Document:

SECURITIES
PURCHASE AGREEMENT

     

    THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and
entered into as of the 26th day of April, 2009 (the “Effective Date”), by and among
NovaStar Financial, Inc., a Maryland corporation (“Buyer”), Advent Financial
Services, LLC, a Delaware limited liability company (the “Company”), and Mark A. Ernst
(“Ernst”).  Buyer,
Company and Ernst shall each be referred to herein as a “Party” and collectively as the
“Parties”.

     

    RECITALS

     

    WHEREAS,
the Company is a start-up company that provides or will provide financial
services including, without limitation, small-dollar banking services, refund
anticipation loans and related servicing to underserved low- and moderate-income
consumer segments (collectively, the “Business”);

     

    WHEREAS,
Ernst is the sole member of the Company and, prior to the Closing, intends to
transfer his Membership Interest in the Company to a trust for the benefit of
certain of his immediate family members (the “Ernst Trust”) in compliance
with the conflict of interest requirements of Ernst’s employer, the Internal
Revenue Service;

     

    WHEREAS,
Ernst and the Company desire that the Company sell to Buyer, and that Buyer
purchase and acquire from the Company, seventy percent (70%) of the fully
diluted outstanding Membership Interests in the Company, on the terms and
subject to the conditions set forth in this Agreement;

     

    WHEREAS,
contemporaneously with Buyer’s purchase of the Membership Interests as set forth
herein, Bernard M. Wilson, John W. Thompson and Bernard E. Amyot (collectively,
the “Other Members”)
will acquire (either individually or through various trusts) those Membership
Interests of the Company as reflected on Exhibit A
hereto;

     

    WHEREAS,
to give effect to the foregoing, the Parties desire to enter into this
Agreement.

     

    AGREEMENT

     

    NOW,
THEREFORE, in consideration of the mutual promises made in this Agreement and
the representations, warranties and covenants contained in this Agreement, and
intending to be legally bound by this Agreement, the Parties agree as
follows:

     

    ARTICLE
1

    THE
TRANSACTION

     

    1.1           Purchase of Purchased
Interest.  At the Closing, pursuant to the terms and conditions
of this Agreement, Buyer shall purchase from the Company, and the Company shall
sell and transfer to Buyer, seventy (70) Units, which shall represent seventy
percent (70%) of the Company’s Membership Interests (the “Purchased Interest”), for the
consideration specified below in this Article
1.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.2           Payment of the Purchase
Price.  The aggregate purchase price (the “Purchase Price”) to be paid
for the Purchased Interest will be equal to the sum of the Initial Payment
Amount and, if and when earned and subject to Section 7.4(b), the
Second Payment Amount, which shall be determined and paid as
follows:

     

    (a)           At
the Closing, Buyer shall pay to the Company an initial aggregate purchase price
amount of $2,000,000 (the “Initial Payment Amount”) in
accordance with Section
1.3.   Upon payment of the Initial Payment Amount, the
Company shall deliver to Buyer a certificate reflecting the Purchased
Interest.  Immediately following such payment and delivery, the Units
and Membership Interest in the Company of Buyer, Ernst and the Other Members
shall be as set forth on Exhibit
A.

     

    (b)           If
the Company successfully achieves the goals and metrics to be agreed upon by the
Parties prior to Closing (the “Triggering Metrics”) for the
twelve (12) months ending April 30, 2010 (as determined by the Parties within
(30) days thereafter), within thirty (30) days after such determination, Buyer
shall pay the Company an additional aggregate purchase price amount, in cash, of
$2,000,000 (the “Second Payment
Amount”), subject to Buyer’s rights under Section
7.4(b).  Any dispute regarding the Company’s achievement of the
Triggering Metrics shall be resolved in accordance with procedures set forth on
Exhibit
B.

     

    1.3           Manner of
Payment.  The Initial Payment Amount and, if and when payable,
the Second Payment Amount shall be paid by Buyer to the Company, by wire
transfer of immediately available funds to an account specified by the Company,
subject in the case of the Second Payment to Buyer’s rights under Section
7.4(b).

     

    1.4           Use of
Proceeds.  The Company will use the proceeds from the sale of
the Purchased Interest for working capital.

     

    1.5           The Closing.  The
closing of the purchase and sale of the Purchased Interest (the “Closing”) shall take place at
the office of Bryan Cave LLP, 3500 One Kansas City Place, 1200 Main Street,
Kansas City, Missouri 64105 at 10:00 a.m. on April 30, 2009, subject however, to
the satisfaction or waiver of all conditions set forth in Article 5, or such
other date as the Parties may mutually determine, but in no event later than May
31, 2009 (the “Closing
Date”).

     

    ARTICLE
2

    REPRESENTATIONS
AND WARRANTIES OF

    THE
COMPANY AND ERNST

     

    The
Company and Ernst hereby represent and warrant to Buyer as follows:

     

    2.1           Organization, Qualification and
Power.  The Company is a limited liability company duly
organized and validly existing under the laws of the State of
Delaware.  The Company is duly qualified to conduct business and is in
good standing under the laws of each jurisdiction in which the nature of the
Company’s Business or the ownership or leasing of its properties requires such
qualification.  The Company has all requisite power and authority to
own, lease and operate its properties and carry on its Business as now conducted
and proposed to be conducted.  The Company is not in default under or
in violation of any provision of its certificate of formation or operating
agreement or any resolution adopted by the member of the Company.

     

    
      
         

      

      
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    2.2           Capitalization.

     

    (a)           Ernst
is the sole member of the Company.  Upon consummation of the Closing,
the name of each holder of Units in the Company and the number of Units owned by
each such holder shall be as set forth on  Exhibit
A.  Upon consummation of the Closing, the Company will not be subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any of the Company’s Units, except pursuant to the terms of the
Amended Operating Agreement or Section 4.4 of this
Agreement.  Upon consummation of the Closing, all of the outstanding
Units of the Company shall be validly issued, fully paid and
nonassessable.

     

    (b)           There
are no statutory or, except as set forth in the Amended Operating Agreement or
Section 4.4 of
this Agreement, contractual equity holders’ preemptive rights or rights of
refusal with respect to the issuance of the Purchased Interest
hereunder.  The Company has not violated and will not knowingly
violate any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its Units, and, assuming the truth and
accuracy of Buyer’s representations and warranties set forth in Section 3.5 of this
Agreement, there is an exemption available to the Company from the registration
requirements of the Securities Act and any applicable state securities laws in
connection with the offer, sale and issuance of the Purchased
Interest.  There are no agreements between the holders of the
Company’s Units with respect to the voting or transfer of the Company’s Units or
with respect to any other aspect of the Company’s affairs, except for the
Amended Operating Agreement.

     

    2.3           Ownership.  As of
the Effective Date, all of the issued and outstanding Units and Membership
Interests of the Company that are held of record by Ernst are owned beneficially
by Ernst free and clear of any Taxes or Liens, other than rights and obligations
under the Amended Operating Agreement and this Agreement.

     

    2.4           Subsidiaries.  The
Company does not own any equity interest in, or otherwise have any investment
in, any entity, joint venture or association.

     

    2.5           Authority and
Enforceability.  The Company and Ernst have full capacity to
execute, deliver and perform its or his obligations under this
Agreement.  The execution, delivery and performance of this Agreement
by the Company has been duly authorized by all necessary limited liability
company action.  This Agreement has been duly executed and delivered
by the Company and Ernst and constitutes the valid and legally binding
obligation of the Company and Ernst, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors’ rights and to general
equity principles.

     

    2.6           Noncontravention.  Except
as provided on Schedule 2.6, neither
the Company nor Ernst is required to give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental Authority or
Person in order to execute and deliver this Agreement or to perform its or his
obligations hereunder.  Neither the execution and delivery of this
Agreement by the Company or Ernst nor the consummation of the transactions
contemplated by this Agreement will: (a) violate any Law to which the Company or
Ernst is subject; (b) violate any provision of the certificate of formation or
operating agreement or other constituent documents of the Company; or (c)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, give any Person the right to accelerate, terminate, modify or
cancel, or require any notice under, any agreement, license, permit,
authorization, instrument or other arrangement to which the Company or Ernst is
a party or by which the Company or Ernst is bound.

     

    
      
         

      

      
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    2.7           Financial
Statements.  The books of account and related records of the
Company correctly, accurately and completely reflect, in all material respects,
all of the assets and Liabilities of the Company on a consolidated basis, except
for such additional assets and Liabilities as are disclosed in Schedule
2.7.  Attached as Schedule 2.7 are the
unaudited balance sheet and unaudited statement of income of the Company as of
and for the fiscal year ended December 31, 2008 and the unaudited balance sheet
and statement of income of the Company as of and for the periods ended April 26,
2009 and April 25, 2009, respectively (each a “Financial Statement” and
collectively the “Financial
Statements”).  Each Financial Statement: (a) has been prepared
based on, and in accordance with, the books of account and related records of
the Company, and (b) correctly, accurately and completely presents, in all
material respects, the financial condition, financial position, results of
operations, assets and Liabilities of the Company for the periods
covered.

     

    2.8           Absence of
Changes.  Except as disclosed on Schedule 2.8, the
Company has not made any distributions or other payments to Ernst in respect of
his Units and Membership Interests and has not made any other payments to Ernst
or any Affiliate of Ernst other than in the ordinary course of business
consistent with past practice.  Since the Company’s inception, there
has been no event or occurrence which has caused or could reasonably be expected
to cause a Material Adverse Effect.  Since the Company’s inception,
except as disclosed in the Company’s Financial Statements or in Schedule 2.8, there
has not been:

     

    (a)           any
sale, lease, transfer, assignment or other disposition by the Company of any of
its assets or properties other than for fair consideration in the ordinary
course of business consistent with past practice, or any disposition or loss of
use by the Company of any Intellectual Property;

     

    (b)           any
agreement, lease, license or other arrangement (or series of related agreements,
leases, licenses or other arrangements) entered into by the Company other than
in the ordinary course of business consistent with past practice;

     

    (c)           any
acceleration, termination, modification or cancellation by any Person (including
the Company) of any agreement, lease, license or other arrangement to which the
Company is a party;

     

    (d)           any
note, bond or other debt security issued or any indebtedness for borrowed money
or capitalized lease obligation created, incurred, assumed or guaranteed by the
Company;

     

    
      
         

      

      
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    (e)           any
cancellation, compromise, waiver or release of any right or claim by the
Company;

     

    (f)       
    any payment of bonus compensation to any of the members,
officers or employees of the Company;

     

    (g)           any
change by the Company in its accounting methods, principles or
practices;

     

    (h)           any
tax election by the Company outside the ordinary course of business or
inconsistent with past practice; or

     

    (i)          
 any occurrence, event, incident, action, and failure to take action or
transaction involving the Company that has had or is reasonably likely to have a
Material Adverse Effect.

     

    2.9           Undisclosed Liabilities.
Except as set forth on Schedule 2.9, the
Company does not have any material Liability, except for: (a) Liabilities set
forth in the April 26, 2009 balance sheet included in the Financial Statements;
and (b) Liabilities incurred since April 25, 2009 in the ordinary course of
business consistent in nature with those reflected in the Financial
Statements.

     

    2.10         Claims.  There are
no actions, suits, proceedings, hearings, investigations, charges, complaints,
claims or demands of any kind pending or, to the Knowledge of the Company,
threatened against or affecting the Company and, to the Knowledge of the
Company, there is no reasonable basis for any of the foregoing.  There
are no actions, suits, proceedings, hearings, investigations, charges,
complaints, claims or demands of any kind pending or, to the Knowledge of the
Company, threatened against or affecting the Company that would be reasonably
likely to affect the Company or any aspect of the Business, and, to the
Knowledge of the Company, there is no reasonable basis for any of the
foregoing.

     

    2.11         Legal
Compliance.  Except as disclosed on Schedule 2.11, in all
material respects: (a) the Company has complied and is currently in compliance
with each applicable Law; and (b) the Company has obtained all franchises,
approvals, permits, licenses, orders, registrations, certificates, variances or
similar rights required to conduct the Business or maintain its assets, and such
franchises, approvals, permits, licenses, orders, registrations, certificates,
variances or similar rights are current and have not been revoked, suspended,
canceled or terminated, nor has notice been given of any threatened revocation,
suspension, cancellation, termination or non-renewal.

     

    2.12         Title to
Assets.  The Company has good and marketable title to the
assets identified in the Financial Statements (except those sold to third
parties in the ordinary course of business) free and clear of all
Liens.  The Company has a valid leasehold interest in, or license or
other contractual right to use, all other assets used by the Company in the
conduct of the Business.

     

    2.13         Real Property.  The
Company does not currently own, and has never owned, any real
property.  Schedule 2.13 lists
each lease of real property to which the Company is a party or by which it is
bound.  Correct and complete copies of such leases, as amended to
date, have been provided to Buyer.  Each such lease is valid, binding,
enforceable and in full force and effect, and neither the Company nor, to the
Knowledge of the Company, any other party, is in default of any material
obligation under any such lease.

     

    
      
         

      

      
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    2.14         Intellectual
Property.  The Company owns all right, title and interest in
and to (free and clear of all Liens), or has the right to use pursuant to a
valid and enforceable license, sublicense, agreement or permission, all
Intellectual Property used in or necessary to the operation of the
Business.  Schedule 2.14
contains a complete and accurate list of all Intellectual Property owned or
licensed by the Company, other than off-the-shelf software
licenses.  The Company has not interfered with, infringed upon,
misappropriated, or otherwise violated any Intellectual Property rights of any
other Person known to the Company, Ernst or the Other Members, and the Company
has never received any charge, complaint, claim, demand or notice alleging any
such interference, infringement, misappropriation or violation.  To
the Knowledge of the Company, no other Person has interfered with, infringed
upon, misappropriated or otherwise conflicted with any Intellectual Property
rights of the Company.

     

    2.15         Contracts.

     

    (a)           The
Company is not a party to or bound by any agreement that purports to restrict
the freedom of the Company or Ernst to engage in any line of business or to
compete with any person.

     

    (b)           The
Company has delivered to Buyer a correct and complete copy of each written
Material Contract, as amended to date, and a written summary setting forth the
terms and conditions of each oral Material Contract.  With respect to
each Material Contract: (i) the Material Contract is legal, valid, binding and
enforceable by the Company and in full force and effect; (ii) to the Knowledge
of the Company, no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification or acceleration, under the Material Contract;
and (iii) to the Knowledge of the Company, no Person has repudiated any
provision of the Material Contract. As used herein, the term “Material Contract”
means:

     

    (i)         
  any agreement (or group of related agreements) for the purchase,
sale, lease or license of goods or services that is reasonably likely to involve
payments to or by the Company in excess of $5,000.00;

     

    (ii)            any
agreement concerning a partnership, joint venture or other business arrangement
with any Person;

     

    (iii)           any
agreement (or group of related agreements) under which (A) any indebtedness for
borrowed money or capitalized lease obligation has been created, incurred,
assumed or guaranteed, or (B) any Lien has been granted or imposed on any assets
or properties of the Company;

     

    (iv)           any
license, sublicense, agreement or permission pursuant to which an item of
Intellectual Property is used;

     

    
      
         

      

      
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    (v)           any
agreement under which a default (whether by the Company or any third party)
would reasonably be expected to have a Material Adverse Effect; or

     

    (vi)           any
agreement for the provision of goods or services by the Company outside the
ordinary course of business.

     

    2.16         Employment
and Consulting Matters.

     

    (a)           The
Company does not currently have, and has never had, any
employees.  Set forth on Schedule 2.16(a) is a
complete and accurate list of the following information for each consultant of
the Company: name, job title, date of engagement, current compensation paid or
payable and any change in compensation during the last 12 months.

     

    (b)           Except
as disclosed on Schedule 2.16(a), the Company is not a party to or bound by any
agreement with any person relating to employment or consulting services,
including but not limited to any agreement specifying a length of employment or
consulting services, base or bonus compensation, severance benefits, or other
employment or consulting terms.

     

    (c)           The
execution, delivery and performance of this Agreement will not trigger any
severance, bonus or other payment obligations to any consultant of the Company
under any contract or otherwise.

     

    (d)           Except
as disclosed on Schedule 2.16(d), the
Company has complied with all Laws relating to employment.

     

    2.17         Employee
Benefits.

     

    (a)           The
Company does not currently have, and has never had, a retirement, pension,
profit sharing, deferred compensation, stock purchase, stock option, incentive,
bonus, severance, retirement, health, welfare, fringe benefit, or other plan,
contract, commitment or arrangement for the benefit of the current or former
directors, officers or consultants of the Company, or any of their respective
dependents, survivors or beneficiaries, that is sponsored, maintained or
contributed to by the Company, or with respect to which the Company could incur
Liability under ERISA or the Code.

     

    2.18         Insurance.

     

    (a)           The
Company has delivered to Buyer accurate and complete copies of all policies of
insurance, including insurance providing benefits for employees (and
correspondence relating to coverage thereunder), providing coverage to the
Company.  All policies of insurance that provide coverage to the
Company: (i) are valid, outstanding and enforceable, and no party thereto is in
default, breach or violation of any obligations or conditions thereunder; (ii)
are issued by an insurer that is financially sound; and (iii) taken together,
provide insurance coverage in scope and amount customary and reasonable for the
Business.

     

    (b)           The
Company has not received (i) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (ii) any notice of
cancellation or non-renewal any other indication that any policy of insurance is
no longer in full force or effect or that the issuer of any policy of insurance
is not willing or able to perform its obligations thereunder.

     

    
      
         

      

      
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    2.19    
     Taxes.

     

    (a)           Except
as set forth on Schedule 2.19, the
Company has: (i) timely and duly filed all Tax returns that the Company is
required to file (the “Tax
Returns”), each of which was accurate and complete in all material
respects; (ii) timely paid all Taxes that have become due and payable, except
such as are being contested in good faith by appropriate proceedings (to the
extent that any such proceedings are required) and with respect to which the
Company is maintaining reserves or accruals in its Financial Statements in an
amount equal to the Taxes being contested; (iii) withheld or collected all Taxes
that the Company was required to withhold or collect, and to the extent
required, paid such Taxes to the proper Governmental Authority; and (iv)
maintained accruals and reserves in its Financial Statements which are in all
respects adequate to cover all Liabilities of the Company for
Taxes.

     

    (b)           To
the Knowledge of the Company, no claim has been made by any Governmental
Authority in a jurisdiction where the Company does not file Tax Returns that the
Company is or may be subject to taxation in that jurisdiction.

     

    (c)           No
extension of time has been requested or granted with respect to the filing of
any Tax Returns.  No Tax Return has ever been audited by any
Governmental Authority and there are no pending or, to the Knowledge of the
Company, threatened, actions, suits, proceedings, disputes, investigations,
audits, charges, claims or demands of any kind relating to Taxes or any Tax
Returns of the Company.  The Company has not granted or been requested
to grant any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax.

     

    (d)           There
is no tax sharing agreement, tax allocation agreement, tax indemnity obligation
or similar written or unwritten agreement, arrangement, understanding or
practice with respect to Taxes to which the Company is a party of by which it is
bound.

     

    2.20          Related Party
Transactions.  Except as set forth on Schedule 2.20,
neither Ernst nor any employee, director, officer, or other representative of
the Company, nor any family member of any of the foregoing, nor any entity in
which any of the foregoing has a financial interest (other than passive
investments in publicly traded securities): (a) is a party to any agreement or
other form of transaction or arrangement with the Company (other than the
Company’s operating agreement, and other than consulting arrangements that are
otherwise disclosed under this Agreement), including, but not limited to, any
loan or any lease or license of any property or assets; (b) has an interest in
any property or assets used by or in connection with any aspect of the Business;
or (c) is engaged in competition with the Company with respect to any of the
products or services of the Company in any market.

     

    2.21          Brokers.  No finder,
broker, agent, or other intermediary acting on behalf of the Company or Ernst is
entitled to a commission, fee, or other compensation in connection with the
negotiation or consummation of this Agreement or any of the transactions
contemplated hereby.

     

    
      
         

      

      
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    2.22          Restrictions on
Ernst.  Neither the Company’s current or proposed operation of
the Business nor Ernst’s involvement in the same (if any, after Closing)
violates any contract to which Ernst is a party including, without limitation,
that certain Separation and Release Agreement dated December 28, 2007 by and
between HRB Management, Inc. and Ernst, as the same may be amended, and as of
the Effective Date the Company does not provide, and the Business does not
consist of, tax preparation, accounting or small business services.

     

    2.23          IRS
Divestiture.  Ernst’s transfer of his Membership Interest to
the Ernst Trust complies with all requirements imposed upon him by his current
employer, the Internal Revenue Service, including, without limitation, the
Government Ethics Programs contained in Part 39 of the Internal Revenue
Manual.

     

    2.24          Full Disclosure.  No
representation, warranty, covenant or agreement made by the Company or Ernst in
this Agreement or in the exhibits or schedules hereto contains any false or
misleading statement of a material fact, or omits any material fact required to
be stated therein or necessary in order to make the statements therein not false
or misleading.

     

    ARTICLE
3

    REPRESENTATIONS
AND WARRANTIES OF BUYER

     

    Buyer
hereby represents and warrants to the Company:

     

    3.1     
      Organization and Good
Standing.  Buyer is a corporation duly formed, validly existing
and in good standing under the laws of the State of Maryland.

     

    3.2      
     Authority and
Enforceability.  Buyer has full power and authority to execute,
deliver and perform this Agreement, and the execution, delivery and performance
of this Agreement by Buyer has been duly authorized by all necessary corporate
action.  This Agreement has been duly executed and delivered by Buyer
and constitutes the valid and legally binding obligation of Buyer, enforceable
in accordance with its terms.  Buyer is not required to give any
notice to, make any filing with or obtain any authorization, consent or approval
of any Governmental Authority or Person in order for the parties to consummate
the transactions contemplated by this Agreement.

     

    3.3       
    Noncontravention.  Neither
the execution or delivery of this Agreement, nor the consummation of the
transactions contemplated by this Agreement, will: (a) violate any Law to which
Buyer is subject; (b) violate any provision of the certificate of incorporation
or bylaws of Buyer or any resolution adopted by the board of directors or
shareholders of
Buyer; or (c) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, give any Person the right to accelerate,
terminate, modify or cancel, or require any notice under, any material
agreement, license, permit, authorization, instrument or other arrangement to
which Buyer is a party or by which Buyer is bound or to which its assets are
subject (or result in the imposition of any Lien upon any of its
assets).

     

    
      
         

      

      
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    3.4       
    Brokers.  No finder,
broker, agent, or other intermediary acting on behalf of Buyer is entitled to a
commission, fee, or other compensation in connection with the negotiation or
consummation of this Agreement or any of the transactions contemplated
hereby.

     

    3.5        
   Investment; Securities Laws.

     

    (a)           Buyer
represents that Buyer is acquiring the Purchased Interest for its own account,
not as nominee or agent for any other Person and not with a view to the resale
or distribution of any part thereof within the meaning of the Securities Act or
any applicable blue sky or state securities law, and Buyer has no present
intention of selling or granting any participation in or otherwise distributing
all or a portion of the same, except as expressly provided in the Amended
Operating Agreement.

     

    (b)           Buyer
represents that it understands that the Purchased Interest has not been and will
not be registered under the Securities Act or under any applicable blue sky or
state securities laws, and that the Purchased Interest must be held indefinitely
unless the Purchased Interest is subsequently registered under the Securities
Act and all applicable blue sky or state securities laws or an exemption from
such registration is available.

     

    ARTICLE
4

    ADDITIONAL
AGREEMENTS

     

    4.1           Pre-Closing Covenants.  The Parties agree
as follows with respect to the period between the Effective Date and the
Closing:

     

    (a)       
    Each of the Parties will use its best efforts to take
all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article 5
below).

     

    (b)           The
Company will give any notices to third parties, and the Company will use its
commercially reasonable efforts to obtain any third party consents, that Buyer
may request.  The Company will give any notices to, make any filings
with, and use its best efforts to obtain any authorizations, consents, and
approvals of any Governmental Authority in connection with the matters referred
to in Section
2.6 above.

     

    (c)       
    Except for the transactions contemplated by this
Agreement, the Company will not engage in any practice, take any action, or
enter into any transaction outside the ordinary course of business as it relates
to the Business.  Without limiting the generality of the foregoing,
the Company will not (i) declare, set aside, or pay any dividend or make any
distribution with respect to its equity securities or redeem, purchase, or
otherwise acquire any of its equity securities, or (ii) otherwise engage in
any practice, take any action, or enter into any transaction of the sort
described in Section
2.8 above.

     

    (d)           The
Company will keep the Business and its properties substantially intact,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and
employees.

     

    
      
         

      

      
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    (e)           The
Company will permit representatives of Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Company and the Business.

     

    (f)         
  During all periods prior to the Closing, the Company or Ernst shall
promptly notify Buyer with respect to any matter, event or circumstance (i)
arising on or before the Effective Date which was known by the Company or Ernst
and that would otherwise constitute a breach, violation or inaccuracy of any
representation or warranty of the Company or Ernst set forth herein, (ii)
arising on or before the Effective Date which was not known by the Company or
Ernst and that would otherwise constitute a breach, violation or inaccuracy of
any representation or warranty of the Company and Ernst set forth herein, (iii)
arising after the Effective Date that, if existing at, or occurring on the
Effective Date, the Closing Date or any date in between the Effective Date and
the Closing Date, would constitute a breach, violation or inaccuracy of any
representation or warranty of the Company and Ernst set forth herein, or (iv)
relating to a breach or violation of any covenant, agreement or obligation of
the Company set forth herein.  No notification of a matter, event or
circumstance set forth in clause (i) or (iv) shall be deemed to cure any breach,
violation or inaccuracy of any representation or warranty or a breach or
violation of any covenant, agreement or obligation, nor limit or alter any of
the representations, warranties, covenants, agreements or obligations of the
Company or Ernst set forth in this Agreement nor any rights or remedies Buyer
may have with respect thereto for purposes of Section 7.1(a) of
this Agreement.  Upon notification of a matter, event or circumstance
specified in clause (ii) or (iii) above, the Company and Ernst may update and
supplement the Schedules with respect to such matter, event or circumstance by
written notice to Buyer.  If requested by Buyer, the Company and Ernst
shall discuss with Buyer any such update or supplement to the Schedules made by
the Company if, absent such change, such matter, event or circumstance would
result in a condition precedent set forth in Sections 5.1(a) or
5.1(e) hereof to remain unsatisfied (a “Material Disclosure Schedule
Change”).  If the Parties cannot resolve any differences
regarding a Material Disclosure Schedule Change, then Buyer shall either
(x) close the transactions contemplated hereby (in which case the
representations and warranties contained herein shall be deemed to have been
updated by the Company’s or Ernst’s disclosure of such matters, events and
circumstances but only to the extent resulting from matters, events or
circumstances arising under (ii) or (iii) above) or (y) terminate this
Agreement without liability to Buyer, said election to be exercised no later
than twenty (20) days following the date on which Buyer receives notice of such
Material Disclosure Schedule Change.

     

    (g)           The
Company and Ernst will not, directly or indirectly, (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any Membership Interests or Units, or any portion of the
assets, of the Company or (ii) participate in any discussions or
negotiations regarding, or facilitate in any other manner any effort or attempt
by any Person to do or seek any of the foregoing.

     

    
      
         

      

      
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    4.2           Intellectual Property
Transfers.  As of the Closing, Ernst shall irrevocably sell,
grant, convey, assign and deliver unto the Company, its successors and assigns,
all of his right, title and interest (if any), throughout the world, in and to
the Inventions, all prior and derivative works relating to the Inventions, all
actions and causes of action relating to the Inventions, and all profits,
damages, penalties and other recoveries related to any of the
foregoing.  As used herein, the term “Inventions” means any and all
inventions, technological innovations, modifications, discoveries, designs,
developments, improvements, processes, programs, formulas, data, techniques,
methods, know-how, ideas, creations, secrets and any other intellectual property
rights whatsoever including any and all interests (whether or not patentable or
registrable under copyright or similar statutes or subject to analogous
protection) and improvements to all such properties that Ernst (either alone or
with others) possessed and/or has made, conceived, discovered, created,
developed, invented, produced, or reduced to practice or possession that (i) in
case of any of the foregoing, relate to or are used or to be used in connection
with the Business or any of the products or services being developed, provided
or sold (or to be developed, provided or sold) by the Company and (ii) was made,
conceived, discovered, created, developed, invented, produced, or reduced to
practice or possession  after December 31, 2007, in the case of
inventions by Ernst, and after January 31, 2008, in the case of any co-inventors
who are also Other Members.  Ernst covenants that, when requested
following the Closing, he will, without charge to the Company, its successors
and assigns, but without out-of-pocket expense to him, execute all documents and
take all such further actions as may be reasonably necessary, desirable or
convenient to enable the Company and its successors and assigns to obtain,
maintain and enforce, in any and all countries, its intellectual property rights
and interests in the matters herein assigned to the Company.

     

    4.3           Further
Assurances.  In case at any time after the date hereof any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties shall take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Article
5).

     

    4.4           Redemption
Option.  If Buyer breaches Section 1.2(b) by
failing to pay the Second Payment Amount when owed, the Company shall have the
option to redeem for $1.00 that number of Units held by Buyer such that
following the redemption, Buyer’s Membership Interest in the Company shall equal
thirty-five percent (35%) (the “Redemption
Option”).  The Redemption Option may be exercised by delivery
of notice to Buyer in accordance with this Agreement.  Notwithstanding
anything to the contrary contained in this Agreement (including without
limitation the provisions in Article 7), the
Redemption Option shall be the Company’s and Ernst’s sole and exclusive remedy
for a breach of Section 1.2(b) by
Buyer, and Buyer shall under no circumstances be liable to the Company or Ernst
for any indirect, special, consequential or incidental damages or any lost
profits or income related to a breach of Section
1.2(b).

     

    4.5           Additional
Agreements.  Simultaneously with the execution of this
Agreement, Company and Ernst shall deliver to Buyer a fully executed
confidentiality, noncompetition and nonsolicitation agreement between Ernst and
the Company (the “Noncompete
Agreement”) and that certain membership interest pledge agreement (the
“Pledge Agreement”)
executed by Ernst in favor of Buyer.

     

     

    
      
         

      

      
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    ARTICLE
5

    CONDITIONS
TO OBLIGATION TO CLOSE

     

    5.1           Conditions to Obligation of
Buyer.  The obligation of
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:

     

    (a)           the
representations and warranties set forth in Article 2 above shall
be true and correct in all material respects at and as of the Closing
Date;

     

    (b)           the
Company and Ernst shall have performed and complied with all of its or his
covenants hereunder through the Closing;

     

    (c)           the
Company shall have procured all of the third party consents required to
consummate the transactions contemplated in this Agreement;

     

    (d)           no
action, suit, or proceeding shall be pending or threatened before any court or
quasi judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of Buyer to own the Purchased
Interest;

     

    (e)           since
the Effective Date there shall have been no Material Adverse Effect on the
Company;

     

    (f)           the
Company and Ernst shall have delivered or caused to be delivered to Buyer (or
tendered subject only to Closing) the following documents:

     

    (i)       
    a certificate representing the Purchased
Interest;

     

    (ii)           an
Officer’s Certificate of the Company, dated as of the Closing Date, stating that
(A) the conditions specified in Section 5.1(a)-(e)
are satisfied in all respects and (B) the Noncompete Agreement and Pledge
Agreement are in full force and effect and have not been altered, modified,
amended, terminated or repudiated by any party thereto;

     

    (iii)           a
Secretary’s Certificate from the Company certifying the names and signatures of
the officers of the Company authorized to sign each of the Investment Documents
to which the Company is a party;

     

    (iv)          certified
copies of the resolutions duly adopted by the sole member of the Company
authorizing the execution, deliver and performance of each of the Investment
Documents to which it is a party, the issuance and sale of the Purchased
Interest and the consummation of all other transactions contemplated by the
Investment Documents;

     

    (v)           certified
copies of the Company’s certificate of organization;

     

    (vi)           certificates
of good standing, dated not more than ten (10) days prior to the Closing Date,
of the Company issued by its jurisdiction of organization and from each
jurisdiction in which the Company is qualified to do business;

     

    
      
         

      

      
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    (vii)          a
certificate from the trustee(s) of the Ernst Trust that its Units and Membership
Interest are free and clear of all Liens;

     

    (viii)        copies
of all third party and governmental consents, approvals and filings required in
connection with the consummation of the transactions under the Investment
Documents (including all blue sky law filings and waivers of all preemptive
rights, rights of first refusal and all other similar rights);

     

    (ix)           fully
executed employment agreements between the Company and each of the Other Members
(the “Employment
Agreements”) on terms satisfactory to Buyer;

     

    (x)           an
executed opinion of Company’s counsel dated the Closing Date satisfactory to
Buyer and its counsel;

     

    (xi)           a
certificate reflecting the Ernst Trust’s ownership of its Units and Membership
Interest in order to perfect the security interest granted by Section 7.2 and the
Pledge Agreement, together with an assignment separate from the certificate
executed in blank by the Ernst Trust;

     

    (xii)           an
invoice dated as of the Closing Date from Sonnenschein Nath & Rosenthal LLP
reflecting all fees and expenses charged to the Company and/or Ernst in
connection with the negotiation and documentation of the transactions
contemplated by this Agreement;

     

    (xiii)         evidence
satisfactory to Buyer that the Other Members have waived their rights to any
consulting payments from the Company for April 2009; and

     

    (xiv)         such
other documents related to the transactions contemplated by the Investment
Documents as Buyer and its counsel may reasonably request;

     

    (g)           neither
the consummation nor the performance of any of the transactions contemplated
herein will, directly or indirectly (with or without notice or lapse of time),
contravene or conflict with or result in a violation of or cause Buyer or any
Affiliate of Buyer to suffer any Adverse Consequences under any applicable
Law;

     

    (h)           Buyer
shall be satisfied in its sole discretion with the result of its due diligence
review of the Company, its Business, operations, prospects and
assets;

     

    
      
         

      

      
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    (i)         
  Buyer’s board of directors shall have authorized the execution,
delivery and performance of each of the Investment Documents to which Buyer is a
party and the consummation of all other transactions contemplated by the
Investment Documents; and

     

    (j)         
  all actions to be taken by the Company in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Buyer in its
sole discretion, and in full force and effect.

     

    Buyer may
waive any condition specified in this Section 5.1 if it
executes a writing so stating at or prior to the Closing.

     

    5.2           Conditions to Obligation of the
Company.  The
obligation of the Company and Ernst to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:

     

    (a)           the
representations and warranties set forth in Article 3 above shall
be true and correct in all material respects at and as of the Closing
Date;

     

    (b)           Buyer
shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing;

     

    (c)           no
action, suit, or proceeding shall be pending or threatened before any court or
quasi judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (1) prevent consummation of any
of the transactions contemplated by this Agreement or (2) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);

     

    (d)           Buyer
shall have delivered or caused to be delivered to the Company (or tendered
subject only to Closing) the following documents:

     

    (i)           the
Initial Payment Amount; and

     

    (ii)           an
Officer’s Certificate of Buyer, dated as of the Closing Date, stating that the
conditions specified in Section 5.2(a)-(c)
are satisfied in all respects;

     

    (e)           all
actions to be taken by Buyer in connection with consummation of the transactions
contemplated hereby and all certificates, instruments, and other documents
required to effect the transactions contemplated hereby will be satisfactory in
form and substance to the Company and Ernst in its or his sole discretion, and
in full force and effect.

     

    The
Company and Ernst may waive any condition specified in this Section 5.2 if it or
he executes a writing so stating at or prior to the Closing.

     

    
      
         

      

      
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    5.3           Conditions to the Parties’ Obligation
to Close.  The obligation of the Company and Ernst, on the one
hand, and Buyer, on the other hand, to consummate the transactions to be
performed by each of them in connection with the Closing is subject to
satisfaction of the following conditions:

     

    (a)            Buyer, the Company, the
Ernst Trust and the Other Members shall have executed the amended and restated
operating agreement of the Company (the “Amended Operating Agreement”)
on terms satisfactory to each of them in their sole discretion;

     

    (b)           Buyer,
Ernst and the Ernst Trust shall have executed an acknowledgement and consent
(the “Acknowledgement and
Consent”) in connection with the Pledge Agreement on terms satisfactory
to each of them in their sole discretion;

     

    (c)           Buyer
and the Company shall have executed an administrative services agreement (the
“Administrative Services
Agreement”) on terms satisfactory to each of them in their sole
discretion; and

     

    (d)           Buyer
and the Company shall have executed a letter agreement regarding the issuance of
certain patents (the “Patent
Letter Agreement”) on terms satisfactory to each of them in their sole
discretion.

     

    (e)           The
Parties shall have agreed upon the Triggering Metrics.

     

    ARTICLE
6

    TERMINATION

     

    6.1           Termination of
Agreement.  The Parties may terminate this Agreement as
provided below:

     

    (a)           Buyer,
the Company and Ernst may terminate this Agreement by mutual written consent at
any time prior to the Closing;

     

    (b)           Buyer
may terminate this Agreement by giving written notice to the Company and Ernst
at any time prior to the Closing (i) in the event the Company or Ernst has
breached any representation, warranty, or covenant contained in this Agreement
in any material respect, Buyer has notified the Company of the breach, and the
breach has continued without cure for a period of 30 days after the notice of
breach or (ii) if the Closing shall not have occurred on or before May 31, 2009,
by reason of the failure of any condition precedent under Section 5.1 hereof
(unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement);
and

     

    (c)           the
Company may terminate this Agreement by giving written notice to Buyer at any
time prior to the Closing (i) in the event Buyer has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, the Company has notified Buyer of the breach, and the breach
has continued without cure for a period of 30 days after the notice of breach or
(ii) if the Closing shall not have occurred on or before May 31, 2009, by reason
of the failure of any condition precedent under Section 5.2 hereof
(unless the failure results primarily from the Company itself or Ernst breaching
any representation, warranty, or covenant contained in this
Agreement).

     

    
      
         

      

      
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    6.2           Effect of
Termination.  If any Party terminates this Agreement pursuant
to Section 6.1
above, all rights and obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party (except for any liability
of any Party then in breach), and each Party shall be responsible for its or his
costs, fees and expenses in connection with this Agreement.

     

    ARTICLE
7

    INDEMNIFICATION

     

    7.1           Indemnification
Obligations.

     

    (a)           The
Company and Ernst shall jointly and severally indemnify Buyer and hold Buyer
harmless from and against any and all Adverse Consequences arising out of or
resulting from any misrepresentation or breach of any representation, warranty,
covenant or agreement made by the Company or Ernst in this Agreement or in any
statement, certificate, instrument or other document or item furnished or
delivered or to be furnished or delivered by the Company or Ernst to Buyer in
connection with the transactions contemplated by this
Agreement.  Notwithstanding the foregoing: (i) Buyer shall not be
entitled to indemnification under this Section (other than with respect to a
breach of any covenant or agreement contained herein) unless the aggregate
monetary amount of all Adverse Consequences for which Buyer would, in the
absence of this sentence, be entitled to receive indemnification under this
Section exceeds an amount equal to $10,000 (the “Threshold”), and then Buyer
shall be entitled to indemnification for only such amounts that, in the
aggregate, exceed the Threshold; and (ii) the aggregate indemnification
obligations of the Company and Ernst collectively under this Article 7 (other than
with respect to a breach of any covenant or agreement contained herein) shall
not exceed $1,000,000.

     

    (b)           Except
as otherwise provided in Section 4.4, Buyer
shall indemnify the Company and hold the Company harmless from and against any
and all Adverse Consequences arising out of or resulting from any
misrepresentation or breach of any representation, warranty, covenant or
agreement made by Buyer in this Agreement or in any statement, certificate,
instrument or other document or item furnished or delivered or to be furnished
or delivered by Buyer to the Company or Ernst in connection with the
transactions contemplated by this Agreement.  Notwithstanding the
foregoing: (i) the Company shall not be entitled to indemnification under this
Section (other than with respect to a breach of any covenant or agreement
contained herein) unless the aggregate monetary amount of all Adverse
Consequences for which the Company would, in the absence of this sentence, be
entitled to receive indemnification under this Section exceeds the Threshold,
and then the Company shall be entitled to indemnification for only such amounts
that, in the aggregate, exceed the Threshold; and (ii) the aggregate
indemnification obligations of Buyer under this Article 7 (other than
with respect to a breach of any covenant or agreement contained herein) shall
not exceed $1,000,000.

     

    
      
         

      

      
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    7.2           Security
Interest.  Ernst hereby pledges and grants to Buyer a first
priority perfected security interest in the Units and Membership Interests owned
by Ernst and all distributions thereon and proceeds thereof, to secure the
obligations of Ernst hereunder.  Ernst agrees to deliver possession of
any certificates reflecting ownership of the Units and Membership Interests to
Buyer at Closing.  Without limiting any other rights, in the event
that Ernst fails to pay to Buyer, when due, the amount of any Claim hereunder
that Ernst is obligated to pay to Buyer, the Company hereby agrees to pay to
Buyer any and all distributions that otherwise would be made with respect to
such Units and Membership Interests to Ernst, and to otherwise comply with
written instructions of Buyer without further consent of any Person, until such
liability to Buyer is satisfied in full.  Ernst and the Company shall
take such actions and deliver such further instruments and documents as Buyer
may from time to time request to perfect and otherwise give effect to the
security interest granted hereby.

     

    7.3           Indemnification
Procedures.

     

    (a)           All
representations and warranties contained in this Agreement or any statement,
certificate, instrument or other document or item delivered or to be delivered
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement shall survive the consummation of the transactions
contemplated by this Agreement.

     

    (b)           A
Party seeking indemnification pursuant to this Article 7 (an “Indemnified Party”) shall give
notice to the Party from whom such indemnification is sought (the “Indemnifying Party”) of any
claim for which it is seeking indemnity under this Article 7 (a “Claim”), but failure to give
such notice shall not relieve the Indemnifying Party of any Liability hereunder
(except to the extent that the Indemnifying Party has suffered actual prejudice
thereby).

     

    (c)           An
Indemnifying Party will have the right to defend the Indemnified Party against
any third party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party notifies the Indemnified
Party, in writing, that the Indemnifying Party will defend the Indemnified Party
against the Claim, (ii) the Claim involves only monetary damages and does not
seek an injunction or other equitable relief, (iii) the Indemnifying Party
confirms in writing that such Claim is subject to indemnification by the
Indemnifying Party hereunder, and provides to the Indemnified Party reasonable
assurances that the Indemnifying Party has the financial ability to satisfy the
Claim, and (iv) the Indemnifying Party conducts the defense of the Claim in a
diligent manner.

     

    (d)           So
long as the Indemnifying Party is conducting the defense of the Claim in
accordance with Section 7.3(c): (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Claim; (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Claim without the prior written consent of the Indemnifying Party
(which consent shall not be withheld or delayed unreasonably); and (iii) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Claim without the prior written consent of
the Indemnified Party (which consent shall not be withheld or delayed
unreasonably).

     

    
      
         

      

      
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    (e)       
    In the event any of the conditions set forth in Section 7.3(c) is or
becomes unsatisfied: (i) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to the
Claim (and the Indemnified Party need not consult with, or obtain any consent
from, the Indemnifying Party); (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Claim (including reasonable attorneys’ fees and expenses); and (iii) the
Indemnifying Party will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from or arising out of the
Claim.

     

    (f)         
  For purposes of this Article 7, including
the determination of Claims by any Indemnified Party, any and all references to
a “Material Adverse
Effect” or “material” limitations or
limitations as to “Knowledge”, while being taken
into account for purposes of determining whether a Claim for Adverse
Consequences exists, shall be disregarded for purposes of calculating the amount
of said Claim.  For purposes of calculating the monetary amount of
Adverse Consequences for which any Claim may be made, a credit will be given to
the extent of any insurance recovery, recovery from any other party alleged to
be responsible therefor, or Tax benefit received by the Indemnified Party, in
respect of such Adverse Consequences.  Each Indemnified Party shall
use its best efforts to collect any amounts available under such insurance
coverage and from such other party alleged to have responsibility and to realize
any Tax benefit with respect to any Adverse Consequences.  If the
amount to be netted hereunder from any payment required under Sections 7.1(a) or
7.1(b) is received after payment by the Indemnifying Party of any amount
otherwise required to be paid to an Indemnified Party pursuant to this Article 7, the
Indemnified Party shall repay to the Indemnifying Party, promptly after receipt,
any amount that the Indemnifying Party would not have had to pay pursuant to
this Article 7
had such determination been made at the time of such payment.

     

    (g)           Each
Indemnified Party shall be obligated to use its commercially reasonable efforts
to mitigate the monetary amount of any Adverse Consequences for which it is
entitled to seek indemnification hereunder, and an indemnifying party shall not
be required to make any payment to an Indemnified Party in respect of such
Adverse Consequences to the extent that such payment would have been avoided had
such Indemnified Party not failed to comply with the foregoing
obligation.

     

    (h)           The
indemnities provided for in Sections 7.1(a) and
7.1(b) hereof shall be the exclusive remedies of the parties to this
Agreement and their respective officers, directors, employees, Affiliates,
agents, consultants, representatives, successors and assigns for any breach of
or inaccuracy in any representation or warranty or any breach, non-fulfillment
or default in the performance of any of the covenants or agreements contained in
this Agreement, and the parties shall not be entitled to a rescission of this
Agreement or to any further indemnification rights or claims of any nature
whatsoever in respect thereof, all of which the parties hereto hereby waive;
provided, however, that the limitations of this Section shall not apply in the
case of fraud or to any breach, non-fulfillment or default in the performance of
any of the covenants or agreements contained in Article 4 of this
Agreement; provided, further, that nothing herein shall limit the rights of any
party to seek specific performance or injunctive or other non-monetary equitable
relief.

     

    
      
         

      

      
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    (i)      
     Any liability for indemnification under this Article 7 shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.

     

    (j)          
 Upon making any indemnification payment pursuant to this Article 7, the
Indemnifying Party will, to the extent of such payment, be subrogated to all
rights of the Indemnified Party against any unaffiliated third party in respect
of the Adverse Consequences to which the payment relates; provided, however,
that until the Indemnified Party recovers full payment of its Adverse
Consequences, any and all claims of the Indemnifying Party against any such
unaffiliated third party on account of said payment are hereby made expressly
subordinated and subjected in right of payment to the Indemnified Party’s rights
against such third party. Without limiting the generality of any other provision
hereof, each such Indemnified Party and Indemnifying Party will duly execute
upon request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.

     

    (k)           Notwithstanding
anything herein to the contrary, the representations and warranties under this
Agreement shall survive until the date that is eighteen (18) months following
the date of this Agreement, and no action or claim for Adverse Consequences
resulting from any misrepresentation or breach of warranty shall be brought or
made thereafter; provided, however, that (i) any of the representations and
warranties contained in Sections 2.2, 2.3, 2.5,
2.22, 2.23, 3.1, 3.2 and 3.4 shall survive indefinitely and the
representations and warranties contained in Section 2.19 shall
survive for the applicable statute of limitations; and (ii) any claims which has
been properly asserted pursuant to Section 7.1 prior to
the expiration of the survival period, shall survive until such claim is finally
resolved and satisfied.  The covenants contained in this Agreement
shall survive the Closing indefinitely.

     

    7.4           Determination
and Payment of Claims.

     

    (a)           After
the giving of any Claim Notice pursuant hereto, the amount of any Claim for
which an Indemnified Party shall be entitled to indemnification under this Article 7 shall be
determined: (i) by the written agreement between the Indemnified Party and the
Indemnifying Party; (ii) by a judgment or decree of any court of competent
jurisdiction; or (iii) by any other means to which the Indemnified Party and the
Indemnifying Party shall agree.  All amounts due to the Indemnified
Party as so finally determined shall be paid within five (5) days after such
final determination.

     

    (b)           All
payments made by the Company to any Indemnified Party pursuant to Section 7.1(b) shall
be treated as an adjustment to the Purchase Price.  The aggregate
amount of any and all Claims payable to Buyer may be recouped and set-off by
Buyer against the Second Payment Amount hereunder, without limiting any other
rights or remedies of Buyer.  In the event that the amount of any
Claim made by Buyer prior to the date on which the Second Payment Amount would
otherwise be due and payable remains unresolved on such date, Buyer shall be
entitled to withhold from the Second Payment Amount an amount equal to the
aggregate amount of all such unresolved Claims, and to recoup and set-off
against such withheld amounts the full amount of such Claims as finally
determined pursuant to Section 7.4(a),
without interest.  In the event that the aggregate amount of all such
Claims are finally determined pursuant to Section 7.4(a) to be
less than the amount of the Second Payment Amount so withheld by Buyer, Buyer
shall pay the difference to the Company within five (5) Business Days after such
final determination.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    ARTICLE
8

    MISCELLANEOUS

     

    8.1           Publicity.  From the
date of this Agreement, neither Buyer, on the one hand, nor the Company or
Ernst, on the other hand, shall, without the written approval of the other, make
any press release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that any such Party
shall be so obligated by applicable Law, in which case such Party shall allow
the other Parties reasonable time to comment on such release or announcement and
the Parties shall use their reasonable efforts to cause a mutually agreeable
release or announcement to be issued; provided, however, that the foregoing
shall not preclude communications or disclosures necessary to implement the
provisions of this Agreement or to comply with any Law or any rules and
regulations of the Securities and Exchange Commission.

     

    8.2           Expenses.  Except as
otherwise provided herein, each Party will pay all costs and expenses incident
to its negotiation and preparation of this Agreement and to its performance and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with, including the fees, expenses and disbursements of
its counsel, accountants, advisors and consultants; provided, however, such fees
and expenses payable by the Company shall not exceed $42,000 and any legal fees
due and payable by the Company or Ernst in connection with the transactions
contemplated by this Agreement in excess of such amount shall be paid personally
by Ernst.

     

    8.3           Notices.  All
notices or other communications required or permitted hereunder shall be in
writing and shall be deemed given or delivered (a) when delivered personally,
against written receipt, (b) if sent by registered or certified mail, return
receipt requested, postage prepaid, when received, (c) when delivered by a
nationally recognized overnight courier service, prepaid, or (d) when received
by facsimile transmission, if confirmed by the other means described in clauses
(a), (b), or (c), and shall be addressed as follows:

     

    If to the
Company, to:

     

    Advent
Financial Services, LLC

    1111 Main
Street, Suite 400

    Kansas
City, Missouri 64105

    Attention:
Bernard  M. Wilson

    Facsimile:  816.569.1843

     

    If to
Ernst, to:

     

    Mark A. Ernst

    444 8th Street NW, Apartment
813

    Washington, DC 20004

    Facsimile:  859.201.6047

    

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    with a
copy to:

     

    Sonnenschein Nath & Rosenthal
LLP

    4520 Main Street, Suite
1100

    Kansas City, Missouri
64111

    Attention:  James A.
Heeter

    Facsimile:  816.531.7545

    

    If to
Buyer, to:

     

    NovaStar
Financial, Inc.

    2114
Central, Suite 600

    Kansas
City, Missouri 64108

    Attention:
W. Lance Anderson

    Facsimile:  913.748.8901

     

    with a
copy to:

     

    Bryan
Cave LLP

    1200 Main
Street, Suite 3500

    Kansas
City, Missouri 64105

    Attention:
Gregory G. Johnson

    Facsimile:  816.855.3227

    

    8.4           Entire
Agreement.  This Agreement, including the initial paragraph and
the recitals to this Agreement and all Schedules and Exhibits attached to this
Agreement, each of which are made a part of this Agreement by this reference,
constitutes the entire understanding of the Parties, and supersedes any prior
agreements or understandings, written or oral, between the Parties with respect
to the subject matter of this Agreement.  No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all of the Parties.  No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing
waiver.  No waiver shall be binding unless executed in writing by the
Party making the waiver.

     

    8.5           Limitation on Third Party
Benefit.  Except as otherwise expressly provided in this
Agreement with respect to Affiliates of a Party, nothing in this Agreement is
intended or shall be construed to confer upon any Person other than the Parties
hereto any right, remedy or claim under or by reason of this
Agreement.

     

    8.6           Severability.  Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction.

     

    8.7           Succession and
Assignment.  This Agreement shall be binding upon, and inure to
the benefit of, the Parties and their representatives, successors and permitted
assigns.  None of the Parties may assign either this Agreement or any
of the rights, interests or obligations hereunder without the prior written
approval of the other Parties; provided, however, that (a) Buyer may assign any
or all of its rights and interests under this Agreement to NovaStar Financial,
Inc. or one of its wholly-owned subsidiaries and (b) Ernst may assign any or all
of his rights and interests under this Agreement the Ernst Trust, provided that
in each of (a) and (b) above no such assignment shall relieve Buyer or Ernst, as
the case may be, from any obligations or liabilities under this
Agreement.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    8.8           Governing Law.  This
Agreement and any disputes hereunder shall be governed by and construed in
accordance with the laws of the State of Missouri without giving effect to any
choice or conflict of law provision or rule (whether of the State of Missouri or
any other jurisdiction) that would cause the application of laws of any
jurisdiction other than those of the State of Missouri.  Each Party
hereby consents to the exclusive jurisdiction of the federal and state courts of
the State of Missouri for purposes of any action that may be brought to enforce
any provision of this Agreement.  To the extent permitted by
applicable Law, the Parties hereby waive the right to trial by jury in any
litigation in any court with respect to, in connection with, or arising out of
this Agreement or the other Investment Documents.

     

    8.9           Counterparts; Exchange by Electronic
Transmission.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.  The Parties may execute
this Agreement and all other agreements, and other documents contemplated by
this Agreement and exchange counterparts of such documents by means of facsimile
transmission or electronic mail and the Parties agree that the receipt of such
executed counterparts shall be binding on such Parties and shall be construed as
originals.

     

    8.10           Specific
Performance.  Each of the Parties acknowledges and agrees that
the other Parties would be damaged irreparably in the event that any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
any other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any other state thereof having jurisdiction over
the parties in the matter, in addition to any other remedy (including monetary
damages) to which it may be entitled, at law or in equity.

     

    8.11           Rules of
Construction.  All references to any Law shall be deemed to
include any amendments thereto, and any successor Law, unless the context
otherwise requires. “Including” means “including
without limitation” and does not limit the preceding words or
terms.  The word “or” is used in the inclusive
sense of “and/or”.  The
singular shall include the plural and vice versa.  Each word of gender
shall include each other word of gender as the context may
require.  References to “Articles” or “Sections” or “Schedules” or “Exhibits” shall mean Articles
or Sections of this Agreement or Schedules or Exhibits attached to this
Agreement, unless otherwise expressly indicated.  The title of each
Article and the headings or titles preceding the text of the Sections are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement.  The Parties have each participated in the negotiation
and drafting of this Agreement.  In the event an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    ARTICLE
9

    DEFINITIONS

     

    9.1           Certain Definitions. As used
in this Agreement, the following terms shall have the respective meanings
ascribed to them in this Section:

     

    (a)           “Acknowledgement
and Consent” has the meaning specified in Section
5.3(b).

     

    (b)           “Administrative
Services Agreement” has the meaning specified in Section
5.3(c).

     

    (c)           “Adverse
Consequences” means all actions, suits, proceedings, hearings, investigations,
charges, claims, injunctions, judgments, orders, decrees, damages, losses,
penalties, costs, amounts paid in settlement and fees, including court costs and
reasonable attorneys’ fees and expenses.

     

    (d)           “Affiliate”
of any Person means any Person, directly or indirectly controlling, controlled
by or under common control with such Person or related by blood, marriage or
adoption to such Person.

     

    (e)           “Amended
Operating Agreement” has the meaning specified in Section
5.3(a).

     

    (f)         
  “Business” has the meaning specified in the recitals to this
Agreement.

     

    (g)           “Buyer”
has the meaning specified in the initial paragraph of this
Agreement.

     

    (h)           “Claim”
has the meaning specified in Section
7.3(b).

     

    (i)         
  “Closing” has the meaning specified in Section
1.5.

     

    (j)       
    “Closing Date” has the meaning specified in Section
1.5.

     

    (k)           “Code”
means the Internal Revenue Code of 1986, as amended.

     

    (l)        
   “Company” has the meaning specified in the initial paragraph
of this Agreement.

     

    (m)           “Effective
Date” has the meaning specified in the initial paragraph of this
Agreement.

     

    (n)           “Employment
Agreements” has the meaning specified in Section
5.1(f).

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    (o)           “ERISA”
means the employee Retirement Income Security Act of 1974, as
amended.

     

    (p)           “Ernst”
has the meaning specified in the initial paragraph of this
Agreement.

     

    (q)           “Ernst
Trust” has the meaning specified in the in the recitals to this
Agreement.

     

    (r)         
  “Financial Statements” or “Financial Statement” has the meaning
specified in Section
2.7.

     

    (s)           “Governmental
Authority” means any U.S. federal, state, local or foreign court or governmental
or regulatory agency or authority.

     

    (t)          
 “Indemnified Party” has the meaning specified in Section
7.3(b).

     

    (u)           “Indemnifying
Party” has the meaning specified in Section
7.3(b).

     

    (v)           “Initial
Payment Amount” has the meaning specified in Section
1.2(a).

     

    (w)          “Intellectual
Property” means, with regard to a Person, all intellectual property of that
Person including (i) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications and patent disclosures, together with all reissuances,
continuations, continuations in part, revisions, extensions and reexaminations
thereof, and statutory invention registrations; (ii) all trademarks, service
marks, trade dress, logos, slogans, trade names and corporate names and rights
in telephone numbers, together with all abbreviations, translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications and registrations and renewals in
connection therewith; (iii) all copyrightable works of authorship, all copyright
protection therein and all applications, registrations and renewals in
connection therewith; (iv) all rights in internet web sites and internet domain
names; (v) all mask works and all applications, registrations and renewals in
connection therewith; (vi) all confidential or proprietary information,
including research and development, know how, trade secrets, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals; (vii) all
rights in telephone numbers; (viii) all other property rights created through
intellectual or discovery efforts; and (ix) all copies and tangible
embodiments of any or all of the above (in whatever form or
medium).

     

    (x)        
   “Inventions” has the meaning specified in Section
4.2.

     

    (y)           “Investment
Documents” mean this Agreement, the agreements and instruments evidencing the
Purchased Interest, the Amended Operating Agreement, the Employment Agreements,
the Pledge Agreement, Acknowledgement and Consent, the Noncompete Agreement, the
Administrative Services Agreement, the Patent Letter Agreement and each of the
other agreements, documents and instruments expressly contemplated hereby and
thereby.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    (z)           “Knowledge
of the Company” means the actual knowledge of Ernst or the Other
Members.

     

    (aa)         “Law”
means any federal, state, local, municipal, foreign, international,
multinational or other constitution, statute, treaty, code, ordinance, principle
of common law or other law (including any rule, regulation, plan, injunction,
judgment, order, decree, ruling or charge thereunder or related
thereto).

     

    (bb)         “Liability”
means any liability of any kind, character or description (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether disputed or undisputed, whether secured or
unsecured, whether joint or several, whether vested or unvested, whether
liquidated or unliquidated, whether due or to become due, or whether executory,
determined, determinable, or otherwise).

     

    (cc)         “Lien”
means any charge, claim, equitable interest, community or other marital property
interest, security interest, conditional sale agreement, mortgage, indenture,
deed of trust, security agreement, pledge, hypothecation, option, restriction,
encroachment, easement, servitude, right of first refusal, condition or other
lien, encumbrance or defect of title of any kind or nature.

     

    (dd)         “Material
Adverse Effect” means any effect or change that would be materially adverse to
the business, operations, conditions (financial or otherwise), operating results
or earnings of the Company, the Business, or any assets of the Company taken as
a whole, and no adverse changes, events or developments arising from the
following shall be taken into account in determining whether there has been a
Material Adverse Effect: (a) general economic conditions; (b) regional, national
or international political or social conditions, including the engagement by the
United States of America in hostilities, whether or not pursuant to a
declaration of war; (c) financial, banking or securities markets (including any
disruption thereof and any decline in the price of any security or any market
index); or (d) changes in applicable Law.

     

    (ee)         “Material
Contract” has the meaning specified in Section
2.15(b).

     

    (ff)      
    “Material Disclosure Schedule Change” has the meaning
specified in Section
4.1(f).

     

    (gg)         “Membership
Interest” means the entire interest of a Person in the Company, including,
without limitation, such Person’s right to vote as a member, Units, and right to
receive profits, losses, distributions or any other economic benefits from the
Company.

     

    (hh)         “Noncompete
Agreement” has the meaning specified in Section
4.5.

     

    (ii)           “Other
Members” has the meaning specified in the recitals to this
Agreement.

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    (jj)           “Party”
or “Parties” has the meaning specified in the initial paragraph of this
Agreement.

     

    (kk)         “Patent
Letter Agreement” has the meaning specified in Section
5.3(d).

     

    (ll)           “Person”
means an individual, a corporation, a partnership, a limited liability company
or partnership, an association, Governmental Authority, a trust or other entity
or organization.

     

    (mm)       “Pledge
Agreement” has the meaning specified in Section
4.5.

     

    (nn)         “Purchase
Price” has the meaning specified in Section
1.2.

     

    (oo)         “Purchased
Interest” has the meaning specified in Section
1.1.

     

    (pp)         “Redemption
Option” has the meaning specified in Section
4.4.

     

    (qq)         “Second
Payment Amount” has the meaning specified in Section
1.2(b).

     

    (rr)           “Securities
Act” means the Securities Act of 1933, as amended, and all rules and regulations
promulgated thereunder.

     

    (ss)         “Tax
Returns” has the meaning specified in Section
2.19(a).

     

    (tt)           “Taxes”
means all federal, state, local or foreign income, gross receipts, license,
employment, payroll, withholding, Social Security (or similar), unemployment,
severance, premium, disability, excise, value-added, accumulated earnings,
windfall profit, net worth, alternative or add-on minimum, estimated, sales,
use, transfer, registration, real property, stamp, environmental (including
taxes under Code §59A), personal property, use and occupancy, business and
occupation, maritime, mercantile, tariff, custom, duty, capital stock,
franchise, gift or estate and all other taxes, fees, assessments, levies,
tariffs, charges or duties of any kind, character, nature or description,
including any interest, penalties or additions thereto.

     

    (uu)         “Threshold”
has the meaning specified in Section
7.1(a).

     

    (vv)         “Triggering
Metrics” has the meaning specified in Section
1.2(b).

     

    (ww)    
   “Unit” means a unit of ownership representing Membership
Interests, which shall not be independent of the Membership Interests
represented thereby.

     

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

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	 	
                                                  BUYER:

                                                	
                                                  NOVASTAR
      FINANCIAL, INC.

                                                	 
	 	 	 	 	 
	 	 	 	 	 
	 	 
      	
                                                  By:

                                                	 
      	 
	 	 
      	 
      	
                                                  Rodney
      Schwatken, Chief Financial Officer

                                                	 
	 	 
      	 
      	 
      	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
                                                  COMPANY:

                                                	
                                                  ADVENT
      FINANCIAL, LLC

                                                	 
	 	 	 	 	 
	 	 	 	 	 
	 	 
      	
                                                  By:

                                                	 
      	 
	 	 
      	 
      	
                                                  Mark
      A. Ernst, Member

                                                	 
	 	 
      	 
      	 
      	 
	 	 	 	 	 
	 	 	 	 	 
	 	 
      	 
      	 
      	 
	 	
                                                  ERNST:

                                                	  
      	 
	 	 
      	
                                                  Mark
      A. Ernst, Individually

                                                	 

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    

     

    EXHIBIT
A

    TO

    SECURITIES
PURCHASE AGREEMENT

     

    MEMBERS FOLLOWING
PURCHASE

     

    Members’
names, Units and Membership Interests immediately following the
Closing:

     

    
      
        
          	
                  MEMBER

                	
                  UNITS

                	
                  MEMBERSHIP
      INTEREST

                
	
                  NovaStar
      Financial, Inc.

                	
                  70

                	
                  70.00%

                
	
                  Mark
      A. Ernst/Ernst Trust

                	
                  14

                	
                  14.00%

                
	
                  Bernard
      M. Wilson

                	
                  6.75

                	
                  6.75%

                
	
                  John
      W. Thompson

                	
                  6.75

                	
                  6.75%

                
	
                  Bernard
      E. Amyot

                	
                  2.5

                	
                  2.5%

                
	
                  TOTAL   
      

                	
                  100

                	
                  100.00%

                

        

      

    

    

     

    

    
      
         

      

      
        A-1

        
          

        

      

      
         

      

    

     

    EXHIBIT
B

    TO

    SECURITIES
PURCHASE AGREEMENT

     

    TRIGGERING METRICS DISPUTE
RESOLUTION

    

     

    If the
Parties are unable to agree by May 30, 2010 (or such later date as agreed to by
the Parties) whether or not the Company satisfied the Triggering Metrics by
April 30, 2010, then such dispute shall be finally settled by a regional
accounting firm mutually acceptable to them or, if the Parties are unable to
agree on an accounting firm, a regional accounting firm selected by lot (after
excluding any such firm engaged by the Parties or any of their respective
Affiliates) (the “Designated
Accounting Firm”).  The determination by the Designated
Accounting Firm of whether or not the Company satisfied the Triggering Metrics
by April 30, 2010 shall be conclusive and binding on the Parties, absent
manifest error or fraud.  The costs of the Designated Accounting Firm
shall be borne by Buyer if the Designated Accounting Firm determines that the
Triggering Metrics have been met and by the Company and Ernst if the Designated
Accounting Firm determines that the Triggering Metrics have not been
met.

     

     

     

     

    
      
         

      

      
        B-1EXHIBIT
10.1

    

    

    SECOND
AMENDMENT TO

     

    TERM
CREDIT AGREEMENT

     

    THIS
SECOND AMENDMENT TO TERM CREDIT AGREEMENT (this “Second
Amendment”)
is entered into effective as the Second Amendment Closing Date (as defined
below) between RANCHER ENERGY
CORP., a Nevada corporation (“Borrower”),
and GASROCK CAPITAL LLC,
a Delaware limited liability company (“Lender”).  Capitalized
terms used but not defined in this Second Amendment have the meaning given them
in the Credit Agreement (as defined below).

     

    RECITALS

     

    A.           Borrower
and Lender entered into that certain Term Credit Agreement dated as of October
16, 2007 (as amended by that certain First Amendment thereto dated October 22,
2008 and as amended, restated or supplemented from time to time, the “Credit
Agreement”).

     

    B.           Borrower
and Lender have agreed to amend the Credit Agreement, subject to the terms and
conditions of this Second Amendment.

     

    AGREEMENT

     

    NOW
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the undersigned hereby agree as follows:

     

    Specific Amendments to
Credit Agreement.

    

    Section 1.1, Defined
Terms, of the Credit Agreement is hereby amended by revising the
following definition in its entirety to read as follows:

     

    “Maturity Date” means
the earliest of (a) May 8, 2009, (b) the date on which all Obligations (other
than the obligations under any ORRI Conveyance and indemnity obligations and
similar obligations that expressly survive the termination of the Loan
Documents) have been paid in full and this Agreement has terminated, and (c) the
date on which Lender notifies Borrower of the acceleration of payments of all or
any portion of the Obligations based on the occurrence of an Event of
Default.

     

    Section 1.1, Defined
Terms, of the Credit Agreement is hereby amended by adding the following
definition in its proper alphabetical order thereto:

     

    “Second
Amendment Closing Date” means April 30, 2009.

     

    2.           Conditions to Closing Second
Amendment.  Unless specifically waived in writing by Lender,
this Second Amendment shall be effective once Lender shall have received the
following documentation, each in form and substance satisfactory to Lender and
its legal counsel, in their sole discretion:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (a)           this
Second Amendment executed by Borrower and Lender; and

    

    
      (b)           such
other documents as Lender may reasonably request.

    

     

    3.           Representations and
Warranties.  Borrower represents and warrants to Lender that
(a) it possesses all requisite power and authority to execute, deliver and
comply with the terms of this Second Amendment, (b) this Second Amendment has
been duly authorized and approved by all requisite corporate action on the part
of Borrower, (c) no other consent of any Person (other than Lender) is required
for this Second Amendment to be effective and (d) the execution and delivery of
this Second Amendment does not violate its organizational
documents.  The representations and warranties made in this Second
Amendment shall survive the execution and delivery of this Second
Amendment.  No investigation by Lender is required for Lender to rely
on the representations and warranties in this Second Amendment.

    

    4.           Scope of Amendment;
Reaffirmation; Release.  All references to the Credit Agreement
shall refer to the Credit Agreement as amended by this Second
Amendment.  Except as affected by this Second Amendment, the Loan
Documents are unchanged and continue in full force and
effect.  However, in the event of any inconsistency between the terms
of the Credit Agreement (as amended by this Second Amendment) and any other Loan
Document, the terms of the Credit Agreement shall control and such other
document shall be deemed to be amended to conform to the terms of the Credit
Agreement.  Borrower hereby reaffirms its obligations under the Loan
Documents to which it is a party and agrees that all Loan Documents to which
they are a party remain in full force and effect and continue to be legal,
valid, and binding obligations enforceable in accordance with their terms (as
the same are affected by this Second Amendment).  Borrower hereby
releases Lender from any liability for actions or omissions (other than any
liability resulting from Lender’s gross negligence or willful misconduct) in
connection with the Credit Agreement and the other Loan Documents prior to the
Second Amendment Closing Date.

    

    5.           Miscellaneous.

    

    (a)           No Waiver of
Defaults.  This Second Amendment does not constitute (i) a
waiver of, or a consent to, (A) any provision of the Credit Agreement or any
other Loan Document not expressly referred to in this Second Amendment, or (B)
any present or future violation of, or default under, any provision of the Loan
Documents, or (ii) a waiver of Lender’s right to insist upon future compliance
with each term, covenant, condition and provision of the Loan
Documents.

     

    (b)                 Form.  Each
agreement, document, instrument or other writing to be furnished Lender under
any provision of this Second Amendment must be in form and substance
satisfactory to Lender and its counsel.

     

    (c)                 Headings.  The
headings and captions used in this Second Amendment are for convenience only and
will not be deemed to limit, amplify or modify the terms of this Second
Amendment, the Credit Agreement, or the other Loan Documents.

     

    (d)                 Costs, Expenses and
Attorneys’ Fees.  Borrower agrees to pay or reimburse Lender on
demand for all its reasonable out-of-pocket costs and expenses incurred in
connection with the preparation, negotiation, and execution of this Second
Amendment, including, without limitation, the reasonable fees and disbursements
of Lender’s counsel.

     

    (e)                 Successors and
Assigns.  This Second Amendment shall be binding upon and inure
to the benefit of each of the undersigned and their respective successors and
permitted assigns.

     

    (f)                 Multiple
Counterparts.  This Second Amendment may be executed in any
number of counterparts with the same effect as if all signatories had signed the
same document.  All counterparts must be construed together to
constitute one and the same instrument.  This Second Amendment may be
transmitted and signed by facsimile or portable document format
(PDF).  The effectiveness of any such documents and signatures shall,
subject to applicable law, have the same force and effect as manually-signed
originals and shall be binding on Borrower and Lender.  Lender may
also require that any such documents and signatures be confirmed by a
manually-signed original; provided that the failure to
request or deliver the same shall not limit the effectiveness of any facsimile
or PDF document or signature.

     

    (g)                 Governing
Law.  THIS SECOND AMENDMENT AND THE OTHER LOAN DOCUMENTS MUST
BE CONSTRUED, AND THEIR PERFORMANCE ENFORCED, UNDER TEXAS LAW.

     

    (h)                 Arbitration.  Upon
the demand of any party to this Second Amendment, any dispute shall be resolved
by binding arbitration as provided for in Section
12.1 of the Credit Agreement.

     

    (i)                 Entirety.  The
Loan Documents (as amended hereby) Represent the Final Agreement Between
Borrower and Lender and May Not Be Contradicted by Evidence of Prior,
Contemporaneous, or Subsequent Oral Agreements by the Parties.  There
Are No Unwritten Oral Agreements among the Parties.

     

    [Signatures
appear on the next page.]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, this Second Amendment is executed as of the Second Amendment
Closing Date.

     

    
      
        
          
            
              
                
                  
                    	 	BORROWER:	 
	 	 	 
	 	RANCHER
      ENERGY CORP.,	 
	 	a
      Nevada corporation	 
	 	 	 	 
	
                             

                          	
                            By:
      

                          	/s/
      John Works	 
	 	 	John
      Works 	 
	 	 	President
      & Chief Executive Officer	 

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        
          
            
              
                	 	LENDER:	 
	 	 	 
	 	GASROCK
      CAPITAL LLC,	 
	 	a
      Delaware limited liability company	 
	 	 	 	 
	
                         

                      	
                        By:
      

                      	/s/
      Marshall Lynn Bass	 
	 	 	Marshall
      Lynn Bass	 
	 	 	Principal	 

              

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    GUARANTOR’S
CONSENT AND AGREEMENT

    TO

    SECOND
AMENDMENT TO TERM CREDIT AGREEMENT

     

    Guarantor
executes this Second Amendment for purposes of acknowledging and agreeing to the
Credit Agreement, as amended by this Second Amendment, and hereby expressly
ratifies and confirms its liability under its Guaranty dated October 16, 2007
executed in favor of Lender and confirms that such liability continues in full
force and effect with respect to the indebtedness of Borrower covered by the
Credit Agreement, as amended by this Second Amendment, as same may be further
restated, amended, modified, renewed, or rearranged from time to
time.

     

    
      
        
          
            
              
                	 	RANCHER
      ENERGY WYOMING, LLC	 
	 	a
      Wyoming limited liability company	 
	 	 	 	 
	
                         

                      	
                        By:
      

                      	RANCHER
      ENERGY CORP.	 
	 	 	its
      sole Manager	 
	 	 	 	 
	 	 	 	 
	 	      
                        By:
      

                      	/s/
      John Works	 
	 	 	John
      Works	 
	 	 	President
      & Chief Executive Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00157-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00157-of-00352.parquet"}]]