Document:

UNITED STATES BANKRUPTCY COURT

                               DISTRICT OF NEVADA

In re:                                      |    Case Nos. BK-S-05-14326 LBR
                                            |              BK-S-05-14331 LBR
PACIFIC MAGTRON INTERNATIONAL,              |              BK-S-05-14335 LBR
CORP., a Nevada Corporation,                |              BK-S-05-14339 LBR
                                            |
PACIFIC MAGTRON, INC.,                      |    Jointly Administered Under
                                            |    Case No. BK-S-05-14326 LBR
PACIFIC MAGTRON (GA), INC.,                 |
                                            |    Chapter 11
LIVEWAREHOUSE, INC.,                        |
                                            |
        Debtors and Debtors in Possession.  |
--------------------------------------------|    MUTUAL SETTLEMENT
                                            |    AGREEMENT AND RELEASE
                                            |
Affects all four Debtors: |_|               |
Affects only:                               |
     |_|   Pacific Magtron International,   |
           Corp.                            |
     |_|   Pacific Magtron, Inc.            |
     |_|   Pacific Magtron (GA), Inc.       |
     |_|   Livewarehouse, Inc.              |
--------------------------------------------|

      This Mutual Settlement Agreement and Release ("Settlement Agreement") is
hereby entered into by and among PACIFIC MAGTRON INTERNATIONAL, CORP., ("PMIC"),
LIVEWAREHOUSE, INC. ("LW"), the liquidating estates of PACIFIC MAGTRON, INC.
("PMI"), and PACIFIC MAGTRON (GA), INC. ("PMIGA") by and through their "Estate
Representative" (as defined in the PMI and PMIGA Second Amended Plans of
Liquidation) (collectively, the "PMIC Entities"), Debtors and
Debtors-in-possession in the above-captioned bankruptcy, ENCOMPASS AFFILIATES
GROUP ("ENCOMPASS"), ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. ("ACT") on its
own behalf and as Estate Representative of PMI and PMIGA, WAYNE DANSON
("Danson"), MARTIN NIELSON ("Nielson"), and THEODORE S. LI ("Li") and HUI
CYNTHIA LEE ("Lee"; collectively with Li, "Li/Lee"). The foregoing Parties to
this Settlement Agreement are sometimes referred to herein as the "Parties" with
reference to the following mutual Settlement Agreement and Release:

<PAGE>

                                    RECITALS
                                    --------

      WHEREAS, on or about December 10, 2004, ACT and Li/Lee entered into a
Stock Purchase Agreement (the "Stock Purchase Agreement"), pursuant to which ACT
agreed to purchase from Li/Lee, and Li/Lee agreed to sell to ACT 6,454,300
shares of PMIC common stock (the "PMIC Stock") for the aggregate purchase price
of $500,000.

      WHEREAS, the purchase price for the PMIC Stock was to be paid pursuant to
the terms of one-year Secured Convertible Promissory Notes (the "Notes") which
were issued on December 30, 2004 (the "Notes Issue Date")to Li (in the amount of
$166,889) and Lee (in the amount of $333,111).

      WHEREAS, the Notes were fully convertible into shares of ACT Stock (as
defined in Section 4(b) infra) any time after the Notes Issue Date.

      WHEREAS, contemporaneously with the execution of the Stock Purchase
Agreement Li and Lee entered into employment agreements with PMIC, ACT and ACT's
wholly-owned subsidiary, Encompass (the "Employment Agreements"). The Employment
Agreements outlined, among other things, Li and Lee's terms of employment and
provided for payment of certain signing bonuses.

                                  Page 2 of 16
<PAGE>

      WHEREAS, neither Li nor Lee received payment on account of the Notes or
signing bonuses associated with the Employment Agreements.

      WHEREAS, on or about May 11, 2005, the PMIC Entities filed for relief
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of Nevada (Case Nos. BK-S-05-14331 LBR,
BK-S-05-14335 LBR, and BK-S-05-14339 LBR, jointly administered under Case No.
BK-S-0514326 LBR) (the "Nevada Bankruptcy").

      WHEREAS, on or about May 11, 2005, ACT filed a lawsuit against Li/Lee in
the United States District Court for the Southern District of New York (Case No.
05-CV-4628) (the "New York Litigation") which alleged, among other things,
counts for securities fraud, fraudulent inducement, breach of contract, fraud
and deceit.

      WHEREAS, on or about January 19, 2006, Li/Lee filed suit against ACT,
Encompass and certain officers of ACT in the Superior Court of State of
California, Santa Clara County (Case No. 106-CV-056507) (the "California
Litigation") alleging, among other things, fraud, intentional misrepresentation,
breach of contract, breach of implied covenant of good faith and fair dealing,
violation of the California Labor Code, violation of the Business of Professions
Code of California, and defamation.

      WHEREAS, PMIC filed its Third Amended Plan of Reorganization on or about
January 30, 2006 (the "Third Amended Plan"). In order to establish voting
procedures for the Third Amended Plan, and to set claims for Plan voting
purposes, PMIC filed a Motion to Estimate Claims (the "Claims Motion") in which
it asserted that the claims of Li/Lee should be valued at zero ($0) dollars. The
hearing on the Claims Motion was scheduled for April 4, 2006, the same date that
was set by the Bankruptcy Court for a hearing to confirm the Third Amended Plan.

                                  Page 3 of 16
<PAGE>

      WHEREAS, PMIC is in the process of negotiating the terms of a merger with
Herborium, Inc. (the "Herborium Merger") as described in the Third Amended Plan.

      WHEREAS, the Herborium Merger is expected to close contemporaneously with
the Effective Date of the Third Amended Plan.(1)

      WHEREAS, ACT was appointed as the Estate Representative of PMI and PMIGA
for the purpose of prosecuting claims against Li/Lee pursuant to Articles V and
IX of the PMI and PMIGA Second Amended Plans of Liquidation.

      WHEREAS, the Parties have now determined to resolve all disputes arising
out of or relating to the Nevada Bankruptcy, New York Litigation, California
Litigation and the Claims Motion on the terms and conditions set forth in this
Settlement Agreement.

                              SETTLEMENT AGREEMENT
                              --------------------

      NOW, THEREFORE, in consideration of the mutual covenants, agreements and
promises contained in this Settlement Agreement, it is hereby agreed as follows:

      1. Payment Upon Closing Of Herborium Merger. Within one business day of
the closing of the Herborium Merger, and in accordance with PMIC's Fourth
Amended Plan of Reorganization (the "Fourth Amended Plan"), which is being filed
contemporaneously herewith, ACT agrees to pay to Li/Lee a total of $325,000 in
cash in immediately available US funds (the "Merger Li/Lee Cash Payment"). The
Merger Li/Lee Cash Payment shall be delivered to Joseph Ainley, Esquire to
administer and distribute the Merger Li/Lee Cash Payment. To the extent it is
able and permitted to, PMIC agrees to reimburse ACT for the Merger Li/Lee Cash
Payment utilizing any and all available cash or other assets remaining in the
PMIC bankruptcy estate after final distribution under the Fourth Amended Plan.

----------
(1)   PMIC intends to prepare and file a Fourth Amended Plan of Reorganization
      contemporaneously with the filing of this Settlement Agreement which will
      integrate the terms of this Settlement Agreement.

                                  Page 4 of 16
<PAGE>

                  2. Herborium Stock. Within one business day of the closing of
the Herborium Merger, and in accordance with the Fourth Amended Plan, PMIC shall
instruct the Stock Transfer Agent (as defined in the Fourth Amended Plan) to
issue to Li/Lee 1,750,000 shares of Herborium common stock (the "Herborium
      Stock") out of the total distribution of Herborium Stock otherwise due to
ACT
shareholders under the Fourth Amended Plan, which shares shall have a minimum
valuation of $.10 per share as more fully described below. The Herborium Stock
also will be subject to the following conditions:

      (a)   For the first one hundred fifty (150) days following the issuance of
            the Herborium Stock (the "Lockup Period"), the Li/Lee shares of the
            Herborium Stock shall be "locked up" and not transferable except as
            explicitly provided in this paragraph. The base price ("Base Price
            Herborium") for determining the obligation of ACT, if any, to
            "top-off" the Herborium Stock as described below, shall be the
            average of the closing prices of Herborium shares on the OTCBB on
            the fifteen (15) trading days prior to the one hundred fiftieth
            (150th) day following closing of the Herborium Merger, provided such
            prices represent arms' length third party transactions. During the
            Lockup Period, Li/Lee may sell their shares of Herborium Stock at
            any time during the Lockup Period provided that any sale is for $.10
            per share or greater. If the price per share is less then $.10 per
            share on the date of determination provided above, ACT shall "top
            up" the Herborium Stock such that Li/Lee shall receive an aggregate
            value equal to the value which would have been received had the
            Herborium stock price been $.10 per share by (i) delivering cash
            equal to the difference between $.10 per share minus the Base Price

                                  Page 5 of 16
<PAGE>

            Herborium multiplied by the number of shares still held by Li/Lee,
            or (ii) providing additional shares of Herborium Stock, utilizing
            shares that otherwise are distributable to ACT shareholders under
            the Fourth Amended Plan, having a value, at the Base Price
            Herborium, equal to the difference between $.10 per share minus the
            Base Price Herborium multiplied by the number of shares still held
            by Li/Lee. The choice of (i) and (ii) shall be in ACT's sole
            discretion.

      (b)   In order to secure the obligation of ACT to "top up" during the
            Lockup Period as noted in Section 2(a) above, ACT agrees to place
            into escrow (to be held in accordance with the terms of the Fourth
            Amended Plan) 1,750,000 shares of the Herborium Stock that otherwise
            are due to ACT shareholders as a distribution under the Fourth
            Amended Plan. The 1,750,000 shares of Herborium Stock shall remain
            in escrow until the earlier of the expiration of the Lockup Period
            or Li/Lee's sale of Herborium Stock prior to the expiration of the
            Lockup Period, after which time all remaining Herborium Stock shall
            promptly be returned to ACT for distribution to its shareholders as
            provided in the Fourth Amended Plan.

                                  Page 6 of 16
<PAGE>

      3. Cash Payment Upon Termination of Herborium Merger. If the Herborium
Merger is not consummated, ACT agrees to pay Li/Lee a total of $325,000.00 in
cash in immediately available U.S. funds (the "ACT Li/Lee Cash Payment") which
shall be delivered to Joseph Ainley, Esquire for administration and distribution
on the seventy-sixth (76th) day following execution of this Settlement
Agreement. Such payment shall be in lieu of the Merger Li/Lee Cash Payment. To
the extent it is able and permitted to, PMIC agrees to reimburse ACT for the ACT
Li/Lee Cash Payment utilizing any and all available cash or other assets
remaining in the PMIC bankruptcy estate after final distribution under the
Fourth Amended Plan.

      4. ACT Stock. If the Herborium Merger does not occur, in lieu of the
provisions of Section 2:

      (a)   ACT further agrees to issue to Li/Lee a total of $175,000 worth of
            ACT common stock (the "ACT Stock"), which shall be determined by use
            of the average closing price of ACT stock on the OTCBB on the
            fifteen (15) trading days prior to the seventy-sixth day (76)
            following the execution of this Settlement Agreement, provided such
            prices represent arms' length third party transactions. The ACT
            Stock shall be released from escrow on the seventy-sixth (76) day
            following execution of this Settlement Agreement to Joseph Ainley,
            Esquire for administration and distribution. Any ACT Stock which is
            issued to Li/Lee under this Settlement Agreement shall be
            effectuated by exercising the conversion option of the Notes and not
            on account of any other obligations, including, but not limited to,
            payment of any bonuses which may have been due under the Employment
            Agreements. Upon issuance of such stock, the Notes shall be deemed
            to have been converted in full and no longer outstanding. In the
            event that ACT issues ACT Stock to Li/Lee, Li and Lee and ACT agree
            to amend and restate the Notes, as may be necessary, in order to
            effectuate such conversion

                                  Page 7 of 16
<PAGE>

      (b)   In order to secure the obligations of ACT to issue such ACT Stock,
            within one business day of the Bankruptcy Court's entry of an Order
            approving this Settlement Agreement, ACT shall issue instructions to
            its Transfer Agent to issue and place 87,500,000 shares of ACT Stock
            into an escrow account, with an escrow agent which is acceptable to
            ACT in its reasonable discretion, in accordance with the Fourth
            Amended Plan. If the price per share of the ACT stock held in
            escrow, based upon the average of the closing prices of ACT stock on
            the OTCBB for the fifteen (15) trading days prior to the
            seventy-sixth day (76) following the execution of this Settlement
            Agreement, provided such prices represent arms' length third party
            transactions, is less then $.002 per share on the date on which the
            ACT stock is released from escrow, ACT shall "top up" the ACT Stock
            such that Li/Lee shall receive an aggregate value which would have
            been received had the ACT stock price been $.002 per share, not to
            exceed a total aggregate value of $175,000 for all ACT Stock, by (i)
            delivering cash equal to the difference between $.002 per share
            minus the actual price per share of ACT Stock as determined by the
            average of the closing prices of ACT stock on the OTCBB on the
            fifteen (15) trading days prior to the seventy-sixth day (76)
            following the execution of this Agreement, provided such prices
            represent arms' length third party transactions,, multiplied by the
            number of shares held in escrow ("ACT Stock Shortfall"), or (ii)
            providing additional shares of ACT Stock having a value equal to the
            ACT Stock Shortfall. The choice of (i) and (ii) shall be in ACT's
            sole discretion. The sole purpose of this provision 4(b) is to
            ensure that Li/Lee actually receive $175,000 worth of ACT stock
            based on the price determination contained in paragraph 4(a) above -
            no more and no less. In the event that the ACT stock being held in
            escrow has a per share value of more than $.002 based upon the
            average of the closing prices of ACT stock on the OTCBB for the
            fifteen (15) trading days prior to the seventy-sixth day (76)

                                  Page 8 of 16
<PAGE>

            following the execution of this Settlement Agreement, provided such
            prices represent arms' length third party transactions, then all
            escrowed shares in excess of the $175,000 worth of ACT stock shall
            be returned to ACT. If the Herborium Merger occurs, then the
            provisions of Section 3 and this Section 4 shall be null and void,
            and all ACT Stock which is being held in escrow shall be returned to
            ACT upon the closing of the Herborium Merger and the delivery to
            Li/Lee of the Herborium Stock pursuant to Section 2 of this
            Agreement.

      5. Termination Letter. PMIC shall provide Li/Lee with a letter of
termination substantially in the form which is attached hereto as Exhibit "A."

      6. Mediation Expenses. ACT represents that it has paid all of the
Mediation fees which were incurred as part of the April 12, 2006 Mediation that
was held in the San Francisco office of JAMS, Inc.

      7. Hard Drive Images. If, and only if, PMIC still is in possession,
custody or control of the hard drives from the PMIC desktop computers originally
maintained by Li or Lee, PMIC agrees to provide an image copies of such hard
drives within thirty (30) days of the approval of this Settlement Agreement by
the Bankruptcy Court.

      8. ACT, PMIC, Encompass, Danson and Nielson and Li/Lee agree that they
will not in the future directly or indirectly file, participate in, instigate or
encourage the filing of any lawsuit by any person or entity in any state or
federal court or any proceeding before any local, state or federal agency
against any party, individual or entity released herein based upon events
occurring prior to the date of the execution of this Settlement Agreement.

                                  Page 9 of 16
<PAGE>

      9. Mutual Releases. Except as provided in this Settlement Agreement, the
Parties agree as follows:

      (a) Li and Lee, in their individual capacities, hereby release, remise,
and discharge ACT, the PMIC Entities, Encompass, Danson and Nielson, and each of
their subsidiaries and affiliates, as well as all of their directors, employees,
representatives, heirs, insurers, attorneys, agents and assigns (collectively
the "ACT Released Parties") from any all causes of action, claims, actions,
rights, judgments, obligations, damages, demands, accountings or liabilities of
whatever kind, nature or character, whether known or unknown, suspected or
unsuspected, which Li/Lee and/or each of them now has or may in the future have
against the ACT Released Parties, including, but not limited to, all claims
which could have been brought in the Nevada Bankruptcy, New York Litigation,
California Litigation or any other forum or jurisdiction or any claims which may
have arisen from or under the Stock Purchase Agreement, the Notes, the
Employment Agreements, or any other documents which may be part of, associated
with or ancillary to the Stock Purchase Agreement and transactions contemplated
thereby, statutory claims or any and all other matters of whatever kind, nature
or description, whether known or unknown, occurring prior to the date of the
execution of this Settlement Agreement. Except as provided in this Settlement
Agreement, Lee and Li expressly waive any and all rights to object to the Fourth
Amended Plan or any subsequent Plans or other pleading which may be filed by the
PMIC Entities in the Nevada Bankruptcy. With respect to the contemplated Plan of
Reorganization, the PMIC entities and ACT agree that the Plan will not be
inconsistent with any provision of this Settlement Agreement and that to the
extent it is inconsistent, the Settlement Agreement controls. Li and Lee retain
standing to object to the plan of reorganization on grounds that it is
inconsistent with this agreement; Li and Lee waive all other bases for objection
to the plan. Except as provided in this Settlement Agreement, Li and Lee
expressly waive any further rights of payment on account of the Notes, Stock
Purchase Agreement, Employment Agreements or any other documents which may be
part of, associated with or ancillary to the Stock Purchase Agreement and
transactions contemplated thereby. Li/Lee further agree to withdraw any and all
proofs of claim which may have been filed in the Nevada Bankruptcy. Li/Lee
acknowledge that this general release of claims specifically includes, but is
not limited to, any and all claims for any conduct whatsoever based upon events
occurring prior to the date of execution of this Settlement Agreement as well as
any and all claims for attorneys' fees and/or litigation costs.

                                 Page 10 of 16
<PAGE>

      (b) ACT, PMIC and Encompass, Danson and Nielson and each of their
subsidiaries ("ACT Releasors"), do hereby release, remise and discharge Li, Lee,
and each former member of the Board of Directors of PMIC who resigned on or
before December 30, 2004, and their representatives, heirs, insurers, attorneys
and agents (the "Li/Lee Releasees"), from any all causes of action, claims,
actions. rights, judgments, obligations, damages, demands, accountings or
liabilities of whatever kind, nature or character, whether known or unknown,
suspected or unsuspected, which the ACT Releasors and/or each of them now has,
or may in the future have against the Li/Lee Releasees, including, but not
limited to, all claims which could have been brought in the Nevada Bankruptcy,
New York Litigation, California Litigation or any other forum or jurisdiction or
any claims which may have arisen from or under the Stock Purchase Agreement, the
Notes, the Employment Agreements, or any other documents which may be part of,
or ancillary to, the Stock Purchase Agreement and transactions contemplated
thereby or statutory claims or any and all other matters of whatever kind,
nature or description, whether known or unknown, occurring prior to the date of
the execution of this Settlement Agreement until the end of the world. ACT
Releasors acknowledge that this general release of claims specifically includes,
but is not limited to, any and all claims for any conduct whatsoever based upon
events occurring prior to the date of execution of this Settlement Agreement as
well as any and all claims for attorneys' fees and/or litigation costs.

      10. Waiver of California Civil Code ss.1542. Li/Lee, ACT, the PMIC
Entities, Encompass, Danson and Nielson do hereby, for themselves and for each
of their respective heirs, representatives and agents, expressly waive and
relinquish all rights and benefits afforded by California Civil Code ss.1542 and
do so understanding and acknowledging the significance and consequences of such
specific waiver of the California Civil Code ss.1542. Li/Lee, ACT, the PMIC
Entities, Encompass, Danson and Nielson each acknowledge that they are familiar
with the provisions of California Civil Code ss.1542. Specifically, California
Civil Code ss.1542 provides as follows:

                                 Page 11 of 16
<PAGE>

            A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
            NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF
            EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE
            MATERIALLY EFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

Thus, notwithstanding the provisions of California Civil Code ss.1542, and for
purposes of implementing the full and complete releases provided in Sections
9(a) and (b) above, Li/Lee, ACT, the PMIC Entities, Encompass, Danson and
Nielson each expressly acknowledge that this Settlement Agreement is intended to
include in its effect all claims which they do not know or expect to exist in
their favor at the time of execution of this Settlement Agreement, and that this
Settlement Agreement contemplates the extinguishment of any such claims or
causes of actions.

      11. No Admission of Liability. Each Party expressly recognizes this
Settlement Agreement shall in no way be construed as an admission by any Party
of any unlawful or wrongful acts or omissions whatsoever. This Settlement
Agreement shall not be admissible in any proceeding as evidence of, or any
admission by, any Party of any violation of any law, regulation or wrongful act.
This Settlement Agreement may be introduced as evidence in any proceeding to
enforce this Settlement Agreement.

      12. Costs and Fees. Except as provided above in Section 6, the Parties
agree that they each shall bear their own costs, expenses and attorneys' fees
with respect to the New York Litigation, California Litigation, the Nevada
Bankruptcy and any and all other dealings between and among the Parties,
including all costs, expenses, and attorneys' fees incurred in connection with,
or in any way related to, the negotiation, mediation or consummation of this
Settlement Agreement. In the event of a breach of this Settlement Agreement, the
prevailing Party in any action to enforce the terms of this Settlement Agreement
shall be entitled to payment of reasonable attorneys' fees and costs by the
Party who breached the Settlement Agreement.

                                 Page 12 of 16
<PAGE>

      13. Dismissal of all Pending Litigation. Upon consummation of this
Settlement Agreement, all Parties hereto agree that each shall cause and/or
cooperate in good faith to cause the dismissal of the New York Litigation,
California Litigation and any other pending actions between them in any other
jurisdictions to be dismissed with prejudice as soon as practicable. The Parties
agree that they will not in the future file, participate in, instigate or
encourage the filing of any lawsuits by any person or entity in any state,
federal or local court or agency on account of or relating to any claim released
by this Agreement.

      14. Interpretation. This Settlement Agreement as been negotiated at
arms-length between the persons knowledgeable and the matters with herein. Each
Party represents and warrants that it has had an opportunity to fully review the
provisions of this Settlement Agreement with attorneys of its own choice. Each
Party signing this Settlement Agreement is entering into it knowingly,
voluntarily, and of its own free will. All provisions of this Settlement
Agreement shall be governed pursuant to the laws of California.

      15. Integration. The Parties hereby acknowledge that this Settlement
Agreement contains all the terms and conditions agreed upon by the Parties
hereto with reference to the subject matter resolved by this Settlement
Agreement. No other agreements, oral or otherwise, shall be deemed to exist or
to bind either of the Parties with respect thereto. This Settlement Agreement
supersedes and voids the April 12, 2006 Binding Term Sheet among the parties. No
representative or agent of any Party hereto had or has any authority to make any
representation or promise not otherwise contained in this Settlement Agreement
and each of the Parties hereto acknowledge that it has not executed this
Settlement Agreement in reliance upon such representation or promise. This
Settlement Agreement cannot be modified or changed except by an instrument
signed by the Parties hereto.

                                 Page 13 of 16
<PAGE>

      16. Counterparts. This Settlement Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one in the same instrument. The Parties hereto agree that
facsimile signatures shall be the same force and effect as original signatures
for all purposes.

      17. Authority. Each individual signing this Settlement Agreement on behalf
of any Party represents and warrants that he/she has full authority to do so.
The Parties represent and warrant that they have not assigned or otherwise
transferred (voluntarily, involuntarily or by operation of law) any right, title
or interest that they have, may have or may have had and which is the subject of
this Settlement Agreement.

      18. Jurisdiction. The United States Bankruptcy Court for the District of
Nevada shall retain jurisdiction to resolve any disputes or controversies
arising from or related to this Settlement Agreement.

      19. Court Approval. This Settlement Agreement shall be effective upon
entry of a final, non-appealable Order by the United States Bankruptcy Court for
the District of Nevada following notice and a hearing as provided in Federal
Rule of Bankruptcy Procedure 9019. In the event that such final, non-appealable
Order is not entered by the Bankruptcy Court, the Parties hereto agree to
cooperate and negotiate in good faith to revise the Settlement Agreement as may
be necessary to obtain the Bankruptcy Court approval required herein.

                                 Page 14 of 16
<PAGE>

      20. Incorporation into the Fourth Amended Plan. The terms of the
Settlement Agreement shall be incorporated into the Fourth Amended Plan, but
shall not be bound by the Fourth Amended Plan if the Fourth Amended Plan is not
confirmed. In such event, this Settlement Agreement shall be fully valid and
effective of its own right and accord.

      Each of the Parties hereto has executed the Settlement Agreement as of the
date and year set forth below.

IN WITNESS WHEREOF:

PACIFIC MAGTRON INTERNATIONAL CORPORATION

By:      /s/ Martin Nielson                                   Date: 6 July, 2006
   --------------------------------                                -------------
         Martin Nielson, Chief Executive Officer

LIVEWAREHOUSE, INC.,

By:      /s/ Wayne Danson                                     Date:  7/17/06
   --------------------------------                                -------------
         President

PACIFIC MAGTRON, INC.

By:      /s/ Wayne Danson                                     Date:  7/17/06
   --------------------------------                                -------------
As Estate Representative

PACIFIC MAGTRON (GA), INC.

By:      /s/ Wayne Danson                                     Date:  7/17/06
   --------------------------------                                -------------
As Estate Representative

                                 Page 15 of 16
<PAGE>

ENCOMPASS AFFILIATES GROUP

By:      /s/ Wayne Danson                                     Date:  7/17/06
   --------------------------------                                -------------
         CEO

ADVANCED COMMUNICATIONS TECHNOLOGIES, INC.

By:      /s/ Wayne Danson                                     Date:  7/17/06
   --------------------------------                                -------------
         President/CEO

WAYNE DANSON

By:      /s/ Wayne Danson                                     Date:  7/17/06
   --------------------------------                                -------------

MARTIN NIELSON

By:      /s/ Martin Nielson                                   Date: 6 July, 2006
   --------------------------------                                -------------

THEODORE S. LI

By:      /s/ Theodore S. Li                                   Date:  6/29/06
    -------------------------------                                -------------

HUI CYNTHIA LEE

By:      /s/ Hui Cynthia Lee                                  Date:  7/2/06
    -------------------------------                                -------------

                                 Page 15 of 16To: ELDERWATCH,
      INC.

    

    ELDERWATCH,
      INC.

    REGULATION
      S SUBSCRIPTION AGREEMENT AND INVESTMENT 

    REPRESENTATION

    

    SECTION
      1

    

    1.1 Subscription.
      

    

    (a)
       The
      undersigned, intending to be legally bound, hereby irrevocably subscribes for
      and agrees to purchase ____________ Units (hereafter defined) to be issued
      by
      Elderwatch, Inc., a Florida corporation (the "Company") in an offshore
      transaction negotiated outside the U.S. and to be consummated and closed outside
      the U.S. The Company is directly offering for sale 2,500,000 Units for an
      aggregate gross proceeds of $250,000. A “Unit” shall consist of the following:

    

    
      	 	
              (1)
                

            	
              one
                share of Common Stock (a “Purchased
                Share”);

            

    

    

    
      	 	
              (2)
                

            	
              one
                Class A Warrant, as further described in the Class A Warrant Agreement
                attached hereto as Exhibit A, entitling the undersigned to purchase
                one
                share of Common Stock at an exercise price of $0.20 per share, expiring
                on
                December 31, 2007 (a “Class A Warrant”); and

            

    

    

    
      	 	
              (3)
                

            	
              one
                Class B Warrant, as further described in the Class B Warrant Agreement
                attached hereto as Exhibit B, entitling the undersigned to purchase
                one
                share of Common Stock at an exercise price of $0.30 per share, expiring
                on
                June 30, 2009 (a “Class B Warrant, and together with the Class A Warrant,
                the “Warrants”). 

            

    

    

    The
      Warrants are redeemable by the Company at any time at a redemption price of
      $0.05 per Warrant.

    

    (b)
       For
      purposes of this Subscription Agreement: 

    

    
      	 	
              (1)
                

            	
              “Common
                Stock” means the common stock of the Company, par value $0.001 per share.
                

            

    

    

    
      	 	
              (2)
                

            	
              “Securities”
                means the Purchased Shares, the Warrants and the Warrant Shares.
                

            

    

    

    
      	 	
              (3)
                

            	
              “Warrant
                Shares” means the shares of Common Stock issuable upon due exercise of the
                Warrants.

            

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.2 Purchase
      of Units.

    

    The
      undersigned understands and acknowledges that the purchase price to be remitted
      to the Company in exchange for the Units shall be ____________ dollars ($______)
      or $0.10 per Unit. Simultaneous with the execution and delivery of this
      Agreement, including the Investor Questionnaire annexed hereto, the undersigned
      shall deliver to the Company the aforementioned purchase price by wire transfer
      of immediately available funds. Wire instructions are attached hereto as
      Appendix A.
      

    

    1.3 Acceptance
      or Rejection.

    

    (a) The
      undersigned understands and agrees that the Company reserves the right to reject
      this subscription for the Units if, in its reasonable judgment, it deems such
      action in the best interest of the Company, at any time prior to the Closing,
      notwithstanding prior receipt by the undersigned of notice of acceptance of
      the
      undersigned's subscription.

    

    (b) The
      undersigned understands and agrees that its subscription for the Units is
      irrevocable.

    

    (c) In
      the
      event the sale of the Units subscribed for by the undersigned is not consummated
      by the Company for any reason (in which event this Subscription Agreement shall
      be deemed to be rejected), this Subscription Agreement and any other agreement
      entered into between the undersigned and the Company relating to this
      subscription shall thereafter have no force or effect and the Company shall
      promptly return or cause to be returned to the undersigned the purchase price
      remitted to the Company by the undersigned, without interest thereon or
      deduction therefrom, in exchange for the Units.

    

    SECTION
      2

    

    2.1 Closing

    

    The
      closing (the "Closing") of the purchase and sale of the Units, shall occur
      simultaneously with the acceptance by the Company of the undersigned's
      subscription, as evidenced by the Company's execution of this Subscription
      Agreement.

    

    SECTION
      3

    

    3.1 Investor
      Representations and Warranties.
      

    

    The
      undersigned hereby acknowledges, represents and warrants to, and agrees with,
      the Company and its affiliates as follows:

    

    (a) The
      undersigned is acquiring the Securities for his own account as principal, not
      as
      a nominee or agent, for investment purposes only, and not with a view to, or
      for, resale, distribution or fractionalization thereof in whole or in part
      and
      no other person has a direct or indirect beneficial interest in such Securities
      or any portion thereof. Further, the undersigned does not have any contract,
      undertaking, agreement or arrangement with any person to sell, transfer or
      grant
      participations to such person or to any third person, with respect to the
      Securities for which the undersigned is subscribing or any part of the
      Securities.

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    (b) The
      undersigned has full power and authority to enter into this Agreement, the
      execution and delivery of this Agreement has been duly authorized, if
      applicable, and this Agreement constitutes a valid and legally binding
      obligation of the undersigned.

    

    (c) The
      undersigned is not subscribing for the Securities as a result of or subsequent
      to any advertisement, article, notice or other communication published in any
      newspaper, magazine or similar media or broadcast over television or radio,
      or
      presented at any seminar or meeting, or any solicitation of a subscription
      by
      person previously not known to the undersigned in connection with investment
      securities generally.

    

    (d) The
      undersigned understands that the Company is under no obligation to register
      the
      Securities under the Securities Act of 1933, as amended (the “Securities Act”),
      or to assist the undersigned in complying with the Securities Act or the
      securities laws of any state of the United States or of any foreign
      jurisdiction.

    

    (e) The
      undersigned is (i) experienced in making investments of the kind described
      in
      this Agreement and the related documents, (ii) able, by reason of the business
      and financial experience of its officers (if an entity) and professional
      advisors (who are not affiliated with or compensated in any way by the Company
      or any of its affiliates or selling agents), to protect its own interests in
      connection with the transactions described in this Agreement, and the related
      documents, and (iii) able to afford the entire loss of its investment in the
      Securities. The undersigned further understands that the Company currently
      has
      no business or operations and although it is contemplating entering the field
      of
      clean energy technologies, the Company currently has no agreements or
      arrangements with any persons in connection therewith.

    

    (f) The
      undersigned acknowledges his understanding that the offering and sale of the
      Purchased Shares, Warrants and the issuance of the Warrant Shares upon due
      exercise of the Warrants is intended to be exempt from registration under the
      Securities Act. In furtherance thereof, in addition to the other representations
      and warranties of the undersigned made herein, the undersigned further
      represents and warrants to and agrees with the Company and its affiliates as
      follows:

    

    
      	 	
              (i)

            	
              The
                undersigned realizes that the basis for the exemption may not be
                present
                if, notwithstanding such representations, the undersigned has in
                mind
                merely acquiring the Securities for a fixed or determinable period
                in the
                future, or for a market rise, or for sale if the market does not
                rise. The
                undersigned does not have any such
                intention;

            

    

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (ii)

            	
              The
                undersigned has the financial ability to bear the economic risk of
                his
                investment, has adequate means for providing for his current needs
                and
                personal contingencies and has no need for liquidity with respect
                to his
                investment in the Company; 

            

    

    

    
      	 	
              (iii)

            	
              The
                undersigned has such knowledge and experience in financial and business
                matters as to be capable of evaluating the merits and risks of the
                prospective investment in the Securities. The undersigned also represents
                it has not been organized for the purpose of acquiring the Securities;
                

            

    

    

    
      	 	
              (iv)

            	
              The
                undersigned has been provided an opportunity for a reasonable period
                of
                time prior to the date hereof to obtain additional information concerning
                the offering of the Securities, the Company and all other information
                to
                the extent the Company possesses such information or can acquire
                it
                without unreasonable effort or expense;
                and

            

    

    

    
      	 	
              (v)

            	
              The
                undersigned has carefully reviewed all of the Company’s filings under the
                Securities Exchange Act of 1934, as amended (the “Exchange
                Act”).

            

    

    

    (g) The
      undersigned is not relying on the Company, or its affiliates or agents with
      respect to economic considerations involved in this investment. The undersigned
      has relied solely on its own advisors.

    

    (h) No
      representations or warranties have been made to the undersigned by the Company,
      or any officer, employee, agent, affiliate or subsidiary of the Company, other
      than the representations of the Company contained herein, and in subscribing
      for
      Units the undersigned is not relying upon any representations other than those
      contained herein. 

    

    (i)  Any
      resale of the Securities during the ‘distribution compliance period’ as defined
      in Rule 902(f) to Regulation S shall only be made in compliance with exemptions
      from registration afforded by Regulation S. Further, any such sale of the
      Securities in any jurisdiction outside of the United States will be made in
      compliance with the securities laws of such jurisdiction. The Investor will
      not
      offer to sell or sell the Securities in any jurisdiction unless the Investor
      obtains all required consents, if any.

    

    (j) The
      undersigned understands that the Securities are being offered and sold in
      reliance on an exemption from the registration requirements of United States
      federal and state securities laws under Regulation S promulgated under the
      Securities Act and that the Company is relying upon the truth and accuracy
      of
      the representations, warranties, agreements, acknowledgments and understandings
      of the Investor set forth herein in order to determine the applicability of
      such
      exemptions and the suitability of the Investor to acquire the Securities. In
      this regard, the undersigned represents, warrants and agrees that:

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    

     

    
      	1.  	
              The
                undersigned is an U.S. Person (as defined below) and is not an affiliate
                (as defined in Rule 501(b) under the Securities Act) of the Company
                and is
                not acquiring the Securities for the account or benefit of a U.S.
                Person.
                A U.S. Person means any one of the
                following:

            

    

     

    
      	·  	
              any
                natural person resident in the United States of
                America;

            

    

     

    
      	·  	
              any
                partnership or corporation organized or incorporated under the laws
                of the
                United States of America;

            

    

     

    
      	·  	
              any
                estate of which any executor or administrator is a U.S.
                person;

            

    

     

    
      	·  	
              any
                trust of which any trustee is a U.S.
                person;

            

    

     

    
      	·  	
              any
                agency or branch of a foreign entity located in the United States
                of
                America;

            

    

     

    
      	·  	
              any
                non-discretionary account or similar account (other than an estate
                or
                trust) held by a dealer or other fiduciary for the benefit or account
                of a
                U.S. person;

            

    

     

    
      	·  	
              any
                discretionary account or similar account (other than an estate or
                trust)
                held by a dealer or other fiduciary organized, incorporated or (if
                an
                individual) resident in the United States of America;
                and

            

    

     

    
      	·  	
              any
                partnership or corporation if:

            

    

     

    (A)
      organized or incorporated under the laws of any foreign jurisdiction;
      and

     

    (B)
      formed by a U.S. person principally for the purpose of investing in securities
      not registered under the Securities Act, unless it is organized or incorporated,
      and owned, by accredited investors (as
      defined in Rule 501(a) under the Securities Act) who are not natural persons,
      estates or trusts.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    
      	2.  	
              At
                the time of the origination of contact concerning this Agreement
                and the
                date of the execution and delivery of this Agreement, the undersigned
                was
                outside of the United States.

            

    

     

    
      	3.  	
              The
                undersigned will not, during the period commencing on the date of
                issuance
                of the Purchased Shares or Warrants and ending on the first anniversary
                of
                such date, or such shorter period as may be permitted by Regulation
                S or
                other applicable securities law (the “Restricted Period”), offer, sell,
                pledge or otherwise transfer the Purchased Shares or the Warrants
                in the
                United States, or to a U.S. Person for the account or for the benefit
                of a
                U.S. Person, or otherwise in a manner that is not in compliance with
                Regulation S. 

            

    

     

    
      	4.  	
              The
                undersigned will, after expiration of the Restricted Period, offer,
                sell,
                pledge or otherwise transfer the Purchased Shares or Warrants only
                pursuant to registration under the Securities Act or an available
                exemption therefrom and, in accordance with all applicable state
                and
                foreign securities laws.

            

    

     

    
      	5.  	
              The
                undersigned was not in the United States, engaged in, and prior to
                the
                expiration of the Restricted Period will not engage in, any short
                selling
                of or any hedging transaction with respect to the Securities, including
                without limitation, any put, call or other option transaction, option
                writing or equity swap.

            

    

     

    
      	6.  	
              Neither
                the undersigned nor or any person acting on his behalf has engaged,
                nor
                will engage, in any directed selling efforts to a U.S. Person with
                respect
                to the Securities and the Investor and any person acting on his behalf
                have complied and will comply with the “offering restrictions”
                requirements of Regulation S under the Securities
                Act.

            

    

     

    
      	7.  	
              The
                transactions contemplated by this Agreement have not been pre-arranged
                with a buyer located in the United States or with a U.S. Person,
                and are
                not part of a plan or scheme to evade the registration requirements
                of the
                Securities Act.

            

    

     

    
      	8.  	
              Neither
                the undersigned nor any person acting on his behalf has undertaken
                or
                carried out any activity for the purpose of, or that could reasonably
                be
                expected to have the effect of, conditioning the market in the United
                States, its territories or possessions, for any of the Securities.
                The
                undersigned agrees not to cause any advertisement of the Securities
                to be
                published in any newspaper or periodical or posted in any public
                place and
                not to issue any circular relating to the Securities, except such
                advertisements that include the statements required by Regulation
                S under
                the Securities Act, and only offshore and not in the U.S. or its
                territories, and only in compliance with any local applicable securities
                laws.

            

    

     

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    
      	9.  	
              Each
                certificate representing the Securities shall be endorsed with the
                following legends, in addition to any other legend required to be
                placed
                thereon by applicable federal or state securities
                laws:

            

    

     

    (A) “THE
      SECURITIESARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED
      IN
      REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE SECURITIES
      ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE
      COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED
      UNDER THE SECURITIES ACT.”

     

    (B) “TRANSFER
      OF THESE SECURITIES IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS
      OF
      REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT
      TO
      AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED
      UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

    

    
      	10.  	
              The
                undersigned consents to the Company making a notation on its records
                or
                giving instructions to any transfer agent of the Company in order
                to
                implement the restrictions on transfer of the Securities set forth
                in this
                Section 2.

            

    

    

    (k) The
      undersigned is an “accredited investor” as that term is defined in Rule 501 of
      the General Rules and Regulations under the Securities Act by reason of Rule
      501(a)(3).

    

    (l) The
      undersigned understands that an investment in the Securities is a speculative
      investment which involves a high degree of risk and the potential loss of his
      entire investment.

    

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    (m) The
      undersigned's overall commitment to investments which are not readily marketable
      is not disproportionate to the undersigned's net worth, and an investment in
      the
      Securities will not cause such overall commitment to become
      excessive.

    

    (n) The
      undersigned has received all documents, records, books and other information
      pertaining to the undersigned’s investment in the Company that has been
      requested by the undersigned. The undersigned has reviewed all reports and
      other
      documents filed by the Company with the Securities and Exchange Commission
      (the
“SEC Documents”).

    

    (o) The
      undersigned represents and warrants to the Company that all information that
      the
      undersigned has provided to the Company, including, without limitation, the
      information in the Investor Questionnaire attached hereto or previously provided
      to the Company (the “Investor Questionnaire”), is correct and complete as of the
      date hereof.

    

    (p) Other
      than as set forth herein, the undersigned is not relying upon any other
      information, representation or warranty by the Company or any officer, director,
      stockholder, agent or representative of the Company in determining to invest
      in
      the Securities. The undersigned has consulted, to the extent deemed appropriate
      by the undersigned, with the undersigned’s own advisers as to the financial,
      tax, legal and related matters concerning an investment in the Securities and
      on
      that basis believes that his or its investment in the Securities is suitable
      and
      appropriate for the undersigned.

    

    (q) The
      undersigned is aware that no federal or state agency has (i) made any finding
      or
      determination as to the fairness of this investment, (ii) made any
      recommendation or endorsement of the Securities or the Company, or (iii)
      guaranteed or insured any investment in the Securities or any investment made
      by
      the Company.

    

    (p) The
      undersigned understands that the price of the Securities offered hereby bear
      no
      relation to the assets, book value or net worth of the Company and were
      determined arbitrarily by the Company. The undersigned further understands
      that
      there is a substantial risk of further dilution on his or its investment in
      the
      Company.

    

    (r) The
      undersigned understands that the Company is undergoing a process to
      re-incorporate its state of incorporation from Florida to Nevada, change its
      name and increase its authorized share capital (the “Reincorporation”).
      Accordingly, the undersigned agrees and acknowledges that it will not receive
      stock certificates evidencing the Purchased Shares until the Reincorporation
      has
      been duly authorized and approved by the shareholders of the Company. The
      undersigned further agrees and acknowledges that it has reviewed the Company’s
      proxy statement on Schedule 14A filed with the SEC on or about July 27, 2006
      with respect to the Reincorporation (the “Proxy Statement”). The undersigned
      further agrees and acknowledges that it is the undersigned’s responsibility to
      review the Proxy Statement and the other SEC Documents, that the undersigned
      fully understands the Proxy Statement and the other SEC Documents, that the
      undersigned has had the opportunity to ask the Company any questions the
      undersigned may have had regarding the Proxy Statement and the other SEC
      Documents, and that the Company has provided to the undersigned all documents
      and other information requested by the undersigned from the Company in
      connection with the undersigned’s review of the Proxy Statements and the other
      SEC Documents.

    

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    SECTION
      4

    

    The
      Company represents and warrants to the undersigned as follows:

    

    4.1  Organization
      of the Company.
      The
      Company is a corporation duly organized and validly existing and in good
      standing under the laws of the State of Florida, and has all requisite power
      and
      authority to own, lease and operate its properties and to carry on its business
      as now being conducted. 

    

    4.2 Authority.
      (a) The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement and to issue the Securities; (b)
      the execution and delivery of this Agreement by the Company and the consummation
      by it of the transactions contemplated hereby and thereby have been duly
      authorized by all necessary corporate action and no further consent or
      authorization of the Company or its Board of Directors is required; and (c)
      this
      Agreement has been duly executed and delivered by the Company and constitutes
      a
      valid and binding obligation of the Company enforceable against the Company
      in
      accordance with its terms, except as such enforceability may be limited by
      applicable bankruptcy, insolvency, or similar laws relating to, or affecting
      generally the enforcement of, creditors' rights and remedies or by other
      equitable principles of general application.

    

    4.3 Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of
      50,000,000 shares of Common Stock, of which as of the date hereof 7,837,500
      shares are issued and outstanding, and 10,000,000 shares of preferred stock,
      none of which are issued. All the outstanding shares have been, or upon issuance
      will be, validly issued and are fully paid and nonassessable. 

    

    4.4 SEC
      Documents.
      To the
      best of Company's knowledge, the Company has not provided to the undersigned
      any
      information that, according to applicable law, rule or regulation, should have
      been disclosed publicly prior to the date hereof by the Company, but which
      has
      not been so disclosed. As of their respective dates, the SEC Documents complied
      in all material respects with the requirements of the Securities Act or the
      Exchange Act, as the case may be, and other federal, state and local laws,
      rules
      and regulations applicable to such SEC Documents, and none of the SEC Documents
      contained any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading. The financial statements of the Company included in the SEC
      Documents comply as to form and substance in all material respects with
      applicable accounting requirements and the published rules and regulations
      of
      the Securities and Exchange Commission (the “SEC”) or other applicable rules and
      regulations with respect thereto. Such financial statements have been prepared
      in accordance with generally accepted accounting principles applied on a
      consistent basis during the periods involved (except (a) as may be otherwise
      indicated in such financial statements or the notes thereto or (b) in the case
      of unaudited interim statements, to the extent they may not include footnotes
      or
      may be condensed or summary statements) and fairly present in all material
      respects the financial position of the Company as of the dates thereof and
      the
      results of operations and cash flows for the periods then ended (subject, in
      the
      case of unaudited statements, to normal year-end audit
      adjustments).

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    4.5 Exemption
      from Registration; Valid Issuances.
      The
      sale and issuance of the Securities, in accordance with the terms and on the
      bases of the representations and warranties of the undersigned set forth herein,
      may and shall be properly issued by the Company to the undersigned pursuant
      to
      Section 4(2), Regulation S and/or any applicable U.S state law. When issued
      and
      paid for as herein provided, the Securities shall be duly and validly issued,
      fully paid, and nonassessable. Neither the sales of the Securities pursuant
      to,
      nor the Company's performance of its obligations under, this Agreement shall
      (a)
      result in the creation or imposition of any liens, charges, claims or other
      encumbrances upon the Securities or any of the assets of the Company, or (b)
      entitle the other holders of the Common Stock of the Company to preemptive
      or
      other rights to subscribe to or acquire the Common Stock or other securities
      of
      the Company. The Securities shall not subject the undersigned to personal
      liability by reason of the ownership thereof. 

    

    4.6 No
      General Solicitation or Advertising in Regard to this
      Transaction.
      Neither
      the Company nor any of its affiliates nor any person acting on its or their
      behalf (a) has conducted or will conduct any general solicitation (as that
      term
      is used in Rule 502(c) of Regulation D) or general advertising with respect
      to
      any of the Securities, or (b) made any offers or sales of any security or
      solicited any offers to buy any security under any circumstances that would
      require registration of the Common Stock under the Securities Act.

    

    4.7 No
      Conflicts. The
      execution, delivery and performance of this Agreement by the Company and the
      consummation by the Company of the transactions contemplated hereby, including
      without limitation the issuance of the Securities, do not and will not (a)
      result in a violation of the Certificate or By-Laws of the Company or (b)
      conflict with, or constitute a material default (or an event that with notice
      or
      lapse of time or both would become a material default) under, or give to others
      any rights of termination, amendment, acceleration or cancellation of, any
      material agreement, indenture, instrument or any "lock-up" or similar provision
      of any underwriting or similar agreement to which the Company is a party, or
      (c)
      result in a violation of any federal, state, local or foreign law, rule,
      regulation, order, judgment or decree (including federal and state securities
      laws and regulations)applicable to the Company or by which any property or
      asset
      of the Company is bound or affected (except for such conflicts, defaults,
      terminations, amendments, accelerations, cancellations and violations as would
      not, individually or in the aggregate, have a material adverse effect on the
      business, operations, properties, prospects or condition (financial or
      otherwise) of the Company) nor is the Company otherwise in violation of,
      conflict with or in default under any of the foregoing. The Company is not
      required under U.S. federal, state or local law, rule or regulation to obtain
      any consent, authorization or order of, or make any filing or registration
      with,
      any court or governmental agency in order for it to execute, deliver or perform
      any of its obligations under this Agreement or issue and sell the Common Stock
      in accordance with the terms hereof (other than any SEC, NASD or state
      securities filings that may be required to be made by the Company subsequent
      to
      the Closing); provided that, for purposes of the representation made in this
      sentence, the Company is assuming and relying upon the accuracy of the relevant
      representations and agreements of the undersigned herein.

    

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    4.8 No
      Undisclosed Liabilities.
      The
      Company has no liabilities or obligations that are material, individually or
      in
      the aggregate, and that are not disclosed in the SEC Documents or otherwise
      publicly announced, other than those incurred in the ordinary course of the
      Company's businesses and which, individually or in the aggregate, do not or
      would not have a material adverse effect on the Company.

     

    4.9 No
      Undisclosed Events or Circumstances.
      No
      event or circumstance has occurred or exists with respect to the Company or
      its
      businesses, properties, prospects, operations or financial condition, that,
      under applicable law, rule or regulation, requires public disclosure or
      announcement prior to the date hereof by the Company but which has not been
      so
      publicly announced or disclosed in the SEC Documents.

    

    4.10 No
      Integrated Offering.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf has, directly or indirectly, made any offers or sales of any security
      or
      solicited any offers to buy any security, other than pursuant to this
      Agreement.

    

    4.11 No
      Misleading or Untrue Communication.
      The
      Company, any person representing the Company, and, to the knowledge of the
      Company, any other person selling or offering to sell the Securities, if any,
      in
      connection with the transactions contemplated by this Agreement, have not made,
      at any time, any written or oral communication in connection with the offer
      or
      sale of the same which contained any untrue statement of a material fact or
      omitted to state any material fact necessary in order to make the statements,
      in
      the light of the circumstances under which they were made, not
      misleading.

    

    SECTION
      5

    

    5.1  Indemnity.
      The
      undersigned agrees to indemnify and hold harmless the Company, its officers
      and
      directors, employees and its affiliates and their respective successors and
      assigns and each other person, if any, who controls any thereof, against any
      loss, liability, claim, damage and expense whatsoever (including, but not
      limited to, any and all expenses whatsoever reasonably incurred in
      investigating, preparing or defending against any litigation commenced or
      threatened or any claim whatsoever) arising out of or based upon any false
      representation or warranty or breach or failure by the undersigned to comply
      with any covenant or agreement made by the undersigned herein or in any other
      document furnished by the undersigned to any of the foregoing in connection
      with
      this transaction.

    

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    5.2 Modification.
      Neither
      this Agreement nor any provisions hereof shall be modified, discharged or
      terminated except by an instrument in writing signed by the party against whom
      any waiver, change, discharge or termination is sought.

    

    5.3 Notices.
      Any
      notice, demand or other communication which any party hereto may be required,
      or
      may elect, to give to anyone interested hereunder shall be sufficiently given
      if
      (a) deposited, postage prepaid, in a United States mail letter box, registered
      or certified mail, return receipt requested, addressed to such address as may
      be
      given herein, or (b) delivered personally at such address.

    

    5.4 Counterparts.
      This
      Agreement may be executed through the use of separate signature pages or in
      any
      number of counterparts and by facsimile, and each of such counterparts shall,
      for all purposes, constitute one agreement binding on all parties,
      notwithstanding that all parties are not signatories to the same counterpart.
      Signatures may be facsimiles.

    

    5.5 Binding
      Effect.
      Except
      as otherwise provided herein, this Agreement shall be binding upon and inure
      to
      the benefit of the parties and their heirs, executors, administrators,
      successors, legal representatives and assigns. If the undersigned is more than
      one person, the obligation of the undersigned shall be joint and several and
      the
      agreements, representations, warranties and acknowledgments herein contained
      shall be deemed to be made by and be binding upon each such person and his
      heirs, executors, administrators and successors.

    

    5.6 Entire
      Agreement.
      This
      Agreement and the documents referenced herein contain the entire agreement
      of
      the parties and there are no representations, covenants or other agreements
      except as stated or referred to herein and therein.

    

    5.7 Assignability.
      This
      Agreement is not transferable or assignable by the undersigned.

    

    5.8 Applicable
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York, without giving effect to conflicts of law
      principles.

    

    5.9 Pronouns.
      The use
      herein of the masculine pronouns "him" or "his" or similar terms shall be deemed
      to include the feminine and neuter genders as well and the use herein of the
      singular pronoun shall be deemed to include the plural as well.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the undersigned has executed this Agreement on
      the ____
      of July,
      2006.

    

    Amount
      of
      Investment:

    

    $_____________________

    

    INDIVIDUAL
      INVESTOR:

    

    

    ______________________

    Name:

    

    

    PARTNERSHIP,
      CORPORATION, TRUST,

    CUSTODIAL
      ACCOUNT, OTHER INVESTOR

    

    ___________________________

    (Print
      Name of Entity)

    

    

    By: __________________

    Name:

    Title:

    Address:

    Taxpayer
      Identification Number:_____________

     

    
 

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    ACCEPTANCE
      OF SUBSCRIPTION

    

    (to
      be
      filed out only
      by the
      Company)

    

    The
      Company hereby accepts the above application for subscription for Units on
      behalf of the Company.

    

    

    

    ELDERWATCH,
      INC.   Dated:
      ______ ___, 2006

    

    

    By:______________________________

    Name:
      

    Title:

    

    

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    Appendix
      A

     

    Wiring
      Instructions

     

    For
      Payment of Purchase Price

     

    The
      following are the wire instructions for the account into which the payment
      of
      the purchase price for the Units subscribed for should be wired.

    

    

     

    
 

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    ELDERWATCH,
      INC.

    

    INVESTOR
      QUESTIONNAIRE

    
 

    
      	
              A.

            	
              General
                

              Information

            	 
	 	 	 
	
              1.

            	
              Print
                Full Name of Investor:

            	
              Individual:

            
	 	 	
              ____________________________________

            
	 	 	
              First,
                Middle, Last

            
	 	 	 
	 	 	
              Partnership,
                Corporation, Trust, Custodial Account, Other:

            
	 	 	 
	 	 	
              ____________________________________

            
	 	 	
              Name
                of Entity

            
	 	 	 
	
              2.

            	
              Address
                for Notices:

            	
              ____________________________________

            
	 	 	
              ____________________________________

            
	 	 	
              ____________________________________

            
	 	 	 
	
              3.

            	
              Name
                of Primary Contact Person:

              Title:

            	
              ____________________________________

            
	 	 	 
	
              4.

            	
              Telephone
                Number:

            	
              ____________________________________

            
	 	 	 
	
              5.

            	
              E-Mail
                Address: 

            	
              ____________________________________

            
	 	 	 
	
              6.

            	
              Facsimile
                Number:

              Permanent
                Address:

            	
              ____________________________________

            
	
               

              7.

            	
               

              Permanent
                Address:

              (if
                different from Address for Notices above)

            	
               

              ____________________________________

            

    

     

    
 

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    

    
      	
              8.

            	
              Authorized
                Signatory:

              Title:

            	
              ____________________________________

              ____________________________________

            
	 	
              Telephone
                Number:

            	
              ____________________________________

            
	 	
              Facsimile
                Number:

            	
              ____________________________________

            
	
              9.

               

            	
              U.S.
                Investors Only:

               

              U.S.
                Taxpayer Identification or Social

              Security
                Number:

            	
               

               

               

              ____________________________________

            

    

    

    

    B. Accredited
      Investor Status

    

    The
      Investor represents and warrants that the Investor is an “accredited investor”
within the meaning of Rule 501 of Regulation D under the Securities Act of
      1933,
      as amended (the “Securities Act”), and has checked the box or boxes below which
      are next to the categories under which the Investor qualifies as an accredited
      investor:

     

    

    

    
      	
              FOR
                INDIVIDUALS:

            
	 
	
              o

            	
              A
                natural person with individual net worth (or joint net worth with
                spouse)
                in excess of $1 million. For purposes of this item, “net worth” means the
                excess of total assets at fair market value, including home, home
                furnishings and automobiles (and including property owned by a spouse),
                over total liabilities.

            
	 	 
	
              o

            	
              A
                natural person with individual income (without including any income
                of the
                Investor’s spouse) in excess of $200,000, or joint income with spouse of
                $300,000, in each of the two most recent years and who reasonably
                expects
                to reach the same income level in the current year.

            
	 	 	 
	
              FOR
                ENTITIES:

            
	 	 
	
              o

            	
              A
                bank as defined in Section 3(a)(2) of the Securities Act or any savings
                and loan association or other institution as defined in Section 3(a)(5)(A)
                of the Securities Act, whether acting in its individual or fiduciary
                capacity.

            
	 	 
	
              o

            	
              An
                insurance company as defined in Section 2(13) of the Securities
                Act.

            
	 	 
	
              o

            	
              A
                broker-dealer registered pursuant to Section 15 of the Securities
                Exchange
                Act of 1934.

            
	 	 
	
              o

            	
              An
                investment company registered under the Investment Company Act of
                1940, as
                amended (the “Investment Company Act”). If an Investor has checked this
                box, please contact _______ for additional information that will
                be
                required.

            
	 	 
	
              o

            	
              A
                business development company as defined in Section 2(a)(48) of the
                Investment Company Act.

            
	 	 
	
              o

            	
              A
                small business investment company licensed by the Small Business
                Administration under Section 301(c) or (d) of the Small Business
                Investment Act of 1958.

            

    

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    
      	 	 
	
              o

            	
              A
                private business development company as defined in Section 202(a)(22)
                of
                the Investment Advisers Act of 1940. If an Investor has checked this
                box,
                please contact ______ for additional information that will be
                required.

            
	 	 
	
              o

            	
              An
                organization described in Section 501(c)(3) of the Internal Revenue
                Code,
                a corporation, Massachusetts or similar business trust, or partnership,
                not formed for the specific purpose of acquiring the Units, with
                total
                assets in excess of $5 million.

            
	 	 
	
              o

            	
              A
                trust with total assets in excess of $5 million not formed for the
                specific purpose of acquiring the Units, whose purchase is directed
                by a
                person with such knowledge and experience in financial and business
                matters as to be capable of evaluating the merits and risks of an
                investment in the Company and the purchase of the
                Units.

            
	 	 
	
              o

            	
              An
                employee benefit plan within the meaning of ERISA if the decision
                to
                invest in the Units is made by a plan fiduciary, as defined in Section
                3(21) of ERISA, which is either a bank, savings and loan association,
                insurance company, or registered investment adviser, or if the employee
                benefit plan has total assets in excess of $5 million or, if a
                self-directed plan, with investment decisions made solely by persons
                that
                are accredited investors.

            
	 	 
	
              o

            	
              A
                plan established and maintained by a state, its political subdivisions,
                or
                any agency or instrumentality of a state or its political subdivisions,
                for the benefit of its employees, if the plan has total assets in
                excess
                of $5 million.

            
	 	 
	
              o

            	
              An
                entity, including a grantor trust, in which all of the equity owners
                are
                accredited investors as determined under any of the foregoing paragraphs
                (for this purpose, a beneficiary of a trust is not an equity owner,
                but
                the grantor of a grantor trust is an equity
                owner).

            

    

    

     

    C.  Supplemental
      Data for Entities

    

    1. If
      the
      Investor is not a natural person, furnish the following supplemental data
      (natural persons may skip this Section C of the Investor
      Questionnaire):

    

    Legal
      form of entity (trust, corporation, partnership, etc.):
      _________________________ 

     

    Jurisdiction
      of organization: ________________________________________________

    

    2.
       Was
      the
      Investor organized for the specific purpose of acquiring the Units?

    

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    If
      the
      answer to the above question is “Yes,” please contact _______, ________, at
      _______ or ________ for additional information that will be
      required.

    

    3.
       Are
      shareholders, partners or other holders of equity or beneficial interest in
      the
      Investor able to decide individually whether to participate, or the extent
      of
      their participation, in the Investor’s investment in the Company (i.e., can
      shareholders, partners or other holders of equity or beneficial interest in
      the
      Investor determine whether their capital will form part of the capital invested
      by the Investor in the Company)?

    

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    If
      the
      answer to the above question is “Yes,” please contact David Lubin &
Associates, PLLC (david@dlubinassociates.com
      or
      516-284-1740) for additional information that will be required.

    

    4(a).
       Please
      indicate whether or not the Investor is, or is acting on behalf of, (i) an
      employee benefit plan within the meaning of Section 3(3) of ERISA, whether
      or not such plan is subject to ERISA,
      or (ii)
      an entity which is deemed to hold the assets of any such employee benefit plan
      pursuant to 29 C.F.R. § 2510.3-101. For example, a plan which is maintained by a
      foreign corporation, governmental entity or church, a Keogh plan covering no
      common-law employees and an individual retirement account are employee benefit
      plans within the meaning of Section 3(3) of ERISA but generally are not subject
      to ERISA (collectively, “Non-ERISA
      Plans”).
      In
      general, a foreign or US entity which is not an operating company and which
      is
      not publicly traded or registered as an investment company under the Investment
      Company Act of 1940, as amended, and in which 25% or more of the value of any
      class of equity interest is held by employee pension or welfare plans (including
      an entity which is deemed to hold the assets of any such plan), would be deemed
      to hold the assets of one or more employee benefit plans pursuant to 29 C.F.R.
§
2510.3-101. However, if only Non-ERISA Plans were invested in such an entity,
      the entity generally would not be subject to ERISA. For purposes of determining
      whether this 25% threshold has been met or exceeded, the value of any equity
      interest held by a person (other than such a plan or entity) who has
      discretionary authority or control with respect to the assets of the entity,
      or
      any person who provides investment advice for a fee (direct or indirect) with
      respect to such assets, or any affiliate of such a person, is
      disregarded.

    

    
      	
              o
                Yes

            	
              o
                No

            

    

     

    4(b).
       If
      the
      Investor is, or is acting on behalf of, such an employee benefit plan, or is
      an
      entity deemed to hold the assets of any such plan or plans, please indicate
      whether or not the Investor is subject to ERISA.

    

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    4(c.) If
      the
      Investor answered “Yes” to question 4.(b) and the Investor is investing the
      assets of an insurance company general account, please indicate what percentage
      of the Investor’s assets the purchase of the Units is subject to ERISA.
      ___________%.

    

    5.
       Does
      the
      amount of the Investor’s subscription for the Units in the Company exceed 40% of
      the total assets (on a consolidated basis with its subsidiaries) of the
      Investor?

    

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    If
      the
      question above was answered “Yes,” please contact David Lubin & Associates
      for additional information that will be required.

    

    6(a). Is
      the
      Investor a private investment company which is not registered under the
      Investment Company Act, in reliance on Section 3(c)(1) or Section 3(c)(7)
      thereof?

    

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    6(b).
       If
      the
      question above was answered “Yes,” was the Investor formed prior to April 30,
      1996?

    

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    If
      the
      questions set forth in (a) and (b) above were both answered “Yes,” please
      contact David Lubin & Associates for additional information that will be
      required.

    

    7(a).
       Is
      the
      Investor a grantor trust, a partnership or an S-Corporation for US federal
      income tax purposes?

    

    
      	
              o
                Yes

            	
              o
                No

            

    

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    7(b).
       If
      the
      question above was answered “Yes,” please indicate whether or not:

    

    (i)
      more
      than 50 percent of the value of the ownership interest of any beneficial owner
      in the Investor is (or may at any time during the term of the Company be)
      attributable to the Investor’s (direct or indirect) interest in the Company;
      or

     

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    (ii)
      it
      is a principal purpose of the Investor’s participation in the Company to permit
      the Partnership to satisfy the 100 partner limitation contained in US Treasury
      Regulation Section 1.7704-1(h)(3).

    

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    If
      either
      question above was answered “Yes,” please contact David Lubin & Associates
      for additional information that will be required.

    

    8. If
      the
      Investor’s tax year ends on a date other than December 31, please indicate such
      date below:

    
      	 	 
	 	
              (Date)

            

    

     

    D.  Related
      Parties

    

    1. 
      To
      the
      best of the Investor’s knowledge, does the Investor control, or is the Investor
      controlled by or under common control with, any other investor in the
      Company?

    

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    If
      the
      answer above was answered “Yes”, please identify such related investor(s)
      below.

    

    Name(s)
      of related investor(s): _______________________________

    

    2.
      Will
      any
      other person or persons have a beneficial interest in the Units to be acquired
      hereunder (other than as a shareholder, partner, or other beneficial owner
      of
      equity interest in the Investor)?

    

    
      	
              o
                Yes

            	
              o
                No

            

    

    

    If
      either
      question above was answered “Yes”, please contact David Lubin & Associates
      for additional information that will be required.

    

    The
      Investor understands that the foregoing information will be relied upon by
      the
      Company for the purpose of determining the eligibility of the Investor to
      purchase the Units. The Investor agrees to notify the Company immediately if
      any
      representation or warranty contained in this Subscription Agreement, including
      this Investor Questionnaire, becomes untrue at any time. The Investor agrees
      to
      provide, if requested, any additional information that may reasonably be
      required to substantiate the Investor’s status as an accredited investor or to
      otherwise determine the eligibility of the Investor to purchase the Units.
      The
      Investor agrees to indemnify and hold harmless the Company and each officer,
      director, shareholder, agent and representative of the Company and their
      respective affiliates and successors and assigns from and against any loss,
      damage or liability due to or arising out of a breach of any representation,
      warranty or agreement of the Investor contained herein.

    
 

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    

    
      	 	
              INDIVIDUAL:

            
	 	 
	 	
              ____________________________________

            
	 	
              (Signature)

            
	 	 
	 	
              ____________________________________

            
	 	
              (Print
                Name)

            
	 	 
	 	
              PARTNERSHIP,
                CORPORATION, TRUST, CUSTODIAL ACCOUNT, OTHER:

            
	 	 
	 	
              ___________________________________

            
	 	
              (Name
                of Entity)

            
	 	 
	 	
              By:
                ________________________________

            
	 	
              (Signature)

            
	 	 
	 	
              ________________________________

            
	 	
              (Print
                Name and Title)

            

    

    

    

      
        
          
          

        

        
          -21-

          
            

          

        

        
          
          

        

      

Annex
      1

     

    DEFINITION
      OF “INVESTMENTS”

    

    The
      term
“investments” means: 

    

    
      	1)  	
              Securities,
                other than securities of an issuer that controls, is controlled by,
                or is
                under common control with, the Investor that owns such securities,
                unless
                the issuer of such securities is:

            

    

    

    
      	(i)  	
              An
                investment company or a company that would be an investment company
                but
                for the exclusions or exemptions provided by the Investment Company
                Act,
                or a commodity pool; or

            

    

    

    
      	(ii)  	
              a
                Public Company (as defined below);

            

    

    

    
      	(iii)  	
              A
                company with shareholders’ equity of not less than $50 million (determined
                in accordance with generally accepted accounting principles) as reflected
                on the company’s most recent financial statements, provided that such
                financial statements present the information as of a date within
                16 months
                preceding the date on which the Investor acquires
                Units;

            

    

    

    
      	2)  	
              Real
                estate held for investment
                purposes;

            

    

    

    
      	3)  	
              Commodity
                Shares (as defined below) held for investment
                purposes;

            

    

    

    
      	4)  	
              Physical
                Commodities (as defined below) held for investment
                purposes;

            

    

    

    
      	5)  	
              To
                the extent not securities, Financial Contracts (as defined below)
                entered
                into for investment purposes;

            

    

    

    
      	6)  	
              In
                the case of an Investor that is a company that would be an investment
                company but for the exclusions provided by Section 3(c)(1) or 3(c)(7)
                of
                the Investment Company Act, or a commodity pool, any amounts payable
                to
                such Investor pursuant to a firm agreement or similar binding commitment
                pursuant to which a person has agreed to acquire an interest in,
                or make
                capital contributions to, the Investor upon the demand of the Investor;
                and

            

    

    

    
      	7)  	
              Cash
                and cash equivalents held for investment
                purposes.

            

    

     

    Real
      Estate that is used by the owner or a Related Person (as defined below) of
      the
      owner for personal purposes, or as a place of business, or in connection with
      the conduct of the trade or business of such owner or a Related Person of the
      owner, will NOT be considered Real Estate held for investment purposes, provided
      that real estate owned by an Investor who is engaged primarily in the business
      of investing, trading or developing real estate in connection with such business
      may be deemed to be held for investment purposes. However, residential real
      estate will not be deemed to be used for personal purposes if deductions with
      respect to such real estate are not disallowed by section 280A of the Internal
      Revenue Code of 1986, as amended. 

    

    A
      Commodity Interest or Physical Commodity owned, or a Financial Contract entered
      into, by the Investor who is engaged primarily in the business of investing,
      reinvesting, or trading in Commodity Shares, Physical Commodities or Financial
      Contracts in connection with such business may be deemed to be held for
      investment purposes.

    

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    “Commodity
      Shares” means commodity futures contracts, options on commodity futures
      contracts, and options on physical commodities traded on or subject to the
      rules
      of:

    

    
      	(i)  	
              Any
                contract market designated for trading such transactions under the
                Commodity Exchange Act and the rules thereunder;
                or

            

    

    

    
      	(ii)  	
              Any
                board of trade or exchange outside the United States, as contemplated
                in
                Part 30 of the rules under the Commodity Exchange
                Act.

            

    

    

    “Public
      Company” means a company that:

    

    
      	(i)  	
              files
                reports pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934, as amended; or

            

    

    

    
      	(ii)  	
              has
                a class of securities that are listed on a Designated Offshore Securities
                Market, as defined by Regulation S of the Securities
                Act.

            

    

    

    “Financial
      Contract” means any arrangement that:

    

    
      	(i)  	
              takes
                the form of an individually negotiated contract, agreement, or option
                to
                buy, sell, lend, swap, or repurchase, or other similar individually
                negotiated transaction commonly entered into by participants in the
                financial markets;

            

    

    

    
      	(ii)  	
              is
                in respect of securities, commodities, currencies, interest or other
                rates, other measures of value, or any other financial or economic
                interest similar in purpose or function to any of the foregoing;
                and

            

    

    

    
      	(iii)  	
              is
                entered into in response to a request from a counter party for a
                quotation, or is otherwise entered into and structured to accommodate
                the
                objectives of the counterparty to such
                arrangement.

            

    

    

    “Physical
      Commodities” means any physical commodity with respect to which a Commodity
      Interest is traded on a market specified in the definition of Commodity Shares
      above.

    

    “Related
      Person” means a person who is related to the Investor as a sibling, spouse or
      former spouse, or is a direct lineal descendant or ancestor by birth or adoption
      of the Investor, or is a spouse of such descendant or ancestor, provided that,
      in the case of a Family Company, a Related Person includes any owner of the
      Family Company and any person who is a Related Person of such an owner. “Family
      Company” means a company that is owned directly or indirectly by or for two or
      more natural persons who are related as siblings or spouse (including former
      spouses), or direct lineal descendants by birth or adoption, spouses of such
      persons, the estates of such persons, or foundations, charitable organizations
      or trusts established for the benefit of such persons.

    

    For
      purposes of determining the amount of investments owned by a company, there
      may
      be included investments owned by majority-owned subsidiaries of the company
      and
      investments owned by a company (“Parent Company”) of which the company is a
      majority-owned subsidiary, or by a majority-owned subsidiary of the company
      and
      other majority-owned subsidiaries of the Parent Company. 

    

    In
      determining whether a natural person is a qualified purchaser, there may be
      included in the amount of such person’s investments any investment held jointly
      with such person’s spouse, or investments in which such person shares with such
      person’s spouse a community property or similar shared ownership interest. In
      determining whether spouses who are making a joint investment in the Partnership
      are qualified purchasers, there may be included in the amount of each spouse’s
      investments any investments owned by the other spouse (whether or not such
      investments are held jointly). There shall be deducted from the amount of any
      such investments any amounts specified by paragraph 2(a) of Annex 2 incurred
      by
      such spouse. 

    

    In
      determining whether a natural person is a qualified purchaser, there may be
      included in the amount of such person’s investments any investments held in an
      individual retirement account or similar account the investments of which are
      directed by and held for the benefit of such person.

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    Annex
      2

     

    VALUATIONS
      OF INVESTMENTS

    

    The
      general rule for determining the value of investments in order to ascertain
      whether a person is a qualified purchaser is that the value of the aggregate
      amount of investments owned and invested on a discretionary basis by such person
      shall be their fair market value on the most recent practicable date or their
      cost. This general rule is subject to the following provisos:

     

    

    
      	1)  	
              In
                the case of Commodity Shares, the amount of investments shall be
                the value
                of the initial margin or option premium deposited in connection with
                such
                Commodity Shares; and

            

    

    

    
      	2)  	
              In
                each case, there shall be deducted from the amount of investments
                owned by
                such person the following amounts:

            

    

    

    
      	(i)  	
              The
                amount of any outstanding indebtedness incurred to acquire the investments
                owned by such person.

            

    

    

    
      	(ii)  	
              A
                Family Company, in addition to the amounts specified in paragraph
                (a)
                above, shall have deducted from the value of such Family Company’s
                investments any outstanding indebtedness incurred by an owner of
                the
                Family Company to acquire such
                investments.

            

    

    

     

    
      
        
        

      

      
        -24-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}]]