Document:

EX-10.2

 

EXHIBIT 10.2

AMENDED AND RESTATED GUARANTY OF PAYMENT OF DEBT

OF

FOREST CITY ENTERPRISES, INC.

Dated as of June 6, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	1. DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	2. ACKNOWLEDGMENTS, CONSIDERATION
	 	 	9	 
	 
	 	 	 	 
	3. GUARANTY
	 	 	10	 
	 
	 	 	 	 
	4. REINSTATEMENT
	 	 	10	 
	 
	 	 	 	 
	5. WAIVERS
	 	 	10	 
	 
	 	 	 	 
	6. ADDITIONAL AGREEMENTS
	 	 	11	 
	 
	 	 	 	 
	7. REPRESENTATIONS AND WARRANTIES
	 	 	12	 
	 
	 	 	 	 
	8. NOTICES
	 	 	13	 
	 
	 	 	 	 
	9. COVENANTS
	 	 	13	 
	 
	 	 	 	 
	10. DEFAULT; REMEDIES
	 	 	30	 
	 
	 	 	 	 
	11. MISCELLANEOUS
	 	 	32	 
	 
	 	 	 	 
	12. JURY TRIAL WAIVER
	 	 	33	 
	 
	 	 	 	 
	13. NOTICES
	 	 	33	 
	 
	 	 	 	 
	14. CONSENT TO JURISDICTION
	 	 	33	 
	 
	 	 	 	 
	15. ENTIRE AGREEMENT
	 	 	33	 
	 
	 	 	 	 
	16. INDEPENDENCE OF COVENANTS
	 	 	34	 

 

 

AMENDED AND RESTATED GUARANTY OF PAYMENT OF DEBT

          THIS AMENDED AND RESTATED GUARANTY OF PAYMENT OF DEBT (this “Guaranty”) is made and issued by
FOREST CITY ENTERPRISES, INC., an Ohio corporation (the “Guarantor”), as of this 6th day of June,
2007, in order to induce the Banks (as hereinafter defined), KEYBANK NATIONAL ASSOCIATION, as
administrative agent for the Banks (the “Administrative Agent”), NATIONAL CITY BANK, as syndication
agent for the Banks (the “Syndication Agent” and together with the Administrative Agent, the
“Agents”), and BANK OF AMERICA, N.A., and LASALLE BANK NATIONAL ASSOCIATION, as co-documentation
agents, (the “Co-Documentation Agents”), to enter into, and lend money pursuant to, a certain
Amended and Restated Credit Agreement of even date herewith (said Amended and Restated Credit
Agreement as it may be from time to time amended, restated, or modified being herein called the
“Agreement”), by and among the Banks, the Agents, the Co-Documentation Agents and FOREST CITY
RENTAL PROPERTIES CORPORATION, a subsidiary of the Guarantor (the “Borrower”).

WITNESSETH:

          WHEREAS, the Guarantor previously executed a Guaranty of Payment of Debt, dated as of March
22, 2004, in favor of the Banks (as hereinafter defined)(as amended to the date hereof, the
“Original Guaranty”); and

          WHEREAS, Borrower, the Banks, the Agents and the Co-Documentation Agents desire to amend and
restate the Original Guaranty in its entirety as hereinafter set forth; and

          WHEREAS, in accordance with Section 13.02 of the Agreement, the Agents, the Co-Documentation
Agents and the Banks have consented to the modifications to the Original Guaranty that are
contained herein.

          NOW, THEREFORE, the Original Guaranty is hereby amended and restated as follows:

          1. DEFINITIONS. As used in this Guaranty, the following terms shall have the following
meanings:

          “Banks” shall mean each of the financing institutions that are party to the Agreement as of
the date of this Guaranty, any other bank(s) that may become parties to the Agreement after the
date hereof, and all successors and assigns of any such bank; and “Bank” shall mean any one of the
foregoing.

          “Capital Stock” of any Person as used herein shall mean any and all shares, interests,
participations, or other equivalents (however designated) of corporate stock or other equity
participations or interests including, without limitation, partnership interests,

 

 

whether general or limited, and membership interests, whether of managing or non-managing
members, of such Person.

          “Cash Flow Coverage Ratio” shall mean, for any Test Period, the ratio of (i) Consolidated Net
Operating Cash Flow to (ii) Consolidated Corporate Debt Service.

          “Collateral” shall mean, collectively, all property, if any, securing the Debt or any part
thereof at the time in question.

          “Company” shall mean the Guarantor and/or a Subsidiary of the Guarantor.

          “Completion Guaranty” shall mean any performance guarantee by the Guarantor that construction
of a real estate project will be completed in accordance with applicable plans and specifications
and that all costs associated with such completion will be paid, provided, that such costs
may include an interest reserve only through completion of the project and not through
stabilization of such project.

          “Consolidated Corporate Debt Service” shall mean, for any period, the sum of (i) all scheduled
payments of principal of (excluding balloon payments) and interest on any Indebtedness owing by the
Borrower or any of its Subsidiaries (excluding any non-recourse mortgage Indebtedness owing by the
Borrower or any Subsidiary of the Borrower, (ii) all scheduled payments of principal of (excluding
balloon payments) and interest on any Indebtedness owing by the Guarantor and (iii) Dividends paid
by the Guarantor.

          “Consolidated GAAP Shareholders’ Equity” shall mean the consolidated shareholders equity of
the Guarantor, as calculated in accordance with GAAP.

          “Consolidated Net Operating Cash Flow” shall mean, for any Test Period, Net Operating Income
(a) less (i) all scheduled payments of principal of non-recourse mortgage Indebtedness
owing by the Guarantor and/or its Subsidiaries (excluding any balloon payments), (ii) all interest
payments on such non-recourse Indebtedness, (iii) Twelve Million Dollars ($12,000,000) of normal
recurring capital expenditures and (b) plus (i) net income (loss) before taxes and
corporate interest expense of the Land Group, (ii) net income (loss) before taxes of the Lumber
Trading Group, (iii) net income (loss) before taxes and corporate interest expense (including, but
not limited to, interest incurred on Debt, subordinated debt or any other third party debt) of the
Corporate Activity Group, (iv) actual cash taxes paid on the Net Operating Income and the income
set forth in subsections (b)(i), (b)(ii) and (b)(iii) above, (v) non-cash interest expense accrued
but not currently payable up to a maximum of Five Million Dollars ($5,000,000) with respect to
Indebtedness owing by the Guarantor and its Subsidiaries other than Indebtedness owing by the
Guarantor and/or its Subsidiaries to the government of the United States or any state or
municipality thereof or any agencies of any of the foregoing and (vi) non-cash interest expense
accrued but not currently payable with respect to Indebtedness by the Guarantor and/or its
Subsidiaries owing to the government of the United States or any state or municipality thereof or
any agencies of any of the foregoing.

          “Contingent Obligation” shall mean, with respect to any Person at the time of any
determination, without duplication, any obligation, contingent or otherwise, of such

 

 

Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any
other Person in any manner, whether directly or otherwise; provided, that the term
“Contingent Obligation” shall not include endorsements for collection or deposit, in each case in
the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the Indebtedness in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum reasonable anticipated
liability in respect thereof (assuming such Person is required to perform thereunder).

          “Controlled Group” shall mean a controlled group of corporations as defined in Section 1563 of
the Internal Revenue Code of 1986, as may be amended from time to time, of which Guarantor or any
Subsidiary of the Guarantor is a part.

          “Debt” shall mean, collectively, (a) all Indebtedness now owing or hereafter incurred by the
Borrower to the Agents and/or the Banks arising under or in connection with the Agreement, whether
pursuant to commitment or otherwise, and including, without limitation, the principal amount of all
Loans made pursuant to the Agreement, all interest thereon determined as provided in the Agreement,
all fees provided to be paid by the Borrower to the Banks and/or the Agents pursuant to the
Agreement or any Related Writing and all liabilities in respect of letters of credit issued by the
Administrative Agent and/or any of the Banks for the account of the Borrower (but not including
Indebtedness held by any Bank arising and outstanding under any transaction or document referred to
in Sections 8.04 (other than that referred to in subclause (a) thereof), and/or 8.07 of the
Agreement), (b) each renewal, extension, consolidation or refinancing of any such Indebtedness in
whole or in part, and (c) all interest from time to time accruing on any of the foregoing
Indebtedness.

          “Distributions” shall have the meaning set forth in Section 9.13(e) hereof.

          “Dividends” shall include all dividends (in cash or otherwise) declared and/or paid, capital
returned, and other distributions of any kind made on or in respect of any share of Capital Stock
outstanding at any time.

          “EBDT” shall mean net earnings from operations before depreciation, amortization and deferred
taxes on income and excludes provision for decline in real estate, gain (loss) on disposition of
properties and extraordinary gains.

          “Environmental Laws” means all provisions of law, statutes, ordinances, rules, regulations,
permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated
by the government of the United States of America or by any state or municipality thereof or by any
court, agency, instrumentality, regulatory authority or commission of any of the foregoing, now or
hereafter in effect, and in each case, as amended, concerning or relating to health, safety and
protection of, or regulation of the discharge of substances into, the environment.

          “ERISA Net Worth” shall mean (a) as to any Subsidiary of the Guarantor, the excess of the net
book value of such Subsidiary’s assets (other than patents, treasury stock, goodwill and similar
intangibles but including unamortized mortgage and lease costs) over all of its liabilities (other
than liabilities to any other Company), such excess being determined in

 

 

accordance with GAAP applied on a basis consistent with the Guarantor’s present accounting
procedures, and (b) as to the Guarantor, the excess of the net book value (after deducting all
applicable reserves and deducting any value attributable to the re-appraisal or write-up of any
asset) of the Guarantor’s assets (other than patents, good will, treasury stock and similar
intangibles but including unamortized mortgage and lease costs) over all of its liabilities as
determined on an accrued and consolidated and consolidating basis and in accordance with GAAP not
inconsistent with the Guarantor’s present accounting principles consistently applied.

          “Event of Default” shall have the meaning set forth in Section 10 hereof.

          “Fiscal Quarterly Date” shall mean each of January 31, April 30, July 31 and October 31.

          “GAAP” shall mean generally accepted accounting principles in the United States of America, in
effect from time to time.

          “Hedge Agreement” shall mean any non-fully paid derivative, such as interest rate swaps or
collar agreements or other similar agreements or arrangements designed to hedge the position of a
Person with respect to interest rates, excluding (a) any such agreements as to which all
obligations of such Person are paid or payable within twelve (12) months of the date such agreement
is entered into by such Person and (b) Total Rate of Return Swaps.

          “Indebtedness” shall mean, with respect to any Person at the time of any determination,
without duplication, all obligations of such Person which in accordance with GAAP should be
classified upon the balance sheet of such Person as liabilities, but in any event including: (a)
all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all obligations of such Person upon
which interest charges are customarily paid or accrued, (d) all written obligations of such Person
to maintain working capital, equity capital or other financial statement condition of another
Person so as to enable such other Person to pay its Indebtedness or otherwise to protect the holder
of such Indebtedness against loss in respect thereof, (e) all obligations of such Person issued or
assumed as the deferred purchase price of property or services, (f) all obligations of others
secured by any Lien on property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all capitalized lease obligations of such Person, (h) all
obligations of such Person in respect of Hedge Agreements and Total Rate of Return Swaps, (i) all
obligations of such Person, actual or contingent, as an account party in respect of letters of
credit or bankers’ acceptances, and, without duplication, all drafts drawn thereunder, and (j) all
obligations of any partnership or joint venture as to which such Person is or may become personally
liable, provided, that, Indebtedness shall not include (i) any obligations incurred as a
result of fraud, misappropriation, misapplication and environmental indemnities, as are usual and
customary in commercial loan transactions, or (ii) trade payables, deferred revenue, taxes and
accrued expenses, in each case arising in the ordinary course of business and that is due and
payable less than twelve (12) months after the date such debt was incurred.

          “Indemnification Lien” shall mean a Lien granted by the Guarantor pursuant to an Indemnity
Agreement entered into by the Guarantor with respect to one or more

 

 

Performance Surety Bonds; provided, that such Indemnification Lien extends only to the
assigned property on which a Surety provides a Performance Surety Bond and not to other property of
the Guarantor or any Subsidiary of the Guarantor and provided, further, that such
Indemnification Lien shall become effective only in the event that (a) the Guarantor fails to honor
its obligations under the related Indemnity Agreement or Performance Surety Bond; (b) the Guarantor
abandons or breaches a contract on a bonded project; (c) the Guarantor defaults under any other
indebtedness or liability owned to such Surety or (d) the Guarantor makes an assignment for the
benefit of creditors.

          “Indemnity Agreement” shall mean any indemnity agreement in form and substance satisfactory to
the Agents and the Banks, by and between the Guarantor and a Surety, and as each such Indemnity
Agreement may be amended, restated or otherwise modified.

          “Indenture” shall mean the indenture dated as of May 19, 2003, between the Guarantor and The
Bank of New York, as indenture trustee and relating to the Senior Notes.

          “Measured Credit Risk” shall mean the product of (i) the notional amount of a Hedge Agreement
entered into or guaranteed by the Guarantor, the Borrower, FCCC or any other Subsidiary of the
Borrower (other than a SPE Subsidiary), in each case with any Person other than a Bank that has a
remaining period to maturity of greater than twelve (12) months, times (ii) the number of
years remaining to maturity of such Hedge Agreement, times (iii)1.25%.

          “MTA Guaranty” shall mean that certain guaranty dated as of January 23, 2006, by the Guarantor
in favor of the Metropolitan Transit Authority for the State of New York (“MTA”), pursuant to which
the Guarantor has agreed to guarantee the obligations of Atlantic Rail Yards, LLC (“ARY”) under a
temporary entry license agreement between the MTA and ARY and as such MTA Guaranty may, from time
to time, be amended, restated or otherwise modified in accordance with the terms of this Guaranty.

          “Net Earnings” shall mean the Guarantor’s net earnings, as determined separately for each
fiscal year, after taxes, upon a consolidated basis (after deducting minority interests) and in
accordance with GAAP consistently applied.

          “Net Losses” shall mean the Guarantor’s net losses, as determined separately for each fiscal
year, after taxes, upon a consolidated basis (after deducting minority interests) in accordance
with GAAP consistently applied.

          “Net Operating Income” shall mean for any relevant period, the excess of the Borrower’s
revenues over the Borrower’s operating expenses, in each case as determined in accordance with the
Pro Rata Consolidation Method. For purposes of this definition, Net Operating Income (i) shall not
include any gains or losses from the sale of income producing real properties, other than gains or
losses obtained from the sale of net outlot parcels to a maximum aggregate amount of Twenty Million
Dollars ($20,000,000) for the immediately preceding four consecutive quarters and (ii) shall
include adjustments for cash flow of properties pursuant to which the Borrower is receiving a
preferred return over and above its ownership percentage in such properties.

 

 

          “Non-Affiliate Construction Project” shall mean any real property and all improvements to be
constructed thereon (collectively, the “Non-Affiliate Property”) (i) with respect to which the
Borrower or a Subsidiary of the Borrower, as the case may be, (a) may make a Permitted
Non-Affiliate Loan, and (b) is the developer pursuant to an agreement with a Non-Affiliated Entity
as owner of the Non-Affiliate Property; and (ii) with respect to which the Borrower or an Affiliate
of the Borrower, as the case may be, holds an irrevocable option from either the Non-Affiliated
Entity or the parent of the Non-Affiliated Entity to acquire, respectively, either (a) the
Non-Affiliate Property, or (b) all of the equity interests owned by the parent of the
Non-Affiliated Entity in and to such Non-Affiliated Entity.

          “Non-Affiliated Entity” shall mean any Person that is not an Affiliate of the Borrower and
that is wholly-owned by another Person.

          “Obligor” shall mean any Person or entity who, or any of whose property is or shall be,
obligated on the Debt or any part thereof in any manner and includes, without limiting the
generality of the foregoing, the Borrower, the Guarantor and any co-maker, endorser, other
guarantor of payment, subordinating creditor, assignor, grantor of a security interest, pledgor,
mortgagor or hypothecator of property, if any.

          “Payment Default” shall mean any failure by the Borrower or the Guarantor to make payment of
principal of, or interest on, any Note (as defined in the Agreement) or this Guaranty, as
applicable, or any other fees or expenses provided hereunder or under the Agreement, when due and
payable, whether at maturity or by acceleration.

          “Performance Surety Bonds” shall mean the bonds, undertakings and like obligations executed by
a Surety for or on behalf of the Guarantor for one or more of the following purposes:

          (a) to guarantee the performance by the Guarantor or a Subsidiary of the Guarantor, as
applicable, that construction of a real estate project will be completed in accordance with
applicable plans and specifications and that all costs associated with such completion will be
paid;

          (b) to insure that any mechanics’ liens incurred in the normal course of constructing a real
estate project are duly paid and discharged;

          (c) as a condition to the issuance of a permit related to a real estate project;

          (d) as a condition to the issuance of state and local licenses required for the construction
and development of a real estate project; or

          (e) to support other obligations related to the construction and development of a real
estate project, provided that such obligations do not constitute Indebtedness.

          “Permitted Debt” shall have the meaning set forth in Section 9.10 hereof.

 

 

          “Permitted Distributions” shall have the meaning set forth in Section 9.13(e) hereof.

          “Permitted Non-Affiliate Loan” shall mean a loan by the Borrower or any Subsidiary of the
Borrower to a Non-Affiliated Entity for the purposes of (a) purchasing or otherwise acquiring a
Non-Affiliate Property or (b) paying construction costs, in each case, in connection with a
Non-Affiliate Construction Project.

          “Person” shall mean an individual, a corporation, a limited liability company, a partnership,
an association, a trust or any other entity or organization, including, without limitation, a
governmental or political subdivision or an agency or instrumentality thereof.

          “Plan” shall mean any employee pension benefit plan subject to Title IV of the Employee
Retirement Income Security Act of 1974, as amended, established or maintained by the Guarantor, any
Subsidiary of the Guarantor, any member of the Controlled Group, or any such Plan to which the
Guarantor, any Subsidiary of the Guarantor or any member of the Controlled Group is required to
contribute on behalf of its employees.

          “Possible Default” shall mean any event or condition which, with notice or lapse of time or
both, would constitute an Event of Default referred to in Section 10 hereof.

          “Pro Rata Consolidation Method” shall mean the pro rata method of consolidation as opposed to
the full consolidation method of accounting.

          “Puttable Notes Hedge and Warrant Transactions” shall mean the purchased call option and
warrant transactions that may be entered into from time to time by the Guarantor, with respect to
its common stock, in connection with the 2006 Puttable Senior Notes.

          “Receivable” shall mean a claim for moneys due or to become due, whether classified as a
contract right, account, chattel paper, instrument, general intangible or otherwise.

          “Related Writing” shall mean any Note, assignment, mortgage, security agreement, guaranty
agreement, Subordination Agreement, financial statement, audit report, officer’s certificate or
other writing furnished by the Borrower, the Guarantor or any of their respective officers to the
Agents or the Banks.

          “Reportable Event” shall mean a reportable event as that term is defined in Title IV of the
Employee Retirement Income Security Act of 1974, as amended, with respect to a Plan as to which the
thirty (30) day notice requirement has not been waived by the Pension Benefit Guaranty Corporation.

          “Restatement Effective Date” shall mean the date on which all conditions precedent set forth
in Article VI of the Agreement are satisfied or waived by the Administrative Agent and the Required
Banks.

 

 

          “Restricted Company” shall mean the Guarantor or a Restricted Subsidiary.

          “Restricted Subsidiary” shall mean any Subsidiary of the Guarantor other than (a) the
Borrower, and (b) any Subsidiary of the Borrower.

          “Senior Notes” shall mean the 2003 Senior Notes, the 2004 Senior Notes and the 2005 Senior
Notes.

          “Subordination Agreement” shall mean any subordination agreement in form and substance
satisfactory to the Agents and the Banks entered into by a Surety in favor of the Agents and the
Banks, and as each such Subordination Agreement may, from time to time, be amended, restated or
otherwise modified.

          “Subsidiary” of any Person shall mean and include (a) any corporation more than fifty percent
(50%) of whose stock of any class or classes having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation is at the time owned by such Person directly
or indirectly through Subsidiaries, (b) any partnership, limited liability company, association
(including business trusts) or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a fifty percent (50%) voting or equity interest at the time, and (c)
any corporation, limited liability company, partnership, association or other entity the accounts
of which are consolidated with those of its parent in the parent’s consolidated financial
statements.

          “Surety” means any surety or insurance company reasonably acceptable to the Agents.

          “Surety Bonds” means the bonds, undertakings and other like obligations executed by a Surety
for the Guarantor subject to an Indemnity Agreement and a Subordination Agreement in a maximum
aggregate principal amount of $30,000,000 for all Sureties (excluding Performance Surety Bonds).

          “Test Period” shall mean each period of four consecutive fiscal quarters of the Guarantor or
the Borrower, as applicable, in each case taken as one accounting period, ended after the,
Restatement Effective Date.

          “Total Rate of Return Swap” shall mean a bilateral financial contract between a total rate of
return payer (the legal owner of the reference asset) and a total rate of return receiver where the
total rate of return payer pays the total return of a reference asset and receives a specified
fixed or floating cash flow from the total rate of return receiver.

          “2003 Senior Notes” shall mean the senior notes of the Guarantor issued on May 19, 2003,
pursuant to the Indenture, in an original aggregate principal amount of $300,000,000.

          “2004 Senior Notes” shall mean the senior notes of the Guarantor issued on February 10, 2004,
pursuant to the Indenture, in an original aggregate principal amount of up to $100,000,000.

 

 

          “2005 Senior Notes” shall mean the senior notes of the Guarantor issued on or about January
25, 2005, pursuant to the Indenture, in an original aggregate principal amount of up to
$150,000,000.

          “2006 Indenture” shall mean the indenture dated as of October 10, 2006, between the Guarantor
and The Bank of New York Trust Company, N.A., as indenture trustee, relating to the 2006 Puttable
Senior Notes.

          “2006 Puttable Senior Notes” shall mean the puttable equity-linked senior notes of the
Guarantor issued on or about October 10, 2006, pursuant to the 2006 Indenture, in an original
aggregate principal amount of up to $287,500,000.

          All capitalized terms used herein but not herein defined that are defined in the Agreement
shall have the respective meanings ascribed to them in the Agreement.

          All financial covenants contained in this Guaranty shall be measured on each Fiscal Quarterly
Date.

Accounting Principles

          Any accounting term not specifically defined in this Section 1 or elsewhere in this Guaranty,
shall have the meaning ascribed thereto by GAAP not inconsistent with the Guarantor’s present
accounting procedures, provided, that, if the Guarantor notifies the Administrative Agent
that the Guarantor requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the Restatement Effective Date in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the Guarantor that the
Required Lenders request an amendment to any provision hereof for such purpose), regardless of
whether any such notice is given before or after such change in GAAP or in the application thereof,
then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.

          Notwithstanding the foregoing, the financial statements furnished to the Banks pursuant hereto
shall be made and prepared in accordance with GAAP consistently applied throughout the periods
involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the
Guarantor to the Banks), provided, that (a) all computations determining compliance with
Sections 9.8 and 9.14, including definitions used therein, shall utilize accounting principles
based on the Pro Rata Consolidation Method, (b) all computations determining compliance with
Sections 9.8, 9.14 and 9.15, including definitions used therein, shall exclude interest income
received by the Borrower or any of its Subsidiaries with respect to loans made by the Borrower or
such Subsidiary pursuant to Sections 8.06(b) and (d) of the Agreement, unless such loans are funded
with the proceeds from Revolving Loans or the Senior Notes and (c) such financial statements must
also include a report (in the footnotes thereto or otherwise) of the financial results of the
Guarantor using accounting principles based on the Pro Rata Consolidation Method.

          2. ACKNOWLEDGMENTS, CONSIDERATION. The Guarantor desires that the Agents and the Banks grant
the Borrower and continue the loan(s), credit and

 

 

financial accommodations provided for under the Agreement. The Agreement provides, on and
subject to certain conditions therein set forth, for Revolving Loans by the Banks to the Borrower
up to an aggregate maximum principal amount of Seven Hundred Fifty Million Dollars ($750,000,000).
There exists and will hereafter exist economic and business relationships between the Guarantor and
the Borrower which will be of benefit to the Guarantor. The Guarantor finds it to be in the direct
business and economic interest of the Guarantor that the Borrower obtain the loans, credit and
financial accommodations from the Agents and the Banks provided for in the Agreement. The
Guarantor understands that the Agents and the Banks are willing to grant and continue the loans,
credit and financial accommodations to the Borrower provided for in the Agreement only upon certain
terms and conditions, one of which is that the Guarantor unconditionally guarantee the payment of
the Debt and this instrument is being executed and delivered by the Guarantor to satisfy that
condition and in consideration of the Agents and the Banks entering into the Agreement.

          3. GUARANTY. The Guarantor hereby absolutely, irrevocably and unconditionally guarantees (a)
the punctual and full payment of all and every portion of the Debt when due, by acceleration or
otherwise, whether now owing or hereafter arising, (b) the prompt observance and performance by the
Borrower of each and all of the Borrower’s covenants, undertakings, obligations and agreements set
forth in the Agreement, the Notes and/or any other Related Writing evidencing or pertaining
thereto, and (c) the prompt payment of all expenses and costs, including reasonable attorneys’
fees, incurred by or for the account of the Agents and/or the Banks in connection with any action
to enforce payment or collection of the Debt from the Borrower and/or the Guarantor or to prepare
any amendments, restatements or modifications of the Agreement, the Notes and/or this Guaranty. If
the Debt or any part thereof shall not be paid in full punctually when due and payable, the Agents
and/or the Banks in each case shall have the right to proceed directly against the Guarantor under
this Guaranty regardless of whether or not the Agents and/or the Banks shall have theretofore
proceeded or shall then be proceeding against the Borrower or any other Obligor or Collateral, if
any, or any of the foregoing, it being understood that the Agents and/or the Banks in their sole
discretion may proceed or not proceed against the Borrower, the Obligors and/or any Collateral and
may exercise or not exercise each right, power or privilege that the Agents and/or the Banks may at
any time have, either simultaneously or separately and, in any event, at such time or times and as
often and in such order as the Agents and/or the Banks in their sole discretion, may from time to
time deem expedient, all without affecting the obligations of the Guarantor hereunder or the right
of the Agents and/or the Banks to demand and/or enforce performance by the Guarantor of the
Guarantor’s obligations hereunder.

          4. REINSTATEMENT. This Guaranty shall continue to be effective or be reinstated, as the case
may be, if any amount paid by or on behalf of the Borrower to the Agents or the Banks on or in
respect of the Debt is rescinded, restored or returned in connection with the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or any other Obligor, or as
a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or any other Obligor or any part of the property of the Borrower or any
other Obligor, or otherwise, all as though such payment had not been made.

          5. WAIVERS. The Guarantor waives any and all contractual, legal and/or equitable rights of
subrogation, contribution, exoneration, indemnity and/or

 

 

reimbursement from or against the Borrower or any Obligor with respect to the Debt and/or any
payments made by the Guarantor on account of this Guaranty.

          6. ADDITIONAL AGREEMENTS. Regardless of the duration of time, regardless of whether the
Borrower may from time to time cease to be indebted to the Banks and irrespective of any act,
omission or course of dealing whatever on the part of the Agents and/or the Banks, the Guarantor’s
liabilities and other obligations under this Guaranty shall remain in full force and effect until
the full and final payment of all of the Debt. Without limiting the generality of the foregoing:

          6.1. The obligations of the Guarantor hereunder shall not be released, discharged or in any
way affected, nor shall the Guarantor have any rights or recourse against the Agents or the Banks
by reason of (a) any action the Agents or the Banks may take or omit to take, or (b) any defense
raised or asserted by the Borrower against enforcement of the Agreement or the Notes or any
challenge to the sufficiency or enforceability of the Agreement, any of the Notes or this Guaranty,
or (c) any act or thing that might otherwise operate as a legal or equitable discharge of a surety,
as to which the Guarantor hereby expressly waives any and all defenses available to a surety except
irrevocable payment in full of the Debt.

          6.2. The obligations of the Guarantor under this Guaranty shall be satisfied strictly in
accordance with the terms of this Guaranty, under all circumstances whatsoever, including, without
limitation, the existence of any claim, setoff, defense or right which the Guarantor or the
Borrower may have at any time against the Agents or the Banks or any other Person or entity,
whether in connection with this Guaranty, the Agreement, the Notes or the transactions contemplated
hereby or any unrelated transaction.

          6.3. The Banks shall at no time be under any duty to the Guarantor to grant any loans, credit
or financial accommodation to the Borrower, irrespective of any duty or commitment of the Banks to
the Borrower, or to follow or direct the application of the proceeds of any such loans, credit or
financial accommodation.

          6.4. The Guarantor waives (a) notice of the granting of any loan to the Borrower or the
incurring of any other Indebtedness, including, but not limited to the creation of the Debt by the
Borrower or the terms and conditions thereof, (b) presentment, notice of nonpayment, demand for
payment, protest, notice of protest and notice of dishonor of the Notes or any other Indebtedness
incurred by the Borrower to the Banks, (c) notice of any indulgence granted to any Obligor, (d)
notice of the Banks’ acceptance of this Guaranty, and (e) any other notice to which the Guarantor
might, but for the within waiver, be entitled.

          6.5. The Agents and/or the Banks in their sole discretion may, without prejudice to their
rights under this Guaranty, at any time or times (a) grant the Borrower whatever loans, credit or
financial accommodations that the Banks, or any thereof, may from time to time deem advisable, even
if the Borrower might be in default and even if those loans, credit or financial accommodations
might not constitute Debt the payment of which is guaranteed hereunder, (b) assent to any renewal,
extension, consolidation or refinancing of the Debt or any part thereof, (c) forbear from demanding
security, if the Agents and/or the Banks shall have the right to do so, (d) release any Obligor or
Collateral or assent to any exchange of

 

 

Collateral, if any, irrespective of the consideration, if any, received therefor, (e) grant
any waiver or consent or forbear from exercising any right, power or privilege that the Agents
and/or the Banks may have or acquire, (f) assent to any amendment, deletion, addition, supplement
or other modification in, to or of any writing evidencing or securing any Debt or pursuant to which
any Debt is created, (g) grant any other indulgence to any Obligor, (h) accept any Collateral for
or other Obligors upon the Debt or any part thereof, or (i) fail, neglect or omit in any way to
realize upon any Collateral or to protect the Debt or any part thereof or any Collateral therefor.

          6.6. The Guarantor’s liabilities and other obligations under this Guaranty shall survive any
merger, consolidation or dissolution of the Guarantor.

          6.7. The Guarantor’s liabilities and other obligations under this Guaranty shall be absolute
and unconditional irrespective of any lack of validity or enforceability of any agreement,
instrument or document evidencing the Debt or related thereto, or any other defense available to
the Guarantor in respect of this Guaranty.

          7. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants that (a) it is a
duly organized and validly existing corporation under the laws of the State of Ohio, (b) the
execution, delivery and performance of this Guaranty have been duly authorized by all necessary
corporate action, (c) there is no prohibition in either its Articles of Incorporation, Code of
Regulations or in any agreement, instrument, judgment, decree or order to which it is a party that
in any way restricts or prohibits the execution, delivery and performance of this Guaranty in any
respect, (d) this Guaranty has been duly executed and delivered by the Guarantor and is a valid and
binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms,
and (e) as of January 31, 2007, there are 56,000,000 shares authorized of Class B Common Stock of
the Guarantor of which 25,254,210 shares are issued and outstanding.

          The Guarantor further represents and warrants that this Guaranty is made in furtherance of the
purposes for which the Guarantor was incorporated and is necessary to promote and further the
business of the Guarantor and that the assumption by the Guarantor of its obligations hereunder
will result in direct financial benefits to the Guarantor.

          This Guaranty is not made in connection with any consumer loan or consumer transaction.

          The Guarantor further represents and warrants that (a) the Guarantor has received
consideration which is the reasonably equivalent value of the obligations and liabilities that the
Guarantor has incurred to the Agents and/or the Banks, (b) the Guarantor is not insolvent as
defined in any applicable state or federal statute, nor will the Guarantor be rendered insolvent by
the execution and delivery of this Guaranty to the Agents and the Banks, (c) the Guarantor is not
engaged or about to engage in any business or transaction for which the assets retained by the
Guarantor shall be an unreasonably small capital, taking into consideration the obligations to the
Agents and the Banks incurred hereunder, and (d) the Guarantor does not intend to, nor does the
Guarantor believe, that the Guarantor will incur debts beyond the Guarantor’s ability to pay as
they become due.

 

 

          The Guarantor further represents and warrants that the Guarantor has no Indebtedness
outstanding from any Subsidiary of the Guarantor to the Guarantor.

          Neither the Guarantor nor any of its Subsidiaries is subject to or in violation of any law,
regulation, or list of any government agency (including, without limitation, the U.S. Office of
Foreign Asset Control list, Executive Order No. 13224 or the USA Patriot Act) that prohibits or
limits the conduct of business with or the receiving of funds, goods or services to or for the
benefit of any Persons specified therein or that prohibits or limits any Bank or the Agents from
making any advances or extensions of credit to the Guarantor or from otherwise conducting business
with the Guarantor.

          8. NOTICES. The Agents and/or the Banks shall be deemed to have knowledge or to have received
notice of any event, condition or thing only if the Agents and/or the Banks shall have received
written notice thereof as provided in the Agreement. A written notice shall be deemed to have been
duly given to the Guarantor whenever a writing to that effect shall have been sent by registered or
certified mail to the Guarantor at the address set forth opposite the Guarantor’s signature below
(or to such other address of the Guarantor as the Guarantor may hereafter furnish to the Banks in
writing for such purpose), but no other method of giving notice to or making a request of the
Guarantor is hereby precluded.

          9. COVENANTS. The Guarantor hereby agrees to perform and observe and to cause each of its
Subsidiaries to perform and observe, all of the following covenants and agreements:

          9.1. INSURANCE. Each Company will:

          (a) insure itself and all of its insurable properties to such extent, by such
insurers and against such hazards and liabilities as is generally done by businesses
similarly situated, it being understood that the Guarantor has obtained a fidelity bond
for such of its employees as handle funds belonging to the Borrower or the Guarantor,

          (b) give the Administrative Agent prompt written notice of any material reduction
or adverse change in that Company’s insurance coverage, and

          (c) forthwith upon any Bank’s or the Administrative Agent’s written request,
furnish to each Bank and the Administrative Agent such information in writing about
that Company’s insurance as any Bank or the Administrative Agent, as applicable, may
from time to time reasonably request.

          9.2. MONEY OBLIGATIONS. Each Company will pay in full:

          (a) prior in each case to the date when penalties would attach, all taxes,
assessments and governmental charges and levies (except only those so long as and, to
the extent that, the same shall be contested in good faith by appropriate and timely
proceedings diligently pursued and taxes and assessments on inconsequential parcels of
vacant land, the nonpayment of which does not materially

 

 

adversely affect the financial condition of the Guarantor) for which it may be or
become liable or to which any or all of its properties may be or become subject,

          (b) all of its wage obligations to its employees in compliance with the Fair Labor
Standards Act (29 U.S.C. Section 206-207) or any comparable provisions, and

          (c) all of its other obligations calling for the payment of money (except only
those so long as and to the extent that the same shall be contested in good faith by
appropriate and timely proceedings diligently pursued) before such payment becomes
overdue; provided that, notwithstanding the foregoing, the Guarantor shall not
make any payment on account of any of the Senior Notes or the 2006 Puttable Senior
Notes in the event of and during the continuance of any Payment Default under the
Agreement or this Guaranty.

          9.3. RECORDS. Each Company will:

          (a) at all times maintain true and complete records and books of account and,
without limiting the generality of the foregoing, maintain appropriate reserves for
possible losses and liabilities, all in accordance with generally accepted accounting
principles applied on a basis not inconsistent with its present accounting procedures,
and

          (b) at all reasonable times permit each Bank to examine that Company’s books and
records and to make excerpts therefrom and transcripts thereof.

          9.4. FRANCHISES. Each Company will preserve and maintain at all times its corporate
existence, rights and franchises; provided, that this Section shall not apply to (a) any
merger of a Subsidiary of the Guarantor into the Guarantor or into another Subsidiary of the
Guarantor, (b) any consolidation of a Subsidiary with another Subsidiary, or (c) any dissolution of
any Subsidiary of the Guarantor, except in each case where the Subsidiary is the Borrower.

          9.5. NOTICE. The Guarantor will cause its Chief Financial Officer, or in his or her absence
another officer designated by the Chief Financial Officer, to promptly notify the Banks whenever
(a) any Event of Default or Possible Default may occur hereunder (including, without limitation,
any default under any of the Senior Notes, the Indenture, the 2006 Puttable Senior Notes, the 2006
Indenture or any other document relating thereto (after giving effect to any applicable grace
period)) or any representation or warranty made herein may for any reason cease in any material
respect to be true and complete, and/or (b) any Restricted Subsidiary shall (i) be in default of
any material (either with respect to the Borrower or the Guarantor) obligation for payment of
borrowed money, or, to the knowledge of the Guarantor, any material obligations in respect of
guarantees, taxes and/or Indebtedness for goods or services purchased by, or other contractual
obligations of, such Subsidiary, and/or (ii) not, to the knowledge of the Guarantor, be in
compliance with any law, order, rule, judgment, ordinance, regulation, license, franchise, lease or
other agreement that has or could reasonably be expected

 

 

to have a material adverse effect on the business, operations, property or financial condition
of such Subsidiary, and/or (c) the Guarantor and/or any Restricted Subsidiary shall have received
notice, or have knowledge, of any actual, pending or threatened claim, notice, litigation,
citation, proceeding or demand relating to any matter(s) described in subclauses (b)(i) and (b)(ii)
of this Section 9.5. Further, the Guarantor shall notify the Banks not less than thirty (30) days
in advance of entering into any proposed amendment or modification of any of the Senior Notes or
the Indenture or the 2006 Puttable Senior Notes or the 2006 Indenture, whether or not the Guarantor
believes that the consent of the Required Banks is needed therefor pursuant to Section 9.10
(i)(iii) or 9.10(h)(iii), as applicable, of this Guaranty.

          9.6. ERISA COMPLIANCE. No Company will incur any material accumulated funding deficiency
within the meaning of the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the regulations thereunder or any material liability to the Pension Benefit Guaranty
Corporation, established thereunder in connection with any Plan. Each Company will furnish (i) as
soon as possible and in any event within thirty (30) days after such Company knows or has reason to
know that any Reportable Event with respect to any Plan has occurred, a statement of the Chief
Financial Officer of such Company setting forth details as to such Reportable Event and the action
which such Company proposes to take with respect thereto, together with a copy of the notice of
such Reportable Event given to the Pension Benefit Guaranty Corporation if a copy of such notice is
available to such Company, (ii) promptly after the filing thereof with the United States Secretary
of Labor or the Pension Benefit Guaranty Corporation, copies of each annual report with respect to
each Plan established or maintained by such Company for each plan year, including (x) where
required by law, a statement of assets and liabilities of such Plan as of the end of such plan year
and statements of changes in fund balance and in financial position, or a statement of changes in
net assets available for plan benefits, for such plan year, certified by an independent public
accountant satisfactory to the Banks, and (y) an actuarial statement of such Plan applicable to
such plan year, certified by an enrolled actuary of recognized standing acceptable to the Banks,
and (iii) promptly after receipt thereof a copy of any notice such Company, any Subsidiary or any
member of the Controlled Group may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any Plan administered by such Company; provided,
that this latter clause shall not apply to notices of general application promulgated by the
Pension Benefit Guaranty Corporation or the Internal Revenue Service. As used in this Section 9.6,
“material” means the measure of a matter of significance which shall be determined as being an
amount equal to five percent (5%) of each Company’s ERISA Net Worth.

          9.7. FINANCIAL STATEMENTS. The Guarantor will furnish to each Bank:

          (a) within forty-five (45) days (or fifty (50) days so long as the Guarantor will
not be reporting an Event of Default on such Form 10-Q report) after the end of each
quarter-annual period of each fiscal year of the Guarantor, a copy of the Guarantor’s
Form 10-Q quarterly report as filed by the Guarantor with the Securities and Exchange
Commission,

          (b) within forty-five (45) days (or fifty (50) days so long as the Guarantor shall
not have reported an Event of Default to the Securities and

 

 

Exchange Commission during such fiscal period nor on its most recent filing with
the Securities and Exchange Commission) after the end of each of the first three (3)
quarter-annual fiscal periods of each fiscal year of the Guarantor, an unaudited
consolidated and consolidating balance sheet of the Guarantor as at the end of that
period and an unaudited consolidated and consolidating statement of income of the
Guarantor for the Guarantor’s current fiscal year to date, all prepared in form and
detail in accordance with GAAP, consistently applied, or the Pro Rata Consolidation
Method, as applicable, and certified by a Senior Officer of the Guarantor, subject to
changes resulting from quarter-end adjustments, together with a certificate of a Senior
Officer of the Guarantor (i) specifying the nature and period of existence of each
Event of Default and/or Possible Default, if any, and the action taken, being taken or
proposed to be taken by the Guarantor in respect thereof or if none, so stating, and
(ii) certifying that the representations and warranties of the Guarantor set forth
herein are true and correct as of the date of such certificate, or, if not, all
respects in which they are not, and (iii) a covenant compliance worksheet in the form
and substance of Schedule 9.7(b) hereof completed as of the end of such fiscal
quarterly period,

          (c) within ninety (90) days (or ninety-five (95) days so long as the Guarantor
shall not have reported an Event of Default to the Securities and Exchange Commission
during such fiscal period nor on its most recent filing with the Securities and
Exchange Commission) after the end of each fiscal year of the Guarantor, an annual
report on Form 10-K as filed by the Guarantor with the Securities and Exchange
Commission, including the complete audited consolidated balance sheets and statements
of income of the Guarantor for that year certified by an independent public accountant
satisfactory to the Banks, and an unaudited consolidating balance sheet and statement
of income of the Parent for the current fiscal year, each in form and detail
satisfactory to the Banks, and prepared in accordance with GAAP, consistently applied,
or the Pro Rata Consolidation Method, as applicable, together with (i) a report of the
independent certified public accountant with an opinion that is not qualified as to the
scope of the audit or as to the status of the Guarantor or the Borrower as a going
concern, (ii) a certificate of the Senior Officer of the Guarantor (X) specifying the
nature and period of existence of each Event of Default and/or Possible Default, if
any, and the action taken, being taken or proposed to be taken by the Guarantor in
respect thereof or if none, so stating, and (Y) certifying that the representations and
warranties of the Guarantor set forth herein are true and correct as of the date of
such certificate, or, if not, all respects in which they are not, and (iii) a fully
completed covenant compliance worksheet in the form and substance of Schedule 9.7(b)
hereof relating to such fiscal year,

          (d) concurrently with furnishing any quarterly financial statement or audit report
pursuant to this Section 9.7, a certificate by Charles A. Ratner, Albert Ratner, Samuel
H. Miller or Thomas G. Smith stating whether any Company has made any guaranty or
incurred any Indebtedness referred to in Section 9.10(d) or Section 9.12(g) hereof and,
if so, the details thereof,

 

 

          (e) as soon as available, copies of all notices, reports, proxy statements and
other similar documents sent by the Guarantor to its shareholders, to the holders of
any of its debentures or bonds or the trustee of any indenture securing the same or
pursuant to which they have been issued, to any securities exchange or to the
Securities Exchange Commission or any similar federal agency having regulatory
jurisdiction over the issuance of the Guarantor’s securities,

          (f) within forty-five (45) days (or fifty (50) days so long as the Guarantor shall
not have reported an Event of Default under the Guaranty to the Securities and Exchange
Commission during such fiscal period nor on its most recent filing with the Securities
and Exchange Commission) after the end of each fiscal quarter of the Guarantor (i) a
schedule setting forth the aggregate Measured Credit Risk as of the last day of such
fiscal quarter, along with the remaining available Measured Credit Risk permitted by
Section 9.10(k) and (ii) a statement of the aggregate notional amount of all Hedge
Agreements on which the Guarantor, the Borrower, FCCC and/or any other Subsidiary of
the Borrower (other than a SPE Subsidiary) are obligated as of the last day of such
fiscal quarter and the aggregate amount of the cash risk to the Guarantor, the
Borrower, FCCC and such other Subsidiaries in respect of such Hedge Agreements as of
the last day of such fiscal quarter,

          (g) concurrently with furnishing any covenant compliance worksheet under Section
9.7(b) or (c) above, such schedules, details and explanations supporting the
calculations contained in such covenant compliance worksheet as may be reasonably
required by the Banks,

          (h) within forty-five (45) days (or fifty (50) days so long as the Guarantor shall
not have reported an Event of Default under the Guaranty to the Securities and Exchange
Commission during such fiscal period nor on its most recent filing with the Securities
and Exchange Commission) after the end of each fiscal quarter of the Guarantor, a
schedule setting forth the face amount and date of each outstanding Performance Surety
Bond issued at the request of the Guarantor pursuant to an Indemnity Agreement along
with all other Surety Bonds then outstanding,

          (i) within one hundred twenty (120) days after the end of each fiscal year of the
Guarantor, a calculation of the consolidated leverage of the Guarantor as of the last
day of such fiscal year, with such details and explanations as may be reasonably
required by the Banks, and

          (j) forthwith upon any Bank’s written request, such other information of any
Company’s financial condition and business, including, but not limited to any
management letters of accountants addressed to the Guarantor or the Borrower.

 

 

     9.8. EBDT. The Guarantor will not suffer or permit its EBDT, as of any Fiscal Quarterly Date
falling within the periods set forth below, for the Test Period ending on such Fiscal Quarterly
Date, to be less than the amount set forth below for the respective periods set forth below:

	 	 	 	 	 
	Period	 	EBDT
	February 1, 2007 through January 31, 2008
	 	$	230,000,000	 
	February 1, 2008 through January 31, 2009
	 	$	240,000,000	 
	February 1, 2009 and thereafter
	 	$	250,000,000	 

          9.9. COMBINATIONS, BULK TRANSFERS. (a) No Restricted Company will be a party to any
consolidation or merger or lease, sell or otherwise transfer all or any substantial part of its
assets or sell, pledge, hypothecate or transfer its stock or other ownership interests in any
Subsidiary of the Guarantor; provided, that this Section 9.9 shall not apply to any
transfer (as opposed to a pledge) effected in the normal course of business on commercially
reasonable terms and provided, further, that a Restricted Company shall only be
permitted to pledge its stock or other ownership interests in any of its Subsidiaries that is a
single asset or special purpose entity (each, a “Pledged Subsidiary”) and such pledge may only
secure the following:

     (i) additional or mezzanine Indebtedness incurred with respect to a
project encumbered by a first mortgage at the time such additional or
mezzanine Indebtedness is incurred, so long as such additional or mezzanine
Indebtedness is permitted under Section 9.10 of this Guaranty
provided, that the sum of the then existing Indebtedness with
respect to such project plus such additional or mezzanine
Indebtedness does not exceed eighty percent (80%) of the appraised value of
the project at the time such additional or mezzanine Indebtedness is
incurred; or

     (ii) primary Indebtedness (or the re-financing thereof) incurred solely
for the purpose of acquiring real property or for construction or
redevelopment purposes, so long as such primary Indebtedness is permitted
under Section 9.10 of this Guaranty; provided, that such primary
Indebtedness (or the re-financing thereof) does not exceed one hundred
percent (100%) of the appraised value of the acquired property at the time
of such financing or re-financing, as applicable.

          (b) In addition to the foregoing, except to the extent permitted by Section
9.19(b)(i), (i) such pledges of stock or other ownership interests in a Pledged
Subsidiary may only be made to secure Indebtedness incurred with respect to a project
owned or to be acquired by such Pledged Subsidiary and not to secure Indebtedness
incurred with respect to a project owned or to be acquired by any other Subsidiary,
(ii) such pledges of stock or other ownership interests in a Pledged Subsidiary given
to secure Indebtedness described in Section 9.9(a)(i) above may only secure the
additional or mezzanine Indebtedness being incurred with respect to

 

 

such project and not all of the Indebtedness on such project and (iii) such
pledges of stock or other ownership interests in a Pledged Subsidiary given to secure
Indebtedness described in Section 9.9(a)(ii) above may only secure the primary
Indebtedness being incurred with respect to the acquisition of real property or such
construction or redevelopment purposes.

          (c) The Guarantor will deliver to the Agents and the Banks an updated schedule, in
the form of Schedule 9.9 attached hereto, listing all of the properties as to which a
pledge of stock or other ownership interests has been provided to a lender in
accordance with Section 9.9(b), within forty-five (45) days after each Fiscal Quarterly
Date.

          9.10. BORROWINGS. No Restricted Company will create, assume or suffer to exist any
Indebtedness of any kind including, but not limited to, leases required to be capitalized under
Financial Accounting Standards Board Standard No. 13 or any reimbursement obligations or other
liabilities with respect to letters of credit issued for any Restricted Company’s account;
provided, that this Section 9.10 shall not apply to any of the following (collectively,
“Permitted Debt”):

          (a) [Reserved],

          (b) any loan obtained from the Guarantor or any Restricted Subsidiary by any
Restricted Subsidiary, other than Portland Lumber Trading, Inc. (fka Forest City
Trading Group, Inc.), provided, that (i) such loans shall be made only in the
ordinary course of business and (ii) Guarantor shall not cause or permit any Restricted
Subsidiary to take any action to enforce any payment of any loan made by the Restricted
Subsidiary to another Restricted Subsidiary without the prior written consent of the
Banks,

          (c) any real estate loan heretofore or hereafter obtained or guaranteed by the
Guarantor for the purpose of financing any building or purchasing equipment, furniture
or fixtures related thereto to be used only for the business of the Guarantor and its
Subsidiaries, provided, that no such loan shall exceed eighty percent (80%) of
the lender’s appraisal of the real estate being financed,

          (d) any loan or letter of credit that is obtained or guaranteed by the Guarantor;
provided, that the Guarantor’s aggregate personal liability in respect of all
such loans (other than any loan obtained by the Guarantor and permitted by any other
clause of this Section 9.10) and letters of credit and in respect of all guaranteed
loans referred to in clause (f) of Section 9.12 hereof, does not then exceed and after
incurring such loan or letter of credit or the guarantee thereof in question would not
exceed, Ten Million Dollars ($10,000,000),

          (e) leases required to be capitalized under Financial Accounting Standards Board
Standard No. 13 in the aggregate amount for all Restricted Subsidiaries of Three
Million Dollars ($3,000,000),

 

 

          (f) any secured Indebtedness of a Restricted Company created in the course of
purchasing or developing real estate or financing construction (or any refinancings
thereof) or other improvements thereon or purchasing furniture, fixtures or other
equipment therefor or any other Indebtedness of any Restricted Company or any
refinancings thereof; provided, that no Restricted Company (other than a
Restricted Company whose sole assets consist of contiguous parcels of land which are
being purchased or developed with such financing, the improvements, if any, thereon,
furniture, fixtures and other equipment used in connection therewith, receivables
arising from tenants in connection therewith and the proceeds of such receivables and
other property directly obtained from the ownership of such assets) shall have any
personal liability for such Indebtedness, the creditors’ recourse being solely to the
property being pledged as collateral for such Indebtedness and the income therefrom,

          (g) any Indebtedness or other obligations under any Performance Surety Bond or the
related Indemnity Agreement; provided, that the terms and conditions of each
such Indemnity Agreement shall be substantially the same as the terms and conditions of
the form of Agreement of Indemnity dated August 23, 2005, between the Guarantor and
Zurich American Insurance Company, that was previously delivered to the Agents,

          (h) any Indebtedness or obligations of the Guarantor under the 2006 Puttable
Senior Notes and/or the Puttable Notes Hedge and Warrant Transactions;
provided, that:

     (i) none of the 2006 Puttable Senior Notes nor the 2006 Indenture nor
the documents evidencing the Puttable Notes Hedge and Warrant Transactions
may provide that an Event of Default under the Agreement or this Guaranty
constitutes a default under any of the 2006 Senior Puttable Notes or the
2006 Indenture or any Puttable Notes Hedge and Warrant Transaction, except
in the case of an Event of Default that constitutes the failure to pay the
principal of any Debt when due and payable after the expiration of any
applicable grace period with respect thereto that results in the Debt
becoming or being declared due and payable prior to the date on which it
would otherwise have become due and payable or constitutes the failure to
pay any portion of the principal of the Debt when due and payable at
maturity or by acceleration;

     (ii) the Indebtedness represented by the 2006 Senior Puttable Notes and
the Puttable Notes Hedge and Warrant Transactions shall be unsecured, pari
passu with the Guarantor’s obligations under this Guaranty and structurally
subordinate to the Borrower’s Debt to the Banks under the Agreement;

     (iii) none of the 2006 Puttable Senior Notes nor the 2006 Indenture
shall be amended or modified without the prior written consent of the
Required Banks, including, without limitation, (A) to allow the maturity of

 

 

any of the 2006 Puttable Senior Notes to be less than five (5) years
from the date of issue, (B) to provide for payment of interest under any of
the 2006 Puttable Senior Notes more frequently than quarterly, (C) to
provide additional circumstances pursuant to which holders of the 2006
Puttable Senior Notes may put their Notes to the Guarantor or to increase
the put rate available to such holders, other than as provided in the 2006
Indenture, or (D) to permit the Guarantor to redeem the 2006 Puttable Senior
Notes prior to their maturity, other than amendments or modifications that
do not adversely affect the Agreement or this Guaranty or their relationship
to any of the 2006 Puttable Senior Notes or the 2006 Indenture;

     (iv) the outstanding and unredeemed principal amount of the 2006
Puttable Senior Notes shall not, at any time, exceed Two Hundred Eighty
Seven Million Five Hundred Thousand Dollars ($287,500,000) in the aggregate;
and

     (v) the terms and conditions of the 2006 Puttable Senior Notes, the
2006 Indenture and the Puttable Notes Hedge and Warrant Transactions shall
be satisfactory, in form and substance, to the Agents and the Banks,

          (i) any Indebtedness or obligations of the Guarantor under the Senior Notes;
provided, that:

     (i) none of the Senior Notes nor the Indenture may provide that an
Event of Default under the Agreement or this Guaranty constitutes a default
under any of the Senior Notes or the Indenture, except in the case of an
Event of Default that constitutes the failure to pay the principal of any
Debt when due and payable after the expiration of any applicable grace
period with respect thereto and shall have resulted in the acceleration of
such Debt or constitutes the failure to pay any portion of the principal of
the Debt when due and payable after acceleration or maturity;

     (ii) the Indebtedness represented by the Senior Notes shall be
unsecured, pari passu with the Guarantor’s obligations under this Guaranty
and structurally subordinate to the Borrower’s Debt to the Banks under the
Agreement;

     (iii) none of the Senior Notes nor the Indenture shall be amended or
modified without the prior written consent of the Required Banks, including,
without limitation, (A) to allow the maturity of any of the Senior Notes to
be less than ten (10) years from the respective date of issue, (B) to
provide for payment of interest under any of the Senior Notes more
frequently than quarterly, or (C) to modify the redemption provisions
contained therein, including adding additional redemption provisions, other
than amendments or modifications that do not adversely

 

 

affect the Agreement or this Guaranty or their relationship to any of
the Senior Notes or the Indenture,

     (iv) the outstanding and unredeemed principal amount of the Senior
Notes shall not, at any time, exceed Five Hundred Fifty Million Dollars
($550,000,000), in the aggregate; and

     (v) the terms and conditions of the 2003 Senior Notes, the 2004 Senior
Notes and the 2005 Senior Notes and the Indenture shall be satisfactory, in
form and substance, to the Agents and the Banks,

          (j) any Indebtedness or obligations of the Guarantor under the Surety Bonds or the
related Indemnity Agreements to a maximum aggregate principal amount of $30,000,000.00
minus the aggregate stated amount of all letters of credit then outstanding for
the account of the Borrower under the Agreement in excess of $10,000,000;
provided, such Indebtedness is fully subordinated to the obligations of the
Guarantor under this Guaranty as set forth in the related Subordination Agreement,

          (k) any Indebtedness of the Guarantor under any Hedge Agreement relating to
Indebtedness otherwise permitted under this Guaranty or the Credit Agreement,
provided, that, any Hedge Agreement proposed to be entered into or guaranteed
by the Guarantor, along with all Hedge Agreements entered into or guaranteed by the
Borrower, FCCC or any other Subsidiary of the Borrower (other than a SPE Subsidiary),
in each case with a Person that is not a Bank that results in an aggregate Measured
Credit Risk for all Hedge Agreements entered into with Persons other than a Bank, in
excess of $33,500,000, shall require the prior written consent of the Required Banks
(such written consent to be delivered by each consenting Bank to the Administrative
Agent not more than three (3) Business Days after the request for such consent has been
delivered by the Guarantor to the Administrative Agent, provided, that, each
Bank that does not deliver such written consent within such three (3) Business Day
period shall be deemed to have denied the request for such Hedge Agreement),

          (l) any Indebtedness of the Guarantor with respect to deferred taxes that are due
and payable in excess of twelve (12) months from the date of the incurrence of such tax
liability,

          (m) any guarantee or indemnity permitted by Section 9.12 hereof to the extent such
guarantee or indemnity constitutes Indebtedness, or

          (n) any Indebtedness of the Guarantor permitted by Section 9.13(d) hereof that
replaces the Indebtedness evidenced by the Senior Notes.

 

 

          9.11. LIENS. No Restricted Company will:

          (a) sell or otherwise transfer any Receivables, including, but not limited to, any
mortgages held by the Guarantor or any of its Subsidiaries, other than in the ordinary
course of business,

          (b) acquire any property subject to any land contract, conditional sale contract
or other title retention contract, or

          (c) suffer or permit any property now owned or hereafter acquired by it to be or
become encumbered by any mortgage, security interest, financing statement, encumbrance
or Lien of any kind or nature;

provided, that this Section 9.11 shall not apply to:

          (i) any Lien for a tax, assessment or other governmental charge or levy so long
as the payment thereof is not required by Section 9.2(a) hereof,

          (ii) any Lien securing only worker’s compensation, unemployment insurance or
similar obligations,

          (iii) any mechanic’s, warehousemen’s, carrier’s or similar common law or
statutory Lien incurred in the normal course of business,

          (iv) any mortgage, security interest or other Lien encumbering property of any
Restricted Subsidiary for the purpose of securing any Permitted Debt owing by only
that Subsidiary,

          (v) any mortgage, security interest or other Lien encumbering property of the
Guarantor and securing any Indebtedness or liability of the Guarantor permitted by
clause (c) of Section 9.10 or by Section 9.12 hereof,

          (vi) any Lien permitted by Section 8.05 of the Agreement,

          (vii) any Indemnification Lien granted pursuant to an Indemnity Agreement
related to one or more Performance Surety Bonds permitted under this Guaranty,

          (viii) any financing statement perfecting a security interest permitted by this
Section 9.11, or

          (ix) any Lien permitted by Sections 9.19(b)(i) and (vi).

 

 

          9.12. GUARANTEES. No Restricted Company will be or become a guarantor of any kind;
provided, that this Section 9.12 shall not apply to:

          (a) any endorsement of a check or other medium of payment for deposit or
collection through normal banking channels or any similar transaction in the normal
course of business,

          (b) any indemnity or guaranty of a surety bond for the performance by a customer
of a Restricted Company of the customer’s obligations under a land development
contract,

          (c) any guarantee by the Guarantor of a real estate loan permitted by clause (c)
of Section 9.10,

          (d) subject to the limitations set forth in Section 9.19 of this Guaranty, any
Completion Guaranty with respect to a real estate building project, if the Guarantor or
any Company is the developer of the project or has a property interest in the project
(including, but not limited to, a Non-Affiliate Construction Project),

          (e) the guarantee by the Guarantor set forth in Section 3 hereof,

          (f) any other guarantee by the Guarantor, provided, that the Guarantor’s
aggregate personal liability in respect of all of such other guarantees and all
Indebtedness described in subsection (a) of the definition of Indebtedness (other than
any loan permitted by clauses (a) through (c), inclusive, of Section 9.10 hereof) does
not exceed, and after making the guarantee in question would not exceed, Ten Million
Dollars ($10,000,000),

          (g) any unsecured guarantee by the Guarantor or any Restricted Subsidiary of the
equity investment or performance of a Subsidiary of the Guarantor (other than any
Indebtedness of such Subsidiary incurred for borrowed money) in connection with a real
estate project in favor of a partner or member, or a partnership or limited liability
company in which such Subsidiary is a general partner or a member, as applicable, when
the Guarantor or such Restricted Subsidiary, as the case may be, deems it to be in its
best interest not to be a partner, a member, or have a direct interest in the
partnership or limited liability company, as applicable,

          (h) the guarantee by the Guarantor of the obligations of Franklin Town Towers
Associates located in Philadelphia, Pennsylvania, with respect to Museum Towers, in the
original principal amount of Twenty Million Four Hundred Thousand Dollars
($20,400,000), provided, that such obligations shall not be amended, restated
or otherwise modified without the prior written consent of the Banks,

          (i) any guarantee or indemnity by the Guarantor or any Restricted Subsidiary for
fraud, misappropriation, misapplication or environmental problems,

 

 

as are usual and customary in commercial mortgage loan transactions entered into
by the Guarantor and/or such Restricted Subsidiary, provided, that such a
guarantee or indemnity may be given by the Guarantor or a Restricted Subsidiary, but
not both (unless such Restricted Subsidiary is also the borrower in the particular
commercial mortgage loan transaction), in connection with any particular commercial
mortgage loan transaction,

          (j) subject to Section 9.10(k) hereof, any guarantee by the Guarantor of an
unsecured Hedge Agreement permitted by Section 8.04 of the Agreement entered into by a
Subsidiary of the Guarantor (other than the Borrower),

          (k) the MTA Guaranty; provided, that (i) the maximum principal amount of
the Guarantor’s obligations thereunder shall not exceed $40,000,000, (ii) so long as
the MTA Guaranty is outstanding and in full force and effect, the Guarantor shall
maintain or cause to be maintained with a reputable insurer, an environmental liability
insurance policy with respect to the real property related to the MTA Guaranty, with a
self-insured retention of not more than $28,000,000 and a limit of coverage of not less
than $12,000,000 to cover any remediation that may be required and (iii) the Guarantor
shall not enter into or agree to enter into any amendment, supplement or other
modification to the MTA Guaranty that, in the opinion of the Agents, is or would be
materially adverse to the interests of the Banks,

          (l) subject to the limitations set forth in Section 9.19 of this Guaranty, any
Completion Guaranty, or

          (m) the guarantee by the Guarantor in connection with the Park Creek Metropolitan
District and Stapleton Land LLC located in Stapleton, Colorado, with respect to the
$19,000,000 Park Creek District Subordinate Limited Property Tax Revenue Bonds, Series
2003A and the $10,000,000 Park Creek District Subordinate Limited Property Tax Revenue
Bonds, Series 2003-B, provided, that such guarantee obligations shall not be
amended, restated or otherwise modified without the prior written consent of the Banks.

          9.13. REDEMPTIONS, PREPAYMENTS, AND DIVIDENDS.

          (a) The Guarantor will not directly or indirectly purchase, acquire, redeem or
retire any shares of its capital stock at any time outstanding or set aside funds for
any such purpose, except that, from and after the Restatement Effective Date, so long
as no Event of Default or violation of Section 9.14 of this Guaranty shall have
occurred or will result after giving effect to such purchase, acquisition, redemption
or retirement, the Guarantor may purchase, acquire, redeem or retire shares of its
outstanding capital stock in an aggregate amount not to exceed Forty Million Dollars
($40,000,000) minus any amounts paid as permitted by Section 9.13(c) hereof, in
any yearly period measured by the anniversary dates of the Restatement Effective Date
of the Agreement thereafter,

 

 

          (b) The Guarantor will not directly or indirectly pay any principal of, make
sinking fund payments in respect of or purchase any Indebtedness now or hereafter owing
by the Guarantor other than any principal payment, sinking fund payment or purchase the
omission of which would (or with the giving of notice or the lapse of any applicable
grace period or both would) accelerate, or give anyone the right to accelerate, the
maturity of such Indebtedness in accordance with the original terms thereof;
provided, that, notwithstanding the foregoing, the Guarantor shall not make any
payment on account of the Senior Notes or the 2006 Puttable Senior Notes in the event
of and during the continuance of any Payment Default under the Agreement or this
Guaranty,

          (c) The Guarantor will not directly or indirectly declare or pay any Dividends,
except that, from and after the Restatement Effective Date, so long as no Event of
Default shall have occurred and be continuing hereunder and no Event of Default shall
have occurred and be continuing under the Agreement, the Guarantor may pay Dividends in
an aggregate amount not to exceed Forty Million Dollars ($40,000,000) minus any
amounts paid as permitted by Section 9.13(a) hereof, in any yearly period measured by
the anniversary dates of the Restatement Effective Date of the Agreement thereafter,

          (d) The Guarantor shall not directly or indirectly exercise its optional
redemption rights, under the terms of any of the Senior Notes or the Indenture, to
redeem any of the Senior Notes prior to its maturity date, or to deposit monies or
other assets with the trustee under the Indenture for the payment of any one or more
Senior Notes or the release of restrictive covenants thereunder, by defeasance, without
in each case the prior written consent of the Required Banks, except that the Guarantor
may take any of the above listed actions in connection with a refinancing of the
Indebtedness represented by the Senior Notes without the prior consent of the Banks, in
each case only so long as such refinancing does not (i) result in an increase in the
aggregate principal amount of Indebtedness of the Guarantor as of the date of such
proposed refinancing, (ii) create Indebtedness that has a maturity earlier than the
final maturity of the Senior Notes, (iii) create a security interest in any property of
the Guarantor or any of its Subsidiaries, or (iv) result in Indebtedness that is senior
to the Indebtedness owing to the Banks under this Guaranty or the Agreement. Executed
copies of any and all documentation evidencing or relating to such refinancing shall be
delivered to the Administrative Agent within five (5) Cleveland Banking Days of the
execution of such documentation,

          (e) In the event of and during the continuance of any Event of Default under the
Agreement or under this Guaranty other than a Payment Default, the Guarantor shall not
cause the Borrower to declare, pay, or make, and shall not accept payment of, any
Dividends in respect of Capital Stock of the Borrower, or, notwithstanding any other
provision of the Agreement or this Guaranty to the contrary, any loans or advances to
the Guarantor, (any such Dividends or loans are referred to herein as “Distributions”)
in excess of the sum of the amount sufficient to pay, when due, all interest payments
in respect of the Senior Notes and the 2006

 

 

Puttable Senior Notes and the amounts sufficient to pay, when due, all taxes of
the Guarantor (collectively, “Permitted Distributions”); provided, that any
Permitted Distributions shall be applied by the Guarantor strictly to the permitted
uses specified above, and

          (f) Notwithstanding the provisions of Section 9.13(e) of this Guaranty, in the
event and during the continuance of any Payment Default, the Guarantor shall not cause
the Borrower to pay or make, and shall not accept payment of, any Distributions.

          9.14. CASH FLOW COVERAGE RATIO. The Guarantor will not permit the Cash Flow Coverage Ratio,
at any time, to be less than 2.25:1.00.

          9.15. CONSOLIDATED GAAP SHAREHOLDERS’ EQUITY. The Guarantor will not permit the Consolidated
GAAP Shareholders’ Equity to be less than (a) on the Restatement Effective Date, Seven Hundred
Seventy-Five Million Dollars ($775,000,000) and (b) at any date of determination thereafter, the
sum of (i) Seven Hundred Seventy-Five Million Dollars ($775,000,000), plus (ii) one hundred
percent (100%) of the cash proceeds from any sale or issuance of equity, plus (iii) fifty
percent (50%) of the Guarantor’s consolidated GAAP net income, in each case, for the year-to-date
period ended on such Fiscal Quarterly Date.

          9.16. ENVIRONMENTAL COMPLIANCE. The Guarantor will comply with any and all Environmental Laws
including, without limitation, all Environmental Laws in jurisdictions in which the Guarantor or
any Restricted Subsidiary owns property, operates, arranges for disposal or treatment of hazardous
substances, solid waste or other wastes, accepts for transport any hazardous substances, solid
waste or other wastes or holds any interest in real property or otherwise. The Guarantor will
furnish to the Banks promptly after receipt thereof a copy of any notice the Guarantor or any
Restricted Subsidiary may receive from any governmental authority, private person or entity or
otherwise that any litigation or proceeding pertaining to any environmental, health or safety
matter has been filed or is threatened against the Guarantor or such Restricted Subsidiary, any
real property in which the Guarantor or such Restricted Subsidiary holds any interest or any past
or present operation of the Guarantor or such Restricted Subsidiary. The Guarantor will not
knowingly allow the storage, release or disposal of hazardous waste, solid waste or other wastes
on, under or to any real property in which the Guarantor holds any interest or performs any of its
operations, in violation of any Environmental Law. As used in this Section, “litigation or
proceeding” means any demand, claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any governmental authority, private person or entity or
otherwise. The Guarantor shall defend, indemnify and hold the Banks harmless against all costs,
expenses, claims, damages, penalties and liabilities of every kind or nature whatsoever (including
attorneys’ fees) arising out of or resulting from the noncompliance of the Guarantor or any
Restricted Subsidiary with any Environmental Law, provided, that, so long as and to the
extent that the Banks are not required to make any payment or suffer to exist any unsatisfied
judgment, order, or assessment against them, the Guarantor may pursue rights of appeal to comply
with such Environmental Laws. In any case of noncompliance with any Environmental Law by a
Restricted Subsidiary, the Banks’ recourse for such indemnity herein shall be limited solely to the
property of the Restricted Subsidiary holding title to the property involved in such noncompliance
and such recovery shall

 

 

not be a lien, or a basis of a claim of lien or levy of execution, against either the
Guarantor’s general assets or the general assets of any of its Restricted Subsidiaries.

          9.17. PLAN. Neither the Guarantor nor any Restricted Subsidiary will suffer or permit any
Plan to be amended if, as a result of such amendment, the current liability under the Plan is
increased to such an extent that security is required pursuant to Section 307 of the Employee
Retirement Income Security Act of 1974, as amended from time to time. As used herein, “current
liability” means current liability as defined in Section 307 of such Act.

          9.18. ANTI-TERRORISM LAWS. Neither the Guarantor nor any of its Subsidiaries shall be in
violation of any law, regulation, or list of any government agency (including, without limitation,
the U.S. Office of Foreign Asset Control list, Executive Order No. 13224 or the USA Patriot Act)
that prohibits or limits the conduct of business with or the receiving of funds, goods or services
to or for the benefit of any Persons specified therein or that prohibits or limits any Bank or
Agent from making any advances or extensions of credit to the Guarantor or from otherwise
conducting business with the Guarantor.

          9.19. CROSS COLLATERALIZATION AND CROSS DEFAULTS.

          (a) Except as expressly permitted by this Section 9.19, neither the Guarantor nor any
Restricted Company will (i) cross-default or agree to cross-default any Permitted Debt to
this Guaranty or the Debt; (ii) agree to any financial covenants based on the performance of
the Guarantor under any other Permitted Debt (other than the Debt); or (iii)
cross-collateralize, or agree to cross-collateralize Permitted Debt (other than the Debt)
owing to any one lender under one or more different loan agreements or arrangements,
provided, that the cross-defaulted and/or cross-collateralized Indebtedness set
forth on Schedule 9.19, dated as of March 22, 2004 (a copy of which is attached hereto)
shall be permitted, provided, further, that such Schedule 9.19 shall not be
amended or otherwise modified after the Restatement Effective Date without the prior written
consent of the Administrative Agent.

          (b) Notwithstanding Section 9.19(a) above:

     (i) with respect to construction projects that are constructed in
multiple phases and/or stabilized properties, any Restricted Company shall
be permitted to cross-default and/or Cross-Collateralize any Permitted Debt
with other Permitted Debt (other than, in each case, the Debt), but only if
the phases to be Cross-Collateralized and/or cross-defaulted consist of a
single identifiable project;

     (ii) under a Completion Guaranty granted by the Guarantor to a
construction lender, the Guarantor shall be permitted to agree to a
financial covenant solely with respect to the Guarantor’s net worth, but
only if (A) the Indebtedness related to such Completion Guaranty is in
excess of One Hundred Million Dollars ($100,000,000), (B) the Indebtedness
related to such Completion Guaranty has a maturity of two (2) years or
greater, not including extensions, (C) any net worth

 

 

financial covenant is calculated in substantially the same manner as
the covenant set forth in Section 9.15 of this Guaranty and requires a net
worth for the Guarantor of not more than Two Hundred Seventy Five Million
Dollars ($275,000,000) and (D) the aggregate of all Indebtedness subject to
such Completion Guaranties shall not exceed Four Hundred Million Dollars
($400,000,000), exclusive of the Indebtedness incurred in connection with
the projects set forth on Schedule 9.19 to this Guaranty;

     (iii) under any Completion Guaranty granted by the Guarantor that
contains the net worth financial covenant referred to in Section 9.19(b)(ii)
above, (A) the construction lender shall not be permitted to call upon such
Completion Guaranty due solely to a violation of such net worth financial
covenant and (B) the construction lender shall only be permitted to call
upon such Completion Guaranty if the project is not performing (i.e. not on
budget and/or schedule);

     (iv) with respect to Hedge Agreements permitted by this Guaranty, the
related documentation may provide that an Event of Default will constitute
an event of default under such Hedge Agreement, provided, that the
Hedge Agreement also provides that the counterparty may not terminate or
exercise any remedy under the Hedge Agreement on account of any Event of
Default unless (A) the Banks have provided a written notice of the Event of
Default to the Borrower, (B) all applicable cure periods have lapsed without
the Event of Default being cured and (C) the Banks may accelerate the
maturity of the Revolving Loans on the basis of the Event of Default;

     (v) the Indenture, the 2006 Indenture and the documents evidencing the
Puttable Notes Hedge and Warrant Transactions may provide that a default by
the Borrower or the Guarantor in the payment of any portion of principal of
the Debt when due and payable after the expiration of any applicable grace
period that results in the Debt becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable or
the failure of the Borrower or the Guarantor to pay any portion of the
principal of the Debt when due and payable at maturity or by acceleration,
constitutes a default under the Indenture, the 2006 Indenture or the
Puttable Notes Hedge and Warrant Transactions, as applicable, and

     (vi) to the extent Permitted Debt of the Borrower or any Subsidiary of
the Borrower may be secured under Section 8.05 of the Agreement, the
Guarantor may provide cash or letters of credit as additional collateral to
secure such Permitted Debt.

          9.20. OWNERSHIP OF LAND. The Guarantor shall not, and shall not permit any Restricted
Subsidiary to purchase, lease or otherwise acquire any real property of any kind after the
Restatement Effective Date, other than any real property to be used only for the

 

 

business of the Guarantor or any such Restricted Subsidiary, in each case, as such business
has been conducted prior to the Restatement Effective Date.

          9.21. PERMITTED NON-AFFILIATE LOAN REPORTS. Within forty-five (45) days after each Fiscal
Quarterly Date, the Guarantor will furnish to each Bank a report setting forth (a) each Permitted
Non-Affiliate Loan that is outstanding as of such Fiscal Quarterly Date and (b) for the three year
period ending on such Fiscal Quarterly Date, the aggregate amount of gain deferred for federal
income tax purposes on the consolidated return of the Guarantor in connection with any
Non-Affiliate Construction Projects, and, if requested by the Agents or any Bank, accompanied by
all applicable tax forms filed or to be filed in connection with such Non-Affiliate Construction
Projects.

          10. DEFAULT; REMEDIES. The Guarantor shall be in default hereunder in the event that any of
the following (each an “Event of Default”) shall occur or exist:

          (a) Any representation or warranty made by the Guarantor, or any of its officers,
herein, or in any written statement or certificate furnished at any time in connection
herewith, shall prove untrue in any material respect as of the date it was made, or

          (b) The Guarantor shall fail to observe, perform, or comply with any obligation,
covenant, agreement, or undertaking of the Guarantor set forth in Sections 3, 9.5, 9.8,
9.13, 9.14 and/or 9.15 hereof, or

          (c) The Guarantor shall fail to observe, perform, or comply with any obligation,
covenant, agreement, or undertaking of the Guarantor set forth in any section or
provision hereof other than those identified specifically in subsections (a) and (b)
above and the Guarantor shall not have corrected such failure within thirty (30) days
after the giving of written notice thereof to the Guarantor by the Administrative Agent
or any Bank that the specified failure is to be corrected, or

          (d) The Guarantor and/or any Restricted Subsidiary defaults in any payment of
principal or interest due and owing upon any Indebtedness in excess of $1,000,000, or,
in the case of the Guarantor, in the payment or performance of any obligation permitted
to be outstanding or incurred pursuant to Sections 9.10 and/or 9.12 hereof in excess of
$1,000,000, beyond any period of grace provided with respect thereto or in the
performance of any other agreement, term or condition contained in any agreement under
which any such obligation is created, if the effect of such default is to accelerate
the maturity of the related Indebtedness or to permit the holder thereof to cause such
Indebtedness to become due prior to its stated maturity or foreclose on any Lien on
property of the Guarantor securing the same, except that defaults in payment or
performance of non-recourse obligations of the Guarantor or any Restricted Subsidiary
shall not constitute Events of Default under this Section 10(d) unless such defaults
have, individually or in the aggregate, a material adverse effect on the business or
financial condition of the Guarantor; provided, that it shall be an Event of
Default hereunder if any default occurs (after giving effect to any applicable grace
period) under (i) the Senior Notes permitted by

 

 

Section 9.10(h) of this Guaranty or under the Indenture or (ii) the 2006 Puttable
Senior Notes or under the 2006 Indenture, or

          (e) (i) any Restricted Subsidiary shall (A) generally not pay its debts as such
debts become due, or (B) make a general assignment for the benefit of creditors, or (C)
apply for or consent to the appointment of a receiver, a custodian, a trustee, an
interim trustee or liquidator of itself or all or a substantial part of its assets, or
(D) be adjudicated a debtor or have entered against it an order for relief under Title
11 of the United States Code, as the same may be amended from time to time, or (E) file
a voluntary petition in bankruptcy or file a petition or an answer seeking
reorganization or an arrangement with creditors or seeking to take advantage of any
other law (whether federal or state) relating to relief of debtors, or admit (by
answer, by default or otherwise) the material allegations of a petition filed against
it in any bankruptcy, reorganization, insolvency or other proceeding (whether federal
or state) relating to relief of debtors, or (F) suffer or permit to continue unstayed
and in effect for thirty (30) consecutive days any judgment, decree or order, entered
by a court of competent jurisdiction, which approves a petition seeking its
reorganization or appoints a receiver, custodian, trustee, interim trustee or
liquidator of itself or of all or a substantial part of its assets, or (G) take or omit
to take any other action in order thereby to effect any of the foregoing or (H) fail to
pay and discharge all lawful taxes, assessments, and governmental charges or levies
imposed upon it or its income, profits, or properties, and/or all lawful claims for
labor, materials, and supplies, which, if unpaid, might become a Lien or charge against
such properties, in all cases before the same shall become in default, or (I) fail to
comply with any and all Environmental Laws applicable to such Subsidiary, its
properties, or activities, or (J) fail to observe, perform, or fulfill any of its
obligations, covenants or conditions contained in any decree, order, judgment, or
instrument to which such Subsidiary is a party or by which it or its assets are bound,
and (ii) any such event or events described in (i) above shall in the reasonable
judgment of the Banks have a material adverse effect on the business or financial
condition of the Guarantor, or

          (f) An Event of Default specified in Article X of the Agreement shall have
occurred and be continuing, or

          (g) The Guarantor shall (i) make a general assignment for the benefit of
creditors, (ii) file a voluntary petition under any chapter or provision of Title 11
United States Code (Bankruptcy), as from time to time in effect (the “Bankruptcy Code”)
or a petition or answer seeking reorganization of the Guarantor or a readjustment of
its Indebtedness under the Bankruptcy Code or any other federal or state law providing
for relief of debtors, reorganization, liquidation, or arrangements with creditors,
(iii) consent to the appointment of a receiver or trustee of its properties, or (iv)
cease to be or be unable to pay its debts generally as they become due, or

          (h) Relief shall be ordered against the Guarantor as debtor in any involuntary
case under the Bankruptcy Code, or a petition or proceedings for

 

 

bankruptcy or for reorganization shall be filed against the Guarantor under the
Bankruptcy Code or any other federal or state law providing for relief of debtors,
reorganization, liquidation, or arrangements with creditors, and the Guarantor shall
admit the material allegations thereof, or an order, judgment or decree entered therein
shall not be vacated or stayed within thirty (30) days of its entry, or a receiver or
trustee shall be appointed for the Guarantor or its properties or any part thereof and
remain in possession thereof for thirty (30) days, or

          (i) The Guarantor defaults in the performance of any obligation in the
Subordination Agreement or in the performance of any other agreement, covenant, term or
condition in the Subordination Agreement,

then, in any such event (other than an Event of Default referred to in Section 10(g) or 10(h)
above), and at any time thereafter, the Administrative Agent and/or the Required Banks may at their
option, by written notice delivered or mailed to the Guarantor, do any one or more of the
following: (a) declare the Debt to be immediately due and payable, and upon any such declaration
such Debt shall become and be forthwith due and payable by Guarantor without any further notice,
presentment, or demand of any kind, all of which are expressly waived by the Guarantor, or (b)
require the Guarantor to purchase the Debt at par value, without recourse, within ten (10) days
after such notice, by paying to the Administrative Agent, in immediately available U.S. funds, an
amount equal to the unpaid principal amount then outstanding on the Notes and any other matured or
unmatured Debt owing to the Banks, plus the unpaid accrued interest on the Notes at the rate or
rates determined in accordance with the Agreement. If any Event of Default referred to in Section
10.07(e), 10.07(f) or 10.07(g) of the Agreement or any Event of Default referred to in Section
10(g) or 10(h) of this Guaranty shall occur, the Debt shall become and thereafter be immediately
due and payable by the Guarantor without any presentment, demand, or notice of any kind, all of
which are hereby waived by the Guarantor. The foregoing rights, powers, and remedies of the
Administrative Agent and the Banks are not exclusive and are in addition to any and all other
rights, powers, and remedies provided for hereunder (including, without limitation, under Section
13 hereof), at law, and/or in equity. The exercise by the Administrative Agent and/or the Banks of
any right, power, or remedy shall not waive or preclude the exercise of any other rights, powers,
and/or remedies.

          11. MISCELLANEOUS. The foregoing rights, powers, and remedies of the Administrative Agent and
the Banks are not exclusive and are in addition to any and all other rights, powers, and remedies
provided for hereunder, at law, and/or in equity. The exercise by the Administrative Agent and/or
the Banks of any right, power, or remedy shall not waive or preclude the exercise of any other
rights, powers, and/or remedies. This Guaranty shall bind the Guarantor and its successors and
assigns and shall inure to the benefit of the Agents and the Banks and their respective successors
and assigns including (without limitation) each holder of any Note. The provisions of this
Guaranty and the respective rights and duties of the Guarantor and the Agents and/or the Banks
hereunder shall be interpreted and determined in accordance with Ohio law, without regard to
principles of conflict of laws. If at any time one or more provisions of this Guaranty is or
becomes invalid, illegal or unenforceable in whole or in part, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
This Guaranty constitutes a final written expression of all of the terms of this Guaranty, is a
complete and exclusive statement of those terms and supersedes all

 

 

oral representations, negotiations, and prior writings, if any, with respect to the subject
matter hereof. The relationship between the Guarantor and the Agents and/or the Banks with respect
to this Guaranty is and shall be solely that of debtor and creditor, respectively, and the Agents
and/or the Banks have no fiduciary obligation to the Guarantor with respect to this Guaranty or the
transactions contemplated thereby. All representations and warranties of the Guarantor shall
survive the execution and delivery of this Guaranty and be and remain true and correct until this
Guaranty is discharged. Captions herein are for convenient reference only and shall have no effect
on the interpretation of any provision hereof. The Guarantor acknowledges that it, either directly
or indirectly through its representatives, has participated in the drafting of this Guaranty, and
any applicable rule of construction that ambiguities are to be resolved against the drafting party
shall not be applied in connection with the construction or interpretation of this Guaranty.

          12. JURY TRIAL WAIVER. THE GUARANTOR WAIVES THE RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN OR AMONG THE GUARANTOR AND
THE AGENTS, THE BANKS, AND/OR THE BORROWER ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT, THIS
GUARANTY, OR ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION
THEREWITH OR THE TRANSACTIONS RELATED THERETO.

          13. NOTICES. Except as otherwise expressly provided herein, all notices, requests, demands
and other communications provided for hereunder shall be in writing (including telegraphic, telex,
facsimile, transmission or cable communication) and mailed, telexed, telegraphed, facsimile
transmitted, cabled or delivered, if to the Guarantor, addressed to it at the address specified on
the signature pages of this Guaranty, if to a Bank, addressed to the address of such Bank specified
on the signature pages of the Agreement and if to the Agents, addressed to them at the address of
the Administrative Agent or the Syndication Agent, as applicable, specified on the signature pages
of the Agreement. All notices, statements, requests, demands and other communications provided for
hereunder shall be deemed to be given or made when delivered or forty-eight (48) hours after being
deposited in the mails with postage prepaid by registered or certified mail or delivered to a
telegraph company, addressed as aforesaid, except that notices from the Guarantor to the Agents or
the Banks pursuant to any of the provisions hereof shall not be effective until received by the
Agents or the Banks.

          14. CONSENT TO JURISDICTION. The Guarantor agrees that any action or proceeding to enforce or
arising out of this Guaranty may be commenced in the Court of Common Pleas for Cuyahoga County,
Ohio or in the District Court of the United States for the Northern District of Ohio, and the
Guarantor waives personal service of process and agrees that a summons and complaint commencing an
action or proceeding in any such court shall be properly served and shall confer personal
jurisdiction over the Guarantor if served to the Guarantor at the address listed opposite the
signature of the Guarantor at the end of this Guaranty or as otherwise provided by the laws of the
State of Ohio or the United States.

          15. ENTIRE AGREEMENT. This Guaranty and any other agreement, document or instrument attached
hereto or referred to herein or executed on or as of the date hereof integrate all the terms and
conditions mentioned herein or incidental hereto and supersede

 

 

all oral representations and negotiations and prior writings with respect to the subject
matter hereof.

          16. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by any of such covenants, the fact that
it would be permitted by an exception to, or be otherwise within the limitations of, another
covenant shall not avoid the occurrence of an Event of Default if such action is taken or condition
exists, and if a particular action or condition is expressly permitted under any covenant, unless
expressly limited to such covenant, the fact that it would not be permitted under the general
provisions of another covenant shall not constitute an Event of Default if such action is taken or
condition exists.

          17. GENERAL LIMITATION OF LIABILITY. No claim may be made by the Guarantor or any Subsidiary
of the Guarantor, against the Agent, the Syndication Agent, any Co-Documentation Agent or any Bank
or the Affiliates, directors, officers, employees, attorneys or agents of any of them for any
damages other than compensatory damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated by the Credit
Agreement, the Notes, this Guaranty or any other Related Writing, or any act, omission or event
occurring in connection therewith; and the Guarantor, hereby, to the fullest extent permitted under
applicable law, waives, releases and agrees not to sue or counterclaim upon any such claim for any
special, consequential or punitive damages, whether or not accrued and whether or not known or
suspected to exist in its favor.

[Remainder of page intentionally left blank; signature page follows]

 

 

          IN WITNESS WHEREOF, the Guarantor, by an officer thereunto duly authorized, has caused this
Guaranty to be executed as of the date set forth above.

	 	 	 	 	 
	Address:

1100 Terminal Tower	FOREST CITY ENTERPRISES, INC.

 	 
	Cleveland, Ohio  44113 	By:  	/s/ THOMAS G. SMITH
 	 
	 	 	Thomas G. Smith 	 
	 	 	Executive Vice President, Chief

Financial Officer and Secretary 	 
	 

[Signature page of Amended and Restated Guaranty]Stock Purchase Agreement dated 9/28/06

    EXHIBIT 10.10

    
 

    SECURITIES
      PURCHASE AGREEMENT

     

     

    SECURITIES
      PURCHASE AGREEMENT (this “Agreement”),
      dated
      as of September 28, 2006, by and among Textechnologies Inc., a [ ] corporation,
      with headquarters located at [ ] (the “Company”),
      and
      each of the purchasers set forth on the signature pages hereto (the
“Buyers”).

     

    WHEREAS:
      

     

    A. The
      Company and the Buyers are executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by the rules and
      regulations as promulgated by the United States Securities and Exchange
      Commission (the “SEC”)
      under
      the Securities Act of 1933, as amended (the “1933
      Act”);

     

    B. Buyers
      desire to purchase and the Company desires to issue and sell, upon the terms
      and
      conditions set forth in this Agreement (i) 6%
      secured convertible notes of the Company, in the form attached hereto as
Exhibit
      “A”,
      in the
      aggregate principal amount of One Million Five Hundred Thousand Dollars
      ($1,500,000) (together with any note(s) issued in replacement thereof or as
      a
      dividend thereon or otherwise with respect thereto in accordance with the terms
      thereof, the “Notes”),
      convertible into shares of common stock, par value [ ] per share, of the Company
      (the “Common
      Stock”),
      upon
      the terms and subject to the limitations and conditions set forth in such Notes
      and (ii) warrants,
      in the form attached hereto as Exhibit
      “B”,
      to
      purchase 10,000,000 shares of Common Stock (the “Warrants”).

     

    C. Each
      Buyer wishes to purchase, upon the terms and conditions stated in this
      Agreement, such principal amount of Notes and number of Warrants as is set
      forth
      immediately below its name on the signature pages hereto; and

     

    D. Contemporaneous
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, in the form attached
      hereto as Exhibit
      “C”
      (the
“Registration
      Rights Agreement”),
      pursuant to which the Company has agreed to provide certain registration rights
      under the 1933 Act and the rules and regulations promulgated thereunder, and
      applicable state securities laws.

     

    NOW
      THEREFORE,
      the
      Company and each of the Buyers severally (and not jointly) hereby agree as
      follows:

     

    1. PURCHASE
      AND SALE OF NOTES AND WARRANTS.

     

    a. Purchase
      of Notes and Warrants.
      On the
      Closing Date (as defined below), the Company shall issue and sell to each Buyer
      and each Buyer severally agrees to purchase from the Company such principal
      amount of Notes and number of Warrants as is set forth immediately below such
      Buyer’s name on the signature pages hereto.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    b. Form
      of Payment.
      On the
      Closing Date (as defined below), (i) each
      Buyer shall pay the purchase price for the Notes and the Warrants to be issued
      and sold to it at the Closing (as defined below) (the “Purchase
      Price”)
      by
      wire transfer of immediately available funds to the Company, in accordance
      with
      the Company’s written wiring instructions, against delivery of the Notes in the
      principal amount equal to the Purchase Price and the number of Warrants as
      is
      set forth immediately below such Buyer’s name on the signature pages hereto, and
(ii) the
      Company shall deliver such Notes and Warrants duly executed on behalf of the
      Company, to such Buyer, against delivery of such Purchase Price. 

     

    c. Closing
      Date.
      Subject
      to the satisfaction (or written waiver) of the conditions thereto set forth
      in
      Section 6 and Section 7 below, the date and time of the issuance and sale of
      the
      Notes and the Warrants pursuant to this Agreement (the “Closing
      Date”)
      shall
      be 12:00 noon, Eastern Standard Time on September 28, 2006, or such other
      mutually agreed upon time. The closing of the transactions contemplated by
      this
      Agreement (the “Closing”)
      shall
      occur on the Closing Date at such location as may be agreed to by the
      parties.

     

    2. BUYERS’
      REPRESENTATIONS AND WARRANTIES.
      Each
      Buyer severally (and not jointly) represents and warrants to the Company solely
      as to such Buyer that:

     

    a. Investment
      Purpose.
      As of
      the date hereof, the Buyer is purchasing the Notes and the shares of Common
      Stock issuable upon conversion of or otherwise pursuant to the Notes (including,
      without limitation, such additional shares of Common Stock, if any, as are
      issuable (i) on
      account of interest on the Notes, (ii) as
      a result of the events described in Sections 1.3 and 1.4(g) of the Notes and
      Section 2(c) of the Registration Rights Agreement or (iii) in
      payment of the Standard Liquidated Damages Amount (as defined in Section 2(f)
      below) pursuant to this Agreement, such shares of Common Stock being
      collectively referred to herein as the “Conversion
      Shares”)
      and
      the Warrants and the shares of Common Stock issuable upon exercise thereof
      (the
“Warrant
      Shares”
and,
      collectively with the Notes, Warrants and Conversion Shares, the “Securities”)
      for
      its own account and not with a present view towards the public sale or
      distribution thereof, except pursuant to sales registered or exempted from
      registration under the 1933 Act; provided,
      however,
      that by
      making the representations herein, the Buyer does not agree to hold any of
      the
      Securities for any minimum or other specific term and reserves the right to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the 1933 Act.

     

    b. Accredited
      Investor Status.
      The
      Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
      Regulation D (an “Accredited
      Investor”).

     

    c. Reliance
      on Exemptions.
      The
      Buyer understands that the Securities are being offered and sold to it in
      reliance upon specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying upon
      the truth and accuracy of, and the Buyer’s compliance with, the representations,
      warranties, agreements, acknowledgments and understandings of the Buyer set
      forth herein in order to determine the availability of such exemptions and
      the
      eligibility of the Buyer to acquire the Securities.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    d. Information.
      The
      Buyer and its advisors, if any, have been, and for so long as the Notes and
      Warrants remain outstanding will continue to be, furnished with all materials
      relating to the business, finances and operations of the Company and materials
      relating to the offer and sale of the Securities which have been requested
      by
      the Buyer or its advisors. The Buyer and its advisors, if any, have been, and
      for so long as the Notes and Warrants remain outstanding will continue to be,
      afforded the opportunity to ask questions of the Company. Notwithstanding the
      foregoing, the Company has not disclosed to the Buyer any material nonpublic
      information and will not disclose such information unless such information
      is
      disclosed to the public prior to or promptly following such disclosure to the
      Buyer. Neither such inquiries nor any other due diligence investigation
      conducted by Buyer or any of its advisors or representatives shall modify,
      amend
      or affect Buyer’s right to rely on the Company’s representations and warranties
      contained in Section 3 below. The Buyer understands that its investment in
      the
      Securities involves a significant degree of risk. The Buyers are not aware
      of
      any facts that may constitute a breach of any of the Company’s representations
      and warranties made herein.

     

    e. Governmental
      Review.
      The
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Securities.

     

    f. Transfer
      or Re-sale.
      The
      Buyer understands that (i) except
      as provided in the Registration Rights Agreement, the sale or re-sale of the
      Securities has not been and is not being registered under the 1933 Act or any
      applicable state securities laws, and the Securities may not be transferred
      unless (a) the
      Securities are sold pursuant to an effective registration statement under the
      1933 Act, (b) the
      Buyer shall have delivered to the Company an opinion of counsel reasonably
      acceptable to the Company and its counsel that shall be in form, substance
      and
      scope customary for opinions of counsel in comparable transactions to the effect
      that the Securities to be sold or transferred may be sold or transferred
      pursuant to an exemption from such registration, which opinion shall be accepted
      by the Company, (c) the
      Securities are sold or transferred to an “affiliate” (as defined in Rule 144
      promulgated under the 1933 Act (or a successor rule) (“Rule
      144”))
      of
      the Buyer who agrees to sell or otherwise transfer the Securities only in
      accordance with this Section 2(f) and who is an Accredited Investor,
(d) the
      Securities are sold pursuant to Rule 144, or (e) the
      Securities are sold pursuant to Regulation S under the 1933 Act (or a successor
      rule) (“Regulation
      S”),
      and
      the Buyer shall have delivered to the Company an opinion of counsel reasonably
      acceptable to the Company and its counsel that shall be in form, substance
      and
      scope customary for opinions of counsel in corporate transactions, which opinion
      shall be accepted by the Company; (ii) any sale of such Securities made in
      reliance on Rule 144 may be made only in accordance with the terms of said
      Rule
      and further, if said Rule is not applicable, any re-sale of such Securities
      under circumstances in which the seller (or the person through whom the sale
      is
      made) may be deemed to be an underwriter (as that term is defined in the 1933
      Act) may require compliance with some other exemption under the 1933 Act or
      the
      rules and regulations of the SEC thereunder; and (iii) neither the Company
      nor
      any other person is under any obligation to register such Securities under
      the
      1933 Act or any state securities laws or to comply with the terms and conditions
      of any exemption thereunder (in each case, other than pursuant to the
      Registration Rights Agreement). Notwithstanding the foregoing or anything else
      contained herein to the contrary, the Securities may be pledged as collateral
      in
      connection with a bona fide
      margin
      account or other lending arrangement. 

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    g. Legends.
      The
      Buyer understands that the Notes and the Warrants and, until such time as the
      Conversion Shares and Warrant Shares have been registered under the 1933 Act
      as
      contemplated by the Registration Rights Agreement or otherwise may be sold
      pursuant to Rule 144 or Regulation S without any restriction as to the number
      of
      securities as of a particular date that can then be immediately sold, the
      Conversion Shares and Warrant Shares may bear a restrictive legend in
      substantially the following form (and a stop-transfer order may be placed
      against transfer of the certificates for such Securities):

     

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended. The securities may not be sold, transferred
      or assigned in the absence of an effective registration statement for the
      securities under said Act, or an opinion of counsel, in form, substance and
      scope customary for opinions of counsel in comparable transactions, that
      registration is not required under said Act or unless sold pursuant to Rule
      144
      or Regulation S under said Act.”

     

    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without such legend to the holder of any Security upon which it
      is
      stamped, if, unless otherwise required by applicable state securities laws,
      (a)
      such Security is registered for sale under an effective registration statement
      filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
      Regulation S without any restriction as to the number of securities as of a
      particular date that can then be immediately sold, or (b) such holder provides
      the Company with an opinion of counsel, in form, substance and scope customary
      for opinions of counsel in comparable transactions, which opinion shall be
      reasonably acceptable to the Company’s counsel, to the effect that a public sale
      or transfer of such Security may be made without registration under the 1933
      Act, which opinion shall be accepted by the Company so that the sale or transfer
      is effected or (c) such holder provides the Company with reasonable assurances
      that such Security can be sold pursuant to Rule 144 or Regulation S. The Buyer
      agrees to sell all Securities, including those represented by a certificate(s)
      from which the legend has been removed, in compliance with applicable prospectus
      delivery requirements, if any.

     

    h. Authorization;
      Enforcement.
      This
      Agreement and the Registration Rights Agreement have been duly and validly
      authorized. This Agreement has been duly executed and delivered on behalf of
      the
      Buyer, and this Agreement constitutes, and upon execution and delivery by the
      Buyer of the Registration Rights Agreement, such agreement will constitute,
      valid and binding agreements of the Buyer enforceable in accordance with their
      terms.

     

    i. Residency.
      The
      Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
      name on the signature pages hereto. 

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    3. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.
      The
      Company represents and warrants to each Buyer that:

     

    a. Organization
      and Qualification.
      The
      Company and each of its Subsidiaries (as defined below), if any, is a
      corporation duly organized, validly existing and in good standing under the
      laws
      of the jurisdiction in which it is incorporated, with full power and authority
      (corporate and other) to own, lease, use and operate its properties and to
      carry
      on its business as and where now owned, leased, used, operated and conducted.
      Schedule
      3(a)
      sets
      forth a list of all of the Subsidiaries of the Company and the jurisdiction
      in
      which each is incorporated. The Company and each of its Subsidiaries is duly
      qualified as a foreign corporation to do business and is in good standing in
      every jurisdiction in which its ownership or use of property or the nature
      of
      the business conducted by it makes such qualification necessary except where
      the
      failure to be so qualified or in good standing would not have a Material Adverse
      Effect. “Material
      Adverse Effect”
means
      any of (i) a material and adverse effect on the legality, validity or
      enforceability of any document executed in connection with this financing,
      (ii)
      a material and adverse effect on the results of operations, assets, prospects,
      business or condition (financial or otherwise) of the Company and the
      Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company’s
      ability to perform under any of the documents executed in connection with this
      financing. “Subsidiaries”
means
      any corporation or other organization, whether incorporated or unincorporated,
      in which the Company owns, directly or indirectly, any equity or other ownership
      interest.

     

    b. Authorization;
      Enforcement.
      (i) The
      Company has all requisite corporate power and authority to enter into and
      perform this Agreement, the Registration Rights Agreement, the Notes and the
      Warrants and to consummate the transactions contemplated hereby and thereby
      and
      to issue the Securities, in accordance with the terms hereof and thereof, (ii)
      the execution and delivery of this Agreement, the Registration Rights Agreement,
      the Notes and the Warrants by the Company and the consummation by it of the
      transactions contemplated hereby and thereby (including without limitation,
      the
      issuance of the Notes and the Warrants and the issuance and reservation for
      issuance of the Conversion Shares and Warrant Shares issuable upon conversion
      or
      exercise thereof) have been duly authorized by the Company’s Board of Directors
      and no further consent or authorization of the Company, its Board of Directors,
      or its shareholders is required, (iii) this Agreement has been duly executed
      and
      delivered by the Company by its authorized representative, and such authorized
      representative is the true and official representative with authority to sign
      this Agreement and the other documents executed in connection herewith and
      bind
      the Company accordingly, and (iv) this Agreement constitutes, and upon execution
      and delivery by the Company of the Registration Rights Agreement, the Notes
      and
      the Warrants, each of such instruments will constitute, a legal, valid and
      binding obligation of the Company enforceable against the Company in accordance
      with its terms.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    c. Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of 1
      billion shares of Common Stock, of which 31,077,356 shares are issued and
      outstanding, no shares are reserved for issuance pursuant to securities (other
      than the Notes and the Warrants) exercisable for, or convertible into or
      exchangeable for shares of Common Stock aside
      from one certificate (#P2) for 10,000 preferred shares, convertible to 60,000
      free trading shares
      and are
      reserved for issuance upon conversion of the Notes and exercise of the Warrants
      (subject to adjustment pursuant to the Company’s covenant set forth in Section
      4(h) below). All of such outstanding shares of capital stock are, or upon
      issuance will be, duly authorized, validly issued, fully paid and nonassessable.
      No shares of capital stock of the Company are subject to preemptive rights
      or
      any other similar rights of the shareholders of the Company or any liens or
      encumbrances imposed through the actions or failure to act of the Company.
      Except as disclosed in Schedule
      3(c),
      as of
      the effective date of this Agreement, (i) there are no outstanding options,
      warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
      agreements, understandings, claims or other commitments or rights of any
      character whatsoever relating to, or securities or rights convertible into
      or
      exchangeable for any shares of capital stock of the Company or any of its
      Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
      is
      or may become bound to issue additional shares of capital stock of the Company
      or any of its Subsidiaries, (ii) there are no agreements or arrangements under
      which the Company or any of its Subsidiaries is obligated to register the sale
      of any of its or their securities under the 1933 Act (except the Registration
      Rights Agreement) and (iii) there are no anti-dilution or price adjustment
      provisions contained in any security issued by the Company (or in any agreement
      providing rights to security holders) that will be triggered by the issuance
      of
      the Notes, the Warrants, the Conversion Shares or Warrant Shares. The Company
      has furnished to the Buyer true and correct copies of the Company’s Articles of
      Incorporation as in effect on the date hereof (“Articles
      of Incorporation”),
      the
      Company’s By-laws, as in effect on the date hereof (the “By-laws”),
      and
      the terms of all securities convertible into or exercisable for Common Stock
      of
      the Company and the material rights of the holders thereof in respect thereto.
      The Company shall provide the Buyer with a written update of this representation
      signed by the Company’s Chief Executive or Chief Financial Officer on behalf of
      the Company as of the Closing Date.

     

    d. Issuance
      of Shares.
      The
      Conversion Shares and Warrant Shares are duly authorized and reserved for
      issuance and, upon conversion of the Notes and exercise of the Warrants in
      accordance with their respective terms, will be validly issued, fully paid
      and
      non-assessable, and free from all taxes, liens, claims and encumbrances with
      respect to the issue thereof and shall not be subject to preemptive rights
      or
      other similar rights of shareholders of the Company and will not impose personal
      liability upon the holder thereof.

     

    e. Acknowledgment
      of Dilution.
      The
      Company understands and acknowledges the potentially dilutive effect to the
      Common Stock upon the issuance of the Conversion Shares and Warrant Shares
      upon
      conversion of the Note or exercise of the Warrants. The Company further
      acknowledges that its obligation to issue Conversion Shares and Warrant Shares
      upon conversion of the Notes or exercise of the Warrants in accordance with
      this
      Agreement, the Notes and the Warrants is absolute and unconditional regardless
      of the dilutive effect that such issuance may have on the ownership interests
      of
      other shareholders of the Company.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    f. No
      Conflicts.
      The
      execution, delivery and performance of this Agreement, the Registration Rights
      Agreement, the Notes and the Warrants by the Company and the consummation by
      the
      Company of the transactions contemplated hereby and thereby (including, without
      limitation, the issuance and reservation for issuance of the Conversion Shares
      and Warrant Shares) will not (i) conflict with or result in a violation of
      any
      provision of the Certificate of Incorporation or By-laws or (ii) violate or
      conflict with, or result in a breach of any provision of, or constitute a
      default (or an event which with notice or lapse of time or both could become
      a
      default) under, or give to others any rights of termination, amendment,
      acceleration or cancellation of, any agreement, indenture, patent, patent
      license or instrument to which the Company or any of its Subsidiaries is a
      party, or (iii) to the Company’s knowledge, result in a violation of any law,
      rule, regulation, order, judgment or decree (including federal and state
      securities laws and regulations and regulations of any self-regulatory
      organizations to which the Company or its securities are subject) applicable
      to
      the Company or any of its Subsidiaries or by which any property or asset of
      the
      Company or any of its Subsidiaries is bound or affected (except for such
      conflicts, defaults, terminations, amendments, accelerations, cancellations
      and
      violations as would not, individually or in the aggregate, have a Material
      Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation
      of its Certificate of Incorporation, By-laws or other organizational documents
      and neither the Company nor any of its Subsidiaries is in default (and no event
      has occurred which with notice or lapse of time or both could put the Company
      or
      any of its Subsidiaries in default) under, and neither the Company nor any
      of
      its Subsidiaries has taken any action or failed to take any action that would
      give to others any rights of termination, amendment, acceleration or
      cancellation of, any agreement, indenture or instrument to which the Company
      or
      any of its Subsidiaries is a party or by which any property or assets of the
      Company or any of its Subsidiaries is bound or affected, except for possible
      defaults as would not, individually or in the aggregate, have a Material Adverse
      Effect. The businesses of the Company and its Subsidiaries, if any, are not
      being conducted, and shall not be conducted so long as a Buyer owns any of
      the
      Securities, in violation of any law, ordinance or regulation of any governmental
      entity. Except as specifically contemplated by this Agreement and as required
      under the 1933 Act and any applicable state securities laws, the Company is
      not
      required to obtain any consent, authorization or order of, or make any filing
      or
      registration with, any court, governmental agency, regulatory agency, self
      regulatory organization or stock market or any third party in order for it
      to
      execute, deliver or perform any of its obligations under this Agreement, the
      Registration Rights Agreement, the Notes or the Warrants in accordance with
      the
      terms hereof or thereof or to issue and sell the Notes and Warrants in
      accordance with the terms hereof and to issue the Conversion Shares upon
      conversion of the Notes and the Warrant Shares upon exercise of the Warrants.
      Except as disclosed in Schedule
      3(f),
      all
      consents, authorizations, orders, filings and registrations which the Company
      is
      required to obtain pursuant to the preceding sentence have been obtained or
      effected on or prior to the date hereof. The Company is not in violation of
      the
      quotation requirements of the pink sheets (the “PINK
      SHEETS”)
      and
      does not reasonably anticipate that the Common Stock will be removed by the
      PINK
      SHEETS in the foreseeable future. The Company and its Subsidiaries are unaware
      of any facts or circumstances which might give rise to any of the foregoing.
      

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    g. Financial
      Statements.
      As of
      their respective dates, the financial statements of the Company complied as
      to
      form in all material respects with applicable accounting requirements and the
      published rules and regulations of the SEC with respect thereto. Such financial
      statements have been prepared in accordance with United States generally
      accepted accounting principles, consistently applied, during the periods
      involved (except (i) as may be otherwise indicated in such financial statements
      or the notes thereto, or (ii) in the case of unaudited interim statements,
      to
      the extent they may not include footnotes or may be condensed or summary
      statements) and fairly present in all material respects the consolidated
      financial position of the Company and its consolidated Subsidiaries as of the
      dates thereof and the consolidated results of their operations and cash flows
      for the periods then ended (subject, in the case of unaudited statements, to
      normal year-end audit adjustments). Except as set forth in the financial
      statements of the Company the Company has no liabilities, contingent or
      otherwise, other than (i) liabilities incurred in the ordinary course of
      business subsequent to December 31, 2005 and (ii) obligations under contracts
      and commitments incurred in the ordinary course of business and not required
      under generally accepted accounting principles to be reflected in such financial
      statements, which, individually or in the aggregate, are not material to the
      financial condition or operating results of the Company.

     

    h. Absence
      of Certain Changes.
      Since
      December 31, 2005, there has been no material adverse change and no material
      adverse development in the assets, liabilities, business, properties,
      operations, financial condition, results of operations or prospects of the
      Company or any of its Subsidiaries.

     

    i. Absence
      of Litigation.
      There
      is no action, suit, claim, proceeding, inquiry or investigation before or by
      any
      court, public board, government agency, self-regulatory organization or body
      pending or, to the knowledge of the Company or any of its Subsidiaries,
      threatened against or affecting the Company or any of its Subsidiaries, or
      their
      officers or directors in their capacity as such, that could have a Material
      Adverse Effect. Schedule
      3(i)
      contains
      a complete list and summary description of any pending or, to the knowledge
      of
      the Company, threatened proceeding against or affecting the Company or any
      of
      its Subsidiaries, without regard to whether it would have a Material Adverse
      Effect. The Company and its Subsidiaries are unaware of any facts or
      circumstances which might give rise to any of the foregoing.

     

    j. Patents,
      Copyrights, etc.
      The
      Company and each of its Subsidiaries owns or possesses the requisite licenses
      or
      rights to use all patents, patent applications, patent rights, inventions,
      know-how, trade secrets, trademarks, trademark applications, service marks,
      service names, trade names and copyrights (“Intellectual
      Property”)
      necessary to enable it to conduct its business as now operated (and, except
      as
      set forth in Schedule
      3(j)
      hereof,
      to the best of the Company’s knowledge, as presently contemplated to be operated
      in the future); there is no claim or action by any person pertaining to, or
      proceeding pending, or to the Company’s knowledge threatened, which challenges
      the right of the Company or of a Subsidiary with respect to any Intellectual
      Property necessary to enable it to conduct its business as now operated (and,
      except as set forth in Schedule
      3(j)
      hereof,
      to the best of the Company’s knowledge, as presently contemplated to be operated
      in the future); to the best of the Company’s knowledge, the Company’s or its
      Subsidiaries’ current and intended products, services and processes do not
      infringe on any Intellectual Property or other rights held by any person; and
      the Company is unaware of any facts or circumstances which might give rise
      to
      any of the foregoing. The Company and each of its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of their Intellectual Property.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    k. No
      Materially Adverse Contracts, Etc.
      Neither
      the Company nor any of its Subsidiaries is subject to any charter, corporate
      or
      other legal restriction, or any judgment, decree, order, rule or regulation
      which in the judgment of the Company’s officers has or is expected in the future
      to have a Material Adverse Effect. Neither the Company nor any of its
      Subsidiaries is a party to any contract or agreement which in the judgment
      of
      the Company’s officers has or is expected to have a Material Adverse
      Effect.

     

    l. Tax
      Status.
      Except
      as set forth on Schedule
      3(l),
      the
      Company and each of its Subsidiaries has made or filed all federal, state and
      foreign income and all other tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject (unless and only to the extent that
      the
      Company and each of its Subsidiaries has set aside on its books provisions
      reasonably adequate for the payment of all unpaid and unreported taxes) and
      has
      paid all taxes and other governmental assessments and charges that are material
      in amount, shown or determined to be due on such returns, reports and
      declarations, except those being contested in good faith and has set aside
      on
      its books provisions reasonably adequate for the payment of all taxes for
      periods subsequent to the periods to which such returns, reports or declarations
      apply. There are no unpaid taxes in any material amount claimed to be due by
      the
      taxing authority of any jurisdiction, and the officers of the Company know
      of no
      basis for any such claim. The Company has not executed a waiver with respect
      to
      the statute of limitations relating to the assessment or collection of any
      foreign, federal, state or local tax. Except as set forth on Schedule
      3(l),
      none of
      the Company’s tax returns is presently being audited by any taxing
      authority.

     

    m. Certain
      Transactions.
      Except
      as set forth on Schedule
      3(m)
      and
      except for arm’s length transactions pursuant to which the Company or any of its
      Subsidiaries makes payments in the ordinary course of business upon terms no
      less favorable than the Company or any of its Subsidiaries could obtain from
      third parties and other than the grant of stock options disclosed on
Schedule
      3(c),
      none of
      the officers, directors, or employees of the Company is presently a party to
      any
      transaction with the Company or any of its Subsidiaries (other than for services
      as employees, officers and directors), including any contract, agreement or
      other arrangement providing for the furnishing of services to or by, providing
      for rental of real or personal property to or from, or otherwise requiring
      payments to or from any officer, director or such employee or, to the knowledge
      of the Company, any corporation, partnership, trust or other entity in which
      any
      officer, director, or any such employee has a substantial interest or is an
      officer, director, trustee or partner.

     

    n. Disclosure.
      All
      information relating to or concerning the Company or any of its Subsidiaries
      set
      forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
      hereof and otherwise in connection with the transactions contemplated hereby
      is
      true and correct in all material respects and the Company has not omitted to
      state any material fact necessary in order to make the statements made herein
      or
      therein, in light of the circumstances under which they were made, not
      misleading. No event or circumstance has occurred or exists with respect to
      the
      Company or any of its Subsidiaries or its or their business, properties,
      prospects, operations or financial conditions, which, under applicable law,
      rule
      or regulation, requires public disclosure or announcement by the Company but
      which has not been so publicly announced or disclosed (assuming for this purpose
      that the Company’s reports filed under the 1934 Act are being incorporated into
      an effective registration statement filed by the Company under the 1933
      Act).

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    o. Acknowledgment
      Regarding Buyers’ Purchase of Securities.
      The
      Company acknowledges and agrees that the Buyers are acting solely in the
      capacity of arm’s length purchasers with respect to this Agreement and the
      transactions contemplated hereby. The Company further acknowledges that no
      Buyer
      is acting as a financial advisor or fiduciary of the Company (or in any similar
      capacity) with respect to this Agreement and the transactions contemplated
      hereby and any statement made by any Buyer or any of their respective
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is not advice or a recommendation and is merely incidental
      to the Buyers’ purchase of the Securities. The Company further represents to
      each Buyer that the Company’s decision to enter into this Agreement has been
      based solely on the independent evaluation of the Company and its
      representatives.

     

    p. 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 in any security
      or
      solicited any offers to buy any security under circumstances that would require
      registration under the 1933 Act of the issuance of the Securities to the Buyers.
      The issuance of the Securities to the Buyers will not be integrated with any
      other issuance of the Company’s securities (past, current or future) for
      purposes of any shareholder approval provisions applicable to the Company or
      its
      securities.

     

    q. No
      Brokers.
      Except
      as set forth in Schedule
      3(q),
      the
      Company has taken no action which would give rise to any claim by any person
      for
      brokerage commissions, transaction fees or similar payments relating to this
      Agreement or the transactions contemplated hereby. 

     

    r. Permits;
      Compliance.
      The
      Company and each of its Subsidiaries is in possession of all franchises, grants,
      authorizations, licenses, permits, easements, variances, exemptions, consents,
      certificates, approvals and orders necessary to own, lease and operate its
      properties and to carry on its business as it is now being conducted
      (collectively, the “Company
      Permits”),
      and
      there is no action pending or, to the knowledge of the Company, threatened
      regarding suspension or cancellation of any of the Company Permits. Neither
      the
      Company nor any of its Subsidiaries is in conflict with, or in default or
      violation of, any of the Company Permits, except for any such conflicts,
      defaults or violations which, individually or in the aggregate, would not
      reasonably be expected to have a Material Adverse Effect. Since December 31,
      2005, neither the Company nor any of its Subsidiaries has received any
      notification with respect to possible conflicts, defaults or violations of
      applicable laws, except for notices relating to possible conflicts, defaults
      or
      violations, which conflicts, defaults or violations would not have a Material
      Adverse Effect.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    s. Environmental
      Matters.

     

    (i) Except
      as
      set forth in Schedule
      3(s),
      there
      are, to the best of the Company’s knowledge, with respect to the Company or any
      of its Subsidiaries or any predecessor of the Company, no past or present
      violations of Environmental Laws (as defined below), releases of any material
      into the environment, actions, activities, circumstances, conditions, events,
      incidents, or contractual obligations which may give rise to any common law
      environmental liability or any liability under the Comprehensive Environmental
      Response, Compensation and Liability Act of 1980 or similar federal, state,
      local or foreign laws and neither the Company nor any of its Subsidiaries has
      received any notice with respect to any of the foregoing, nor is any action
      pending or, to the Company’s knowledge, threatened in connection with any of the
      foregoing. The term “Environmental
      Laws”
means
      all federal, state, local or foreign laws relating to pollution or protection
      of
      human health or the environment (including, without limitation, ambient air,
      surface water, groundwater, land surface or subsurface strata), including,
      without limitation, laws relating to emissions, discharges, releases or
      threatened releases of chemicals, pollutants contaminants, or toxic or hazardous
      substances or wastes (collectively, “Hazardous
      Materials”)
      into
      the environment, or otherwise relating to the manufacture, processing,
      distribution, use, treatment, storage, disposal, transport or handling of
      Hazardous Materials, as well as all authorizations, codes, decrees, demands
      or
      demand letters, injunctions, judgments, licenses, notices or notice letters,
      orders, permits, plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (ii) Other
      than those that are or were stored, used or disposed of in compliance with
      applicable law, no Hazardous Materials are contained on or about any real
      property currently owned, leased or used by the Company or any of its
      Subsidiaries, and no Hazardous Materials were released on or about any real
      property previously owned, leased or used by the Company or any of its
      Subsidiaries during the period the property was owned, leased or used by the
      Company or any of its Subsidiaries, except in the normal course of the Company’s
      or any of its Subsidiaries’ business.

     

    (iii) Except
      as
      set forth in Schedule
      3(s),
      to the
      best of the Company’s knowledge there are no underground storage tanks on or
      under any real property owned, leased or used by the Company or any of its
      Subsidiaries that are not in compliance with applicable law. 

     

    t. Title
      to Property.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      are described in Schedule
      3(t)
      or such
      as would not have a Material Adverse Effect. Any real property and facilities
      held under lease by the Company and its Subsidiaries are held by them under
      valid, subsisting and enforceable leases with such exceptions as would not
      have
      a Material Adverse Effect.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    u. Insurance.
      The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged. Neither the Company
      nor
      any such Subsidiary has any reason to believe that it will not be able to renew
      its existing insurance coverage as and when such coverage expires or to obtain
      similar coverage from similar insurers as may be necessary to continue its
      business at a cost that would not have a Material Adverse Effect. The Company
      has provided to Buyer true and correct copies of all policies relating to
      directors’ and officers’ liability coverage, errors and omissions coverage, and
      commercial general liability coverage.

     

    v. Internal
      Accounting Controls.
      The
      Company and each of its Subsidiaries maintain a system of internal accounting
      controls sufficient, in the judgment of the Company’s board of directors, to
      provide reasonable assurance that (i) transactions are executed in accordance
      with management’s general or specific authorizations, (ii) transactions are
      recorded as necessary to permit preparation of financial statements in
      conformity with generally accepted accounting principles and to maintain asset
      accountability, (iii) access to assets is permitted only in accordance with
      management’s general or specific authorization and (iv) the recorded
      accountability for assets is compared with the existing assets at reasonable
      intervals and appropriate action is taken with respect to any
      differences.

     

    w. Foreign
      Corrupt Practices.
      Neither
      the Company, nor any of its Subsidiaries, nor any director, officer, agent,
      employee or other person acting on behalf of the Company or any Subsidiary
      has,
      in the course of his actions for, or on behalf of, the Company, used any
      corporate funds for any unlawful contribution, gift, entertainment or other
      unlawful expenses relating to political activity; made any direct or indirect
      unlawful payment to any foreign or domestic government official or employee
      from
      corporate funds; violated or is in violation of any provision of the U.S.
      Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate,
      payoff, influence payment, kickback or other unlawful payment to any foreign
      or
      domestic government official or employee.

     

    x. Solvency.
      The
      Company (after giving effect to the transactions contemplated by this Agreement)
      is solvent (i.e.,
      its
      assets have a fair market value in excess of the amount required to pay its
      probable liabilities on its existing debts as they become absolute and matured)
      and currently the Company has no information that would lead it to reasonably
      conclude that the Company would not, after giving effect to the transaction
      contemplated by this Agreement, have the ability to, nor does it intend to
      take
      any action that would impair its ability to, pay its debts from time to time
      incurred in connection therewith as such debts mature. The Company did receive
      a
      qualified opinion from its auditors with respect to its most recent fiscal
      year
      end and, after giving effect to the transactions contemplated by this Agreement,
      does not anticipate or know of any basis upon which its auditors might issue
      a
      qualified opinion in respect of its current fiscal year.

     

    y. No
      Investment Company.
      The
      Company is not, and upon the issuance and sale of the Securities as contemplated
      by this Agreement will not be an “investment company” required to be registered
      under the Investment Company Act of 1940 (an “Investment
      Company”).
      The
      Company is not controlled by an Investment Company.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    z. Certain
      Registration Matters.
      Assuming the accuracy of the Buyers' representations and warranties set forth
      in
      Section 3, no registration under the Securities Act is required for the offer
      and sale of the Conversion Shares and Warrant Shares by the Company to the
      Buyers under the transaction documents. Except as specified in Schedule
      3(z),
      the
      Company has not granted or agreed to grant to any Person any rights (including
      "piggy-back" registration rights) to have any securities of the Company
      registered with the Commission or any other governmental authority that have
      not
      been satisfied.

     

    aa. Breach
      of Representations and Warranties by the Company.
      If the
      Company materially breaches any of the representations or warranties set forth
      in this Section 3, and in addition to any other remedies available to the Buyers
      pursuant to this Agreement, the Company shall pay to the Buyer the Standard
      Liquidated Damages Amount in cash or in shares of Common Stock at the option
      of
      the Company, until such breach is cured. If the Company elects to pay the
      Standard Liquidated Damages Amounts in shares of Common Stock, such shares
      shall
      be issued at the Conversion Price at the time of payment.

     

    4. COVENANTS.

     

    a. Best
      Efforts.
      The
      parties shall use their best efforts to satisfy timely each of the conditions
      described in Section 6 and 7 of this Agreement. 

     

    b. Form
      D; Blue Sky Laws.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to each Buyer promptly after such
      filing. The Company shall, on or before the Closing Date, take such action
      as
      the Company shall reasonably determine is necessary to qualify the Securities
      for sale to the Buyers at the applicable closing pursuant to this Agreement
      under applicable securities or “blue sky” laws of the states of the United
      States (or to obtain an exemption from such qualification), and shall provide
      evidence of any such action so taken to each Buyer on or prior to the Closing
      Date; provided,
      however,
      that
      the Company shall not be required in connection therewith or as a condition
      thereto to (a) qualify
      to do business in any jurisdiction where it would not otherwise be required
      to
      qualify but for this Section 4(b), (b) subject
      itself to general taxation in any such jurisdiction, (c) file
      a general consent to service of process in any such jurisdiction, (d) provide
      any undertakings that cause the Company undue expense or burden, or (e) make
      any change in its charter or bylaws, which in each case the Board of Directors
      of the Company determines to be contrary to the best interests of the Company
      and its shareholders.

     

    c. Reporting
      Status; Eligibility to Use Form S-3, SB-2 or Form 

     

    S-1. The
      Company represents and warrants that it meets the requirements for the use
      of
      Form SB-2 for registration of the sale by the Buyer of the Registrable
      Securities (as defined in the Registration Rights Agreement). So long as the
      Buyer beneficially owns any of the Securities, the Company shall timely file
      all
      reports required to be filed with the SEC pursuant to the 1934 Act, and the
      Company shall not terminate its status as an issuer required to file reports
      under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
      would permit such termination. The Company further agrees to file all reports
      required to be filed by the Company with the SEC in a timely manner so as to
      become eligible, and thereafter to maintain its eligibility, for the use of
      Form
      SB-2. The Company shall issue a press release describing the material terms
      of
      the transaction contemplated hereby as soon as practicable following the Closing
      Date but in no event more than two (2) business days of the Closing Date, which
      press release shall be subject to prior review by the Buyers. The Company agrees
      that such press release shall not disclose the name of the Buyers unless
      expressly consented to in writing by the Buyers or unless required by applicable
      law or regulation, and then only to the extent of such requirement.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    d. Use
      of Proceeds.
      The
      Company shall use the net proceeds from the sale of the Notes and the Warrants
      in the manner set forth in Schedule
      4(d)
      attached
      hereto and made a part hereof and shall not, directly or indirectly, use such
      proceeds for (i) any loan to or investment in any other corporation,
      partnership, enterprise or other person (except in connection with its currently
      existing direct or indirect Subsidiaries); (ii) the satisfaction of any portion
      of the Company’s debt (other than payment of trade payables and accrued expenses
      in the ordinary course of the Company’s business and consistent with prior past
      practices), or (iii) the redemption of any Common Stock.

     

    e. Future
      Offerings.
      Subject
      to the exceptions described below, the Company will not, without the prior
      written consent of a majority-in-interest of the Buyers, which consent shall
      not
      be unreasonably withheld, negotiate or contract with any party to obtain
      additional equity financing (including debt financing with an equity component)
      that involves (A) the issuance of convertible securities that are convertible
      into an indeterminate number of shares of Common Stock or (B) the issuance
      of
      warrants during the period (the “Lock-up
      Period”)
      beginning on the Closing Date and ending on the later of (i) two hundred seventy
      (270) days from the Closing Date and (ii) one hundred eighty (180) days from
      the
      date the Registration Statement (as defined in the Registration Rights
      Agreement) is filed (plus any days in which sales cannot be made thereunder).
      In
      addition, subject to the exceptions described below, the Company will not
      conduct any equity financing (including debt with an equity component)
      (“Future
      Offerings”)
      during
      the period beginning on the Closing Date and ending two (2) years after the
      end
      of the Lock-up Period unless it shall have first delivered to each Buyer, at
      least twenty (20) business days prior to the closing of such Future Offering,
      written notice describing the proposed Future Offering, including the terms
      and
      conditions thereof and proposed definitive documentation to be entered into
      in
      connection therewith, and providing each Buyer an option during the fifteen
      (15)
      day period following delivery of such notice to purchase its pro rata share
      (based on the ratio that the aggregate principal amount of Notes purchased
      by it
      hereunder bears to the aggregate principal amount of Notes purchased hereunder)
      of the securities being offered in the Future Offering on the same terms as
      contemplated by such Future Offering (the limitations referred to in this
      sentence and the preceding sentence are collectively referred to as the
“Capital
      Raising Limitations”). 
      In the
      event the terms and conditions of a proposed Future Offering are amended in
      any
      respect after delivery of the notice to the Buyers concerning the proposed
      Future Offering, the Company shall deliver a new notice to each Buyer describing
      the amended terms and conditions of the proposed Future Offering and each Buyer
      thereafter shall have an option during the fifteen (15) day period following
      delivery of such new notice to purchase its pro rata share of the securities
      being offered on the same terms as contemplated by such proposed Future
      Offering, as amended. The foregoing sentence shall apply to successive
      amendments to the terms and conditions of any proposed Future Offering. The
      Capital Raising Limitations shall not apply to any transaction involving (i)
      issuances of securities in a firm commitment underwritten public offering
      (excluding a continuous offering pursuant to Rule 415 under the 1933 Act, an
      equity line of credit or similar financing arrangement) resulting in net
      proceeds to the Company of in excess of $1,500,000, or (ii) issuances of
      securities as consideration for a merger, consolidation or purchase of assets,
      or in connection with any strategic partnership or joint venture (the primary
      purpose of which is not to raise equity capital), or in connection with the
      disposition or acquisition of a business, product or license by the Company.
      The
      Capital Raising Limitations also shall not apply to the issuance of securities
      upon exercise or conversion of the Company’s options, warrants or other
      convertible securities outstanding as of the date hereof or to the grant of
      additional options or warrants, or the issuance of additional securities, under
      any Company stock option or restricted stock plan approved by the shareholders
      of the Company. 

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    f. Expenses.
      At the
      Closing, the Company shall reimburse Buyers for expenses incurred by them in
      connection with the negotiation, preparation, execution, delivery and
      performance of this Agreement and the other agreements to be executed in
      connection herewith (“Documents”), including, without limitation, attorneys’ and
      consultants’ fees and expenses, transfer agent fees, fees for stock quotation
      services, fees relating to any amendments or modifications of the Documents
      or
      any consents or waivers of provisions in the Documents, fees for the preparation
      of opinions of counsel, escrow fees, and costs of restructuring the transactions
      contemplated by the Documents. When possible, the Company must pay these fees
      directly, otherwise the Company must make immediate payment for reimbursement
      to
      the Buyers for all fees and expenses immediately upon written notice by the
      Buyer or the submission of an invoice by the Buyer. Notwithstanding anything
      herein to the contrary, the Company’s obligation to reimburse Buyers’ expenses
      shall not exceed $50,000 in the aggregate.

     

    g. Financial
      Information.
      The
      Company agrees to send the following reports to each Buyer until such Buyer
      transfers, assigns, or sells all of the Securities: (i) within
      ten (10) days after the filing with the SEC, a copy of its Annual Report on
      Form
      10-KSB its Quarterly Reports on Form 10-QSB and any Current Reports on Form
      8-K;
(ii) within
      one (1) day after release, copies of all press releases issued by the Company
      or
      any of its Subsidiaries; and (iii) contemporaneously
      with the making available or giving to the shareholders of the Company, copies
      of any notices or other information the Company makes available or gives to
      such
      shareholders.

     

    h. Authorization
      and Reservation of Shares.
      The
      Company shall at all times have authorized, and reserved for the purpose of
      issuance, a sufficient number of shares of Common Stock to provide for the
      full
      conversion or exercise of the outstanding Notes and Warrants and issuance of
      the
      Conversion Shares and Warrant Shares in connection therewith (based on the
      Conversion Price of the Notes or Exercise Price of the Warrants in effect from
      time to time) and as otherwise required by the Notes. The Company shall not
      reduce the number of shares of Common Stock reserved for issuance upon
      conversion of Notes and exercise of the Warrants without the consent of each
      Buyer. The Company shall at all times maintain the number of shares of Common
      Stock so reserved for issuance at an amount (“Reserved
      Amount”)
      equal
      to no less than the number that is then actually issuable upon full conversion
      of the Notes and Additional Notes and upon exercise of the Warrants and the
      Additional Warrants (based on the Conversion Price of the Notes or the Exercise
      Price of the Warrants in effect from time to time). If at any time the number
      of
      shares of Common Stock authorized and reserved for issuance (“Authorized
      and Reserved Shares”)
      is
      below the Reserved Amount, the Company will promptly take all corporate action
      necessary to authorize and reserve a sufficient number of shares, including,
      without limitation, calling a special meeting of shareholders to authorize
      additional shares to meet the Company’s obligations under this Section 4(h), in
      the case of an insufficient number of authorized shares, obtain shareholder
      approval of an increase in such authorized number of shares, and voting the
      management shares of the Company in favor of an increase in the authorized
      shares of the Company to ensure that the number of authorized shares is
      sufficient to meet the Reserved Amount. If the Company fails to obtain such
      shareholder approval within thirty (30) days following the date on which the
      number of Reserved Amount exceeds the Authorized and Reserved Shares, the
      Company shall pay to the Borrower the Standard Liquidated Damages Amount, in
      cash or in shares of Common Stock at the option of the Buyer. 

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    If
      the
      Buyer elects to be paid the Standard Liquidated Damages Amount in shares of
      Common Stock, such shares shall be issued at the Conversion Price at the time
      of
      payment. In order to ensure that the Company has authorized a sufficient amount
      of shares to meet the Reserved Amount at all times, the Company must deliver
      to
      the Buyer at the end of every month a list detailing (1) the current amount
      of
      shares authorized by the Company and reserved for the Buyer; and (2) amount
      of
      shares issuable upon conversion of the Notes and upon exercise of the Warrants
      and as payment of interest accrued on the Notes for one year. If the Company
      fails to provide such list within five (5) business days of the end of each
      month, the Company shall pay the Standard Liquidated Damages Amount, in cash
      or
      in shares of Common Stock at the option of the Buyer, until the list is
      delivered. If the Buyer elects to be paid the Standard Liquidated Damages Amount
      in shares of Common Stock, such shares shall be issued at the Conversion Price
      at the time of payment.

     

    i. Listing.
      The
      Company shall promptly secure the listing of the Conversion Shares and Warrant
      Shares upon each national securities exchange or automated quotation system,
      if
      any, upon which shares of Common Stock are then listed (subject to official
      notice of issuance) and, so long as any Buyer owns any of the Securities, shall
      maintain, so long as any other shares of Common Stock shall be so listed, such
      listing of all Conversion Shares and Warrant Shares from time to time issuable
      upon conversion of the Notes or exercise of the Warrants. The Company will
      obtain and, so long as any Buyer owns any of the Securities, maintain the
      listing and trading of its Common Stock on the OTCBB or any equivalent
      replacement exchange, the Pinksheets, the Nasdaq National Market (“Nasdaq”),
      the
      Nasdaq SmallCap Market (“Nasdaq
      SmallCap”),
      the
      New York Stock Exchange (“NYSE”),
      or
      the American Stock Exchange (“AMEX”)
      and
      will comply in all respects with the Company’s reporting, filing and other
      obligations under the bylaws or rules of the National Association of Securities
      Dealers (“NASD”)
      and
      such exchanges, as applicable. The Company shall promptly provide to each Buyer
      copies of any notices it receives from the OTCBB and any other exchanges or
      quotation systems on which the Common Stock is then listed regarding the
      continued eligibility of the Common Stock for listing on such exchanges and
      quotation systems.

     

    j. Corporate
      Existence.
      So long
      as a Buyer beneficially owns any Notes or Warrants, the Company shall maintain
      its corporate existence and shall not sell all or substantially all of the
      Company’s assets, except in the event of a merger or consolidation or sale of
      all or substantially all of the Company’s assets, where the surviving or
      successor entity in such transaction (i) assumes the Company’s obligations
      hereunder and under the agreements and instruments entered into in connection
      herewith and (ii) is a publicly traded corporation whose Common Stock is listed
      for trading on the OTCBB, Pinksheets, Nasdaq, Nasdaq SmallCap, NYSE or
      AMEX.

     

    k. No
      Integration.
      The
      Company shall not make any offers or sales of any security (other than the
      Securities) under circumstances that would require registration of the
      Securities being offered or sold hereunder under the 1933 Act or cause the
      offering of the Securities to be integrated with any other offering of
      securities by the Company for the purpose of any stockholder approval provision
      applicable to the Company or its securities.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    l. Subsequent
      Investment.
      The
      Company and the Buyers agree that, upon the filing by the Company of the
      Registration Statement to be filed pursuant to the Registration Rights Agreement
      (the “Filing
      Date”),
      the
      Buyers shall purchase additional Notes (the “Filing
      Notes”)
      in the
      aggregate principal amount of Five Hundred Thousand Dollars ($500,000), for
      an
      aggregate purchase price of Five Hundred Thousand Dollars ($500,000), with
      the
      closing of such purchase to occur within two (2) days of the Filing Date;
provided,
      however,
      that
      the obligation of each Buyer to purchase the Filing Notes is subject to the
      satisfaction, at or before the closing of such purchase and sale, of the
      conditions set forth in Section 7. The Company and the Buyers further agree
      that, upon the declaration of effectiveness of the Registration Statement to
      be
      filed pursuant to the Registration Rights Agreement (the “Effective
      Date”),
      the
      Buyers shall purchase additional notes (the “Effectiveness
      Notes”
and,
      collectively with the Filing Notes, the “Additional
      Notes”)
      in the
      aggregate principal amount of Five Hundred Thousand Dollars ($500,000) for
      an
      aggregate purchase price of Five Hundred Thousand Dollars ($500,000), with
      the
      closing of such purchase to occur within two (2) days of the Effective Date;
      provided,
      however,
      that
      the obligation of each Buyer to purchase the Additional Notes is subject to
      the
      satisfaction, at or before the closing of such purchase and sale, of the
      conditions set forth in Section 7; and, provided,
      further,
      that
      there shall not have been a Material Adverse Effect as of such effective date.
      The terms of the Additional Notes shall be identical to the terms of the Notes
      to be issued on the Closing Date. The Common Stock underlying the Additional
      Notes shall be Registrable Securities (as defined in the Registration Rights
      Agreement) and shall be included in the Registration Statement to be filed
      pursuant to the Registration Rights Agreement.

     

    m. Key
      Man Insurance.
      The
      Company shall use its best efforts to obtain, on or before five (5) business
      days from the date hereof, key man life insurance on its CEO, Peter
      Maddocks.

     

    n. Restriction
      on Short Sales.
      The
      Buyers agree that, so long as any of the Notes remain outstanding, but in no
      event less than two (2) years from the date hereof, the Buyers will not enter
      into or effect any “short sales” (as such term is defined in Rule 3b-3 of the
      1934 Act) of the Common Stock or hedging transaction which establishes a net
      short position with respect to the Common Stock.

     

    o. Breach
      of Covenants.
      If the
      Company breaches any of the covenants set forth in this Section 4, and in
      addition to any other remedies available to the Buyers pursuant to this
      Agreement, the Company shall pay to the Buyers the Standard Liquidated Damages
      Amount, in cash or in shares of Common Stock at the option of the Company,
      until
      such breach is cured. If the Company elects to pay the Standard Liquidated
      Damages Amount in shares, such shares shall be issued at the Conversion Price
      at
      the time of payment.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    5. TRANSFER
      AGENT INSTRUCTIONS.
      The
      Company shall issue irrevocable instructions to its transfer agent to issue
      certificates, registered in the name of each Buyer or its nominee, for the
      Conversion Shares and Warrant Shares in such amounts as specified from time
      to
      time by each Buyer to the Company upon conversion of the Notes or exercise
      of
      the Warrants in accordance with the terms thereof (the “Irrevocable
      Transfer Agent Instructions”).
      Prior
      to registration of the Conversion Shares and Warrant Shares under the 1933
      Act
      or the date on which the Conversion Shares and Warrant Shares may be sold
      pursuant to Rule 144 without any restriction as to the number of Securities
      as
      of a particular date that can then be immediately sold, all such certificates
      shall bear the restrictive legend specified in Section 2(g) of this Agreement.
      The Company warrants that no instruction other than the Irrevocable Transfer
      Agent Instructions referred to in this Section 5, and stop transfer instructions
      to give effect to Section 2(f) hereof (in the case of the Conversion Shares
      and
      Warrant Shares, prior to registration of the Conversion Shares and Warrant
      Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
      Shares may be sold pursuant to Rule 144 without any restriction as to the number
      of Securities as of a particular date that can then be immediately sold), will
      be given by the Company to its transfer agent and that the Securities shall
      otherwise be freely transferable on the books and records of the Company as
      and
      to the extent provided in this Agreement and the Registration Rights Agreement.
      Nothing in this Section shall affect in any way the Buyer’s obligations and
      agreement set forth in Section 2(g) hereof to comply with all applicable
      prospectus delivery requirements, if any, upon re-sale of the Securities. If
      a
      Buyer provides the Company with (i) an opinion of counsel reasonably acceptable
      to the Company and its counsel in form, substance and scope customary for
      opinions in comparable transactions, to the effect that a public sale or
      transfer of such Securities may be made without registration under the 1933
      Act
      and such sale or transfer is effected or (ii) the Buyer provides reasonable
      assurances that the Securities can be sold pursuant to Rule 144, the Company
      shall permit the transfer, and, in the case of the Conversion Shares and Warrant
      Shares, promptly instruct its transfer agent to issue one or more certificates,
      free from restrictive legend, in such name and in such denominations as
      specified by such Buyer. The Company acknowledges that a breach by it of its
      obligations hereunder will cause irreparable harm to the Buyers, by vitiating
      the intent and purpose of the transactions contemplated hereby. Accordingly,
      the
      Company acknowledges that the remedy at law for a breach of its obligations
      under this Section 5 may be inadequate and agrees, in the event of a breach
      or
      threatened breach by the Company of the provisions of this Section, that the
      Buyers shall be entitled, in addition to all other available remedies, to an
      injunction restraining any breach and requiring immediate transfer, without
      the
      necessity of showing economic loss and without any bond or other security being
      required.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    6. CONDITIONS
      TO THE COMPANY’S OBLIGATION TO SELL.
      The
      obligation of the Company hereunder to issue and sell the Notes and Warrants
      to
      a Buyer at the Closing is subject to the satisfaction, at or before the Closing
      Date of each of the following conditions thereto, provided that these conditions
      are for the Company’s sole benefit and may be waived by the Company at any time
      in its sole discretion:

     

    a. The
      applicable Buyer shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Company.

     

    b. The
      applicable Buyer shall have delivered the Purchase Price in accordance with
      Section 1(b) above.

     

    c. The
      representations and warranties of the applicable Buyer shall be true and correct
      in all material respects as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date), and the applicable Buyer shall have performed, satisfied
      and complied in all material respects with the covenants, agreements and
      conditions required by this Agreement to be performed, satisfied or complied
      with by the applicable Buyer at or prior to the Closing Date. 

     

    d. No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    7. CONDITIONS
      TO EACH BUYER’S OBLIGATION TO PURCHASE.
      The
      obligation of each Buyer hereunder to purchase the Notes and Warrants at the
      Closing is subject to the satisfaction, at or before the Closing Date of each
      of
      the following conditions, provided that these conditions are for such Buyer’s
      sole benefit and may be waived by such Buyer at any time in its sole
      discretion:

     

    a. The
      Company shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Buyer.

     

    b. The
      Company shall have delivered to such Buyer duly executed Notes (in such
      denominations as the Buyer shall request) and Warrants in accordance with
      Section 1(b) above.

     

    c. The
      Irrevocable Transfer Agent Instructions, in form and substance satisfactory
      to a
      majority-in-interest of the Buyers, shall have been delivered to and
      acknowledged in writing by the Company’s Transfer Agent.

     

    d. The
      representations and warranties of the Company shall be true and correct in
      all
      material respects as of the date when made and as of the Closing Date as though
      made at such time (except for representations and warranties that speak as
      of a
      specific date) and the Company shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by the Company at
      or
      prior to the Closing Date. The Buyer shall have received a certificate or
      certificates, executed by the chief executive officer of the Company, dated
      as
      of the Closing Date, to the foregoing effect and as to such other matters as
      may
      be reasonably requested by such Buyer including, but not limited to certificates
      with respect to the Company’s Certificate of Incorporation, By-laws and Board of
      Directors’ resolutions relating to the transactions contemplated
      hereby.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    e. No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    f. No
      event
      shall have occurred which could reasonably be expected to have a Material
      Adverse Effect on the Company.

     

    g. The
      Conversion Shares and Warrant Shares shall have been authorized for quotation
      on
      the PINK SHEETS and trading in the Common Stock on the PINK SHEETS shall not
      have been suspended by the SEC or the PINK SHEETS.

     

    h. The
      Buyer
      shall have received an opinion of the Company’s counsel, dated as of the Closing
      Date, in form, scope and substance reasonably satisfactory to the Buyer and
      in
      substantially the same form as Exhibit
      “D”
      attached
      hereto.

     

    i. The
      Buyer
      shall have received an officer’s certificate described in Section 3(c) above,
      dated as of the Closing Date.

     

    8. GOVERNING
      LAW; MISCELLANEOUS.
      

     

    a. Governing
      Law.
      THIS
      AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
      LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
      ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
      LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
      STATES AND UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH
      RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED
      INTO
      IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
      BOTH
      PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
      MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
      OF PROCESS UPON A PARTY MAILED BY REGISTERED FIRST CLASS MAIL SHALL BE DEEMED
      IN
      EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT
      OR
      PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN
      ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
      NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE
      AND
      MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
      LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
      THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
      REASONABLE ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH
      SUCH DISPUTE. HOWEVER,
      ALL PARTIES HERETO AGREE THAT PRIOR TO THE FILING OF ANY SUIT IN THE COURTS
      OF
      NEW YORK THAT THEY SHALL FIRST AGREE TO ARBITRATION BY CHOOSING AN ARTIBRATOR
      IN
      NEW YORK WHO SHALL HAVE FULL AUTHORITY TO HEAR, ADJUDGE AND ISSUE ANY FINDINGS
      HE FINDS REASONABLE. 

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    b. Counterparts;
      Signatures by Facsimile.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original but all of which shall constitute one and the same agreement
      and shall become effective when counterparts have been signed by each party
      and
      delivered to the other party. This Agreement, once executed by a party, may
      be
      delivered to the other party hereto by facsimile transmission of a copy of
      this
      Agreement bearing the signature of the party so delivering this
      Agreement.

     

    c. Headings.
      The
      headings of this Agreement are for convenience of reference only and shall
      not
      form part of, or affect the interpretation of, this Agreement. 

     

    d. Severability.
      In the
      event that any provision of this Agreement is invalid or unenforceable under
      any
      applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law. Any provision hereof
      which
      may prove invalid or unenforceable under any law shall not affect the validity
      or enforceability of any other provision hereof.

     

    e. Entire
      Agreement; Amendments.
      This
      Agreement and the instruments referenced herein contain the entire understanding
      of the parties with respect to the matters covered herein and therein and,
      except as specifically set forth herein or therein, neither the Company nor
      the
      Buyer makes any representation, warranty, covenant or undertaking with respect
      to such matters. No provision of this Agreement may be waived or amended other
      than by an instrument in writing signed by the party to be charged with
      enforcement. 

     

    f. Notices.
      Any
      notices required or permitted to be given under the terms of this Agreement
      shall be sent by certified or registered mail (return receipt requested) or
      delivered personally or by courier (including a recognized overnight delivery
      service) or by facsimile and shall be effective five days after being placed
      in
      the mail, if mailed by regular United States mail, or upon receipt, if delivered
      personally or by courier (including a recognized overnight delivery service)
      or
      by facsimile, in each case addressed to a party. The addresses for such
      communications shall be:

     

    If
      to the
      Company:

    Textechnologies
      Inc.

    David
      E.
      Price, G.C.

    13520
      Oriental St

    Rockville,
      Md 20853

    (301)
      4605818

    

    With
      a
      copy to:

    Peter
      Maddocks, CEO

    31-32
      Ely
      Place

    31-32
      Ely
      Place

    London
      EC1N 6TD

    (44)
      20
      7822 2222

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    If
      to a
      Buyer: To the address set forth immediately below such Buyer’s name on the
      signature pages hereto.

     

    With
      copy
      to:

    

    Ballard
      Spahr Andrews & Ingersoll, LLP

    1735
      Market Street

    51st
      Floor

    Philadelphia,
      Pennsylvania 19103

    Attention:
      Gerald J. Guarcini, Esq.

    Telephone:
      215-864-8625

    Facsimile:
      215-864-8999

     

    Each
      party shall provide notice to the other party of any change in
      address.

     

    g. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and assigns. Neither the Company nor any Buyer shall assign
      this Agreement or any rights or obligations hereunder without the prior written
      consent of the other. Notwithstanding the foregoing, subject to
      Section 2(f), any Buyer may assign its rights hereunder to any person that
      purchases Securities in a private transaction from a Buyer or to any of its
      “affiliates,” as that term is defined under the 1934 Act, without the consent of
      the Company.

     

    h. Third
      Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person.

     

    i. Survival.
      The
      representations and warranties of the Company and the agreements and covenants
      set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
      notwithstanding any due diligence investigation conducted by or on behalf of
      the
      Buyers. The Company agrees to indemnify and hold harmless each of the Buyers
      and
      all their officers, directors, employees and agents for loss or damage arising
      as a result of or related to any breach or alleged breach by the Company of
      any
      of its representations, warranties and covenants set forth in Sections 3 and
      4
      hereof or any of its covenants and obligations under this Agreement or the
      Registration Rights Agreement, including advancement of expenses as they are
      incurred.

     

    j. Publicity.
      The
      Company and each of the Buyers shall have the right to review a reasonable
      period of time before issuance of any press releases, SEC, PINK SHEETS or NASD
      filings, or any other public statements with respect to the transactions
      contemplated hereby; provided,
      however,
      that
      the Company shall be entitled, without the prior approval of each of the Buyers,
      to make any press release or SEC, PINK SHEETS (or other applicable trading
      market) or NASD filings with respect to such transactions as is required by
      applicable law and regulations (although each of the Buyers shall be consulted
      by the Company in connection with any such press release prior to its release
      and shall be provided with a copy thereof and be given an opportunity to comment
      thereon).

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    k. Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    l. No
      Strict Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    m. Remedies.
      The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Buyers by vitiating the intent and purpose of the
      transaction contemplated hereby. Accordingly, the Company acknowledges that
      the
      remedy at law for a breach of its obligations under this Agreement will be
      inadequate and agrees, in the event of a breach or threatened breach by the
      Company of the provisions of this Agreement, that the Buyers shall be entitled,
      in addition to all other available remedies at law or in equity, and in addition
      to the penalties assessable herein, to an injunction or injunctions restraining,
      preventing or curing any breach of this Agreement and to enforce specifically
      the terms and provisions hereof, without the necessity of showing economic
      loss
      and without any bond or other security being required.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF,
      the
      undersigned Buyers and the Company have caused this Agreement to be duly
      executed as of the date first above written.

     

    

    TEXTECHNOLOGIES
      INC.

    

    

    By:
      ________________________________

    Chief
      Executive Officer 

    

    

    AJW
      PARTNERS, LLC

    By:
      SMS
      Group, LLC

    

    

    ______________________________________

    Corey
      S.
      Ribotsky

    Manager

    

    

    RESIDENCE:
      Delaware

    

    ADDRESS:            1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New York 11576

    Facsimile:
      (516) 739-7115

    Telephone:
      (516) 739-7110

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    

    Aggregate
      Principal Amount of
      Notes:                                                     
$
      ________

    Number
      of
      Warrants:                                                                                       
________

    Aggregate
      Purchase
      Price:                                                                           $
      ________

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    AJW
      OFFSHORE, LTD.

    By:
      First
      Street Manager II, LLC

    

    

    ______________________________________

    Corey
      S.
      Ribotsky 

    Manager

    

    

    RESIDENCE: 
      Cayman
      Islands

    

    ADDRESS:           
      AJW
      Offshore, Ltd.

    P.O.
      Box
      32021 SMB

    Grand
      Cayman, Cayman Island, B.W.I. 

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    
      

      Aggregate
        Principal Amount of
        Notes:                                                     
$
        ________

      Number
        of
        Warrants:                                                                                       
________

      Aggregate
        Purchase
        Price:                                                                           $
        ________

    

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    

    AJW
      QUALIFIED PARTNERS, LLC

     

    By:
      AJW
      Manager, LLC

     

    ____________________________________

    Corey
      S.
      Ribotsky 

    Manager

     

    

    RESIDENCE: 
      New
      York

    

    ADDRESS:           
      1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New York 11576

    Facsimile: (516)
      739-7115

    Telephone: (516)
      739-7110

    

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    
      

      Aggregate
        Principal Amount of
        Notes:                                                     
$
        ________

      Number
        of
        Warrants:                                                                                       
________

      Aggregate
        Purchase
        Price:                                                                           $
        ________

    

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    

    NEW
      MILLENNIUM CAPITAL PARTNERS II, LLC 

     

    By:
      First
      Street Manager II, LLP

     

    ____________________________________

    Corey
      S.
      Ribotsky 

    Manager

     

    

    RESIDENCE: 
      New
      York

    

    ADDRESS:           
      1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New York 11576

    Facsimile: (516)
      739-7115

    Telephone: (516)
      739-7110

    

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    
      

      Aggregate
        Principal Amount of
        Notes:                                                     
$
        ________

      Number
        of
        Warrants:                                                                                       
________

      Aggregate
        Purchase
        Price:                                                                           $
        ________

       

    

     

    27

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}]]