar obligations, which do not materially impair the value of the
underlying property or the continued use of such property for the purposes for
which the property is currently being used by the Company or any Subsidiary,
(e) Liens granted under equipment leases with third parties entered into in the
ordinary course of business consistent with past practice, (f) Liens permissible
under any applicable loan agreements and indentures, (g) restrictions arising
under applicable securities Laws and (h) Liens securing the Notes.

“Person” shall mean an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or any other entity or organization.

“Portfolio Company” shall have the meaning set forth in the Certificate of
Designation.

“Preferred Stock” shall have the meaning set forth in Section 3.2(a).

“Protected Information” shall have the meaning set forth in Section 5.1(b).

“Purchasers” means, collectively, the Soros Purchaser, the DDJ Purchasers and
the JHL Purchaser.
 
 
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“Purchaser Adverse Effect” shall have the meaning set forth in the Section 4.3.

“Purchaser Indemnified Party” shall have the meaning set forth in Section 10.1.

“Registered Intellectual Property” shall have the meaning set forth in the
definition of “Intellectual Property”.

“Registration Rights Agreement” shall have the meaning set forth in the
recitals.

 “Registration Rights Amendment and Joinder” shall have the meaning set forth in
the recitals.

“Representatives” means, with respect to any Person, such Person’s Affiliates
(other than any Portfolio Company) and their respective directors, officers,
employees, managers, trustees, principals, stockholders, members, general or
limited partners, agents and other representatives.

“Rule 144” shall have the meaning set forth in Section 4.8(a).

“SEC” shall mean the Securities and Exchange Commission.

“Securities Act” shall mean the Securities Act of 1933, as amended, and all of
the rules and regulations promulgated thereunder.

 “Securities Exercise Notice” shall have the meaning set forth in
Section 5.5(b)(ii).

“Securities Participation Amount” shall have the meaning set forth in
Section 5.5(a).

“Securities Participation Right” shall have the meaning set forth in
Section 5.5(a).

“Securities Participation Rights Notice” shall have the meaning set forth in
Section 5.5(b)(i).

 “SFM” shall have the meaning set forth in Section 5.7.

 “Shares” shall have the meaning set forth in Section 2.1.

“Share Purchase Price” shall have the meaning set forth in the Section 2.1.

“Significant Subsidiary” shall mean any Subsidiary or group of Subsidiaries that
would, taken together, be a "significant subsidiary" as defined in Article 1,
Rule 1-02 (w)(1) or (2) of Regulation S-X promulgated under the Securities Act,
as such regulation is in effect from time to time; provided, however, that
Spectrum and its Subsidiaries shall be deemed not to be Significant Subsidiaries
of the Company for purposes of Section 3.

“Soros Purchaser” shall have the meaning set forth in the preamble.

 “Specified Breach Event” shall have the meaning set forth in the Certificate of
Designation.
 
 
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“Specified Industries” shall mean the consumer products, insurance and financial
products, agriculture, power generation and water and natural resources
industries.

“Spectrum” shall mean Spectrum Brands Holdings, Inc., a Delaware corporation.

“Spectrum Financial Statements” shall have the meaning set forth in the
Section 3.8(e).

“Spectrum SEC Reports” shall have the meaning set forth in the Section 3.27(p).

“Standstill Period” shall have the meaning set forth in Section 5.4(a).

 “Subsidiary” of any Person shall mean any corporation, partnership, joint
venture, limited liability company, trust or other form of legal entity (whether
incorporated or unincorporated) of which (or in which) more than 50% of (i) the
Total Current Voting Power; (ii) the interest in the capital or profits of such
partnership, joint venture or limited liability company; or (iii) the beneficial
interest in such trust or estate; is, directly or indirectly, owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person’s other Subsidiaries; provided,
however, that Spectrum and F&G and their respective Subsidiaries shall be deemed
not to be Subsidiaries of the Company for purposes of Section 3 (other than
Sections 3.2, 3.8(e), 3.8(f), 3.8(g), 3.10(a), 3.23(a)(i), 3.23(a)(vii) and
3.26) or for purposes of the definition of “Benefit Plan”; provided, further,
however, that F&G and its Subsidiaries shall be deemed to be Subsidiaries of the
Company for purposes of Sections 3.19.  For the avoidance of doubt, Spectrum,
F&G and their respective Subsidiaries shall be deemed to be Subsidiaries of the
Company for purposes of the definition of “Material Adverse Effect.”

“Survival Period” shall have the meaning set forth in Section 10.2.

“Tag-Along Agreement” shall have the meaning set forth in the recitals.

“Tax Returns” shall mean returns, reports, information statements and other
documentation (including any additional or supporting material) filed or
required to be filed in connection with the calculation, determination,
assessment or collection of any Tax, including any schedules or amendments
thereto.

“Taxes” shall mean any and all taxes, levies, fees, imposts, duties and charges
of whatever kind (including any interest, penalties or additions to the tax
imposed in connection therewith or with respect thereto) imposed by any
Governmental Authority, including, without limitation, taxes imposed on, or
measured by, income, franchise, profits or gross receipts, and any ad valorem,
value added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, employment, social security, workers’
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premium, windfall profits, transfer and gains taxes and
customs or duties.

“Third Party Intellectual Property” shall have the meaning set forth in
Section 3.12(c).

“Total Current Voting Power” shall mean, with respect to any entity, at the time
of determination of Total Current Voting Power, the total number of votes which
may be cast in the
 
 
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general election of directors of such entity (or, in the event the entity is not
a corporation, the governing members, board or other similar body of such
entity).

“Transaction Agreements” shall mean this Agreement, the Certificate of
Designation, the Tag-Along Agreement, the Registration Rights Amendment and
Joinder and the First Amendment to the Certificate of Designation.

“Transfer” shall mean the direct or indirect transfer, sale, assignment,
exchange, distribution, mortgage, pledge or disposition of any Equity Securities
of the Company.

“Treasury Regulation” shall mean the Treasury Regulations promulgated under the
Code.

“Voting Stock” shall mean securities of any class or kind ordinarily having the
power to vote generally for the election of (x) Directors of the Company or its
successor (including the Common Stock and the Convertible Preferred Stock) or
(y) directors of any Subsidiary of the Company.

“Wholly Owned Subsidiary” means (x) any Subsidiary of the Company of which the
Company owns, either directly or indirectly, 100% of the outstanding equity
interests of such Subsidiary (excluding qualifying shares held by directors),
and (y) Zap.Com.

 “Zap.Com” shall mean Zap.Com Corporation, a corporation formed under the Laws
of the State of Nevada.

“Zap.Com Financial Statements” shall have the meaning set forth in Section
3.8(d).

“Zap.Com SEC Reports” shall have the meaning set forth in Section 3.8(b).

2.           Authorization, Purchase and Sale of Shares.

2.1           Authorization, Purchase and Sale.  Subject to and upon the terms
and conditions of this Agreement, the Company will issue and sell to the several
Purchasers, and the several Purchasers will purchase from the Company, at the
Closing, the number of shares of Convertible Preferred Stock set forth next to
each such Purchaser’s name on Annex A (each, a “Share” and collectively, the
“Shares”).  The purchase price per Share shall be $1,000 and the aggregate
purchase price (the “Share Purchase Price”) for the Shares shall be the amount
set forth on Annex A.

2.2           Closing.

(a)           The closing of the purchase and sale of the Shares (the “Closing”)
shall take place at the offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP,
1285 Avenue of the Americas, New York, New York 10019 on August 5, 2011,
following the satisfaction or waiver of each of the conditions set forth in
Section 6 (other than those conditions which, by their terms, are to be
satisfied or waived at the Closing), or at such other place or such other date
as agreed to by the parties hereto (the “Closing Date”).
 
 
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(b)           At the Closing:

(i)           the Company shall deliver to each Purchaser one or more
certificates representing the Shares purchased by such Purchaser; and

(ii)           each Purchaser shall deliver, or cause to be delivered, to the
Company an amount equal to the portion of the Share Purchase Price set forth
next to such Purchaser’s name on Annex A by wire transfer of immediately
available funds to an account that the Company shall designate at least one
(1) Business Day prior to the Closing Date.

3.           Representations and Warranties of the Company.  Except as set forth
in the disclosure letter delivered by the Company to the Purchasers on the date
hereof (the “Disclosure Letter”) (it being agreed that disclosure of any item in
any section of the Disclosure Letter shall also be deemed disclosure with
respect to any other Section of this Agreement to which the relevance of such
item is reasonably apparent) or as disclosed in the Company SEC Filings,
Spectrum SEC Reports or the Zap.com SEC Reports, filed and publicly available
prior to the date of this Agreement and only as and to the extent disclosed
therein (but excluding any risk factor disclosures contained under the heading
“Risk Factors,” any disclosure of risks included in any “forward-looking
statements” disclaimer or any other statements that are similarly
forward-looking), the Company hereby represents and warrants to the Purchasers
as follows:

3.1           Organization and Power.

(a)           Each of the Company and its Subsidiaries is a legal entity duly
organized, validly existing and in good standing under the Laws of its
respective jurisdiction of organization.  Each of the Company and its
Subsidiaries has the requisite corporate power and authority to carry on its
respective business as it is presently being conducted and to own, lease or
operate its respective properties and assets, except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b)           Each of the Company and its Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation (or other legal
entity) in each jurisdiction where the ownership, leasing or operation of its
assets or properties or conduct of its business requires such qualification,
except where the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  The organizational or governing documents of the Company and
each of its Subsidiaries are in full force and effect.  Neither the Company nor
any Subsidiary is in violation of its organizational or governing
documents.  The Company has delivered or made available to the Purchasers
complete and correct copies of the certificates of incorporation and bylaws or
other constituent documents, as amended to date and currently in full force and
effect, of the Company and its Significant Subsidiaries.

3.2           Capitalization.

(a)           As of the date of this Agreement, the authorized shares of capital
stock of the Company consist of 500,000,000 shares of Common Stock and
10,000,000 shares of
 
 
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preferred stock, par value $0.01 per share (“Preferred Stock”).  As of the close
of business on July 22, 2011 (the “Capitalization Date”), (i) 139,284,286 shares
of Common Stock were issued and outstanding, (ii) 6,273,241 shares of Common
Stock were reserved for issuance under the Company Stock Plans, (iii) 280,000
shares of Existing Series A Preferred Stock were issued and outstanding, (v) a
sufficient number of shares of Common Stock were reserved for issuance upon
conversion of the Existing Series A Preferred Stock, and (v) zero shares of
Common Stock or Preferred Stock were held by the Company as treasury
shares.  All outstanding shares of Common Stock are validly issued, fully paid,
nonassessable and free of preemptive or similar rights.  Since the
Capitalization Date, the Company has not sold or issued or repurchased, redeemed
or otherwise acquired any shares of the Company’s capital stock (other than
issuances pursuant to the exercise of any Company Option or vesting of any share
unit award that had been granted under any Company Stock Plan, or repurchases,
redemptions or other acquisitions pursuant to agreements contemplated by a
Company Stock Plan).  No Subsidiary of the Company owns any Equity Securities of
the Company.

(b)           As of the Capitalization Date, with respect to the Company Stock
Plans, (i) there were 404,833 shares of Common Stock underlying outstanding
Company Options to acquire shares of Common Stock, such outstanding Company
Options having a weighted average exercise price per share as of the
Capitalization Date of $6.18, (ii) there were zero shares of Common Stock
issuable upon the vesting of outstanding share award units, and (iii) 5,868,408
additional shares of Common Stock were reserved for issuance for future grants
pursuant to the Company Stock Plans.  All shares of Common Stock reserved for
issuance as noted in the foregoing sentence, when issued in accordance with the
respective terms thereof, are or will be validly issued, fully paid,
nonassessable and free of preemptive or similar rights.  Each Company Option was
granted with an exercise price per share equal to or greater than the per share
fair market value (as such term is used in Code Section 409A and the regulations
and other interpretive guidance issued thereunder) of the Common Stock
underlying such Company Option on the grant date thereof and was otherwise
issued in material compliance with applicable Law.

(c)           Except as set forth in this Section 3.2, as of the date of this
Agreement, there are no outstanding Equity Securities of the Company and no
other obligations by the Company or any of its Subsidiaries to make any payments
based on the price or value of any Equity Securities of the Company.  Except as
set forth in the Existing Series A Transaction Agreements, there are no
outstanding agreements of any kind which obligate the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Equity Securities of
the Company.

(d)           Except as set forth in the Transaction Agreements, the Existing
Series A Transaction Agreements or in any registration rights agreements filed
as exhibits to the Company’s SEC Reports, neither the Company nor any of its
Subsidiaries is a party to any agreement relating to the voting of, requiring
registration of, or granting any preemptive, anti-dilutive rights or rights of
first refusal or other similar rights with respect to any Equity Securities of
the Company.

(e)           Upon the filing of the Certificate of Designation with the
Secretary of State of the State of Delaware, (i) the Convertible Preferred Stock
will be duly authorized and (ii) a sufficient number of Conversion Shares will
have been duly authorized and validly
 
 
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reserved for issuance upon conversion of the Shares in accordance with the
Certificate of Designation.  When the Shares are issued and paid for in
accordance with the provisions of this Agreement and the Certificate of
Designation, all such Shares will be duly authorized, validly issued, fully
paid, nonassessable and free of preemptive or similar rights except as set forth
in the Transaction Agreements.  When Conversion Shares are issued in accordance
with the provisions of the Certificate of Designation all such Conversion Shares
will be duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights.

3.3           Authorization.  The Company has all requisite corporate power to
enter into each of the Transaction Agreements to which it is a party and to
consummate the transactions contemplated by each of the Transaction Agreements
to which it is a party and to carry out and perform its obligations
thereunder.  All corporate action on the part of the Company, its officers and
directors necessary for the authorization of the Convertible Preferred Stock and
the authorization, execution, delivery and performance of the Transaction
Agreements to which the Company is a party has been taken.  The execution,
delivery and performance of the Transaction Agreements to which the Company is a
party by the Company and the issuance of the Common Stock upon conversion of the
Shares, in each case in accordance with their terms, and the consummation of the
other transactions contemplated herein do not require any approval of the
Company’s stockholders.  Upon their respective execution by the Company and the
other parties thereto and assuming that they constitute legal and binding
agreements of each Purchaser party thereto, each of the Transaction Agreements
to which the Company is a party will constitute a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that such enforceability (a) may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar Laws
affecting or relating to creditors’ rights generally, and (b) is subject to
general principles of equity (regardless of whether considered in a proceeding
in equity or at Law).

3.4           Registration Requirements.  Subject to the accuracy of the
representations made by the Purchasers in Section 4, the offer, sale and
issuance of the Shares and the conversion of the Shares into Common Stock in
accordance with the Certificate of Designation (i) has been and will be made in
compliance with applicable exemptions from the registration and prospectus
delivery requirements of the Securities Act and (ii) will have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable Blue Sky
laws.

3.5           No Conflict.  The execution, delivery and performance of the
Transaction Agreements to which the Company is a party by the Company, the
issuance of the Shares and the Common Stock upon conversion of the Shares and
the consummation of the other transactions contemplated hereby and by the other
Transaction Agreements to which the Company is a party will not (i) conflict
with or result in any violation of any provision of the certificate of
incorporation or bylaws of the Company, or, upon its filing with the Secretary
of State of the State of Delaware, the Certificate of Designation, (ii) result
in any breach or violation of, or default (with or without notice or lapse of
time, or both) under, require consent under, or give rise to a right of
termination, cancellation, modification or acceleration of any obligation or to
the loss of any benefit under any mortgage, Contract, purchase or sale order,
instrument, permit, concession, franchise, right or license binding upon the
Company or any of its Subsidiaries or result in the creation of any liens,
claims, mortgages, encumbrances, pledges, security interests,
 
 
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equities or charges of any kind (each, a “Lien”) upon any of the properties,
assets or rights of the Company or any of its Subsidiaries, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or to prevent or materially delay or hinder the ability of the
Company to perform its obligations under the Transaction Agreements, or
(iii) subject to the matters referred to in Section 3.6, conflict with or
violate any applicable material law, statute, code, ordinance, rule, regulation,
or agency requirement of or undertaking to or agreement with any Governmental
Entity, including common law (collectively, “Laws” and each, a “Law”) or any
judgment, order, injunction or decree issued by any Governmental Entity.

3.6           Consents.  No consent, approval, order, or authorization of, or
filing or registration with, or notification to (any of the foregoing being a
“Consent”), any Governmental Entity is required on the part of the Company or
its Subsidiaries in connection with (a) the execution, delivery or performance
of the Transaction Agreements to which the Company is a party and the
consummation of the transactions contemplated hereby and thereby, or (b) the
issuance of the Shares or the issuance of the Common Stock upon conversion of
the Shares in accordance with the Certificate of Designation; other than (i) the
filing of the Certificate of Designation with the Secretary of State of the
State of Delaware, (ii) the expiration or termination of any applicable waiting
periods under the Antitrust Laws with respect to performance under the
Transaction Agreements, or the consummation of transactions, in each case
occurring after the Closing, (iii) those to be obtained, in connection with the
registration of the Shares under the Registration Rights Agreement, under the
applicable requirements of the Securities Act and any related filings and
approvals under applicable state securities laws, (iv) such filings as may be
required under any applicable requirements of the Exchange Act or the rules of
the NYSE and (v) such Consents the failure of which to make or obtain would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or to prevent or materially delay or hinder the ability of the
Company to perform its obligations under the Transaction Agreements.

3.7           Permits.  The Company and each of its Subsidiaries possess all
permits, licenses, authorizations, consents, approvals and franchises of
Governmental Entities that are required to conduct its business, except for such
permits or licenses the absence of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
ability of the Company and its Subsidiaries, taken as a whole, to conduct their
businesses consistent with past practices.

3.8           SEC Reports; Financial Statements.

(a)           The Company has filed all forms, reports and documents with the
SEC that have been required to be filed by it under applicable Laws since the
Acquisition Date (collectively, with the Registration Statement on Form S-4
(File No. 333-171924) as amended or superseded by a filing prior to the date of
this Agreement (the “Form S-4”), the “Company SEC Filings”), including the
Annual Report of the Company on Form 10-K for the fiscal year ended December 31,
2010, as amended through the date of this Agreement (the “Company Annual
Report”).  Each Company SEC Filing complied as of its filing date as to form in
all material respects with the applicable requirements of the Securities Act or
the Exchange Act, as the case may be, each as in effect on the date such Company
SEC Filing was filed (and, if amended or superseded by a filing prior to the
date of this Agreement, on the date of such amended or
 
 
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superseded filing).  As of its filing date (and, if amended or superseded by a
filing prior to the date of this Agreement, on the date of such amended or
superseded filing), each Company SEC Filing did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.  Other than Spectrum and Zap.Com, none of the
Company’s Subsidiaries is required to file any forms, reports or other documents
with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act.  Since the
Acquisition Date, no executive officer of the Company or Zap.Com has failed to
make the certifications required by him or her under Section 302 and 906 of the
Sarbanes Oxley Act of 2002 with respect to any Company SEC Filing or Zap.Com SEC
Report.  There are no transactions that have occurred since the Acquisition Date
that are required to be disclosed in the Company SEC Filings pursuant to Item
404 of Regulation S-K that have not been disclosed in the Company SEC Filings.

(b)           Zap.Com has filed all forms, reports and documents with the SEC
that have been required to be filed by it under applicable Laws since January 1,
2010 (the “Zap.Com SEC Reports”).  Each Zap.Com SEC Report complied as of its
filing date, as to form in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be, each
as in effect on the date such Zap.Com SEC Report was filed (and, if amended or
superseded by a filing prior to the date of this Agreement, on the date of such
amended or superseded filing).  As of its filing date (and, if amended or
superseded by a filing prior to the date of this Agreement, on the date of such
amended or superseded filing), each Zap.Com SEC Report did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.

(c)           The consolidated financial statements (including all related notes
and schedules) of the Company and its Subsidiaries included in the Company SEC
Filings and  (collectively, the “Company Financial Statements”) (i) comply as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto, and (ii) fairly present, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of the
dates indicated and the results of their operations and their cash flows for the
periods therein specified, all in accordance with United States generally
accepted accounting principles applied on a consistent basis (“GAAP”) throughout
the periods therein specified (except as otherwise noted therein, and in the
case of quarterly financial statements except for the absence of footnote
disclosure and subject, in the case of interim periods, to normal year-end
adjustments).

(d)           The financial statements (including all related notes and
schedules) of Zap.Com included in the Zap.Com SEC Reports (collectively, the
“Zap.Com Financial Statements”) (i) comply as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, and
(ii) fairly present, in all material respects, the consolidated financial
position of Zap.Com and its Subsidiaries as of the dates indicated and the
results of their operations and their cash flows for the periods therein
specified, all in accordance with GAAP throughout the periods therein specified
(except as otherwise noted therein, and in the case of quarterly financial
statements except for the absence of footnote disclosure and subject, in the
case of interim periods, to normal year-end adjustments).
 
 
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(e)           To the Company’s Knowledge, the financial statements (including
all related notes and schedules) of Spectrum included in the Spectrum SEC
Reports (collectively, the “Spectrum Financial Statements”) (i) comply as to
form in all material respects with the published rules and regulations of the
SEC applicable with respect thereto, and (ii) fairly present, in all material
respects, the consolidated financial position of Spectrum and its Subsidiaries
as of the dates indicated and the results of their operations and their cash
flows for the periods therein specified, all in accordance with GAAP throughout
the periods therein specified (except as otherwise noted therein, and in the
case of quarterly financial statements except for the absence of footnote
disclosure and subject, in the case of interim periods, to normal year-end
adjustments).

(f)           To the Company’s Knowledge, the financial statements (including
all related notes and schedules) of F&G included in the Form S-4 (collectively,
the “F&G Financial Statements”) (i) comply as to form in all material respects
with the published rules and regulations of the SEC applicable with respect
thereto, and (ii) fairly present, in all material respects, the consolidated
financial position of F&G and its Subsidiaries as of the dates indicated and the
results of their operations and their cash flows for the periods therein
specified, all in accordance with GAAP throughout the periods therein specified
(except as otherwise noted therein, and in the case of quarterly financial
statements except for the absence of footnote disclosure and subject, in the
case of interim periods, to normal year-end adjustments), except, in each case,
as would not and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.

(g)           Except as disclosed on Section 3.8(g) of the Disclosure Letter,
there are no Liabilities of the Company or any of its Subsidiaries of any kind
whatsoever, other than:  (i) Liabilities disclosed and provided for in the
Company Financial Statements, the Spectrum Financial Statements, the F&G
Financial Statements or in the Zap.Com Financial Statements; (ii) Liabilities
incurred in the ordinary course of business consistent with past practice; (iii)
Liabilities incurred in connection with the transactions contemplated by this
Agreement, the other Transaction Agreements or the Existing Series A Transaction
Agreements, in each case to which the Company is a party or (iv) Liabilities
that would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.

(h)           The Company’s principal executive officer and its principal
financial officer have (i) devised and maintained a system of internal
accounting controls sufficient to provide reasonable assurances regarding the
reliability of financial reporting and preparation of financial statements in
accordance with GAAP, and have evaluated such system at the times required by
the Exchange Act and in any event no less frequently than at reasonable
intervals and (ii) disclosed to the Company’s management, auditors and the audit
committee of the Board (x) all significant deficiencies and material weaknesses
in the design or operation of internal controls over financial reporting which
are reasonably likely to adversely affect the Company’s or any of its
Subsidiaries’ (other than Spectrum, Harbinger F&G and their Subsidiaries, as to
which no representation is made pursuant to this clause (ii)(x)) ability to
record, process, summarize and report financial information and (y) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the internal controls of the Company, and the Company has
provided to the Purchasers copies of any written materials relating to the
foregoing.  To the Company’s Knowledge, Spectrum’s principal
 
 
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executive officer and its principal financial officer have disclosed to
Spectrum’s management, auditors and the audit committee of Spectrum’s board of
directors (x) all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect Spectrum’s or any of its Subsidiaries’ ability to
record, process, summarize and report financial information and (y) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the internal controls of Spectrum.  As of the date of this
Agreement, the Company has no Knowledge of any material weaknesses in the
internal controls over financial reporting of Harbinger F&G and its
Subsidiaries, that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.  The Company has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a 15 under
the Exchange Act); such disclosure controls and procedures are designed to
ensure that material information relating to the Company and its Subsidiaries
(other than Harbinger F&G and its Subsidiaries as to which the Company is in the
process of implementing its disclosure controls and procedures.) required to be
included in the Company’s periodic reports under the Exchange Act is made known
to the Company’s principal executive officer and its principal financial officer
by others within those entities, and such disclosure controls and procedures are
sufficient to ensure that the Company’s principal executive officer and its
principal financial officer are made aware of such material information required
to be included in the Company’s periodic reports required under the Exchange
Act.  There are no outstanding loans made by the Company or any of its
Subsidiaries to any executive officer (as defined in Rule 3b-7 under the
Exchange Act) or director of the Company.  Neither the Company, since the
Acquisition Date, nor any Subsidiary of the Company, since the date that the
Company acquired (either directly or indirectly) a majority of the outstanding
capital stock of such Subsidiary, has made any loans to any executive officer
(as defined in Rule 3b-7 under the Exchange Act) or director of the Company or
any of its Subsidiaries.

3.9           Litigation.  Except as set forth on Section 3.9 of the Disclosure
Letter, there are no (i) investigations or, to the Knowledge of the Company,
proceedings pending or threatened by any Governmental Entity with respect to the
Company or any of its Subsidiaries or any of their properties or
assets,  (ii) Legal Proceedings pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries, or any
of their respective properties or assets, at Law or in equity that would
reasonably be expected to result in liability to the Company or its Subsidiaries
in excess of $250,000, or (iii) orders, judgments or decrees of any Governmental
Entity against the Company or any of its Subsidiaries.

3.10           Absence of Certain Changes.  Since December 31, 2010 and except
as disclosed on Section 3.10 of the Disclosure Letter, the business of the
Company and its Subsidiaries has been conducted in the ordinary course of
business consistent with past practices and there has not been:

(a)           any Change which, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect;

(b)           any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase;
 
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redemption or other acquisition by the Company or any of its Subsidiaries of any
outstanding shares of capital stock or other securities of the Company or any of
its Subsidiaries;
 
(c)           any incurrence, assumption or guarantee by the Company or any of
its Subsidiaries of any indebtedness for borrowed money in excess of $25,000,
individually, or $100,000, in the aggregate, or the repurchase, redemption or
repayment of any indebtedness for borrowed money of the Company or any of its
Subsidiaries in excess of $25,000, individually, or $100,000, in the aggregate;

(d)           any event of default (or event which with notice, the passage of
time or both, would become an event of default) in the payment of any
indebtedness for borrowed money in an aggregate principal amount in excess of
$100,000 by the Company or any of its Subsidiaries;

(e)           any change in any methods of accounting by the Company or any of
its Subsidiaries, except as may be appropriate to conform to changes in GAAP; or

(f)           any material Tax election made by the Company or any of its
Subsidiaries or any settlement or compromise of any material Tax liability by
the Company or any of its Subsidiaries, except (i) as required by applicable Law
or (ii) with respect to any material Tax election, consistent with elections
historically made by the Company.

3.11           Compliance with Law.  The Company and each of its Subsidiaries
are in compliance with and are not in default under or in violation of, and have
not received any written notices of non-compliance, default or violation with
respect to, any material Laws, in each case, except as, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect or
to materially delay or hinder the ability of the Company to perform its
obligations under the Transaction Agreements.

3.12           Intellectual Property.

(a)           The Company and its Subsidiaries own, license, sublicense or
otherwise possess legally enforceable rights to use all Intellectual Property
necessary to conduct the business of the Company and its Subsidiaries, as
currently conducted, free and clear of all Liens (other than non-exclusive
licenses granted in the ordinary course of business), except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, all Intellectual
Property developed for the Company or any of its Subsidiaries by any employees,
contractors and consultants of the Company or any of its Subsidiaries is
exclusively owned by the Company or one of its Subsidiaries, free and clear of
all Liens (other than non-exclusive licenses granted in the ordinary course of
business or Permitted Liens).

(b)           All Registered Intellectual Property owned by the Company or any
of its Subsidiaries is subsisting and has not expired or been cancelled or
abandoned and, to the Company’s Knowledge, is valid and enforceable, except, in
each case, as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.  To the
 
 
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Company’s Knowledge, no third party is infringing, violating or misappropriating
any of the Company Intellectual Property in any material respect.

(c)           The execution and delivery of the Transaction Agreements to which
the Company is a party by the Company and the consummation of the transactions
contemplated hereby and thereby will not result in the breach of, or create on
behalf of any third party the right to terminate or modify, (i) any license or
other agreement relating to any Intellectual Property owned by the Company or
any of its Subsidiaries (the “Company Intellectual Property”), or (ii) any
license, sublicense and other agreement as to which the Company or any of its
Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries is authorized to use any third party Intellectual Property,
excluding generally commercially available, off-the-shelf software programs
licensed for a license fee of less than $50,000 in the aggregate (the “Third
Party Intellectual Property”), except, in either case, as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

(d)           The conduct of the business of the Company and its Subsidiaries
has not infringed, violated or constituted a misappropriation of any
Intellectual Property of any third party and as currently conducted does not
infringe, violate or constitute a misappropriation of any Intellectual Property
of any third party, except, in either case, as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  Neither
the Company nor any of its Subsidiaries (i) has received any written claim or
notice alleging any such infringement, violation or misappropriation, or
(ii) has been or is subject to any settlement, order, decree, injunction, or
stipulation imposed by any Governmental Entity that may affect the use, validity
or enforceability of Company Intellectual Property.

(e)           The Company and its Subsidiaries take all reasonable actions to
protect the Company Intellectual Property and to protect and preserve the
confidentiality of their trade secrets, including disclosing trade secrets to a
third party only where such third party is bound by a confidentiality agreement,
except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

3.13           Employee Benefits.

(a)           Prior to the date hereof, a complete and correct copy of each
Benefit Plan of the Company has been delivered or otherwise made available to
the Purchasers.

(b)           Except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, with respect to any Benefit Plan
of the Company, no Legal Proceeding has been threatened, asserted, instituted,
or, to the Knowledge of the Company, is anticipated (other than non-material
routine claims for benefits, and appeals of such claims), and, to the Knowledge
of the Company, no facts or circumstances exist that would give rise to any such
Legal Proceeding.

(c)           Except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, each Benefit Plan of the Company
has been established and administered in accordance with its terms, and in
compliance with the applicable
 
 
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provisions of ERISA, the Code and all other applicable laws, rules and
regulations, and each Benefit Plan of the Company that is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination or opinion letter from the Internal Revenue Service to the effect
that such Benefit Plan of the Company is qualified under the Code and nothing
has occurred that would reasonably be expected to cause the loss of such
qualification.

(d)           Except as set forth on Section 3.13(d) of the Disclosure Letter,
neither the Company, any of its Subsidiaries, nor any other entity which,
together with the Company or any of its Wholly Owned Subsidiaries would be
treated as a single employer under Section 4001 of ERISA or Section 414 of the
Code (each such entity, an “ERISA Affiliate”) sponsors, maintains, contributes
to, or has had in the past six (6) years an obligation at any time to sponsor,
maintain or contribute to, or has any liability in respect of (i) any “defined
benefit pension plan” (as defined in Section 3(35) of ERISA), (ii) any “employee
benefit plan” (as defined in Section 3(3) of ERISA) subject to Section 412 of
the Code or Section 302 of ERISA or Title IV of ERISA, including any
“multiemployer plan” (as defined in Section 4001(a)(15) of ERISA), (iii) any
other plan which is subject to Section 4063, 4064 or 4069 of ERISA, or (iv) any
“employee pension benefit plan” (within the meaning of Section 3(2) of ERISA)
that is not intended to be qualified under Section 401(a) of the Code.  Except
as set forth in Section 3.13(d) of the Disclosure Letter, and except as required
by Section 4980B of the Code, no Benefit Plan of the Company provides any
retiree or post-employment medical, disability or life insurance benefits to any
person.  The assets of any defined benefit pension plan equal or exceed the
projected benefit obligation of such plan, as determined using the actuarial
assumptions used for purposes of the Company Financial Statements.

(e)           Except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, neither the execution of the
Transaction Agreements nor the consummation of the transactions contemplated
hereby and thereby will (i) accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any Company employee, or
(ii) give rise to any other liability or funding obligation under any Benefit
Plan of the Company or otherwise, including liability for severance pay,
unemployment compensation or termination pay.

(f)           Except as set forth on Section 3.13(f) of the Disclosure Letter,
no Benefit Plan of the Company is maintained outside the jurisdiction of the
United States, or covers any employee residing or working outside the United
States (any such Benefit Plan the “Foreign Benefit Plans”).  Except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, all Foreign Benefit Plans that are required to be funded are
fully funded, and with respect to all other Foreign Benefit Plans, adequate
reserves therefor have been established on the accounting statements of the
Company or its applicable Subsidiary.

3.14           Labor Relations.

(a)           (i) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or as set forth on
Section 3.14 of the Disclosure Letter, no Company employee is represented by a
labor union or works council and, to the Knowledge of the Company, no organizing
efforts have been conducted within the last
 
 
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three years or are now being conducted, (ii) neither the Company nor any of its
Subsidiaries is a party to any material collective bargaining agreement or other
labor contract or collective agreement, and (iii) neither the Company nor any of
its Subsidiaries currently has, or, to the Knowledge of the Company, is there
now threatened, a strike, picket, work stoppage, work slowdown or other material
labor dispute.

(b)           (i) Each of the Company and its Subsidiaries has complied with all
applicable laws relating to the employment of labor, including all applicable
laws relating to wages, hours, collective bargaining, employment discrimination,
civil rights, safety and health, workers’ compensation, pay equity and the
collection and payment of withholding and/or social security taxes, except as
would not, individually or in the aggregate, have a Material Adverse Effect and
(ii) neither the Company nor any of its Subsidiaries has incurred any liability
or obligation under the Worker Adjustment and Retraining Notification Act or any
similar state or local Law within the last two years which remains unsatisfied.

3.15           Taxes.

(a)           The Company and each of its Subsidiaries have filed all Tax
Returns required to have been filed as of the date hereof (or extensions have
been duly obtained) and such Tax Returns are correct and complete in all
respects and have paid all Taxes required to have been timely paid by them in
full through the date hereof, except to the extent such Taxes are both (i) being
challenged in good faith and (ii) adequately provided for on the financial
statements of the Company and its Subsidiaries in accordance with GAAP, except
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

(b)           Neither the Company nor any of its Subsidiaries has any current
liability, and to the Knowledge of the Company, there are no events or
circumstances which would result in any liability, for Taxes of any Person
(other than the Company and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

(c)           None of the Company or any of its Subsidiaries is a party to, is
bound by or has any obligation under any Tax sharing or Tax indemnity agreement
or similar Contract or arrangement other than any such agreement or similar
Contract or arrangement between the Company and any of its Subsidiaries.

(d)           All Taxes required to be withheld, collected or deposited by or
with respect to Company and each of its Subsidiaries have been timely withheld,
collected or deposited as the case may be, and to the extent required, have been
paid to the relevant taxing authority, except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

(e)           No deficiencies for any Taxes have been proposed or assessed in
writing against or with respect to the Company or any of its Subsidiaries, and
there is no outstanding audit, assessment, dispute or claim concerning any Tax
liability of the Company or any of its Subsidiaries pending or raised by an
authority in writing, except as would not,
 
 
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individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  No written claim has been made by any Governmental Entity in a
jurisdiction where neither the Company nor any of its Subsidiaries files Tax
Returns that the Company or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction.  Neither the Company nor any of its Subsidiaries
has granted any waiver of any federal, state, local or foreign statute of
limitations with respect to, or any extension of a period for the assessment of,
any material Tax.

(f)           There are no Liens with respect to Taxes upon any of the assets or
properties of either the Company or any of its Subsidiaries, other than with
respect to Taxes not yet delinquent, except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

(g)           No closing agreement pursuant to Section 7121 of the Code (or any
similar provision of state, local or foreign law) has been entered into by or
with respect to the Company or any of its Subsidiaries.

(h)           Neither the Company nor any of its Subsidiaries has participated
in a “listed transaction” within the meaning of Treasury Regulation
Section 1.6011-4(b)(2).

(i)           The representations and warranties expressly set forth in this
Section 3.15 shall be the only representations and warranties, express or
implied, written or oral, with respect to the subject matter contained in this
Section 3.15.

3.16           NYSE.

(a)           Shares of the Common Stock are registered pursuant to
Section 12(b) of the Exchange Act and are listed on The New York Stock Exchange
(the “NYSE”), and there is no action pending by the Company or any other Person
to terminate the registration of the Common Stock under the Exchange Act or to
delist the Common Stock from NYSE, nor has the Company received any notification
that the SEC or the NYSE is currently contemplating terminating such
registration or listing.

(b)           The shares of Common Stock issuable upon conversion of the Shares
have been approved by the NYSE for listing on the NYSE.

(c)           The representations and warranties expressly set forth in this
Section 3.16 shall be the only representations and warranties, express or
implied, written or oral, with respect to the subject matter contained in this
Section 3.16.

3.17           Investment Company Act.  The Company is not, nor immediately
after the Company’s receipt of the Share Purchase Price from the Purchasers,
will the Company be, an “investment company” within the meaning of, and required
to be registered under, the Investment Company Act of 1940, as amended.

3.18           Brokers.  Except for Jefferies & Company, Inc., the Company has
not retained, utilized or been represented by any broker or finder who is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement.
 
 
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3.19           Subsidiaries.

(a)           As of the date hereof, the Company has no Subsidiaries other than
as listed in Exhibit 21.1 to the Company Annual Report and Harbinger F&G and any
Subsidiaries thereof, which are listed on Section 3.19 of the Disclosure Letter.

(b)           Except as set forth on Section 3.19 of the Disclosure Letter, all
of the outstanding shares of capital stock of, or other equity or voting
interest in, each Subsidiary of the Company (i) have been duly authorized,
validly issued and are fully paid and nonassessable and (ii) are owned, directly
or indirectly, by the Company, free and clear of all Liens (other than
restrictions under applicable securities Laws and Liens securing the Notes).

3.20           Environmental Matters.

(a)           Except as would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect or as set forth on Section 3.20
of the Disclosure Letter:

(i)           The Company and its Subsidiaries and their respective operations
are and have been in compliance with all, and have not violated any, applicable
Environmental Laws, which compliance includes the possession and maintenance of,
and compliance with, all permits, licenses, authorizations, waivers, exemptions,
registrations, consents, approvals and franchises from Governmental Entities
required under applicable Environmental Laws (“Environmental Permits”) for the
operation of the business of the Company and its Subsidiaries; the Company has
no reason to believe that any such Environmental Permits will be modified,
revoked or otherwise made ineffective, or will not be renewed on terms
substantially the same as those currently in effect;

(ii)           Neither the Company nor any of its Subsidiaries, nor any other
entity for which the Company or any of its Subsidiaries is responsible, has
transported, produced, processed, manufactured, generated, used, treated,
handled, stored or disposed of any Hazardous Substances, except in compliance
with applicable Environmental Laws and in a manner that would not result in
liability under any applicable Environmental Law.  No Hazardous Substance has
been released by the Company, the Subsidiaries, or to the Knowledge of the
Company, by any other Person (including, without limitation, any of the
predecessors in interest to the Company or any of its Subsidiaries), at, on,
about or under (i) any property now or formerly owned, operated or leased by the
Company, its Subsidiaries or their respective predecessors in interest; or
(ii) any property to which the Company, its Subsidiaries or their respective
predecessors in interest has sent waste;

(iii)           Neither the Company nor any of its Subsidiaries, nor, to the
Knowledge of the Company, any of their respective predecessors in interest has
exposed any employee or any third party to Hazardous Substances in violation of,
or in a manner that would result in liability under, any applicable
Environmental Law or tort law;

(iv)           Neither, the Company nor any of its Subsidiaries, nor, to the
Knowledge of the Company, any of their respective predecessors in interest, is a
party to or the subject of any pending, or, to the Knowledge of the Company,
threatened, Legal Proceeding
 
 
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alleging Liabilities under or noncompliance with any Environmental Law or
seeking to impose any financial responsibility for any investigation, cleanup,
removal, containment or any other remediation or compliance under any
Environmental Law.  Neither the Company nor any of its Subsidiaries, nor, to the
Knowledge of the Company, any of their respective predecessors in interest, is
subject to any orders, judgments or decrees or agreement by or with any
Governmental Entity or third party imposing any Liabilities with respect to any
Environmental Laws or any Hazardous Substances;

(v)           There are no liabilities of any third party arising out of or
related to Environmental Laws or Hazardous Substances that the Company, its
Subsidiaries or, to the Knowledge of the Company, their respective predecessors
in interest has expressly agreed to assume, to indemnify or retain by contract
or otherwise;

(vi)           Neither the Company nor the Subsidiaries has received any notice,
claim, subpoena, or summons from any Person alleging: (i) any environmental
liability relating to the Company, the Subsidiaries, or their respective
predecessors in interest; or (ii) any violation by the Company, the Subsidiaries
or their respective predecessors in interest of any Environmental Law;

(vii)           Neither the Company nor any of its Subsidiaries has manufactured
any products that are not or were not in compliance with all Environmental Laws
applicable to such products to be imported, sold, or otherwise marketed in any
jurisdiction in which such products are currently, or have been, imported, sold,
or otherwise marketed; and

(viii)           None of the products currently or formerly manufactured,
produced, distributed, sold, leased, licensed, repaired, delivered, installed,
conveyed or otherwise put into the stream of commerce by the Company or any of
its Subsidiaries, or, to the Knowledge of the Company, any other Person for
which the Company or any of its Subsidiaries is responsible by contract or
operation of law, contains or has contained (i) asbestos; or (ii) any other
Hazardous Substance that has resulted in or would reasonably be expected to
result in any liability to the Company or any of its Subsidiaries.

(b)           As of the date hereof, all reports of environmental site
assessments, reviews, audits, investigations or similar evaluations, and any
material documents in the possession or control of the Company or any of its
Subsidiaries concerning (i) environmental conditions at any facilities or real
property ever owned, operated or leased by the Company, the Subsidiaries or any
of their respective predecessors in interest; or (ii) any environmental
liability of the Company, its Subsidiaries or any of their respective
predecessors in interest have been made available to the Purchasers.

(c)           The representations and warranties expressly set forth in this
Section 3.20 shall be the only representations and warranties, express or
implied, written or oral, with respect to the subject matter contained in this
Section 3.20.

3.21           Assets.

(a)           The Company and its Subsidiaries have good and marketable title to
all of its or their real or personal properties (whether tangible or
intangible), rights and assets,
 
 
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except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, in each case, free and clear of all Liens (other
than Permitted Liens).  The properties and assets owned and leased by the
Company and its Subsidiaries are sufficient to carry on their businesses as they
are now being conducted except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

(b)           Except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, the Company or a Subsidiary of
the Company has good and valid leasehold interests in all of its leased
properties, whether as lessee or sublessee (the “Leased Real Property”), in each
case, sufficient to conduct its respective businesses as currently conducted,
free and clear of all Liens (other than Permitted Liens), assuming the timely
discharge of all obligations owing under or related to Leased Real
Property.  Neither the Company nor any of its Subsidiaries owns any real
property.

3.22           Insurance.  The Company and its Subsidiaries have and maintain in
effect policies of insurance covering the Company, its Subsidiaries or any of
their respective employees, properties or assets, including policies of life,
property, fire, workers’ compensation, products liability, directors’ and
officers’ liability and other casualty and liability insurance, that is in a
form and amount that is customarily carried by persons conducting business
similar to that of the Company and its Subsidiaries and which the Company
reasonably believes are adequate for the operation of its business.  All such
insurance policies are in full force and effect, no written notice of
cancellation has been received by the Company as of the date hereof and, to the
Knowledge of the Company, no such notice is imminent, and there is no existing
default or event which, with the giving of notice or lapse of time or both,
would constitute a default, by any insured thereunder, except for such defaults
that would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.  There is no material claim pending under any of such
policies as to which coverage has been denied or disputed by the underwriters of
such policies and there has been no threatened termination of any such policies,
except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

3.23           Material Contracts.

(a)           Except as filed as an exhibit to the Company SEC Filings, Spectrum
SEC Reports or Zap.com SEC Reports, there are none of the following (each a
“Material Contract”):

(i)           Contracts restricting the payment of dividends upon, or the
redemption, repurchase or conversion of, the Convertible Preferred Stock or the
Common Stock issuable upon conversion thereof;

(ii)           joint venture, partnership, limited liability or other similar
Contract or arrangement relating to the formation, creation, operation,
management or control of any partnership or joint venture that is material to
the business of the Company and its Subsidiaries, taken as a whole;
 
 
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(iii)           any Contract relating to the acquisition or disposition of any
business, stock or assets that is material to the business of the Company and
its Subsidiaries, taken as a whole, other than in the ordinary course of
business consistent with past practice;

(iv)           Contracts containing any covenant (x) limiting the right of the
Company or any of its Subsidiaries to engage in any line of business or in any
geographic area, or (y) prohibiting the Company or any of its Subsidiaries from
engaging in business with any Person or levying a fine, charge or other payment
for doing so;

(v)           “material contracts” (as such term is defined in Item 601(b)(10)
of Regulation S-K of the SEC, excluding any exhibits, schedules and annexes to
such material contracts that are not required to be filed with the SEC, and
those agreements and arrangements described in Item 601(b)(10)(iii)) with
respect to the Company and its Subsidiaries required to be filed with the SEC
(the Material Contracts, together with any lease, binding commitment, option,
insurance policy, benefit plan or other contract, agreement, instrument or
obligation (whether oral or written) to which the Company or any of its
Subsidiaries may be bound, the “Contracts”);

(vi)           Contracts relating to indebtedness for borrowed money of the
Company or any of its Subsidiaries in an amount exceeding $500,000;

(vii)           Contracts that would be binding on the Purchasers or any of
their Affiliates after the Closing;

(viii)           Contracts with any Governmental Entity that imposes any
material obligation or restriction on the Company or any of its Subsidiaries,
taken as a whole; and

(ix)           any material Contract with any current or former director,
officer or employee.

(b)           Each Material Contract is valid and binding on the Company (and/or
each such Subsidiary of the Company party thereto) and, to the Knowledge of the
Company, on each other party thereto, and is in full force and effect, and
neither the Company nor any of its Subsidiaries that is a party thereto, nor, to
the Knowledge of the Company, any other party thereto, is in breach of, or
default under, any such Material Contract, and no event has occurred that with
notice or lapse of time or both would constitute such a breach or default
thereunder or would result in the termination thereof or would cause or permit
the acceleration or other change of any right or obligation of the loss of any
benefit thereunder by the Company or any of its Subsidiaries, or, to the
Knowledge of the Company, any other party thereto, except for such failures to
be in full force and effect and such breaches and defaults that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

3.24           Right of First Refusal; Stockholders Agreement; Voting and
Registration Rights.  Except as set forth on Section 3.24 of the Disclosure
Letter or as provided for in this Agreement, the other Transaction Agreements or
the Existing Series A Transaction Agreements, no party has any right of first
refusal, right of first offer, right of co-sale, preemptive right, anti-
 
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dilution right or other similar right regarding Equity Securities of the
Company.  Except as set forth on Section 3.24 of the Disclosure Letter, there
are no provisions of the Company’s organizational documents and no Material
Contracts other than the Certificate of Designation, this Agreement, the other
Transaction Agreements or the Existing Series A Transaction Agreements, which
(a) may affect or restrict the voting rights of the Purchasers with respect to
the Shares in their capacity as stockholders of the Company, (b) restrict the
ability of the Purchasers, or any successor thereto or assignee or transferee
thereof, to transfer the Shares, (c) would adversely affect the Company’s or the
Purchasers’ right or ability to consummate the transactions contemplated by this
Agreement or comply with the terms of the other Transaction Agreements or the
Certificates of Designation and the transactions contemplated hereby or thereby,
(d) require the vote of more than a majority of the Company’s issued and
outstanding Common Stock or require a separate class vote, voting together as a
single class, to take or prevent any corporate action (other than those matters
expressly requiring a different vote under the provisions of the DGCL) or
(e) entitle any party to nominate or elect any director of the Company or
require any of the Company’s stockholders to vote for any such nominee or other
person as a director of the Company.

3.25           Anti-Takeover Statutes.  To the extent necessary, the Board has
taken all required actions so that the restrictions on business combinations set
forth in Article IX, Section (b) of the Company’s certificate of incorporation
are not applicable to the Transaction Agreements and the transactions
contemplated hereby and thereby, including the acquisition of Beneficial
Ownership by the Purchasers of additional shares of voting stock of the Company
pursuant to additional issuances contemplated by the Certificate of Designation
or through the exercise of the Purchasers’ rights set forth in Section 5.5, and
any other acquisition of Beneficial Ownership by the Purchasers of additional
shares of voting stock of the Company made in compliance with Section 5.4.  The
Company has elected in its certificate of incorporation not to be governed by
Section 203 of the DGCL and no other state takeover statute or similar
regulation applies to or purports to apply to the Transaction Agreements and the
transactions contemplated hereby and thereby.

3.26           No Additional Understandings.  Other than the Transaction
Agreements, (x) none of the Company, its Subsidiaries or any of the Harbinger
Affiliates is a party to any agreement or other legally binding arrangement,
whether oral or written, with any Purchaser or any Affiliate thereof relating to
the Shares or the transactions contemplated by the Transaction Agreements and
(y) none of the Purchasers or any of their Affiliates have been paid or are
entitled to any transaction or similar fees or compensation from the Company,
any of its Subsidiaries, or any Harbinger Affiliates (other than reimbursement
of actual out-of-pocket costs and expenses as provided in Section 12.8) in
connection herewith or therewith.

3.27           Spectrum and F&G.

(a)           As of the date hereof, the Company directly or indirectly owns
27,756,905 shares of common stock of Spectrum free and clear of all Liens (other
than restrictions under applicable securities Laws and Liens securing the
Notes).

(b)           Organization.  Each of Spectrum and F&G and their respective
Subsidiaries are validly existing and in good standing under the laws of their
respective
 
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jurisdictions of organization; and each of them is duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified and in good standing
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

(c)           No Conflicts.  The execution, delivery and performance of the
Transaction Agreements, the issuance of the Shares and the Common Stock upon
conversion of the Shares and the consummation of the other transactions
contemplated hereby and by the other Transaction Agreements will not (i)
conflict with or result in any violation of any provision of the certificate of
incorporation or bylaws of Spectrum or Harbinger F&G or any of their respective
Subsidiaries, (ii) result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, require consent under, or give
rise to a right of termination, cancellation, modification or acceleration of
any obligation or to the loss of any benefit under any mortgage, Contract,
purchase or sale order, instrument, permit, concession, franchise, right or
license binding upon Spectrum or Harbinger F&G or any of their respective
Subsidiaries or result in the creation of any Lien upon any of the properties,
assets or rights of Spectrum or Harbinger F&G or any of their respective
Subsidiaries, or (iii) subject to the matters referred to in Section 3.27(d),
conflict with or violate any applicable Law or any judgment, order, injunction
or decree issued by any Governmental Entity, except in each case with respect to
clauses (i), (ii) and (iii), as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or to prevent or
materially delay or hinder the ability of the Company to perform its obligations
under the Transaction Agreements.

(d)           No Consents.  No Consent of any Governmental Entity is required on
the part of Spectrum or Harbinger F&G or any of their respective Subsidiaries in
connection with (a) the execution, delivery or performance of the Transaction
Agreements party and the consummation of the transactions contemplated hereby
and thereby, or (b) the issuance of the Shares or the issuance of the Common
Stock upon conversion of the Shares in accordance with the Certificate of
Designation; other than (i) such filings as may be required under any applicable
requirements of the Exchange Act, and (ii) such Consents the failure of which to
make or obtain would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or to prevent or materially delay or
hinder the ability of the Company to perform its obligations under the
Transaction Agreements.

(e)           Permits.  Each of Spectrum and its Subsidiaries possess all
permits, licenses, authorizations, consents, approvals and franchises of
Governmental Entities that are required to conduct its business, except for such
permits or licenses the absence of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

(f)           Litigation.  To the Knowledge of the Company, except as disclosed
on Section 3.27(f) of the Disclosure Letter, and except as disclosed in the
Spectrum SEC Reports and the disclosure schedules to the F&G Purchase Agreement,
there are no (i) investigations or proceedings pending or threatened by any
Governmental Entity with respect to Spectrum or F&G or any of their respective
Subsidiaries or any of their properties or assets,  (ii) Legal Proceedings
pending or, to the Knowledge of the Company, threatened against or affecting
Spectrum or F&G or any of their respective Subsidiaries, or any of their
respective properties or
 
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assets, at law or in equity, or (iii) orders, judgments or decrees of any
Governmental Entity against Spectrum or F&G or any of their respective
Subsidiaries, except in the case of each of clauses (i), (ii), and (iii), which
would not reasonably be expected to have a Material Adverse Effect.

(g)           Compliance with Law.  Except as set forth on Section 3.27(g) of
the Disclosure Letter, each of Spectrum and F&G and each of their respective
Subsidiaries are in compliance with and are not in default under or in violation
of, and have not received any written notices of non-compliance, default or
violation with respect to, any Laws, in each case, except as, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.

(h)           Insurance.  Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, each of Spectrum and
F&G and each of their respective Subsidiaries have and maintain in effect
policies of insurance covering such entities, their respective Subsidiaries or
any of their respective employees, properties or assets, including policies of
life, property, fire, workers’ compensation, products liability, directors’ and
officers’ liability and other casualty and liability insurance, that is in a
form and amount that is customarily carried by persons conducting business
similar to that of such entities and which the Company reasonably believes are
adequate for the operation of their respective businesses.

(i)           Intellectual Property.  To the Knowledge of the Company, each of
Spectrum and F&G and their respective subsidiaries:  (i) own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other rights
to inventions, know how, patents, copyrights, confidential information and other
intellectual property (collectively, “intellectual property rights”) necessary
to conduct the business now operated by them, or presently employed by them,
except where the failure to own, possess or acquire such intellectual property
rights would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and (ii) have not received any written
notice of infringement of or conflict with asserted rights of others with
respect to any intellectual property rights that would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.

(j)           Benefit Plans.  To the Knowledge of the Company, except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, each Benefit Plan of Spectrum and Benefit Plan of F&G and their
respective Subsidiaries has been established and administered in accordance with
its terms, and in compliance with the applicable provisions of ERISA, the Code
and all other applicable laws, rules and regulations.

(k)           Labor Matters.  To the Knowledge of the Company, no labor dispute
with the employees of Spectrum or F&G, or any of their respective Subsidiaries,
exists or is imminent, except such labor disputes as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

(l)           Taxes.  To the Knowledge of the Company, Spectrum, F&G and their
respective Subsidiaries have filed all Tax Returns that are required to be filed
or have requested extensions thereof (except in any case in which the failure so
to file would not have a
 
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Material Adverse Effect); and, to the Knowledge of the Company, Spectrum, F&G
and their respective Subsidiaries have paid all Taxes required to be paid by
them, except for any such Taxes currently being contested in good faith or as
would not, individually or in the aggregate, have a Material Adverse Effect.

(m)           Environmental Matters.  To the Knowledge of the Company, none of
Spectrum or F&G or their respective Subsidiaries is in violation of any
Environmental Law, owns or operates any real property contaminated with any
substance that is subject to any environmental laws, is liable for any off site
disposal or contamination pursuant to any environmental laws, or is subject to
any claim relating to any environmental laws, which violation, contamination,
liability or claim would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; nor to the Knowledge of the Company is
there any pending investigation which would reasonably be expected to lead to
such a claim.

(n)           Title to Property.  To the Knowledge of the Company, each of
Spectrum, F&G and their respective Subsidiaries have good and marketable title
in fee simple to all real property owned by them, good title to all personal
property owned by them and valid leasehold interests in real and personal
property being leased by them, in each case, as of the date hereof, free from
all liens, charges, encumbrances and defects, except (x) for Permitted Liens as
such term is defined in the Indenture, (y) for such as would not, individually
or in the aggregate, reasonably be expected to interfere in any material respect
with the use made and proposed to be made of such property by the Company and
its Subsidiaries, or (z) for such as would not otherwise have a Material Adverse
Effect.

(o)           Spectrum SEC Compliance.  To the Company’s Knowledge, Spectrum has
filed all forms, reports and documents with the SEC that have been required to
be filed by it under applicable Laws since October 1, 2009 (the “Spectrum SEC
Reports”).  To the Company’s Knowledge, each Spectrum SEC Report complied as of
its filing date, as to form in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be, each
as in effect on the date such Spectrum SEC Report was filed (and, if amended or
superseded by a filing prior to the date of this Agreement, on the date of such
amended or superseded filing).  To the Company’s Knowledge, as of its filing
date (and, if amended or superseded by a filing prior to the date of this
Agreement, on the date of such amended or superseded filing), each Spectrum SEC
Report did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.

(p)           F&G.  The acquisition contemplated by the F&G Purchase Agreement
has been consummated.  Except as set forth on Section 3.27(p) of the Disclosure
Letter, to the Knowledge of the Company, there has not been any breach of the
representations and warranties made by OM Group (UK) Limited to Harbinger F&G in
Article III of the F&G Purchase Agreement that has given or would reasonably be
expected to give rise to a claim for indemnification under the F&G Purchase
Agreement.  Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, each of the Insurance Subsidiaries
possess all permits, licenses, authorizations, consents, approvals and
franchises that are required by applicable Law to conduct their business in the
ordinary course of business.
 
 
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(q)           Form S-4.  To the Company's Knowledge, as of its effective date
(and, if thereafter amended or superseded by a filing prior to the date of this
Agreement, on the date of such amended or superseded filing), the financial
statements of Spectrum and its subsidiaries incorporated by reference into the
Form S-4, the financial statements of F&G and its subsidiaries incorporated by
reference into the Form S-4 and the information contained in Annexes A through E
included in the Form S-4 did not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading, except as would not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

3.28           No Other Representations and Warranties.  Except for the
representations and warranties contained in Section 3 (including, or as
qualified by, the Disclosure Letter), the Company makes no other representation
or warranty, express or implied, written or oral, and hereby, to the maximum
extent permitted by applicable Law, disclaims any such representation or
warranty, whether by the Company or any other Person, with respect to the
Company or with respect to any other information (including, without limitation,
pro-forma financial information, financial projections or other forward-looking
statements) provided to or made available to any Purchaser in connection with
the transactions contemplated hereby.  Neither the Company nor any other Person
will have or be subject to any liability or indemnification obligation to any
Purchaser or any other Person resulting from any other express or implied
representation or warranty with respect to the Company, unless any such
information is expressly included in a representation or warranty contained in
Section 3 or in an applicable section of the Disclosure Letter.

4.           Representations and Warranties of the Purchasers.  Each Purchaser
represents and warrants, severally and not jointly, to the Company as follows:

4.1           Organization.  Such Purchaser is a legal entity duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
organization.

4.2           Authorization.  Such Purchaser has all requisite corporate power
to enter into this Agreement and the other Transaction Agreements to which such
Purchaser is a party and to consummate the transactions contemplated by the
Transaction Agreements to which such Purchaser is a party and to carry out and
perform its obligations thereunder.  All corporate or member action on the part
of such Purchaser or the holders of the capital stock or other equity interests
of such Purchaser necessary for the authorization, execution, delivery and
performance of the Transaction Agreements to which such Purchaser is a party has
been taken.  Upon their respective execution by such Purchaser and the other
parties thereto and assuming that they constitute legal and binding agreements
of the Company, each of the Transaction Agreements to which such Purchaser is a
party will constitute a legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, except that
such enforceability (a) may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar Laws affecting or relating to
creditors’ rights generally, and (b) is subject to general principles of equity
(regardless of whether considered in a proceeding in equity or at Law).
 
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4.3           No Conflict.  The execution, delivery and performance of the
Transaction Agreements to which such Purchaser is a party by such Purchaser, the
issuance of the Shares and the Common Stock upon conversion of the Shares in
accordance with the Certificate of Designation and the consummation of the other
transactions contemplated hereby will not (i) conflict with or result in any
violation of any provision of the certificate of incorporation or by-laws or
other equivalent organizational document, in each case as amended, of such
Purchaser, (ii) result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, require consent under, any
Contract binding upon such Purchaser or (iii) subject to the matters referred to
in Section 4.4, conflict with or violate any applicable Laws or any judgment,
order, injunction or decree issued by any Governmental Entity, except in the
case of each of clauses (i), (ii) and (iii) as would not, individually or in the
aggregate, be reasonably expected to materially delay or hinder the ability of
such Purchaser to perform its obligations under the Transaction Agreements (with
respect to each Purchaser, a “Purchaser Adverse Effect”).

4.4           Consents.  No Consent of any Governmental Entity is required on
the part of such Purchaser in connection with (a) the execution, delivery or
performance of the Transaction Agreements to which such Purchaser is a party and
the consummation of the transactions contemplated hereby and thereby, and
(b) the issuance of the Shares or the issuance of the Common Stock upon
conversion of the Shares in accordance with the Certificate of Designation,
other than (i) the expiration or termination of any applicable waiting periods
under the Antitrust Laws with respect to the performance under the Transaction
Agreements, or consummation of transactions, in each case occurring after the
Closing, (ii) those to be obtained, in connection with the registration of the
Shares under the Registration Rights Agreement, under the applicable
requirements of the Securities Act and any related filings and approvals under
applicable state securities Laws, (iii) such filings and approvals as may be
required by any federal or state securities Laws, including compliance with any
applicable requirements of the Exchange Act, and (iv) such Consents the failure
of which to make or obtain would not, individually or in the aggregate,
reasonably be expected to have a Purchaser Adverse Effect.

4.5           Brokers.  Such Purchaser has not retained, utilized or been
represented by any broker or finder in connection with the transactions
contemplated by this Agreement whose fees the Company would be required to pay.

4.6           Purchase Entirely for Own Account.  Such Purchaser is acquiring
the Shares for its own account solely for the purpose of investment, not as
nominee or agent, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act, and such
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same, in violation of the Securities Act.  Such
Purchaser has no present agreement, undertaking, arrangement, obligation or
commitment providing for the disposition of the Shares.

4.7           Investor Status.  Such Purchaser certifies and represents to the
Company that such Purchaser is an “accredited investor” as defined in Rule 501
of Regulation D promulgated under the Securities Act.  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 receive
information
 
 
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from, and to ask questions of and receive answers from the management of, the
Company concerning this investment so as to allow it to make an informed
investment decision prior to its investment and has sufficient knowledge and
experience in investing in companies similar to the Company so as to be able to
evaluate the risks and merits of its investment in the Company.

4.8           Securities Not Registered.

(a)           Such Purchaser understands that the Shares and the Conversion
Shares have not been approved or disapproved by the SEC or by any state
securities commission nor have the Shares or the Conversion Shares 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 and the Conversion 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.  Such Purchaser understands
that the exemptions from registration afforded by Rule 144 under the Securities
Act (“Rule 144”) (the provisions of which are known to it) depend on the
satisfaction of various conditions, and that, if applicable, Rule 144 may afford
the basis for sales only in limited amounts.

(b)           The Shares and the Conversion Shares shall be subject to the
restrictions contained herein.

(c)           It is understood that the Shares and the Conversion Shares, and
any securities issued in respect thereof or in exchange therefor, may bear one
or all of the legends set forth in Section 9.

4.9           Financing.  Such Purchaser has (and at the Closing will have) an
amount of cash sufficient to enable it to consummate the transactions
contemplated hereunder (including the purchase of the Shares set forth next to
such Purchaser’s name on Annex A) on the terms and conditions set forth in this
Agreement.

4.10           Equity Securities of the Company.  Such Purchaser does not
Beneficially Own any Equity Securities of the Company except, as of the Closing,
the Shares.

4.11           Indebtedness.  Except as disclosed to the Company in writing on
or prior to the date hereof, neither such Purchaser nor any of its Affiliates
owns any debt securities or other indebtedness issued by the Company or any of
its Subsidiaries.

5.           Covenants.

5.1           Regulatory Approval.

(a)           [Reserved.]

(b)           To the extent a filing, notification or submission is to be made
under applicable insurance laws with the Vermont Department of Banking,
Insurance, Securities and Health Care Administration, the New York State
Insurance Department, the Maryland Insurance Administration, the Bermuda
Monetary Authority or any other Governmental Entity regulating an insurance
business of the Company or any of its controlled Affiliates (the
 
 
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“Insurance Regulatory Authorities”) in connection with the exercise by a
Purchaser of its rights under the Transaction Agreements, upon the request of
such Purchaser, the Company shall reasonably cooperate and assist such Purchaser
in the making by it of any such filing, notification or submission with the
Insurance Regulatory Authorities, including by promptly furnishing any
information or documentation as those authorities may reasonably require or
request from such Purchaser in connection with such filing, notification or
submission.  Each Purchaser hereto shall promptly inform the Company (and vice
versa) of any meetings or hearings to be held with or before any Insurance
Regulatory Authority regarding any of the transactions contemplated by the
Transaction Agreements applicable to such Purchaser, and shall afford the
Company or such Purchaser, as applicable, the opportunity to attend all such
meetings and hearings to the extent permitted by such Insurance Regulatory
Authority and applicable Law, except as to any portion of such meeting that
addresses Protected Information (as defined below) of such Purchaser.  Each
Purchaser shall permit the Company and their counsel (and vice versa) the
opportunity to review in advance, and comment upon, any proposed written
communication to any Insurance Regulatory Authority, and provide the Company or
such Purchaser, as applicable, with copies of all filings made by the Company or
such Purchaser, as applicable, and all correspondence between such Purchaser (or
its advisors) or the Company with any Insurance Regulatory Authority and any
other information supplied by such Purchaser or the Company to, or received
from, any Insurance Regulatory Authority, in each case relating to the
transactions contemplated by the Transaction Agreements relating to such
Purchaser, except to the extent prohibited by such Insurance Regulatory
Authority or applicable Law or in the event any Insurance Regulatory Authority
requires or requests a Purchaser or the Company or any of their Affiliates to
provide or a Purchaser or the Company or any of their Affiliates otherwise
provides: (i) personal financial information, including, but not limited to, any
individual tax return or statement of net worth, or any other information that
is of a personal or private nature, about any individual who is an employee,
officer, director, general partner or limited partner (including the identity of
any such limited partner) of such party or any of its Affiliates, or (ii)
information that is either confidential or constitutes a trade secret of such
party (the information described in the preceding clauses (i) and (ii),
“Protected Information”), such party shall have no obligation to provide to the
other party, and the other party shall have no right to review, such Protected
Information, the other party shall not seek Protected Information from any such
Insurance Regulatory Authority, and in the event any Insurance Regulatory
Authority were to share such information with the other party, the other party
agrees upon discovering this fact, to cease accessing or reading any Protected
Information, not to disclose such information to any third party, and to return
it (otherwise unread) to such party.  Subject to applicable Law, each Purchaser
and the Company shall have the right to file Protected Information separately
from other correspondence, filings or communications, or to redact Protected
Information from such documents prior to sharing them with the other party.

(c)           Each Purchaser hereto shall promptly inform the Company (and vice
versa) of any material communication from the Insurance Regulatory Authorities
or any other Governmental Entity regarding any of the transactions contemplated
by this Agreement relating to such Purchaser.  If any Purchaser or the Company
or any Affiliate thereof receives a request for additional information or
documentation from any such Governmental Entity with respect to the transactions
contemplated by this Agreement relating to such Purchaser, then such party will
endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and, if permitted by applicable Law, after consultation with the
other party, an appropriate
 
 
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response in compliance with such request; provided, however, the foregoing shall
not require any party to disclose or otherwise provide any Protected
Information.

5.2           Shares Issuable Upon Conversion.  The Company will at all times
have reserved and available for issuance such number of shares of Common Stock
as shall be from time to time sufficient to permit the conversion in full of the
outstanding Shares into Common Stock, including as may be adjusted for share
splits, combinations or other similar transactions as of the date of
determination or due to the accrual of Accreting Dividends.

5.3           Commercially Reasonable Efforts; Further Assurances; Notification.

(a)           Upon the terms and subject to the conditions set forth in this
Agreement, each of the Purchasers and the Company shall use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties or parties
hereto in doing, all things reasonably necessary, proper or advisable under
applicable Law to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement and the other
Transaction Agreements, including using commercially reasonable efforts
to:  (i) cause the conditions to the Closing set forth in Section 6 to be
satisfied; (ii) obtain all necessary actions or non-actions, waivers, consents,
approvals, orders and authorizations from Governmental Entities and make all
necessary registrations, declarations and filings with Governmental Entities;
and (iii) execute or deliver any additional instruments reasonably necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement and the other Transaction Agreements.

(b)           Each party agrees to cooperate with each other and their
respective officers, employees, attorneys, accountants and other agents, and,
generally, do such other reasonable acts and things in good faith as may be
reasonably necessary to effectuate the transactions contemplated by this
Agreement and the other Transaction Agreements, subject to the terms and
conditions hereof and thereof and compliance with applicable Law, including
taking reasonable action to facilitate the filing of any document or the taking
of reasonable action to assist the other parties hereto in complying with the
terms hereof and thereof.

5.4           Standstill.

(a)           Each Purchaser hereby agrees that from Closing until the date that
is the earlier of (i) the date such Purchaser ceases to hold any Shares and (ii)
three (3) years following the Closing (the “Standstill Period”), such Purchaser
shall not, and shall cause its Affiliates not to, directly or indirectly:

(i)           make, or in any way participate, directly or indirectly, in any
“solicitation” of “proxies” to vote (as such terms are used in the rules of the
SEC), or seek to advise or influence any Person (other than (x) such Purchaser
or its Affiliates, or (y) in accordance with and consistent with the
recommendation of the Board) with respect to the voting of any Company Voting
Stock;

(ii)           authorize or commence any tender offer or exchange offer for
shares of Company Voting Stock (for the avoidance of doubt, tendering into any
tender offer
 
 
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or exchange offer not otherwise violating this clause this Section 5.4(a)(ii)
will not violate this Section 5.4(a)(ii));

(iii)           form, join or in any way participate in a “group” as defined in
Section 13(d)(3) of the Exchange Act, for the purpose of voting, acquiring,
holding, or disposing of any Company Voting Stock;

(iv)           submit to the Board a written proposal for or offer of (with or
without conditions), any merger, recapitalization, reorganization, business
combination or other extraordinary transaction involving the Company, or make
any public announcement with respect to such proposal or offer;

(v)           request the Company or any of its Affiliates, directly or
indirectly, to amend or waive any provision of this Section 5.4; or

(vi)           enter into any arrangements with any third party concerning any
of the foregoing.

(b)           If, at any time prior to the termination of the Standstill Period,
(i) the Company has entered into a definitive agreement, the consummation of
which would result in a Company Change in Control Event, (ii) any Person shall
have commenced and not withdrawn a bona fide public tender or exchange offer
which if consummated would result in a Company Change in Control Event and the
Board has not recommended that the stockholders of the Company reject such offer
within the time period contemplated by Rule 14e 3 under the Exchange Act, or
(iii) the Company files or consents to the filing against the Company of a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, insolvency, reorganization or other similar Law, makes an assignment
for the benefit of creditors or consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to the
Company or with respect to any substantial part or its property, then, in each
case, for so long as such condition continues to apply, the limitation on the
actions described in clauses  (i), (ii), (iii), (iv), (v) and (vi) of
Section 5.4(a) (and any related acquisition of Beneficial Ownership by such
Purchaser and/or their Affiliates) shall not be applicable to such Purchaser.

(c)           Anything in this Section 5.4 to the contrary notwithstanding, this
Section 5.4 shall not be construed to prohibit or restrict (i) any actions taken
by any designee, nominee or appointee on the Board, in their capacities as a
member of the Board and in compliance with and subject to his or her fiduciary
duties as a member of the Board or (ii) the Purchaser from making non-public
suggestions, recommendations and proposals regarding the future management of,
or business plans of, the Company to the Company’s management or its Board after
the occurrence of a Specified Breach Event (as defined in the Certificate of
Designation) that would not require any Person to publicly disclose such
suggestions, recommendations or proposals.

(d)           Anything in this Section 5.4 to the contrary notwithstanding, this
Section 5.4 shall not prohibit or restrict any activity of the Soros Purchaser
in an account under the discretionary investment management of a third-party
investment adviser, provided that the
 
 
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Soros Purchaser does not instruct or advise such third-party investment adviser
to act in a manner that would be considered a breach of the terms of this
Section 5.4.

5.5           Participation Rights.

(a)           At any time prior to the fifth (5th) anniversary of the Closing
Date, for so long as a Purchaser (along with its Affiliates) owns at least 50%
of the Shares issued to such Purchaser and its Affiliates at the Closing, the
Company shall not issue, or agree to issue, any Equity Securities of the Company
to any Person unless the Company offers such Purchaser the right (the
“Securities Participation Right”) to purchase in the aggregate up to the number
of such Equity Securities of the Company (the “Securities Participation Amount”)
equal to the product of (x) the total number of such offered shares of Equity
Securities of the Company multiplied by (y) such Purchaser’s Participation
Rights Fraction, at the same price per security (payable in cash, except to the
extent that the consideration for such issuance is an exchange of Convertible
Preferred Stock) and otherwise upon the same terms and conditions as those
offered to such Person in accordance with the procedures set forth in this
Section 5.5; provided that the Securities Participation Rights shall not be
applicable to the issuance of the following Equity Securities of the
Company:  (i) an underwritten registered public offering of Common Stock for
cash (which shall exclude for this purpose any registered direct offering to one
or more purchasers (other than to or through brokers, dealers, underwriters or
market makers, in each case purchasing for resale to investors) in an aggregate
amount greater than the lesser of $5 million and 1% of the shares the Company’s
Common Stock then outstanding), (ii) an issuance of equity or equity linked
securities pursuant to any director, officer or employee compensation
arrangements approved by the Board that is permitted, or not prohibited by, the
Certificate of Designation, (iii) an issuance of equity to a seller, or in the
case of a merger, the shareholders of the target company, and the employees or
officers of any target company in connection with a bona fide merger, business
combination transaction or acquisition of stock or assets outside of the
ordinary course (other than any merger, business combination or acquisition
transaction involving a Harbinger Affiliate), (iv) a conversion of shares of one
class of capital stock of the Company into shares of another class of capital
stock of the Company in accordance with the terms of such securities, (v) a
stock split or other subdivision or combination, or a stock dividend made to all
holders on a pro rata basis of any Equity Securities of the Company, (vi) an
issuance of Equity Securities of the Company that is incidental to and is issued
as part of a debt financing from a bank, institutional lender or similar
financial institution, (vii) an issuance of Additional Permitted Preferred Stock
(as defined in the Certificate of Designation), or (viii) an issuance of
preferred stock that is not convertible into Common Stock (or Equity Securities
of the Company that are convertible into Common Stock) and non-voting (treating
preferred stock that is entitled to elect no more than two directors upon a
default resulting from the failure to pay six (6) or more consecutive quarterly
dividends as non-voting for this purpose).  For purposes of clarity, the parties
agree that the issuance of Conversion Shares shall not be subject to the
Securities Participation Rights. In no event will any Existing Series A
Preferred Stock, Convertible Preferred Stock or Additional Permitted Preferred
Stock (or any Common Stock issuable in connection with the conversion of any
Existing Series A Preferred Stock, Convertible Preferred Stock or Additional
Permitted  Preferred Stock) issued in connection with or as a result of
accretions to the face amount of, or payments in kind with respect to, any
Existing Series A Preferred Stock, Convertible Preferred Stock or Additional
Permitted Preferred Stock, Option Securities and Convertible Securities of the
Company outstanding on the Closing or otherwise
 
 
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permitted to be issued, or not prohibited, by the Certificate of Designation or
the Existing Certificate of Designation be subject to the Securities
Participation Rights.

(b)           Securities Participation Rights Process.

(i)           The Company shall send a written notice (the “Securities
Participation Rights Notice”) to each applicable Purchaser stating the number of
Equity Securities of the Company to be offered, a description of the terms of
such Equity Securities of the Company if not Common Stock, the price and terms
on which it proposes to offer such Equity Securities of the Company (including a
description of any non-cash consideration sufficiently detailed to permit a
valuation thereof), and a reference to such Purchaser’s Securities Participation
Rights hereunder.

(ii)           Within ten (10) Business Days after the delivery of the
Securities Participation Rights Notice, each such Purchaser may elect by written
notice to the Company (the “Securities Exercise Notice”) to purchase such Equity
Securities of the Company, at the price and on the terms specified in the
Securities Participation fRights Notice (or, if such price includes non-cash
consideration, an amount of cash equal to the fair market value of such non-cash
consideration, except to the extent that the consideration for such issuance is
an exchange of Convertible Preferred Stock), up to such Purchaser’s Securities
Participation Amount (or, in the event that the offered securities are preferred
securities that are not convertible into Common Stock or Equity Securities of
the Company that are convertible into Common Stock, up to such Purchaser’s
Preferred Participation Amount).  A Securities Exercise Notice shall constitute
a binding agreement of such Purchaser to purchase the amount of Equity
Securities of the Company so specified at the price and other terms set forth in
the Securities Participation Rights Notice.  Assuming delivery of the Securities
Participation Rights Notice in accordance with the terms hereof, the failure of
any Purchaser to respond within such ten (10) Business Day period shall be
deemed a waiver of such Purchaser’s rights under this Section 5.5 with respect
to the offering described in the applicable Securities Participation Rights
Notice.  Notwithstanding anything to the contrary herein, at any time prior to
the issuance of the Equity Securities of the Company (whether or not a
Securities Exercise Notice shall have been delivered), the Company may elect (in
its sole discretion), upon written notice to the applicable Purchasers, not to
issue such Equity Securities of the Company and rescind, in such event, the
applicable Securities Participation Rights Notice without liability to any
Person hereunder.

(iii)           Subject to the last sentence of this Section 5.5(b)(iii), the
Company may offer the Equity Securities of the Company specified in the
Securities Participation Rights Notice in excess of the Securities Participation
Amount, if any, to any Person or Persons at a price not less than, and on terms
no more favorable to such offerees than, those set forth in such Securities
Participation Rights Notice, at any time after the Securities Participation
Rights Notice is sent but on or before the 90th day after the Securities
Participation Rights Notice was sent.  In addition, during the period beginning
ten (10) Business Days after the Securities Participation Rights Notice was sent
and ending on the 90th day after the Securities Participation Rights Notice was
sent, the Company may offer any Equity Securities of the Company of the
Securities Participation Amount that are not timely elected to be purchased by
the applicable Purchasers in accordance herewith to any other Person or Persons,
provided that if such Equity Securities of the Company are to be offered at a
price less than, or on terms
 
 
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materially more favorable to such offerees than, those specified in the
Securities Participation Rights Notice, the Company shall promptly notify the
applicable Purchasers in writing of such modified terms and such Purchasers
shall have five (5) Business Days after the receipt of such notice in which to
elect to purchase the Securities Participation Amount of such Equity Securities
of the Company at the price and on the terms specified in such subsequent
notice.

(iv)           The closing of the purchase of Equity Securities of the Company
by each Purchaser pursuant to this Section 5.5(b) shall occur as promptly as
practicable following delivery of the Securities Exercise Notice to the Company
by all Purchasers; provided that such closing shall be subject to and shall
occur not earlier than the later of (x) concurrently with the closing of the
purchase of Equity Securities of the Company by such offeree and (y) ten (10)
Business Days after delivery of the Securities Exercise Notice by each Purchaser
to the Company.  The closing of the purchase of Equity Securities of the Company
by the applicable Purchasers pursuant to this Section 5.5(b) shall also be
subject to the receipt of any necessary regulatory approvals, the expiration of
any required waiting periods and applicable Law.

(v)           Notwithstanding anything to the contrary contained in this
Agreement, in the event any Purchaser would be required to file any Notification
and Report Form pursuant to the HSR Act as a result of the purchase of Equity
Securities of the Company by such Purchaser pursuant to this Section 5.5, the
closing of such purchase by such Purchaser shall be delayed (in whole, or at the
option of such Purchaser, only to the extent necessary to avoid a violation of
the HSR Act), until such Purchaser shall have made such filing under the HSR Act
and such Purchaser shall have received early termination clearance in respect
thereof or the waiting period in connection with such filing under the HSR Act
shall have expired. In such circumstances such Purchaser shall use commercially
reasonable efforts to make such filing and obtain such clearance or expiration
of such waiting period as promptly as reasonably practical and the Company shall
use commercially reasonable efforts to make all required filings and reasonably
cooperate with and assist such holder in connection with the making of such
filing and obtaining such clearance or expiration of such waiting period.

5.6           Hedging Restrictions.  Each Purchaser agrees that from Closing
until the date that is the earlier of (i) the date such Purchaser ceases to hold
any Shares and (ii) the expiration of the Hedging Limitation Period, such
Purchaser shall not, and shall cause each of its Affiliates not to, enter into
any Hedging Agreement with respect to the Common Stock or the Convertible
Preferred Stock or the equity securities of any Subsidiary of the Company that
are traded on a national securities exchange.  For the avoidance of doubt,
following the Hedging Limitation Period, nothing in this Section 5.6 shall
prohibit such Purchaser or its Affiliates from entering into any Hedging
Agreement with respect to the Common Stock or the Convertible Preferred Stock or
the equity securities of any Subsidiary of the Company, including any
transactions involving an index-based portfolio of securities that includes
Common Stock or the equity securities of any Subsidiary of the Company
(regardless of the value of such Common Stock or equity securities of any
Subsidiary of the Company in such portfolio relative to the total value of the
portfolio of securities) or involving the purchase or sale of derivative
securities or any short sale of the Common Stock or the equity securities of any
Subsidiary of the Company. Anything in this Section 5.6 to the contrary
notwithstanding, this Section 5.6 shall not prohibit or restrict any activity of
the Soros Purchaser in an account under the discretionary investment
 
 
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management of a third-party investment adviser, provided that the Soros
Purchaser does not instruct or advise such third-party investment adviser to act
in a manner that would be considered a breach of the terms of this Section 5.6.

5.7           Form 8-K.  The Company shall, promptly following the date hereof
(but in any event within the time period required by the rules and regulations
of the SEC), file a Current Report on Form 8-K, disclosing the material terms of
the transactions contemplated hereby and filing the Transaction Agreements as
exhibits thereto, provided that the Company shall afford the Purchasers with
reasonable opportunity to review and comment on such Current Report on Form 8-K
prior to the filing thereof.  Notwithstanding the foregoing, except as required
by Law, court order, subpoena, stock exchange, self-regulatory organization,
governmental agency or regulatory body (including pursuant to any rules or
regulations of any of the foregoing), the Company, the Company’s controlled
Affiliates and the Company’s Representatives shall not directly or indirectly
use or refer to Soros Fund Management LLC (“SFM”), the “Soros” name, or any
derivation thereof, or the funds advised by SFM, for any purpose whatsoever
(including, without limitation, in any filing with any governmental authority,
any press release, any public announcement or statement, advertisement or in any
interview or other discussion with any reporter or other member of the media)
without the prior written consent of SFM with respect to each such use or
reference. Notwithstanding the foregoing, except as required by Law, court
order, subpoena, stock exchange, self-regulatory organization, governmental
agency or regulatory body (including pursuant to any rules or regulations of any
of the foregoing), the Company, the Company’s controlled Affiliates and the
Company’s Representatives shall not directly or indirectly use or refer to JHL
Capital Group LLC (“JHL”), the “JHL” name, or any derivation thereof, or the
funds advised by JHL, for any purpose whatsoever (including, without limitation,
in any filing with any governmental authority, any press release, any public
announcement or statement, advertisement or in any interview or other discussion
with any reporter or other member of the media) without the prior written
consent of JHL with respect to each such use or reference.

5.8           Tax Characterization.  Unless otherwise required by a
“determination”, as defined in Section 1313(a) of the Code, the parties agree to
treat the Convertible Preferred Stock as stock other than preferred stock for
U.S. federal, and to the extent applicable, state and local income tax purposes.

5.9           Confidential Information.

(a)           Each Purchaser recognizes that Confidential Information may have
been and may be disclosed to such Purchaser by the Company or any of its
Affiliates.  Each Purchaser shall not engage in the unauthorized use, and shall
cause its Affiliates not to engage in the unauthorized use, or make any
unauthorized disclosure to any third party, of any Confidential Information
without the prior written consent of the Company and shall use due care to
ensure that such Confidential Information is kept confidential, including by
treating such information as such party would treat its own Confidential
Information.  Notwithstanding the foregoing, the Purchasers shall have the right
to share any Confidential Information with any of their Representatives, each of
whom shall be required to agree to keep confidential such Confidential
Information to the extent required of the Purchaser under this Section
5.9.  With respect to each Purchaser, at the Closing, the confidentiality
agreement entered into by the Company and such
 
 
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Purchaser prior to the date hereof shall terminate.  As used herein,
“Confidential Information” means all information, knowledge, systems or data
relating to the business, operations, finances, policies, strategies, intentions
or inventions of the Company and/or its Subsidiaries (including any of the terms
of this Agreement) from whatever source obtained, except for any such
information, knowledge, systems or data which (i) has become publicly known and
made generally available through no wrongful act of such Purchaser, (ii) has
been rightfully received by such Purchaser from a third party who, to the
knowledge of such Purchaser, is not bound any obligations of confidentiality
with respect to such information, knowledge, systems or data, (iii) is
independently developed by such Purchaser without use of Confidential
Information, (iv) is already known by a Portfolio Company of such Purchaser or
is already in the possession of a Portfolio Company of such Purchaser prior to
the date hereof, or (v) subject to the obligations set forth in Section 5.9(b),
is required by law, court order, subpoena, stock exchange, self-regulatory
organization, governmental agency, or regulatory body to be disclosed.

(b)           If any Purchaser is requested to disclose any Confidential
Information by any Governmental Entity or for any regulatory reason, such
Purchaser will promptly notify the Company, as is reasonably practicable and
legally permissible under the circumstances, to permit it to seek a protective
order or take other action that the Board in its discretion deems appropriate,
and such Purchaser will cooperate in any such efforts to obtain a protective
order or other reasonable assurance that confidential treatment will be accorded
such Confidential Information, at the Company’s sole cost and expense.  If, in
the absence of a protective order, such Purchaser is compelled to disclose any
such information in any proceeding or pursuant to legal process, such Purchaser
may disclose to the party compelling disclosure only the part of such
Confidential Information as is required to be disclosed (in which case, prior to
such disclosure, such Purchaser will advise and, if requested by the Board,
consult with the Company and its counsel as to such disclosure and the nature
and wording of such disclosure) and such Purchaser will use its commercially
reasonable efforts to obtain confidential treatment therefor.  Notwithstanding
the foregoing, the Purchaser shall not be required to notify the Company if it
is required to disclose Confidential Information pursuant to a routine
regulatory inquiry or blanket document request, not targeting the Company or the
Board.

5.10           Amendment to Certificate of Designation.  Each Purchaser hereby
consents and agrees to the adoption, execution and filing by the Company of the
First Amendment to the Certificate of Designation of Series A Participating
Convertible Preferred Stock, attached as Exhibit E (the “First Amendment to the
Certificate of Designation”), for all purposes of SECTION 4 of the Certificate
of Designation.

5.11           Most Favored Nation Status.  With respect to the next $45 million
of Additional Permitted Preferred Stock issued or sold by the Company, prior to
the time when the Purchasers cease to own any shares of Convertible Preferred
Stock, the Company shall not (x) sell any such Additional Permitted Preferred
Stock with a cash dividend rate, an accreting dividend rate or a combined
dividend rate that is higher than the dividend rates applicable to the
Convertible Preferred Stock, (y) sell any such Additional Permitted Preferred
Stock for a price per share less than $1,000 or (z) pay to any Person that is
acquiring such Additional Permitted Preferred Stock any transaction fee or
similar fee or compensation in connection therewith other than reimbursement of
actual out-of-pocket costs and expenses.
 
 
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6.           Conditions Precedent.

6.1           Conditions to the Obligation of the Purchasers to Consummate the
Closing.  The obligations of the Purchasers to consummate the transactions to be
consummated at the Closing, and to purchase and pay for the Shares pursuant to
this Agreement, are subject to the satisfaction of the following conditions
precedent:

(a)           the Company shall have filed with the Secretary of State of the
State of Delaware the Certificate of Designation;

(b)           the Purchasers shall have received the Registration Rights
Amendment and Joinder, duly executed and delivered by the parties thereto (other
than the Purchasers);

(c)           the Purchasers shall have received the Tag-Along Agreement, duly
executed and delivered by the parties thereto (other than the Purchasers);

(d)           the Purchasers shall have received from Paul, Weiss, Rifkind,
Wharton & Garrison LLP, counsel to the Company, an opinion substantially in the
form attached hereto as Exhibit D;

(e)           no Law shall be in effect and no judgment or order shall have been
entered, in each case that restrains, enjoins or prohibits the performance of
all or any part of this Agreement or the consummation of all or any part of the
transactions contemplated hereby, or declares unlawful the transactions
contemplated hereby or would cause any of the transactions contemplated hereby
to be rescinded; and

(f)           since December 31, 2010, there shall not have occurred any
Material Adverse Effect.

6.2           Conditions to the Obligation of the Company to Consummate the
Closing.  The obligation of the Company to consummate the transactions to be
consummated at the Closing, and to issue and sell to the Purchasers the Shares
pursuant to this Agreement, is subject to the satisfaction of the following
conditions precedent:

(a)           each Purchaser shall have executed and delivered each Transaction
Agreement to which such Purchaser is a party;

(b)           the Certificate of Designation shall have been duly filed and
accepted by the Secretary of State of the State of Delaware; and

(c)           no Law shall be in effect and no judgment or order shall have been
entered, in each case that restrains, enjoins or prohibits the performance of
all or any part of this Agreement or the consummation of all or any part of the
transactions contemplated hereby, or declares unlawful the transactions
contemplated hereby or would cause any of the transactions contemplated hereby
to be rescinded.
 
 
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7.           Additional Covenants.

7.1           Material Non-Public Information.  If any Purchaser has notified
the Company in writing that it does not want to receive any material nonpublic
information regarding the Company and its Subsidiaries, the Company shall
thereafter not disclose material nonpublic information to such Purchaser, or to
advisors to or representatives of such Purchaser (in their capacity as such)
until such time as such Purchaser may again request in writing to receive such
information.

7.2           Information Rights.  For so long as a Purchaser and its Affiliates
collectively own at least 12,500 Shares (or Common Stock issued upon conversion
of such Shares) (as adjusted for any stock splits, combinations,
re-classifications or the like), whether or not the Company is required to file
any forms, reports or documents with the SEC, the Company shall deliver to each
such Purchaser all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Form 10-Q or Form 10-K, as
applicable, if the Company were required to file such Form with the SEC and,
with respect to the annual information only, a report thereon by the Company’s
independent registered accountants. Notwithstanding the foregoing, the Company’s
obligation under this Section 7.2 to deliver the foregoing information shall be
deemed to have been satisfied upon the filing of the abovementioned forms,
reports and documents with the SEC in accordance with applicable Laws.

8.           Transfer Restrictions.  Each Purchaser understands and agrees that
the Shares and any Conversion Shares may be offered, resold, pledged or
otherwise transferred only (a) in a transaction not involving a public offering,
(b) pursuant to an exemption from registration under the Securities Act provided
by Rule 144 thereunder (if available), (c) pursuant to an effective registration
statement under the Securities Act, (d) to the Company or one of its
Subsidiaries, (e) to any Affiliate of such Purchaser (provided such Person is an
institutional investor) or (f) to any other holder of shares of Convertible
Preferred Stock and to any Affiliates thereof (provided such Person is an
institutional investor); in each of cases (a) through (e) in accordance with any
applicable state and federal securities laws; provided that as a condition
precedent to a transfer of any Shares or Conversion Shares to an Affiliate of a
Purchaser pursuant to clause (e), any such Affiliate shall assume, on a several
and not joint basis, all then continuing obligations of such Purchaser hereunder
pursuant to a written agreement reasonably acceptable to the Company.  Any
purported transfer of Shares or Conversion Shares other than in compliance with
the terms hereof shall be void ab initio.

9.           Legends; Securities Act Compliance.

(a)           Each certificate representing the Shares and each certificate
representing Conversion Shares will bear a legend conspicuously thereon to the
following effect:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS THE
 
 
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SAME ARE REGISTERED AND QUALIFIED IN ACCORDANCE WITH THE SAID ACT AND ANY OTHER
APPLICABLE STATE SECURITIES LAWS OR SUCH OFFER, SALE, TRANSFER OR OTHER
DISPOSITION IS EXEMPT FROM REGISTRATION UNDER SUCH ACT AND ANY OTHER APPLICABLE
STATE SECURITIES LAWS.”

(b)           Removal of Legends. The legend set forth above will be removed and
the Company shall issue a certificate representing Conversion Shares without
such legend to the holder of such certificate or issue to such holder by
electronic delivery at the applicable balance account at The Depository Trust
Company (“DTC”), if (i) such Conversion Shares are registered for resale under
the Securities Act, (ii) such Conversion Shares are sold or transferred pursuant
to Rule 144 (assuming the transferor is not an Affiliate of the Company) or Rule
144A, or (iii) such Conversion Shares are eligible for sale under Rule 144
without regard to the volume, notice, manner of sale or current public
information requirements of Rule 144. The Company shall cause its counsel to
issue a legal opinion to the Company’s transfer agent on the effective date of a
Shelf Registration Statement (as such term is defined in the Registration Rights
Agreement) to cover any removal of legend pursuant to clause (i) of this Section
9(b) and the transferor shall provide to the Company an opinion of counsel to
cover any removal of legend pursuant to clauses (ii) and (iii) of this Section
9(b).  For further clarity, if any portion of the Shares are converted at a time
when there is an effective Shelf Registration Statement to cover the resale of
the Conversion Shares under clause (i) of this Section 9(b), or if such
Conversion Shares may be sold under Rule 144 under clause (iii) of this Section
9(b), then such Conversion Shares shall be issued free of all legends. Following
the effective date of a Shelf Registration Statement, or at such earlier time as
a legend is no longer required for Shares or Conversion Shares, the Company will
no later than three (3) Business Days following the delivery by a Purchaser to
the Company or the transfer agent (with notice to the Company) of (i) a legended
certificate representing such Shares or Conversion Shares (endorsed or with
stock powers attached, signatures guaranteed, and otherwise in form necessary to
affect the reissuance and/or transfer) or (ii) a conversion notice in the manner
stated in Section 5 of the Certificate of Designation to effect the conversion
of such Shares in accordance with its terms and an opinion of counsel to the
extent required, deliver or cause to be delivered to such Purchaser a
certificate representing such Conversion Shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to the transfer agent that enlarge the restrictions
on transfer set forth in this Section 9(b).

10.           Indemnification; Survival.

10.1           Company Indemnification.  The Company shall defend, indemnify,
exonerate and hold free and harmless each Purchaser and its Affiliates and their
respective directors, officers and employees (each, a “Purchaser Indemnified
Party” and, collectively, the “Purchaser Indemnified Parties”) from and against
any and all Losses actually incurred by such Indemnified Parties that arise out
of, or result from:  (i) any inaccuracy in or breach of the Company’s
representations or warranties in this Agreement or (ii) the Company’s breach of
its agreements or covenants in this Agreement.
 
 
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10.2           Survival of Representations and Warranties.  The representations
and warranties contained herein shall survive until 5:00 p.m. EDT on the fifteen
(15) month anniversary of the Closing, other than the representations and
warranties set forth in Sections 3.1, 3.2, 3.3, 3.4  and 3.26, which shall
survive indefinitely (the “Survival Period”).  For the avoidance of doubt, all
other covenants, agreements and obligations contained in this Agreement shall
survive indefinitely (unless a different period is specifically provided for
pursuant to the provisions of this Agreement expressly relating thereto).

10.3           Purchaser Indemnification.  Each Purchaser, severally and not
jointly, shall defend, indemnify, exonerate and hold free and harmless the
Company and its Affiliates and their respective directors, officers and
employees (each a “Company Indemnified Party” and collectively, the “Company
Indemnified Parties”) from and against any and all Losses actually incurred by
such Company Indemnified Parties that arise out of, or result from:  (i) any
inaccuracy in or breach of such Purchaser’s representations or warranties in
this Agreement or (ii) such Purchaser’s breach of its agreements or covenants in
this Agreement.

10.4           Limitations.  Notwithstanding anything in this Agreement to the
contrary, (i) no indemnification claims for Losses shall be asserted by the
Purchaser Indemnified Parties under Section 10.1 or by the Company Indemnified
Parties under Section 10.3 unless and until (x) the aggregate amount of Losses
that would otherwise be payable under Section 10.1 or Section 10.3, as
applicable, exceeds $2,000,000 (the “Basket Amount”), whereupon the Purchaser
Indemnified Party or Company Indemnified Party, as applicable, shall be entitled
to receive only amounts for Losses in excess of the Basket Amount or (y) Losses
have been asserted against such Person in accordance with this Section 10.4, and
(ii) the aggregate liability of the Company or any Purchaser for Losses under
Section 10.1 or Section 10.3, as applicable, shall in no event exceed the
applicable Share Purchase Price.

10.5           Procedures.  A party entitled to indemnification hereunder (each,
an “Indemnified Party”) shall give written notice to the party from whom
indemnification is sought (the “Indemnifying Party”) of any claim with respect
to which it seeks indemnification promptly after the discovery by such
Indemnified Party of any matters giving rise to a claim for indemnification
hereunder; provided, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 10 unless and to the extent that the Indemnifying Party shall
have been materially prejudiced by the failure of such Indemnified Party to so
notify such party.  Such notice shall describe in reasonable detail such
claim.  In case any such action, suit, claim or proceeding is brought against an
Indemnified Party, the Indemnifying Party shall be entitled to assume and
conduct the defense thereof, with counsel reasonably satisfactory to the
Indemnified Party unless (i) such claim seeks remedies, in addition to or other
than, monetary damages that are reasonably likely to be awarded, (ii) such claim
involves a criminal proceeding or (iii) counsel to the Indemnified Party advises
such Indemnifying Party in writing that such claim involves a conflict of
interest that would reasonably be expected to make it inappropriate for the same
counsel to represent both the Indemnifying Party and the Indemnified Party.  If
any one of the foregoing clauses (i) through (iii) applies, the Indemnified
Party shall be entitled to retain its own counsel at the cost and expense of the
Indemnifying Party (except that the Indemnifying Party shall only be liable for
the legal fees and expenses of one law firm for all Indemnified Parties, taken
together with respect to any single action or group of related actions, other
than local counsel).  If the
 
 
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Indemnifying Party assumes the defense of any claim, the Indemnified Party shall
nevertheless be entitled to hire, at its own expense, separate counsel and
participate in the defense thereof; provided, that all Indemnified Parties shall
thereafter deliver to the Indemnifying Party copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
claim, and each Indemnified Party shall reasonably cooperate in the defense or
prosecution of such claim.  Such reasonable cooperation shall include the
retention and (upon the Indemnifying Party’s reasonable request) the provision
to the Indemnifying Party of records and information that are reasonably
relevant to such claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder.  The Indemnifying Party shall not be liable for any settlement of any
action, suit, claim or proceeding effected without its prior written consent
(not to be unreasonably withheld, conditioned or delayed).  The Indemnifying
Party further agrees that it will not, without the Indemnified Party’s prior
written consent (which shall not be unreasonably withheld, conditioned or
delayed), settle or compromise any claim or consent to entry of any judgment in
respect thereof in any pending or threatened action, suit, claim or proceeding
in respect of which indemnification has been sought or may be hereunder unless
such settlement or compromise includes an unconditional release of such
Indemnified Party from all liability arising out of such action, suit, claim or
proceeding and is solely for monetary damages.

10.6           Additional Limitations.  Notwithstanding anything contained
herein to the contrary, “Losses” shall not include (i) any Losses to the extent
such Losses could not have been reasonably foreseen by the parties as of the
Closing, and (ii) punitive damages, except to the extent payable by an
Indemnified Party to a third party.  No party hereto shall be obligated to
indemnify any other Person with respect to any representation, warranty,
covenant or condition specifically waived in writing by any other party on or
prior to the Closing.

10.7           Exclusive Remedies.  Notwithstanding anything to the contrary
herein, the provisions of Section 10 and Section 12.6 shall be the sole and
exclusive remedies of parties under this Agreement following the Closing for any
and all breaches or alleged breaches of any representations or warranties,
covenants or agreements of the parties contained in this Agreement.  For the
avoidance of doubt, this Section 10 shall not prevent the parties from obtaining
specific performance or other non-monetary remedies at in equity or at Law
pursuant to Section 12.6 of this Agreement and shall not limit other remedies
that may be available to the parties under any of the Transaction Agreements
(other than this Agreement).

11.           Termination.

11.1           Conditions of Termination.  Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated at any time before
the Closing by either the Company, on the one hand, or any Purchaser, on the
other hand, if the Closing shall not have occurred on or prior to 5:00 p.m., New
York time, on August 5, 2011.

11.2           Effect of Termination.  In the event of any termination pursuant
to Section 11.1 hereof, this Agreement shall become null and void and have no
further effect, with no liability on the part of the Company or any Purchaser,
or their directors, partners, members, employees, affiliates, officers,
stockholders or agents or other representatives, with respect to this Agreement,
except (a) for the terms of this Section 11.2 and Section 12 (Miscellaneous
 
 
49

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Provisions), which shall survive the termination of this Agreement, and (b) that
nothing in this Section 11 shall relieve any party or parties hereto, as
applicable, from liability or damages incurred or suffered by any other party
resulting from any intentional (x) breach of any representation or warranty of
such first party or (y) failure of such first party to perform a covenant
thereof.  As used in the foregoing sentence, “intentional” shall mean an act or
omission by such party which such party actually knew, or reasonably should have
known, would constitute a breach of this Agreement by such party.

12.           Miscellaneous Provisions.

12.1           Public Statements or Releases.  Neither the Company nor any
Purchaser shall make any public release or announcement with respect to the
existence or terms of this Agreement or the transactions provided for herein
without the prior approval of the other parties, which shall not be unreasonably
withheld, conditioned or delayed.  Notwithstanding the foregoing, nothing in
this Section 12.1 shall prevent any party from making any public release
required (in the exercise of its reasonable judgment) in order to satisfy its
obligations under law or under the rules or regulations of any United States
national securities exchange, in which case the party or parties, as applicable,
required to make the release or announcement shall, to the extent reasonably
practicable, allow the other party or parties, as applicable, reasonable time to
comment on such release or announcement in advance of such issuance.

12.2           Interpretation.  The words “hereof,” “herein” and “hereunder” and
words of similar import when used in this Agreement will refer to this Agreement
as a whole and not to any particular provision of this Agreement, and section
and subsection references are to this Agreement unless otherwise specified.  The
headings in this Agreement are included for convenience of reference only and
will not limit or otherwise affect the meaning or interpretation of this
Agreement.  Whenever the words “include,” “includes” or “including” are used in
this Agreement, they will be deemed to be followed by the words “without
limitation.”  The phrases “the date of this Agreement,” “the date hereof” and
terms of similar import, unless the context otherwise requires, will be deemed
to refer to the date set forth in the first paragraph of this Agreement.  The
meanings given to terms defined herein will be equally applicable to both the
singular and plural forms of such terms.  All matters to be agreed to by any
party hereto must be agreed to in writing by such party unless otherwise
indicated herein.  Except as specified otherwise herein, references to
agreements, policies, standards, guidelines or instruments, or to statutes or
regulations, are to such agreements, policies, standards, guidelines or
instruments, or statutes or regulations, as amended or supplemented from time to
time (or to successors thereto).  All references herein to the Subsidiaries of a
Person shall be deemed to include all direct and indirect Subsidiaries of such
Person, unless otherwise indicated or the context otherwise requires.  The
parties hereto agree that they have been represented by counsel during the
negotiation and execution of the Transaction Agreements and, therefore, waive
the application of any Law, holding or rule of construction providing that
ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.

12.3           Notices.  All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (a) three (3) Business Days after being sent by registered or
certified mail, return receipt requested, postage prepaid (b) one (1) Business
Day after being sent via a reputable nationwide overnight courier service
 
 
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guaranteeing next business day delivery, (c) on the date of delivery if
delivered personally, or (d) if by facsimile, upon written confirmation of
receipt by facsimile, in each case to the intended recipient as set forth below:

(a)           if to the Company, addressed as follows:

Harbinger Group Inc.
450 Park Avenue
27th Floor
New York, New York  10022
Attention:    Francis T. McCarron
Facsimile:    (212) 906-8559

with copies (which shall not constitute notice) to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York  10019
Attention:    Jeffrey D. Marell and Kelley D. Parker
Facsimile:    (212) 757-3990

(b)           if to the Soros Purchaser, to:

Quantum Partners LP
c/o Soros Fund Management LLC
888 Seventh Avenue
New York, New York  10106
Attention:    Maryann Canfield
Facsimile:    (646) 731-5551

with a copy to (which shall not constitute notice) to:

Soros Fund Management LLC
888 Seventh Avenue
New York, New York  10106
Attention:    Alex Shapiro
Facsimile:    (646) 731-5802

(c)           if to a DDJ Purchaser (as applicable), to:

DDJ High Yield Fund
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:   Legal Department
Facsimile:    (781) 283-8541
 
 
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General Motors Hourly-Rate Employes Pension Trust – 7N1H
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

General Motors Salaried Employes Pension Trust – 7N1I
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

Stichting Pensioenfonds Hoogovens
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

Caterpillar Inc. Master Retirement Trust
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

J.C. Penney Corporation, Inc. Pension Plan Trust
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

Stichting Bewaarder Interpolis Pensioenen Global High Yield Pool
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

Stichting Pensioenfond voor Fysiotherapeuten
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541
 
 
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Houston Municipal Employees Pension System
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

UAW Retiree Medical Benefits Trust
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

DDJ Distressed and Special Situations Fund, L.P.
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

Russell Investment Company - Russell Global Opportunistic Credit Fund
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541

DDJ Capital Management Group Trust – High Yield Investment Fund
c/o DDJ Capital Management, LLC
130 Turner Street, Building 3, Suite 600
Waltham, MA 02453
Attention:    Legal Department
Facsimile:    (781) 283-8541
 
(d)           if to the JHL Purchaser, to:

JHL Capital Group Master Fund L.P.
c/o JHL Capital Group LLC
900 N. Michigan Avenue
Suite 1340
Chicago, IL  60611
Attention:    David Weiss
Facsimile:    (312) 628-7351
 
 
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Any party may change the address to which notices, requests, consents or other
communications hereunder are to be delivered by giving the other parties notice
in the manner set forth in this Section 12.3.

12.4           Severability.  In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto.  The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.

12.5           Governing Law; Jurisdiction; WAIVER OF JURY TRIAL.

(a)           This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law thereof.

(b)           Each of the parties hereto irrevocably (i) agrees that any legal
suit, action or proceeding brought by any party hereto against arising out of or
based upon this Agreement may be instituted in any United States federal court
or New York State court located in the Borough of Manhattan in The City of
New York (a “New York Court”), (ii) waives, to the fullest extent it may
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such proceeding and (iii) submits to the non-exclusive
jurisdiction of a New York Court in any such suit, action or proceeding.

(c)           EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ACTIONS OF ANY PURCHASER OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.

12.6           Specific Performance.  The parties hereto agree that the
obligations imposed on them in this Agreement are special, unique and of an
extraordinary character, and that irreparable damages for which money damages,
even if available, would not be an adequate remedy, would occur in the event
that the parties hereto do not perform the provisions of this Agreement in
accordance with its specified terms or otherwise breach such provisions.  The
parties acknowledge and agree that the parties shall be entitled to seek an
injunction, specific performance and other equitable relief to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which they are entitled, at law or
in equity; and the parties hereto further agree to waive any requirement for the
securing or posting of any bond or other security in connection with the
obtaining of any such injunctive or other equitable relief.  Each of the parties
agrees that it will not oppose the granting of an injunction, specific
performance and other equitable relief as provided herein on the basis that
(x) either party has an adequate remedy at
 
 
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law or (y) an award of specific performance is not an appropriate remedy for any
reason at law or equity.

12.7           Delays or Omissions; Waiver.  No delay or omission to exercise
any right, power, or remedy accruing to a party upon any breach or default of
another party under this Agreement shall impair any such right, power, or remedy
of such party, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring.  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.  Any agreement on the part of a party or parties hereto to
any waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party or parties, as applicable.  Any delay in exercising any
right under this Agreement shall not constitute a waiver of such right.

12.8           Fees; Expenses.

(a)           Except as set forth in this Section 12.8, all fees and expenses
incurred in connection with the Transaction Agreements and the transactions
contemplated hereby and thereby shall be paid by the party or parties, as
applicable, incurring such expenses whether or not the transactions contemplated
hereby and thereby are consummated.

(b)           The Company shall pay any and all documentary, stamp or similar
issue or transfer Tax payable in connection with this Agreement, the issuance of
the Shares at Closing and the issuance of the Conversion Shares.

(c)           Each party shall pay for any filing fees associated with any
filings made by it to the Insurance Regulatory Authorities.

12.9           Assignment.  None of the parties may assign its rights or
obligations under this Agreement without the prior written consent of the other
parties, provided, however, that each Purchaser may assign its right and
obligations hereunder to an Affiliate of such Purchaser without the prior
written consent of the Company or any other Purchaser; provided, further, that
as a condition precedent to such assignment (x) any such Affiliate shall assume,
on a several and not joint basis, all then continuing obligations of such
Purchaser hereunder pursuant to a written agreement reasonably acceptable to the
Company, and (y) no assignment and assumption shall relieve such Purchaser from
any liability hereunder; provided, further, that any assignment to an Affiliate
shall only be effective for so long as such Person remains an Affiliate of the
applicable Purchaser and the rights assigned to such Person shall cease to be of
further force and effect when such Person ceases to be an Affiliate of the
applicable Purchaser.  Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties to
this Agreement and their respective successors and permitted assigns.  Any
purported assignment other than in compliance with the terms hereof shall be
void ab initio.
 
 
55

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12.10           No Third Party Beneficiaries.  Except for Section 10 (with
respect to which all Indemnified Parties shall be third party beneficiaries),
this Agreement does not create any rights, claims or benefits inuring to any
Person that is not a party hereto nor create or establish any third party
beneficiary hereto.  Without limiting the foregoing, the representations and
warranties in this Agreement are the product of negotiations among the parties
hereto and are for the sole benefit of the parties hereto. In some instances,
the representations and warranties in this Agreement may represent an allocation
among the parties hereto of risks associated with particular matters regardless
of the knowledge of any of the parties hereto. Consequently, Persons other than
the parties hereto may not rely upon the representations and warranties in this
Agreement as characterizations of actual facts or circumstances as of the date
of this Agreement or as of any other date.

12.11           Counterparts.  This Agreement may be executed and delivered
(including by facsimile or electronic transmission) in any number of
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed an original, but all of which taken
together shall constitute a single instrument.

12.12           Entire Agreement; Amendments.  This Agreement and the documents
and instruments and other agreements among the parties hereto as contemplated by
or referred to herein, including the Disclosure Letter and the Annexes and
Exhibits hereto, constitute the entire agreement between the parties hereto
respecting the subject matter hereof and supersede 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,
on the one hand, and the Purchasers holding a majority of the Shares issued at
the Closing (whether held in the form of Convertible Preferred Stock or Common
Stock issued upon the conversion of Convertible Preferred Stock), on the other
hand; provided, however, that any modification, alteration, waiver or change
that (a) has a disproportionate and adverse effect on any right of any Purchaser
under this Agreement, (b) increases any restriction or imposes any additional
restriction upon any Purchaser or any successor or assigns thereof with respect
to the Shares acquired by such Purchaser at Closing or with respect to any
Common Stock acquired upon conversion thereof or otherwise or (c) increases in
any respect the obligations or liabilities of any Purchaser under this Agreement
shall not be effective against such Purchaser without the written approval of
such Purchaser; provided, further, no modification, alteration, waiver or change
with respect to Section 5.4 (Standstill) or 5.6 (Hedging Restrictions) for the
benefit of any Purchaser shall be effective unless such modification,
alteration, waiver or change is made equally applicable to all Purchasers;
provided, further, that with respect to the rights and obligations of any
Purchaser under Sections 2 (Authorization, Purchase and Sale of Shares), 5.4
(Standstill), 5.5 (Participation Rights),  5.6 (Hedging Restrictions), 5.10
(Confidentiality), 5.11 (Most Favored Nation Status),  6.1 (Conditions to the
Obligation of the Purchasers to Consummate Closing), 7.1 (Material Non-Public
Information), 7.2 (Information Rights), 11 (Termination), and 12.13 (Freedom to
Pursue Opportunities) such provisions may be amended with respect to the rights
and obligations of such Purchaser by written instrument duly executed by the
Company, on the one hand, and such Purchaser, on the other hand; provided,
further, that Sections 3 (Representations and Warranties of the Company), 4
(Representations and Warranties of the Purchasers), 5.2 (Shares Issuable Upon
Conversion), 5.8 (Tax Characterization), 10 (Indemnification; Survival) and this
12.12
 
 
56

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shall not be modified, altered, waived or changed unless made in writing and
duly executed by each of the parties hereto.

12.13           Freedom to Pursue Opportunities.  Each of the parties hereto
expressly acknowledges and agrees that:  (i) each Purchaser has the right to,
and shall have no duty (contractual or otherwise) not to, directly or indirectly
engage in the same or similar business activities or lines of business as the
Company or any of its Subsidiaries, including those deemed to be competing with
the Company or any of its Subsidiaries; and (ii) in the event that a Purchaser
acquires knowledge of a potential transaction or matter that may be a corporate
opportunity for each of the Company and such Purchaser, such Person shall have
no duty (contractual or otherwise) to communicate or present such corporate
opportunity to the Company or any of its Subsidiaries, as the case may be, and,
notwithstanding any provision of this Agreement to the contrary, shall not be
liable to the Company or its Affiliates for breach of any duty (contractual or
otherwise) by reason of the fact that such Purchaser, directly or indirectly,
pursues or acquires such opportunity for itself, directs such opportunity to
another Person, or does not present such opportunity to the Company.

12.14           No Person Liability of Directors, Officers, Owners, Etc.  No
director, officer, employee, incorporator, shareholder, managing member, member,
general partner, limited partner, principal or other agent of any of the
Purchasers or the Company shall have any liability for any obligations of the
Purchasers or the Company, as applicable, under this Agreement or for any claim
based on, in respect of, or by reason of, the respective obligations of the
Purchasers or the Company, as applicable, under this Agreement.  Each party
hereby waives and releases all such liability.  This waiver and release is a
material inducement to each party's entry into this Agreement.

12.15           Nature of Purchasers' Obligations and Rights.  The obligations
of each Purchaser under this Agreement or any Transaction Agreement are several
and not joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser under this Agreement or any other Transaction
Agreement.  Nothing contained herein or in any other Transaction Agreement, and
no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Agreement or any other Transaction
Agreement.  Each Purchaser confirms that it has independently participated in
the negotiation of the transactions contemplated hereby and has been represented
by separate counsel.  All rights, powers and remedies provided to the Purchasers
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative or exclusive, and the exercise or
beginning of the exercise of any thereof by any party shall not preclude the
simultaneous or later exercise of any other rights, powers or remedies by such
party or any other party.

 [Remainder of the Page Intentionally Left Blank]
 
 
57

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
 

 
COMPANY:
                    HARBINGER GROUP INC.                  
 
By:
        Name:       Title:          

 
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
 
 
 
 

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QUANTUM PARTNERS LP
         
 
By:
        Name:       Title:          

 
 
 
 
 
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
 
 
 

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JHL CAPITAL GROUP MASTER FUND L.P.
         
 
By:
        Name:       Title:          

 
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
 
 
 

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Caterpillar Inc. Master Retirement Trust
By: DDJ Capital Management, LLC, on behalf of Caterpillar Inc. Master Retirement
Trust, in its capacity as investment manager
                 
 
By:
        Name:       Title:          

 
 

 
DDJ Capital Management Group Trust – High Yield Investment Fund
By: DDJ Capital Management, LLC, in its capacity as Investment Manager
         
 
By:
        Name:  David J. Breazzano       Title:  President          

 
 

 
DDJ High Yield Fund
By: DDJ Capital Management, LLC, its attorney-in-fact
         
 
By:
        Name:       Title:          

 
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
 
 
 

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General Motors Hourly-Rate Employes Pension Trust – 7N1H
 
By: State Street Bank and Trust Company, solely in its capacity as Trustee for
General Motors Hourly-Rate Employes Pension Trust (Account 7N1H), and not in its
individual capacity, as directed by DDJ Capital Management, LLC, as Investment
Manager
             
By:
     
Name:
   
Title:
 

 
General Motors Salaried Employes Pension Trust – 7N1I
 
By: State Street Bank and Trust Company, solely in its capacity as Trustee for
General Motors Salaried Employes Pension Trust (Account 7N1I), and not in its
individual capacity, as directed by DDJ Capital Management, LLC, as Investment
Manager
             
By:
     
Name:
   
Title:
 

 

 
Houston Municipal Employees Pension System
By: DDJ Capital Management, LLC, in its capacity as Manager
         
 
By:
        Name:       Title:          

 

 
J.C. Penney Corporation, Inc. Pension Plan Trust
By: DDJ Capital Management, LLC, on behalf of J.C. Penney Corporation, Inc.
Pension Plan Trust, in its capacity as investment manager
         
 
By:
        Name:       Title:          

 
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
 
 
 

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Russell Investment Company - Russell Global Opportunistic Credit Fund
By: DDJ Capital Management, LLC, in its capacity as Money Manager
         
 
By:
        Name:       Title:          

 

 
Stichting Bewaarder Interpolis Pensioenen Global High Yield Pool
By: Syntrus Achmea Asset Management, as asset manager
By: DDJ Capital Management, LLC, as subadviser
         
 
By:
        Name:       Title:          

 

 
Stichting Pensioenfonds Hoogovens
By: DDJ Capital Management, LLC, on behalf of Stichting Pensioenfonds Hoogovens,
in its capacity as Manager
         
 
By:
        Name:       Title:          

 

 
Stichting Pensioenfonds voor Fysiotherapeuten
By: DDJ Capital Management, LLC, in its capacity as investment manager
         
 
By:
        Name:       Title:          

 
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
 
 
 

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UAW Retiree Medical Benefits Trust
By: State Street Bank and Trust Company, solely in its capacity as Trustee for
UAW Retiree Medical Benefits Trust, as directed by DDJ Capital Management, LLC,
and not in its individual capacity
         
 
By:
        Name:       Title:          

 

 
DDJ Distressed and Special Situations Fund, L.P.
By: DDJ/GP Distressed and Special Situations, LLC, its General Partner
By: DDJ Capital Management, LLC, Manager
         
 
By:
        Name:       Title:          

 
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
 
 
 

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Annex A

Shares and Purchasers
 
 
Purchaser
 
 
 Shares
   
 
Share Purchase Price
                   
Quantum Partners LP
    25,000       $25,000,000.00                    
DDJ High Yield Fund
    250       $250,000.00                    
General Motors Hourly-
Rate Employes Pension
Trust – 7N1H
      3,750       $3,750,000.00                    
General Motors Salaried
Employes Pension Trust –
7N1I
      2,000       $2,000,000.00                    
Stichting Pensioenfonds
Hoogovens
    1,250       $1,250,000.00                    
Caterpillar Inc. Master
Retirement Trust
    2,500       $2,500,000.00                    
J.C. Penney Corporation,
Inc. Pension Plan Trust
    3,000       $3,000,000.00                    
Stichting Bewaarder
Interpolis Pensioenen Global
High Yield Pool
    3,250       $3,250,000.00                    
Stichting Pensioenfonds voor
Fysiotherapeuten
    1,000       $1,000,000.00                    
Houston Municipal
Employees Pension System
    1,000       $1,000,000.00                    
UAW Retiree Medical
Benefits Trust
    3,750       $3,750,000.00                    
DDJ Distressed and Special
Situations Fund, L.P.
    1,000       $1,000,000.00                    
Russell Investment
Company - Russell Global
Opportunistic Credit Fund
      2,000       $2,000,000.00                    
DDJ Capital Management
Group Trust -
High Yield
Investment Fund
    250       $250,000.00                    
JHL Capital Group Master
Fund L.P.
    25,000       $25,000,000.00                    
TOTAL:
    75,000       $75,000,000.00  

 
 

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Exhibit A

Form of Certificate of Designation
 

[see attached]

 
 

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Exhibit B

Form of Registration Rights Amendment and Joinder

[see attached]

 
 

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Exhibit C

Form of Tag-Along Agreement

[see attached]

 
 

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Exhibit D

Form of Legal Opinion

[see attached]

 
 

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Exhibit E

Form of Amendment to Certificate of Designation

[see attached]

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