Document:

Spartan Stores Exhibit 10.1 to Form 8-K - 05/30/07

Exhibit 10.1

$95,000,000 AGGREGATE PRINCIPAL AMOUNT*

Spartan Stores, Inc.

3.375% CONVERTIBLE SENIOR NOTES DUE 2027

Purchase Agreement

dated May 23, 2007

_________________________________

* Plus an additional $15,000,000 aggregate principal amount of Notes pursuant to an option granted to the Initial Purchasers.

Purchase Agreement

May 23, 2007

BANC OF AMERICA SECURITIES LLC

BEAR, STEARNS & CO. INC.

     As Representatives of the several Initial Purchasers

c/o Banc of America Securities LLC 

9 West 57th Street

New York, New York  10019

Ladies and Gentlemen:

          Spartan Stores, Inc., a Michigan corporation (the "Company"), proposes to issue and sell to the several purchasers named in Schedule A (the "Initial Purchasers") $95,000,000 in aggregate principal amount of its 3.375% Convertible Senior Notes due May 15, 2027 (the "Firm Notes"). In addition, the Company has granted to the Initial Purchasers an option to purchase up to an additional $15,000,000 in aggregate principal amount of its 3.375% Convertible Senior Notes due May 15, 2027 (the "Optional Notes" and, together with the Firm Notes, the "Notes"). Banc of America Securities LLC ("BAS," and in its capacity as a representative of the Initial Purchasers, the "Representative") and Bear, Stearns & Co. Inc. have agreed to act as representatives of the several Initial Purchasers in connection with the offering and sale of the Notes. To the extent that there are no Initial Purchasers listed on Schedule A other than BAS and Bear, Stearns & Co. Inc., the term "Initial Purchasers" as used herein shall mean BAS and Bear, Stearns & Co. Inc. as Initial Purchasers. 

          The Notes will be convertible on the terms, and subject to the conditions, set forth in the indenture (the "Indenture") to be entered into between the Company and The Bank of New York Trust Company, N.A., as trustee (the "Trustee"), on the Closing Date (as defined herein). As used herein, "Conversion Shares" means the shares of common stock, no par value, of the Company (the "Common Stock") that may be received by the holders of the Notes upon conversion of the Notes pursuant to the terms of the Notes.

          The Notes will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission (the "Commission") thereunder (the "Securities Act"), in reliance upon an exemption therefrom.

          Holders of the Notes (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of a Resale Registration Rights Agreement, dated the Closing Date, between the Company and the Initial Purchasers (the "Registration Rights Agreement"), pursuant to which the Company will agree to file or have on file with the Commission a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Registration Statement") covering the resale of the Notes and the Conversion Shares. This

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Agreement, the Indenture, the Notes and the Registration Rights Agreement are referred to herein collectively as the "Operative Documents."

          The Company understands that the Initial Purchasers propose to make an offering of the Notes on the terms and in the manner set forth herein and in the Disclosure Package (as defined below), including the Preliminary Offering Memorandum (as defined below), and the Final Offering Memorandum (as defined below) and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Notes to purchasers (the "Subsequent Purchasers") at any time after the date of this Agreement.

          The Company has prepared an offering memorandum, dated the date hereof, setting forth information concerning the Company, the Indenture, the Notes, the Registration Rights Agreement and the Common Stock, in form and substance reasonably satisfactory to the Initial Purchasers. As used in this Agreement, "Offering Memorandum" means, collectively, the Preliminary Offering Memorandum dated May 22, 2007 (the "Preliminary Offering Memorandum") and the offering memorandum dated the date hereof (the "Final Offering Memorandum"), each as then amended or supplemented by the Company. As used herein, each of the terms "Disclosure Package", "Offering Memorandum", "Preliminary Offering           Memorandum" and "Final Offering Memorandum" shall include in each case the documents incorporated or deemed to be incorporated by reference therein.

          The Company hereby confirms its agreements with the Initial Purchasers as follows:

          Section 1.  Representations, Warranties and Covenants of the Company.

          The Company hereby represents, warrants and covenants to each Initial Purchaser as follows:

          (a)  No Registration. Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 6 and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Notes to the Initial Purchasers, the offer, resale and delivery of the Notes by the Initial Purchasers to Subsequent Purchasers and the conversion of the Notes into Conversion Shares, in each case in the manner contemplated by this Agreement, the Indenture, the Disclosure Package and the Offering Memorandum, to register the Notes or the Conversion Shares under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").

          (b)  No Integration. None of the Company or any of its subsidiaries has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) that is or will be integrated with the sale of the Notes or the Conversion Shares in a manner that would require registration under the Securities Act of the Notes or the Conversion Shares.

          (c)  Rule 144A. No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Notes are listed on any national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or quoted on an automated inter-dealer quotation system.

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          (d)  Exclusive Agreement. The Company has not paid or agreed to pay to any person any compensation for soliciting another person to purchase any Notes (except as contemplated in this Agreement).

          (e)  Offering Memorandum. The Company hereby confirms that it has authorized the use of the Disclosure Package, including the Preliminary Offering Memorandum, and the Final Offering Memorandum in connection with the offer and sale of the Notes by the Initial Purchasers. Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Disclosure Package or the Final Offering Memorandum complied when it was filed, or will comply when it is filed, as the case may be, in all material respects with the Exchange Act and the rules and regulations of the Commission thereunder. The Preliminary Offering Memorandum, at the date thereof, did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. At the date of this Agreement, the Closing Date and on any Subsequent Closing Date, the Final Offering Memorandum did not and will not (and any amendment or supplement thereto, at the date thereof, at the Closing Date and on any Subsequent Closing Date, will not) contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information included in or omitted from the Preliminary Offering Memorandum or the Final Offering Memorandum in reliance upon and in conformity with written information furnished to the Company by or on the behalf of the Initial Purchasers specifically for inclusion therein, it being understood and agreed that the only such information furnished by or on the behalf of the Initial Purchasers consists of the information described as such in Section 8 hereof.

          (f)  Disclosure Package. The term "Disclosure Package" shall mean (i) the Preliminary Offering Memorandum, as amended or supplemented at the Applicable Time, (ii) the Final Term Sheet (as defined herein) and (iii) any other writings that the parties expressly agree in writing to treat as part of the Disclosure Package ("Issuer Written Information"). The Disclosure Package as of 5:00 pm (Eastern time) on the date hereof (the "Applicable Time") will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to information included in or omitted from the Disclosure Package in reliance upon and in conformity with written information furnished to the Company by or on the behalf of the Initial Purchasers specifically for inclusion therein, it being understood and agreed that the only such information furnished by or on behalf of any Initial Purchaser consists of the information described as such in Section 8 hereof.

          (g)  Accuracy of Statements in the Disclosure Package and Final Offering Memorandum. The statements (i) in the Preliminary Offering Memorandum and the Final Offering Memorandum under the captions "Dividend Policy," "Description of Capital Stock," "Description of Other Indebtedness" and "U.S. Federal Income Tax Considerations" and (ii) in Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 under the captions "Business-Regulation" and "Legal Proceedings" fairly summarize in all material respects the matters therein described.

          (h)  Authorization of the Purchase Agreement. This Agreement has been duly authorized, executed and delivered by the Company.

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          (i)  Authorization of the Indenture. The Indenture has been duly authorized by the Company and, upon the effectiveness of the Registration Statement, will be qualified under the Trust Indenture Act; on the Closing Date, the Indenture will have been duly executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, will constitute a legally valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles; and on the Closing Date the Indenture will conform in all material respects to the description thereof contained in the Disclosure Package and the Final Offering Memorandum.

          (j)  Authorization of the Notes. The Notes have been duly authorized by the Company; when the Notes are executed, authenticated and issued in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchasers pursuant to this Agreement on the Closing Date or any Subsequent Closing Date, as the case may be (assuming due authentication of the Notes by the Trustee), such Notes will constitute legally valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles; and the Notes will conform in all material respects to the description thereof contained in the Disclosure Package and the Final Offering Memorandum.

          (k)  Authorization of the Conversion Shares. The Conversion Shares have been duly authorized and reserved and, when issued upon conversion of the Notes in accordance with the terms of the Notes and the Indenture, will be validly issued, fully paid and non-assessable, and the issuance of such Conversion Shares will not be subject to any preemptive or similar rights.

          (l)  Authorization of the Registration Rights Agreement. The Registration Rights Agreement has been duly authorized, executed and delivered by the Company.

          (m)  No Material Adverse Change. Except as otherwise disclosed in the Disclosure Package and the Final Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), subsequent to the respective dates as of which information is given in the Disclosure Package: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, properties, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, considered as one entity (a "Material Adverse Change"); (ii) the Company and its subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, nor entered into any material transaction or agreement other than in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company other than regular quarterly dividends consistent in timing and amount with past practice or, except for dividends paid to the Company or other subsidiaries, any of its subsidiaries on any class of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock.

          (n)  Independent Accountants. Deloitte & Touche LLP, who have expressed their opinion with respect to the respective financial statements (which term as used in this Agreement includes the related notes thereto) of the Company and of D&W Food Centers, Inc. ("D&W") included in the Disclosure Package and the Final Offering Memorandum, are independent

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registered public accountants with respect to the Company and to D&W as required by the Securities Act and the Exchange Act and the applicable published rules and regulations thereunder.

          (o)  Preparation of the Financial Statements. The financial statements included in the Disclosure Package and the Final Offering Memorandum present fairly, in all material respects, the consolidated financial position of the Company and its consolidated subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements comply as to form, in all material respects, with the applicable accounting requirements of Regulation S-X and have been prepared, in all material respects, in conformity with generally accepted accounting principles as applied in the United States applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto or in the Disclosure Package and the Final Offering Memorandum. The financial data set forth (i) in the Preliminary Offering Memorandum and the Final Offering Memorandum under the captions "Selected Financial Data" and (ii) in Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 under the caption "Selected Financial Data" present fairly the information set forth therein on a basis consistent with that of the audited financial statements included in the Disclosure Package and the Final Offering Memorandum. The Company's ratios of earnings to fixed charges set forth in the Preliminary Offering Memorandum and the Final Offering Memorandum, if any, have been calculated in compliance with Item 503(d) of Regulation S-K under the Securities Act. The pro forma financial statements and the related notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 present fairly the information contained therein, have been prepared, in all material respects, in accordance with the Commission's rules and regulations and guidelines with respect to pro forma financial statements and have been properly presented on the basis described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.

          (p)  Subsidiaries. The subsidiaries listed on Annex A attached hereto (each a "Significant Subsidiary") are the only "significant subsidiaries" of the Company as defined by Rule 1-02 of Regulation S-X.

          (q)  Incorporation and Good Standing of the Company and its Significant Subsidiaries. Each of the Company and its Significant Subsidiaries has been duly incorporated (or, if not a corporation, otherwise organized) and is validly existing as a corporation (or other legal entity) in good standing under the laws of the jurisdiction of its incorporation (or organization) and has corporate (or other) power and authority to own or lease, as the case may be, and operate its properties and to conduct its business as described in the Disclosure Package and the Final Offering Memorandum and, in the case of the Company, to enter into and perform its obligations under this Agreement. Each of the Company and each Significant Subsidiary is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the condition, financial or otherwise, or on the earnings, business, properties, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, considered as one entity (a "Material Adverse Effect"). All of the issued and outstanding shares of capital stock of each Significant Subsidiary that is a corporation have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company, directly or through subsidiaries, free and clear of

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any security interest, mortgage, pledge, lien, encumbrance or claim except as disclosed in the Disclosure Package and the Final Offering Memorandum. The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 (excluding those subsidiaries that may be omitted from such list pursuant to Form 10-K).

          (r)  Capitalization and Other Capital Stock Matters. The authorized, issued and outstanding capital stock of the Company is as set forth in the Disclosure Package and the Final Offering Memorandum under the caption "Capitalization" (other than for subsequent issuances, if any, pursuant to stock option, stock bonus and other stock plans or arrangements described in the Disclosure Package and the Final Offering Memorandum or upon exercise of outstanding options, warrants or other rights described in the Disclosure Package and the Final Offering Memorandum, as the case may be). The Common Stock (including the Conversion Shares) conforms in all material respects to the description thereof contained in the Disclosure Package and the Final Offering Memorandum. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company other than those described in the Disclosure Package and the Final Offering Memorandum and subsequent grants or awards of stock options and restricted stock pursuant to the plans described in the Disclosure Package and the Final Offering Memorandum. The description of the Company's stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, set forth in the Disclosure Package and the Final Offering Memorandum accurately and fairly presents and summarizes in all material respects such plans, arrangements, options and rights.

          (s)  Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. Neither the Company nor any of its subsidiaries (i) is in violation of its articles of incorporation or bylaws, (ii) is (or, with the giving of notice or lapse of time, would be) in default ("Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other agreement, obligation or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound (including, without limitation, the Loan and Security Agreement (the "Bank Facility") dated as of December 23, 2003, as amended, among the Company and certain subsidiaries of the Company as Borrowers, Congress Financial Corp. as Agent and Lender, the other Lenders from time to time thereunder, and certain subsidiaries of the Company as Guarantors, as amended), or to which any of the property or assets of the Company or any of its subsidiaries is subject (each, an "Existing Instrument"), or (iii) is in violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable, except, with respect to clauses (ii) and (iii) only, for such Defaults or violations as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

          The Company's execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated thereby, as described in the Disclosure Package and the Final Offering Memorandum (i) have been duly authorized by all necessary corporate action on the part of the Company and will not result in any violation of the articles of

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incorporation or bylaws of the Company or any subsidiary, (ii) will not conflict with or constitute a breach of, or Default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument and (iii) will not result in any violation of any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries or any of its or their properties.

          No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency is required for the Company's execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated thereby, as described in the Disclosure Package and the Final Offering Memorandum, except (i) with respect to the transactions contemplated by the Registration Rights Agreement, as may be required under the Securities Act, the Trust Indenture Act and the rules and regulations promulgated thereunder and (ii) such as have been obtained or made by the Company and are in full force and effect under the Securities Act, applicable state securities or blue sky laws and from the National Association of Securities Dealers, Inc. ("NASD").

          (t)  No Stamp or Transfer Taxes. There are no stamp or other issuance or transfer taxes or duties or other similar fees or charges required to be paid in connection with the execution and delivery of this Agreement or the issuance or sale by the Company of the Notes or upon the issuance of any Conversion Shares upon the conversion of the Notes, if any.

          (u)  No Material Actions or Proceedings. There are no legal or governmental actions, suits or proceedings pending or, to the best of the Company's knowledge, threatened (i) against or affecting the Company or any of its subsidiaries, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its subsidiaries or (iii) relating to environmental, employment or discrimination matters where, in any case, (A) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Company or such subsidiary and (B) any such action, suit or proceeding, if determined adversely, would reasonably be expected to have a Material Adverse Effect or adversely affect the consummation of the transactions contemplated by this Agreement.

          (v)  Labor Matters. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the best of the Company's knowledge, is threatened or imminent, and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its or its subsidiaries' principal suppliers, contractors or customers, that would reasonably be expected to have a Material Adverse Effect.

          (w)  Intellectual Property Rights. The Company and its subsidiaries own, possess, license or have other rights to use all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the "Intellectual Property") necessary for the conduct of the Company's business as a whole as now conducted or as proposed in the Disclosure Package and the Final Offering Memorandum to be conducted. Except as would not reasonably be expected to have a Material Adverse Effect, (a) no party has been granted an exclusive license to use any portion of such Intellectual Property owned by the Company; (b) to the best of the Company's knowledge, there is no material infringement by third parties of any such Intellectual Property owned by or exclusively licensed to the Company; (c) there is no pending or, to the best of the Company's knowledge, threatened action, suit,

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proceeding or claim by others challenging the Company's rights in or to any material Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (d) there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; and (e) there is no pending or, to the best of the Company's knowledge, threatened action, suit, proceeding or claim by others that the Company's business as now conducted infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact that would form a reasonable basis for any such claim.

          (x)  All Necessary Permits, etc. Except as would not reasonably be expected to have a Material Adverse Effect, the Company and each subsidiary possess such valid and current licenses, certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the Company's business as a whole, and neither the Company nor any subsidiary has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit.

          (y)  Title to Properties. Except as would not reasonably be expected to have a Material Adverse Effect, the Company and each of its subsidiaries has good and marketable title to all the properties and assets reflected as owned in the financial statements included in the Disclosure Package and the Final Offering Memorandum, in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except as disclosed in the Disclosure Package or such as do not, singly or in the aggregate, materially and adversely affect the value of such property and do not, singly or in the aggregate, materially interfere with the use made or proposed to be made of such property by the Company or such subsidiary. The real property, improvements, equipment and personal property held under lease by the Company or any subsidiary are held under valid and enforceable leases, with such exceptions as do not result in a Material Adverse Effect and do not, singly or in the aggregate, materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company or such subsidiary.

          (z)  Tax Law Compliance. Except as would not reasonably be expected to have a Material Adverse Effect, the Company and each of its subsidiaries have filed all necessary federal, state, local and foreign income and franchise tax returns in a timely manner and have paid all taxes required to be paid by any of them and, if due and payable, any related or similar assessment, fine or penalty levied against any of them, except for any taxes, assessments, fines or penalties as may be being contested in good faith and by appropriate proceedings. Except as would not reasonably be expected to have a Material Adverse Effect, the Company has made appropriate provisions in the financial statements included in the Disclosure Package and the Final Offering Memorandum in respect of all federal, state and foreign income and franchise taxes for all current or prior periods as to which the tax liability of the Company or any of its subsidiaries has not been finally determined.

          (aa)  Company Not an "Investment Company". The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Company is not, and after receipt of payment for the Notes and application of the proceeds as described under "Use of Proceeds" in the Disclosure Package and the Final Offering Memorandum will not be, an "investment company" within the meaning of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act.

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          (bb)  Compliance with Reporting Requirements. The Company is subject to and in full compliance with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act.

          (cc)  Insurance. Except as would not reasonably be expected to have a Material Adverse Effect, each of the Company and its subsidiaries are insured by recognized, financially sound and reputable institutions, or are self-insured, with policies in such amounts and with such deductibles and covering such risks that the Company reasonably deems to be adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its subsidiaries against theft, damage, destruction, acts of terrorism or vandalism and earthquakes. Except as would not reasonably be expected to have a Material Adverse Effect: (i) all policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; (ii) the Company and its subsidiaries are in compliance with the terms of such policies and instruments; (iii) there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and (iv) neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for. The Company has no reason to believe that it or any subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not have a Material Adverse Effect.

          (dd)  No Restriction on Distributions. No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary's capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary's property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Disclosure Package and the Final Offering Memorandum.

          (ee)  No Price Stabilization or Manipulation. The Company has not taken and will not take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Notes.

          (ff)  Related Party Transactions. There are no material business relationships or related party transactions involving the Company or any subsidiary and any other person of the type required to be disclosed under Item 404 of Regulation S-X that have not been described in the Disclosure Package or the Final Offering Memorandum.

          (gg)  No General Solicitation. None of the Company or any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), has, directly or through an agent, engaged in any form of general solicitation or general advertising in connection with the offering of the Notes or the Conversion Shares (as those terms are used in Regulation D) under the Securities Act or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; the Company has not entered into any contractual arrangement with respect to the distribution of the Notes or the Conversion Shares except for this Agreement, and the Company will not enter into any such arrangement except for the Registration Rights Agreement and as may be contemplated thereby.

          (hh)  No Unlawful Contributions or Other Payments. Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or

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affiliate of the Company or any of its subsidiaries is aware of or has taken any action on behalf of the Company, directly or indirectly, that would result in a violation by such persons of the FCPA, including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any "foreign official" (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company, its subsidiaries and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA. "FCPA" means the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

          (ii)  No Conflict with Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any governmental agency (collectively, the "Money Laundering Laws") and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

          (jj)  No Conflict with OFAC Laws. Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ("OFAC"); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

          (kk)  Compliance with Environmental Laws. Except as otherwise disclosed in the Disclosure Package and the Final Offering Memorandum, (i) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign law, regulation, order, permit or other requirement relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, "Materials of Environmental Concern"), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "Environmental Laws"), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or its subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or any of its subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its subsidiaries is in violation of any Environmental Law, except as would not, individually or in the aggregate, have a Material Adverse Effect; (ii) there is no claim, action or cause of action filed with a court or governmental authority of which the Company has received service of process or otherwise become aware, no investigation with respect to which the Company has received written notice,

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and no written notice has been given to the Company by any person or entity alleging potential liability for investigatory costs, clean-up costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its subsidiaries, now or in the past (collectively, "Environmental Claims"), pending or, to the best of the Company's knowledge, threatened against the Company or any of its subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law, except as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) to the best of the Company's knowledge, there are no past, present or anticipated future actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law, require expenditures to be incurred pursuant to Environmental Law, or form the basis of a potential Environmental Claim against the Company or any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law, except as would not, individually or in the aggregate, have a Material Adverse Effect; and (iv) neither the Company nor any of its subsidiaries is subject to any pending or, to the best of the Company's knowledge, threatened proceeding under Environmental Law to which a governmental authority is a party and which is reasonably likely to result in monetary sanctions of $500,000 or more.

          (ll)  ERISA Compliance. None of the following events has occurred or exists except as disclosed in the Disclosure Package or as would not reasonably be expected to have a Material Adverse Effect: (i) a failure to fulfill the obligations, if any, under the minimum funding standards of Section 302 of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the regulations and published interpretations thereunder with respect to a Plan, determined without regard to any waiver of such obligations or extension of any amortization period; (ii) an audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other federal or state governmental agency or any foreign regulatory agency with respect to the employment or compensation of employees by the Company or any of its subsidiaries; or (iii) any breach of any contractual obligation, or any violation of law or applicable qualification standards, with respect to the employment or compensation of employees by the Company or any of its subsidiaries. None of the following events has occurred or is reasonably likely to occur in the current fiscal year of the Company except as disclosed in the Disclosure Package or as would not reasonably be expected to have a Material Adverse Effect: (i) increases in the aggregate amount of contributions required to be made to all Plans compared to the amount of such contributions made in the Company's most recently completed fiscal year; (ii) a material increase in the Company's consolidated "accumulated post-retirement benefit obligations" (within the meaning of Statement of Financial Accounting Standards 106) compared to the amount of such obligations in the Company's most recently completed fiscal year; or (iii) any event or condition giving rise to a liability under Title IV of ERISA. For purposes of this paragraph, the term "Plan" means a plan (within the meaning of Section 3(3) of ERISA) subject to Title IV of ERISA with respect to which any member of the Company may have any liability.

          (mm)  Sarbanes-Oxley Compliance. There is and has been no failure on the part of the Company and any of the Company's directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the "Sarbanes-Oxley Act"), including Section 402 related to loans and Sections 302 and 906 related to certifications.

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          (nn)  Internal Controls and Procedures. The Company maintains (i) effective internal control over financial reporting as defined in Rule 13a-15 under the Exchange Act, and (ii) a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management's general or specific authorizations; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

          (oo)  No Material Weakness in Internal Controls. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, since the end of the Company's most recent audited fiscal year, there has been (i) no material weakness in the Company's internal control over financial reporting (whether or not remediated) and (ii) no change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

          (pp)  Disclosure Controls. The Company and its subsidiaries maintain an effective system of "disclosure controls and procedures" (as defined in Rule 13a-15 of the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure. The Company and its subsidiaries have carried out evaluations of the effectiveness of their disclosure controls and procedures as required by Rule 13a-15 of the Exchange Act.

          (qq)  Lending Relationship. Except as disclosed in the Disclosure Package and the Final Offering Memorandum, the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of any Initial Purchaser and (ii) does not intend to use any of the proceeds from the sale of the Notes hereunder to repay any outstanding debt owed to any affiliate of any Initial Purchaser.

          Any certificate signed by an officer of the Company and delivered to the Representative or to counsel for the Initial Purchasers shall be deemed to be a representation and warranty by the Company to each Initial Purchaser as to the matters set forth therein.

          Section 2.  Purchase, Sale and Delivery of the Notes

          (a)  The Firm Notes. The Company agrees to issue and sell to the several Initial Purchasers the Firm Notes upon the terms herein set forth. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Initial Purchasers agree, severally and not jointly, to purchase from the Company the respective principal amount of Firm Notes set forth opposite their names on Schedule A at a purchase price of 97.5% of the aggregate principal amount thereof. The Initial Purchasers hereby advise the Company that they intend to offer the Notes for resale at an initial price of 100% of the aggregate principal amount thereof.

          (b)  The Closing Date. Delivery of the Firm Notes to be purchased by the Initial Purchasers and payment therefor shall be made at the offices of Cleary Gottlieb Steen &

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Hamilton LLP (or such other place as may be agreed to by the Company and the Representative) at 9:00 a.m. New York City time, on May 30, 2007 or such other time and date not later than June 13, 2007 as the Representative shall designate by notice to the Company (the time and date of such closing are called the "Closing Date").

          (c)  The Optional Notes; any Subsequent Closing Date. In addition, on the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company hereby grants an option to the several Initial Purchasers to purchase, severally and not jointly, up to $15,000,000 aggregate principal amount of Optional Notes from the Company at the same price as the purchase price to be paid by the Initial Purchasers for the Firm Notes. The option granted hereunder may be exercised at any time and from time to time upon notice by the Representative to the Company, which notice may be given at any time prior to the 13th day after the Closing Date. Such notice shall set forth (i) the amount (which shall be an integral multiple of $1,000 in aggregate principal amount) of Optional Notes as to which the Initial Purchasers are exercising the option, (ii) the names and denominations in which the Optional Notes are to be registered and (iii) the time, date and place at which such Notes will be delivered (which time and date may be simultaneous with, but not earlier than, the Closing Date; and in such case the term "Closing Date" shall refer to the time and date of delivery of the Firm Notes and the Optional Notes). Such time and date of delivery, if subsequent to the Closing Date, is called a "Subsequent Closing Date" and shall be determined by the Representative. Such date may be the same as the Closing Date but shall not be earlier than the Closing Date and shall be prior to the 13th day after the Closing Date. If any Optional Notes are to be purchased, each Initial Purchaser agrees, severally and not jointly, to purchase the principal amount of Optional Notes (subject to such adjustments to eliminate fractional amount as the Representative may determine) that bears the same proportion to the total principal amount of Optional Notes to be purchased as the principal amount of Firm Notes set forth on Schedule A opposite the name of such Initial Purchaser bears to the total principal amount of Firm Notes.

          (d)  Payment for the Notes. Payment for the Notes shall be made at the Closing Date (and, if applicable, at any Subsequent Closing Date) by wire transfer of immediately available funds to the order of the Company.

          It is understood that the Representative has been authorized, for its own account and the accounts of the several Initial Purchasers, to accept delivery of and receipt for, and make payment of the purchase price for, the Firm Notes and any Optional Notes the Initial Purchasers have agreed to purchase. BAS, individually and not as the Representative of the Initial Purchasers, may (but shall not be obligated to) make payment for any Notes to be purchased by any Initial Purchaser whose funds shall not have been received by the Representative by the Closing Date or any Subsequent Closing Date, as the case may be, for the account of such Initial Purchaser, but any such payment shall not relieve such Initial Purchaser from any of its obligations under this Agreement.

          (e)  Delivery of the Notes. The Company shall deliver, or cause to be delivered, to the Representative for the accounts of the several Initial Purchasers the Firm Notes at the Closing Date, against receipt of a wire transfer of immediately available funds for the amount of the purchase price therefor. The Company shall also deliver, or cause to be delivered, to the Representative for the accounts of the several Initial Purchasers, the Optional Notes the Initial Purchasers have agreed to purchase at the Closing Date or any Subsequent Closing Date, as the case may be, against receipt of a wire transfer of immediately available funds for the amount of the purchase price therefor. Delivery of the Notes shall be made through the facilities of The Depository Trust Company unless the Representative shall otherwise instruct. Time shall be of

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the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Initial Purchasers.

          Section 3.  Covenants of the Company

          The Company covenants and agrees with each Initial Purchaser as follows:

          (a)  Representative's Review of Proposed Amendments and Supplements. During such period beginning on the date hereof and ending on the date of the completion of the resale of the Notes by the Initial Purchasers (as notified by the Initial Purchasers to the Company), prior to amending or supplementing the Disclosure Package or the Final Offering Memorandum, the Company shall furnish to the Representative for review a copy of each such proposed amendment or supplement, and the Company shall not print, use or distribute such proposed amendment or supplement to which the Representative reasonably objects.

          (b)  Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters. If, at any time prior to the completion of the resale of the Notes by the Initial Purchasers (as notified by the Initial Purchasers to the Company), any event or development shall occur or condition exist as a result of which it is necessary to amend or supplement the Disclosure Package or the Final Offering Memorandum in order that the Disclosure Package or the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made or then prevailing, as the case may be, not misleading, or if in the opinion of the Representative or counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Disclosure Package or the Final Offering Memorandum to comply with law, the Company shall promptly notify the Initial Purchasers and prepare, subject to Section 3(a) hereof, such amendment or supplement as may be necessary to correct such untrue statement or omission.

          (c)  Copies of Disclosure Package and the Offering Memorandum. The Company agrees to furnish to the Representative, without charge, until the earlier of nine months after the date hereof or the completion of the resale of the Notes by the Initial Purchasers (as notified by the Initial Purchasers to the Company) as many copies of the materials contained in the Disclosure Package and the Final Offering Memorandum and any amendments and supplements thereto, and deliver them in such quantities and at such places as the Representative may reasonably request.

          (d)  Blue Sky Compliance. The Company shall cooperate with the Representative and counsel for the Initial Purchasers, as the Initial Purchasers may reasonably request from time to time, to qualify or register the Notes for sale under (or obtain exemptions from the application of) the state securities or blue sky laws, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Notes. The Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. The Company will advise the Representative promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Notes for offering, sale or trading in any jurisdiction or any initiation or, to the best of the Company's knowledge, threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use commercially reasonable efforts to obtain the withdrawal thereof at the earliest possible moment.

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          (e)  Rule 144A Information. For so long as any of the Notes are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Company shall provide to any holder of the Notes or to any prospective purchaser of the Notes designated by any holder, upon request of such holder or prospective purchaser, information required to be provided by Rule 144A(d)(4) of the Securities Act if, at the time of such request, the Company is not subject to the reporting requirements under Section 13 or 15(d) of the Exchange Act.

          (f)  Compliance with Securities Law. For a period of three years from the Closing, the Company will comply in all material respects with all applicable securities and other laws, rules and regulations, including, without limitation, the Sarbanes-Oxley Act, and use all appropriate efforts to cause the Company's directors and officers, in their capacities as such, to comply in all material respects with such laws, rules and regulations, including, without limitation, the provisions of the Sarbanes-Oxley Act.

          (g)  Legends. Each of the Notes will bear, to the extent applicable, the legend contained in "Notice to Investors" in the Disclosure Package and the Final Offering Memorandum for the time period and upon the other terms stated therein.

          (h)  Written Information Concerning the Offering. Without the prior written consent of the Representative, the Company will not give to any prospective purchaser of the Notes any written information concerning the offering of the Notes other than the Disclosure Package, the Final Offering Memorandum or any other offering materials prepared by or with the prior consent of the Representative, including Issuer Written Information.

          (i)  No General Solicitation. Except following the effectiveness of the Registration Statement, the Company will not, and will cause its subsidiaries not to, solicit any offer to buy or offer to sell the Notes by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act.

          (j)  No Integration. The Company will not, and will cause its subsidiaries not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Securities Act) in a transaction that could be integrated with the sale of the Notes in a manner that would require the registration under the Securities Act of the Notes.

          (k)  Information to Publishers. Any information provided by the Company to publishers of publicly available databases about the terms of the Notes shall include a statement that the Notes have not been registered under the Securities Act and are subject to restrictions under Rule 144A under the Securities Act.

          (l)  DTC. The Company will cooperate with the Representative and use commercially reasonable efforts to permit the Notes to be eligible for clearance and settlement through The Depository Trust Company.

          (m)  Rule 144 Tolling. During the period of two years after the last Closing Date, the Company will not, and will not permit any of its "affiliates" (as defined in Rule 144 under the Securities Act) to, resell any of the Notes that constitute "restricted securities" under Rule 144 that have been reacquired by any of them, except for the Notes purchased by the Company or any of its affiliates and resold in a transaction registered under the Securities Act.

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          (n)  Use of Proceeds. The Company shall apply the net proceeds from the sale of the Notes in the manner described under the caption "Use of Proceeds" in the Disclosure Package and the Final Offering Memorandum.

          (o)  Transfer Agent. The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Common Stock.

          (p)  Available Conversion Shares. The Company will reserve and keep available at all times, free of pre-emptive rights, the full number of Conversion Shares.

          (q)  Conversion Price. Between the date hereof and the Closing Date, the Company will not do or authorize any act or thing that would result in an adjustment of the conversion price.

          (r)  Company to Provide Interim Financial Statements and Other Information. Prior to the Closing Date, the Company will furnish the Initial Purchasers, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Disclosure Package and the Final Offering Memorandum.

          (s)  Agreement Not to Offer or Sell Additional Securities. During the period commencing on the date hereof and ending on the 90th day following the date of the Final Offering Memorandum, the Company will not, without the prior written consent of BAS (which consent may be withheld at the sole discretion of BAS), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open "put equivalent position" or liquidate or decrease a "call equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer (or enter into any transaction that is designed to, or might reasonably be expected to, result in the disposition of), or announce the offering of, or file any registration statement under the Securities Act in respect of, any shares of Common Stock, options or warrants to acquire shares of the Common Stock or securities exchangeable or exercisable for or convertible into shares of Common Stock (other than as contemplated by this Agreement with respect to the Notes and the Conversion Shares); provided, however, that the Company may issue shares of its Common Stock or options to purchase its Common Stock, or Common Stock upon exchange for or exercise of options or warrants, pursuant to any stock option, stock bonus or other stock plan or arrangement described in the Disclosure Package and the Final Offering Memorandum.

          (t)  Future Reports to Stockholders. The Company will, for a period of not less than three years after the Closing Date, make available, by timely filing with the Commission or other reasonably prompt and appropriate means, to its securityholders after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the date of the Offering Memorandum), will make available to its securityholders, by timely filing with the Commission or other reasonably prompt and appropriate means, consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail.

          (u)  Future Reports to the Representative. During the period of three years after the Closing Date the Company will furnish to the Representative at 9 West 57th Street, New York, NY 10019 (i) as soon as practicable after the end of each fiscal year, copies of the annual report of the Company containing the balance sheet of the Company as of the close of such fiscal year

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and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its capital stock.

          (v)  Investment Limitation. The Company shall not invest or otherwise use the proceeds received by the Company from its sale of the Notes in such a manner as would require the Company or any of its subsidiaries to register as an investment company under the Investment Company Act.

          (w)  No Manipulation of Price. The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Notes.

          (x)  Lock-Up Agreements. The Company will enforce all agreements between the Company and any of its security holders to be entered into pursuant to this Agreement that prohibit the sale, transfer, assignment, pledge or hypothecation of any of the Company's securities. In addition, the Company will direct the transfer agent to place stop transfer restrictions upon any such securities of the Company that are bound by such "lock-up" agreements and held in record name by the securityholder bound by the agreement for the duration of the periods contemplated in such agreements.

          (y)  Final Term Sheet. The Company will prepare a final term sheet, containing solely a description of the Notes and the offering thereof, in the form approved by you and attached as Schedule B hereto (the "Final Term Sheet").

          Section 4.  Payment of Expenses

          The Company agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all expenses incident to the issuance and delivery of the Notes (including all printing and engraving costs), (ii) all fees and expenses of the Trustee under the Indenture, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Notes to the Initial Purchasers, (iv) all fees and expenses of the Company's counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection with the preparation, printing, shipping and distribution of the materials contained in the Disclosure Package, including the Preliminary Offering Memorandum, and the Final Offering Memorandum and all amendments and supplements thereto, (vi) all filing fees, attorneys' fees and expenses incurred by the Company or reasonably incurred by the Initial Purchasers in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Notes for offer and sale under the state securities or blue sky laws, and, if reasonably requested by the Representative, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising the Initial Purchasers of such qualifications, registrations and exemptions, (vii)  the expenses of the Company and the Initial Purchasers in connection with the marketing and offering of the Notes, including all transportation and other expenses incurred in connection with presentations to prospective purchasers of the Notes, (viii) the fees and expenses associated with

17

listing the Conversion Shares on The Nasdaq Global Market and (ix) all expenses and fees in connection with admitting the Notes for trading in the PORTAL Market. Except as provided in this Section 4, Section 7, Section 10 and Section 11 hereof, the Initial Purchasers shall pay their own expenses, including the fees and disbursements of their counsel.

          Section 5.  Conditions of the Obligations of the Initial Purchasers

          The obligations of the several Initial Purchasers to purchase and pay for the Notes as provided herein on the Closing Date and, with respect to the Optional Notes, any Subsequent Closing Date, shall be subject to the accuracy of the representations and warranties on the part of the Company set forth in Section 1 hereof as of the date hereof and as of the Closing Date as though then made and, with respect to the Optional Notes, as of the related Subsequent Closing Date as though then made, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the timely performance by the Company of its covenants and other obligations hereunder, and to each of the following additional conditions:

          (a)  Accountants' Comfort Letter. On the date hereof, the Representative shall have received from Deloitte & Touche LLP, independent public accountants for the Company, a letter dated the date hereof addressed to the Initial Purchasers, the form of which is attached as Exhibit A.

          (b)  No Material Adverse Change or Rating Agency Change. For the period from and after the date of this Agreement and prior to the Closing Date and, with respect to the Optional Notes, any Subsequent Closing Date:

          (i)  in the judgment of the Representative there shall not have occurred any Material Adverse Change;

          (ii)  there shall not have been any change or decrease specified in the letter referred to in paragraph (a) of this Section 5 which is, in the sole judgment of the Representative, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Notes as contemplated by the Disclosure Package and the Final Offering Memorandum; and

          (iii)  there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Company or any of its subsidiaries by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Securities Act.

          (c)  Opinion of Sidley Austin LLP. On each of the Closing Date and any Subsequent Closing Date, the Representative shall have received the favorable opinion of Sidley Austin LLP, counsel for the Company, dated as of such Closing Date, the form of which is attached as Exhibit B.

          (d)  Opinion of Warner Norcross & Judd LLP. On each of the Closing Date and any Subsequent Closing Date, the Representative shall have received the favorable opinion of Warner Norcross & Judd LLP, Counsel for the Company, dated as of such Closing Date, the form of which is attached as Exhibit C.

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          (e)  Opinion of Seyfarth Shaw LLP. On each of the Closing Date and any Subsequent Closing Date, the Representative shall have received the favorable opinion of Seyfarth Shaw LLP, Counsel for the Company, dated as of such Closing Date, the form of which is attached as Exhibit D.

          (f)  Opinion of Cleary Gottlieb Steen & Hamilton LLP. On each of the Closing Date and any Subsequent Closing Date, the Representative shall have received the favorable opinion of Cleary Gottlieb Steen & Hamilton LLP, counsel for the Initial Purchasers, dated as of such Closing Date, in form and substance satisfactory to, and addressed to, the Representative, with respect to the issuance and sale of the Notes, the Disclosure Package, the Preliminary Offering Memorandum, the Final Offering Memorandum and such other related matters as the Representative may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.

          (g)  Officers' Certificate. On each of the Closing Date and any Subsequent Closing Date, the Representative shall have received a written certificate executed by the Chairman of the Board, Chief Executive Officer, President or any Executive Vice-President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of such Closing Date, to the effect that the signers of such certificate have examined the Disclosure Package, including the Preliminary Offering Memorandum, and the Final Offering Memorandum, any amendments or supplements thereto and this Agreement, to the effect set forth in subsection (b)(iii) of this Section 5, and further to the effect that:

          (i)  for the period from and after the date of this Agreement and prior to such Closing Date or such Subsequent Closing Date, as the case may be, there has not occurred any Material Adverse Change;

          (ii)  the representations and warranties of the Company set forth in Section 1 of this Agreement are true and correct on and as of the Closing Date or the Subsequent Closing Date, as the case may be, with the same force and effect as though expressly made on and as of such Closing Date or such Subsequent Closing Date, as the case may be; and

          (iii)  the Company has complied with all the agreements hereunder and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date or such Subsequent Closing Date, as the case may be.

          (h)  Bring-down Comfort Letter. On each of the Closing Date and any Subsequent Closing Date, the Representative shall have received from Deloitte & Touche LLP, independent public accountants for the Company, a letter dated such date, in form and substance satisfactory to the Representative, to the effect that such firm reaffirms the statements made in the letter furnished by it pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Closing Date or Subsequent Closing Date, as the case may be.

          (i)  Registration Rights Agreement. The Company and the Initial Purchasers shall have executed and delivered the Registration Rights Agreement substantially in the form of Exhibit E hereto and the Registration Rights Agreement shall be in full force and effect.

          (j)  Lock-Up Agreements from Officers and Directors of the Company. On or prior to the date hereof, the Company shall have furnished to the Representative an agreement in the form of

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Exhibit F hereto from each of Theodore C. Adornato, M. Shân Atkins, Dennis Eidson, Alex J. DeYonker, Frank M. Gambino, Derek Jones, Frederick S. Morganthall, II, Elizabeth A. Nickels, Timothy J. O'Donovan, David M. Staples, Kenneth T. Stevens, Craig C. Sturken, Thomas A. Van Hall and James F. Wright, and such agreement shall be in full force and effect on each of the Closing Date and any Subsequent Closing Date.

          (k)  PORTAL Designation. The Notes shall have been designated PORTAL-eligible securities in accordance with the rules and regulations of the NASD.

          (l)  Nasdaq Global Market Listing. The Company shall use commercially reasonable efforts to cause the Conversion Shares to be approved for listing, subject to issuance, on the Nasdaq Global Market.

          (m)  Additional Documents. On or before each of the Closing Date and any Subsequent Closing Date, the Representative and counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Notes as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained.

          If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Representative by notice to the Company at any time on or prior to the Closing Date and, with respect to the Optional Notes, at any time prior to the applicable Subsequent Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 7, Section 8, Section 9 and Section 13 shall at all times be effective and shall survive such termination.

          Section 6.  Representations, Warranties and Agreements of Initial Purchasers

          Each of the Initial Purchasers represents and warrants that it is a "qualified institutional buyer", as defined in Rule 144A under the Securities Act. Each Initial Purchaser agrees with the Company that:

          (a)  it has not offered or sold, and will not offer or sell, any Notes as part of their distribution at any time except to those it reasonably believes to be "qualified institutional buyers" (as defined in Rule 144A under the Securities Act);

          (b)  neither it nor any person acting on its behalf has made or will make any offer or sale of Notes by means of any form of general solicitation or general advertising (within the meaning of Regulation D);

          (c)  in connection with each sale pursuant to Section 6(a), it has taken or will take reasonable steps to ensure that the purchaser of such Notes is aware that such sale is being made in reliance on Rule 144A under the Securities Act;

          (d)  any information provided by the Initial Purchasers to publishers of publicly available databases about the terms of the Notes shall include a statement that the Notes have not been registered under the Securities Act and are subject to restrictions under Rule 144A under the Securities Act; and

20

          (e)  it acknowledges that restrictions on the offer, sale and other transfers of the Notes and the Conversion Shares issuable upon conversion thereof are described in the Disclosure Package and the Final Offering Memorandum.

          Section 7.  Reimbursement of Initial Purchasers' Expenses

          If this Agreement is terminated by the Representative pursuant to Section 5, Section 10 or clause (i) of Section 11 (solely with respect to the Company's securities), or if the sale to the Initial Purchasers of the Notes on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse the Representative and the other Initial Purchasers, severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Representative and the Initial Purchasers in connection with the proposed purchase and the offering and sale of the Notes, including but not limited to reasonable fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges.

          Section 8.  Indemnification

          (a)  Indemnification of the Initial Purchasers. The Company agrees to indemnify and hold harmless each Initial Purchaser, its directors, officers, employees and agents, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act or the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Initial Purchaser, director, officer, employee, agent or controlling person may become subject, insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum, the Final Offering Memorandum, the Final Term Sheet, the Company's Current Report on Form 8-K furnished to the Commission on May 16, 2007, any Issuer Written Information or any other written information prepared by or on behalf of, or used by, the Company in connection with the offer or sale of the Notes (or any amendment or supplement to the foregoing), or the omission or alleged omission therefrom of a material fact, in each case, necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and to reimburse each Initial Purchaser, its officers, directors, employees, agents and each such controlling person for any and all expenses (including the fees and disbursements of counsel chosen by BAS) as such expenses are reasonably incurred by such Initial Purchaser or its officers, directors, employees, agents or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Representative expressly for use in the Preliminary Offering Memorandum, the Final Offering Memorandum, the Final Term Sheet, any Issuer Written Information or any other written information prepared by or on behalf of, or used by, the Company in connection with the offer or sale of the Notes (or any amendment or supplement to the foregoing). The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that the Company may otherwise have.

          (b)  Indemnification of the Company, its Directors and Officers. Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its

21

directors, each of its officers and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, or any such director, officer or controlling person may become subject, insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum, the Final Offering Memorandum, the Final Term Sheet, any Issuer Written Information or any other written information prepared by or on behalf of, or used by, the Company in connection with the offer or sale of the Notes (or any amendment or supplement to the foregoing), or arises out of or is based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, and only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Preliminary Offering Memorandum, the Final Offering Memorandum, the Final Term Sheet, any Issuer Written Information or any other written information prepared by or on behalf of, or used by, the Company in connection with the offer or sale of the Notes (or any amendment or supplement to the foregoing), in reliance upon and in conformity with written information furnished to the Company by the Representative expressly for use therein; and to reimburse the Company, or any such director, officer or controlling person for any legal and other expense reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company hereby acknowledges that the only information that the Initial Purchasers have furnished to the Company expressly for use in the Preliminary Offering Memorandum, the Final Offering Memorandum, the Final Term Sheet, any Issuer Written Information or any other written information prepared by or on behalf of, or used by, the Company in connection with the offer or sale of the Notes (or any amendment or supplement to the foregoing) are the statements set forth in Schedule C. The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that each Initial Purchaser may otherwise have.

          (c)  Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the failure to so notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it or other indemnified parties that are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the

22

indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel for all indemnified parties (other than local counsel), reasonably approved by the indemnifying party (or by BAS in the case of Section 8(b)), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party.

          (d)  Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, which shall not be withheld unreasonably, but if settled with such consent or if there is a final judgment, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and (y) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

          Section 9.  Contribution

          If the indemnification provided for in Section 8 is for any reason unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Notes pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions or alleged statements or alleged omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Notes pursuant to this Agreement shall be deemed to be in the same respective proportions as the

23

total net proceeds from the offering of the Notes pursuant to this Agreement (before deducting expenses) received by the Company, and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Notes. The relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Initial Purchasers, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

          The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim.

          The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9.

          Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the purchase discount received by such Initial Purchaser in connection with the Notes purchased by it hereunder. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in Schedule A. For purposes of this Section 9, each director, officer, employee and agent of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director of the Company, each officer of the Company, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.

          Section 10.  Default of One or More of the Several Initial Purchasers

          If, on the Closing Date or any Subsequent Closing Date, as the case may be, any one or more of the several Initial Purchasers shall fail or refuse to purchase Notes that it or they have agreed to purchase hereunder on such date, and the aggregate principal amount of Notes which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase does not exceed 10% of the aggregate principal amount of the Notes to be purchased on such date, the other Initial Purchasers shall be obligated, severally, in the proportions that the principal amount of Firm Notes set forth opposite their respective names on Schedule A bears to the aggregate principal amount of Firm Notes set forth opposite the names of all such non-defaulting Initial Purchasers, or in such other proportions as may be specified by the Representative with the consent of the non-defaulting Initial Purchasers, to purchase the Notes which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase on such date. If, on the Closing Date or any Subsequent Closing Date, as the case may be, any one or more of the Initial Purchasers shall fail or refuse to purchase Notes and the aggregate principal amount of Notes with respect to which such default occurs exceeds 10% of the aggregate principal amount of Notes to be purchased on such date, and arrangements satisfactory to the Representative and the Company for the purchase of such Notes are not made within 48 hours after such default, this

24

Agreement shall terminate without liability of any party (other than a defaulting Initial Purchaser) to any other party except that the provisions of Section 4, Section 7, Section 8 and Section 9 shall at all times be effective and shall survive such termination. In any such case either the Representative or the Company shall have the right to postpone the Closing Date or any Subsequent Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Final Offering Memorandum or any other documents or arrangements may be effected.

          As used in this Agreement, the term "Initial Purchaser" shall be deemed to include any person substituted for a defaulting Initial Purchaser under this Section 10. Any action taken under this Section 10 shall not relieve any defaulting Initial Purchaser from liability in respect of any default of such Initial Purchaser under this Agreement.

          Section 11.  Termination of this Agreement

          On or prior to the Closing Date this Agreement may be terminated by the Representative by notice given to the Company if at any time (i) trading or quotation in any of the Company's securities shall have been suspended or limited by the Commission or by the Nasdaq Global Market, or trading in securities generally on either the New York Stock Exchange or the Nasdaq Global Market shall have been suspended or limited, or minimum or maximum prices shall have been generally established by the Commission or the NASD on either such stock exchange; (ii) a general banking moratorium shall have been declared by any federal or New York authority or a material disruption in commercial banking or securities settlement or clearance services in the United States has occurred; or (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States' or international political, financial or economic conditions, as in the judgment of the Representative is material and adverse and makes it impracticable or inadvisable to market the Notes in the manner and on the terms described in the Disclosure Package and the Final Offering Memorandum or to enforce contracts for the sale of securities. Any termination pursuant to this Section 11 shall be without liability on the part of (a) the Company to any Initial Purchaser, except that the Company shall be obligated to reimburse the expenses of the Representative and the Initial Purchasers pursuant to Sections 4 and 7 hereof or (b) any Initial Purchaser to the Company.

          Section 12.  No Advisory or Fiduciary Responsibility

          The Company acknowledges and agrees that: (i) the purchase and sale of the Notes pursuant to this Agreement, including the determination of the offering price of the Notes and any related discounts and commissions, is an arm's-length commercial transaction between the Company, on the one hand, and the several Initial Purchasers, on the other hand, and the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (ii) in connection with each transaction contemplated hereby and the process leading to such transaction each Initial Purchaser is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary of the Company or its affiliates, stockholders, creditors or employees or any other party; (iii) no Initial Purchaser has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Company with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether such Initial Purchaser has advised or is currently advising the Company on other matters) and no Initial Purchaser has any obligation to the Company with respect to the offering contemplated hereby except the obligations expressly set forth in this

25

Agreement; (iv) the several Initial Purchasers and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and that the several Initial Purchasers have no obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Initial Purchasers have not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.

          This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the several Initial Purchasers, or any of them, with respect to the subject matter hereof. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the several Initial Purchasers with respect to any breach or alleged breach of agency or fiduciary duty.

          Section 13.  Representations and Indemnities to Survive Delivery

          The respective indemnities, contribution, agreements, representations, warranties and other statements of the Company, of its officers and of the several Initial Purchasers set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation, or statement as to the result hereof, made by or on behalf of any Initial Purchaser or the Company or any of its or their partners, officers, directors, employees, agents or any controlling person, as the case may be, (ii) acceptance of the Notes and payment for them hereunder or (iii) any termination of this Agreement.

          Section 14.  Notices

          All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed, or sent by air courier that guarantees overnight delivery, to the parties hereto as follows:

	
 
	
If to the Representative:

	
 
	
 
	
 

	
 
	
 
	
Banc of America Securities LLC

9 West 57th Street 

New York, New York 10019

Facsimile:  212-933-2217

Attention:  Syndicate Department

	
 
	
 
	
 

	
 
	
with a copy to:

	
 
	
 
	
 

	
 
	
 
	
Banc of America Securities LLC

9 West 57th Street

New York, New York 10019

Attention:  Equity Capital Markets Legal

26

	
 
	
If to the Company:

	
 
	
 
	
 

	
 
	
 
	
Spartan Stores, Inc.

850 - 76th Street, SW

Grand Rapids, Michigan 49518

Facsimile:  616-878-8287

Attention:  Alex J. DeYonker, Executive Vice President, General Counsel and

Secretary

	
 
	
 
	
 

	
 
	
with a copy to:

	
 
	
 
	
 

	
 
	
 
	
Warner Norcross & Judd LLP

900 Fifth Third Center

111 Lyon Street, N.W.

Grand Rapids, Michigan 49503-2487

Facsimile:  616-222-2752

Attention:  Gordon R. Lewis

Any party hereto may change the address for receipt of communications by giving written notice to the others.

          Section 15.  Successors

          This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Initial Purchasers pursuant to Section 10 hereof, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9, and in each case their respective successors. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 15, any legal or equitable right, remedy, or claim under or in respect of this Agreement or any provision contained herein. The term "successors" shall not include any purchaser of the Notes as such from any of the Initial Purchasers merely by reason of such purchase.

          Section 16.  Partial Unenforceability

          The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

          Section 17.  Governing Law

          THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 

          Section 18.  General Provisions

          This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures

27

thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto. The Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.

28

          If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms.

	
 
	
Very truly yours,

	
 
	
 

	
 
	
SPARTAN STORES, INC.

	
 
	
 

	
 
	
 

	
 
	
By:
	
 

	
 
	
 
	
Name:

	
 
	
 
	
Title:

          The foregoing Purchase Agreement is hereby confirmed and accepted by the Representative as of the date first above written.

	
BANC OF AMERICA SECURITIES LLC

Acting as representative of the

several Initial Purchasers named in

the attached Schedule A.
	
 

	
 
	
 

	
 
	
 

	
By:
	
 

	
 

	
 
	
Name:
	
 

	
 
	
Title:
	
 

	
BEAR, STEARNS & CO. INC.

Acting as representative of the

several Initial Purchasers named in

the attached Schedule A.
	
 

	
 
	
 

	
 
	
 

	
By:
	
 

	
 

	
 
	
Name:
	
 

	
 
	
Title:
	
 

29Factoring and Security Agreement

 

	
            FACE AMOUNT
 	
            $725,000
 

	
            INTEREST RATE
 	
            3% per month
 

	
            ISSUANCE DATE
 	
            May 29, 2007
 

	
            MATURITY DATE
 	
            August 15, 2007
 

 

FOR VALUE RECEIVED, Siena Technologies, Inc., Inc., a Nevada corporation (the “Company”), (OTC BB: SEIN) hereby promises to pay DUTCHESS PRIVATE EQUITIES FUND, LTD.  (the “Holder”) by August 15, 2007 (the “Maturity Date”), or earlier, the Face Amount of Seven Hundred and Twenty-Five Thousand dollars ($725,000) U.S., plus accrued interest, in such amounts, at such times and on such terms and conditions as are specified herein. 

 

WHEREAS, the Company desires to sell to the Holder certain of its Accounts, now existing, which represent amounts due from bona fide sales and delivery of good, or the rendering of service, or both, in the regular course of the Company’s business; and,

 

WHEREAS,  Holder desires to purchase those Accounts of the Company that it deems acceptable upon the terms and conditions set forth in the this Agreement.

 

In consideration of the above recitals, the terms and covenants of this Agreement and other good and valuable consideration, including the payment of money from Holder to Company, the receipt of which is hereby acknowledged, and intending to be bound hereby, the Parties agree as follows:

 

	
            Article 1
 	
            Method of Payment/Interest
 

 

The Company shall pay three percent (3%) monthly coupon, compounded daily, on the unpaid Face Amount, pro rata for partial periods.  The Company shall pay a minimum of twenty-one thousand seven hundred and fifty dollars ($21,750) in interest on the funds ("Minimum Interest"). 

 

Section 1.2  Prepayment

 

The Company shall make mandatory payments to the Holder as the funds become available from the invoices listed below in Exhibit A due to the Company’s wholly owned subsidiary Kelley Technologies, Inc. (“Kelley”) ("Collateral Accounts" or “Account”) (attached hereto and incorporated herein by reference).  The Company agrees to pay to the Holder, within one (1) day, in whole or part, that portion of funds from the Collateral Accounts as they become available in the Company's account.  All payments to the Holder shall be made via wire transfer. 

 

The Company may make additional payments (“Prepayment”) without any penalties provided the Minimum Interest is paid.  

 

	
            Article 2  
 	
            Collateral
 

 

 

1

	
            ______  
 	
            ______  
 

	
            JMK  
 	
            DHL
 

SIEN.NOTE.5.29.2007.FINAL.$725,000

 

The Company will secure the assigned materials and all funds receivable underlying the Collateral Accounts, due to the Company from the vendors listed on Collateral Accounts.  The Company shall immediately make payment to the Holder on ANY funds received from the vendors listed on Exhibit A.

 

	
            Article 2
 	
            Sale; Purchase Price; Assignment and Transfer of Ownership.
 

 

	
             
 	
            2.1
 	
            Offer of Accounts for Sale; Acceptance by Holder.
 

 

a.           Company shall offer to sell to Holder as absolute owner, with full recourse, all of Company’s right, title and interest in such of Company’s Accounts as are listed on the Schedules of Accounts.  The current version of the Schedule of Accounts is attached hereto as Exhibit “A” and may be periodically revised by Holder.

 

b.           Each Schedule of Accounts shall be accompanied by such documentation supporting and evidencing the Account, as Holder shall from time-to-time request.

 

	
             
 	
            2.2
 	
            Assignment and Sale
 

 

For those Accounts that Holder agrees to purchase from Company, Company shall assign and transfer over to Holder as absolute owner with full recourse all of Company’s right, title and interest in the Accounts being sold.  Company agrees to execute the Assignment of Accounts substantially in the form attached hereto as Exhibit “B” for Accounts being sold to Holder.

 

	
            Article 3  
 	
            Unpaid Amounts
 

 

In the event that on the Maturity Date, there is an outstanding balance on the Face Amount, the Holder can exercise its right to increase the Face Amount by ten percent (10%) as an initial penalty. The Company shall also continue to pay the interest rate outlined in this Agreement.  If the aforementioned occurs, the Company will be in Default and remedies as described in Article 4 may be taken at the Holder’s discretion. 

 

	
            Article 4
 	
            Defaults and Remedies
 

 

Section 4.1                      Events of Default. An “Event of Default” occurs if any of the following occur:

 

(a)          the Company does not make the Payment on the Face Amount of this Agreement within two (2) business days of the Maturity Date, as applicable, upon receipt of Collateral or otherwise; or

 

(b)          the Company, pursuant to or within the meaning of any Bankruptcy Law (as hereinafter defined):  (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian (as 

 

2

	
            ______  
 	
            ______  
 

	
            JMK  
 	
            DHL
 

SIEN.NOTE.5.29.2007.FINAL.$725,000

 

hereinafter defined) of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:  (A) is for relief against the Company in an involuntary case; (B) appoints a Custodian of the Company or for all or substantially all of its property; or (C) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for sixty (60) calendar days; or 

 

(c)          the Company’s common stock (the "Common Stock") is suspended or is no longer listed on any recognized exchange, including an electronic over-the-counter bulletin board, for in excess of two (2) consecutive trading days; or 

 

(d)          any of the Company’s representations or warranties contained in this Agreement were false when made and such failure continues for a period of five (5) business days; or, 

 

(e)          the Company breaches any covenant or condition of this Agreement, and such breach, if subject to cure, continues for a period of five (5) business days.

 

 (f)          the Company’s failure to pay any taxes when due unless such taxes are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been provided on the Company’s books; provided, however, that in the event that such failure is curable, the Company shall have ten (10) business days to cure such failure; or,

 

 (g)         an attachment or levy is made upon the Company’s assets having an aggregate value in excess of twenty-five thousand dollars ($25,000) or a judgment is rendered against the Company or the Company’s property involving a liability of more than twenty-five thousand dollars ($25,000) which shall not have been vacated, discharged, stayed or bonded pending appeal within ninety (90) days from the entry hereof; or,

 

 (h)         any change in the Company’s condition or affairs (financial or otherwise) which in the Holder’s reasonable, good faith opinion, would have a Material Adverse Effect; provided, however, that in the event that such failure is curable, the Company shall have ten (10) business days to cure such failure; or,

 

 (i)          any Lien, except for Permitted Liens, created hereunder or under any of the Transaction Documents for any reason ceases to be or is not a valid and perfected Lien having a first priority interest; or,

 

 (j)          the indictment or threatened indictment of the Company, any officer of the Company under any criminal statute, or commencement or threatened commencement of criminal or civil proceeding against the Company or any officer of the Company pursuant to which statute or proceeding penalties or remedies sought or available include forfeiture of any of the property of the company.

 

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As used in this Section 4.1, the term “Bankruptcy Law” means Title 11 of the United States Code or any similar federal or state law for the relief of debtors.  The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. 

 

Section 4.2                      Remedies.  In the Event of Default, the Holder may elect to secure a portion of the Company's assets as outlined in Article 20 of this Agreement.

 

For each Event of Default, as outlined in this Agreement, the Holder can exercise its right to increase the Face Amount ten percent (10%) as an initial penalty.  In addition, the Holder may elect to increase the Face Amount by three percent (3%) per month paid as a penalty for Liquidated Damages in addition to the current Interest being paid on the Note.  The Liquated Damages will be compounded daily.  It is the intention and acknowledgement of both parties that the Liquidated Damages not be deemed as interest.

 

In the event of a Default hereunder, the Holder shall have the right, but not the obligation, to 1) switch the Residual Amount to a three-year (“Convertible Maturity Date”), fifteen percent (15%) interest bearing convertible debenture at the terms described in Section 4.2 (the "Convertible Debenture"). At such time of Default, the Convertible Debenture shall be considered closed (“Convertible Closing Date”).  If the Holder chooses to convert the Residual Amount to a Convertible Debenture, the Company shall have forty-five (45) business days after notice of the same (the "Notice of Convertible Debenture") to file a registration statement covering an amount of shares equal to three hundred percent (300%) of the Residual Amount. The Company shall use its best efforts to require such registration statement shall be declared effective under the Securities Act of 1933, as
amended (the “Securities Act”), by the Securities and Exchange Commission (the “Commission”) within ninety (90) business days of the date the Company files such Registration Statement.   In the event the Company does not file such registration statement within twenty (20)  business days of the Holder's request, or such registration statement is not declared by the Commission to be effective under the Securities Act within the time period described above , the Residual Amount shall increase by five thousand dollars ($5,000) per day.  In the event the Company is given the option for accelerated effectiveness of the registration statement, it agrees that it shall cause such registration statement to be declared effective as soon as reasonably practicable.  In the event that the Company is given the option for accelerated effectiveness of the registration statement, but chooses not to cause such registration statement to be declared effective on such accelerated basis,
the Residual Amount shall increase by five thousand dollars ($5,000) per day commencing on the earliest date as of which such registration statement would have been declared to be effective if subject to accelerated effectiveness.

 

	
             
  	
            Section 4.3
 	
            Conversion Privilege
 

 

(a)          The Holder shall have the right to convert the Convertible Debenture into shares of Common Stock at any time following the Convertible Closing Date and which is before the close of business on the Convertible Maturity Date.  The number of shares of Common Stock issuable upon the conversion of the Convertible Debenture shall be determined pursuant to Section 4.3, but the number of shares issuable shall be rounded up or down, as the case may be, to the nearest whole share. 

 

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(b)          The Convertible Debenture may be converted, whether in whole or in part, at any time and from time to time.

 

(c)          In the event all or any portion of the Convertible Debenture remains outstanding on the Convertible Maturity Date (the "Debenture Residual Amount"), the unconverted portion of such Convertible Debenture will automatically be converted into shares of Common Stock on such date in the manner set forth in Section 4.3.

 

	
             
  	
            Section 4.4
 	
            Conversion Procedure
 

 

(a)          The Residual Amount may be converted, in whole or in part any time and from time to time, following the Convertible Closing Date.  Such conversion shall be effectuated by surrendering to the Company, or its attorney, the Convertible Debenture to be converted together with a facsimile or original of the signed notice of conversion (the "Notice of Conversion").   The date on which the Notice of Conversion is effective (“Conversion Date”) shall be deemed to be the date on which the Holder has delivered to the Company a facsimile or original of the signed Notice of Conversion, as long as the original Convertible Debenture(s) to be converted are received by the Company within five (5) business days thereafter.  At such time that the original Convertible Debenture has been received by
the Company, the Holder can elect to whether a reissuance of the Convertible Debenture is warranted, or whether the Company can retain the Convertible Debenture as to a continual conversion by the Holder.  Notwithstanding the above, any Notice of Conversion received by 4:00 P.M. EST shall be deemed to have been received the following business day (receipt being via a confirmation of the time such facsimile to the Company is received). 

 

(b)          Common Stock to be Issued.  Upon the conversion of any Convertible Debentures and upon receipt by the Company or its attorney of a facsimile or original of the Holder’s signed Notice of Conversion, the Company shall instruct its transfer agent to issue stock certificates without restrictive legends or stop transfer instructions, if at that time the aforementioned registration statement described in Section 4.1 has been declared effective (or with proper restrictive legends if the registration statement has not as yet been declared effective), in such denominations to be specified at conversion representing the number of shares of Common Stock issuable upon such conversion, as applicable.   In the event that
the Debenture is aged one year and deemed sellable under Rule 144, the Company shall, upon a Notice of Conversion, instruct the transfer agent to issue free trading certificates without restrictive legends, subject to other applicable securities laws.  The Company is responsible to provide all costs associated with the issuance of the shares, including but not limited to the opinion letter, FedEx of the certificates and any other costs that arise. The Company shall act as registrar and shall maintain an appropriate ledger containing the necessary information with respect to each Convertible Debenture. The Company warrants that no instructions, other than these instructions, have been given or will be given to the transfer agent and that the Common Stock shall otherwise be freely resold, except as may be set forth herein or subject to applicable law.

 

(c)          Conversion Rate.  Holder is entitled to convert the Debenture Residual Amount , plus accrued interest, anytime following the Convertible Maturity Date, at the lesser of 

 

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(i) fifty percent (50%) of the lowest closing bid price during the fifteen (15) trading  immediately preceding the Convertible Maturity Date or (ii) 100% of the lowest bid price for the twenty (20) trading days immediately preceding the  Convertible Maturity Date (“Fixed Conversion Price”).   No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded up or down, as the case may be, to the nearest whole share.

 

(d)          Nothing contained in the Convertible Debenture shall be deemed to establish or require the payment of interest to the Holder at a rate in excess of the maximum rate permitted by governing law.  In the event that the rate of interest required to be paid exceeds the maximum rate permitted by governing law, the rate of interest required to be paid thereunder shall be automatically reduced to the maximum rate permitted under the governing law and such excess shall be returned with reasonable promptness by the Holder to the Company. 

 

(e)          It shall be the Company’s responsibility to take all necessary actions and to bear all such costs to issue the Common Stock as provided herein, including the responsibility and cost for delivery of an opinion letter to the transfer agent, if so required.  Holder shall be treated as a shareholder of record on the date Common Stock is issued to the Holder. If the Holder shall designate another person as the entity in the name of which the stock certificates issuable upon conversion of the Convertible Debenture are to be issued prior to the issuance of such certificates, the Holder shall provide to the Company evidence that either no tax shall be due and payable as a result of such transfer or that the applicable tax has been paid by the Holder or such person. Upon surrender of any
Convertible Debentures that are to be converted in part, the Company shall issue to the Holder a new Convertible Debenture equal to the unconverted amount, if so requested in writing by the Holder.  

 

(f)           Within five (5) business days after receipt of the documentation referred to above in Section 4.2, the Company shall deliver a certificate, for the number of shares of Common Stock issuable upon the conversion.  In the event the Company does not make delivery of the Common Stock as instructed by Holder within five (5) business days after the Conversion Date, then in such event the Company shall pay to the Holder one percent (1%) in cash of the dollar value of the Debenture Residual Amount remaining after said conversion, compounded daily, per each day after the fifth (5th) business day following the Conversion Date that the Common Stock is not delivered to the Holder.            

 

(g)          The Company acknowledges that its failure to deliver the Common Stock within five (5) business days after the Conversion Date will cause the Holder to suffer damages in an amount that will be difficult to ascertain.  Accordingly, the parties agree that it is appropriate to include in this Agreement a provision for liquidated damages.  The parties acknowledge and agree that the liquidated damages provision set forth in this section represents the parties’ good faith effort to quantify such damages and, as such, agree that the form and amount of such liquidated damages are reasonable and will not constitute a penalty.  The payment of liquidated damages shall not relieve the Company from its obligations to deliver the Common Stock pursuant to the terms of this Convertible Debenture.

 

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(h)          The Company shall at all times reserve (or make alternative written arrangements for reservation or contribution of shares) and have available all Common Stock necessary to meet conversion of the Convertible Debentures  by the Holder of the entire amount of Convertible Debentures then outstanding. If, at any time the Holder submits a Notice of Conversion and the Company does not have sufficient authorized but unissued shares of Common Stock (or alternative shares of Common Stock as may be contributed by stockholders of the Company) available to effect, in full, a conversion of the Convertible Debentures (a “Conversion Default,” the date of such default being referred to herein as the “Conversion Default Date”), the Company shall issue to the Holder all of the shares of
Common Stock which are available, and the Notice of Conversion as to any Convertible Debentures requested to be converted but not converted (the “Unconverted Convertible Debentures”), may be deemed null and void upon written notice sent by the Holder to the Company.  The Company shall provide notice of such Conversion Default (“Notice of Conversion Default”) to the Holder, by facsimile within three (3) business days of such default (with the original delivered by overnight mail or two day courier), and the Holder shall give notice to the Company by facsimile within five (5) business days of receipt of the original Notice of Conversion Default (with the original delivered by overnight mail or two day courier) of its election to either nullify or confirm the Notice of Conversion.

 

(i)           The Company agrees to pay the Holder payments for a Conversion Default (“Conversion Default Payments”) in the amount of (N/365) multiplied by .24 multiplied by the initial issuance price of the outstanding or tendered but not converted Convertible Debentures held by the Holder where N = the number of days from the Conversion Default Date to the date (the “Authorization Date”) that the Company authorizes a sufficient number of shares of Common Stock to effect conversion of all remaining Convertible Debentures.  The Company shall send notice (“Authorization Notice”) to the Holder that additional shares of Common Stock have been authorized, the Authorization Date, and the amount of Holder’s accrued Conversion Default Payments.  The accrued Conversion
Default shall be paid in cash or shall be convertible into Common Stock at the conversion rate set forth in the first sentence of this paragraph, upon written notice sent by the Holder to the Company, which Conversion Default shall be payable as follows:  (i) in the event the Holder elects to take such payment in cash, cash payments shall be made to the Holder  by the fifth (5th) day of the following calendar month, or (ii) in the event Holder elects to take such payment in stock, the Holder may convert such payment amount into Common Stock at  the conversion rate set forth in the first sentence of this paragraph at any time after the fifth (5th) day of the calendar month following the month in which the Authorization Notice was received, until the expiration of the mandatory three (3) year conversion period.

 

(j)           The Company acknowledges that its failure to maintain a sufficient number of authorized but unissued shares of Common Stock to effect in full a conversion of the Convertible Debentures will cause the Holder to suffer damages in an amount that will be difficult to ascertain.  Accordingly, the parties agree that it is appropriate to include in this Agreement a provision for liquidated damages.  The parties acknowledge and agree that the liquidated damages provision set forth in this section represents the parties’ good faith effort to quantify such damages and, as such, agree that the form and amount of such liquidated damages are reasonable and will not constitute a penalty.  The payment of liquidated damages shall not 

 

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relieve the Company from its obligations to deliver the Common Stock pursuant to the terms of this Convertible Debenture.  

 

(k)          If, by the third (3rd) business day after the Conversion Date of any portion of the Convertible Debentures to be converted (the “Delivery Date”), the transfer agent fails for any reason to deliver the Common Stock upon conversion by the Holder and after such Delivery Date, the Holder purchases, in an open market transaction or otherwise, shares of Common Stock (the "Covering Shares") solely in order to make delivery in satisfaction of a sale of Common Stock by the Holder (the "Sold Shares"), which delivery such Holder anticipated to make using the Common Stock issuable upon conversion (a "Buy-In"), the Company shall pay to the Holder, in addition to any other amounts due to Holder pursuant to this Convertible Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as
defined below).  The "Buy In Adjustment Amount" is the amount equal to the excess, if any, of (x) the Holder's total purchase price (including brokerage commissions, if any) for the Covering Shares over (y) the net proceeds (after brokerage commissions, if any) received by the Holder from the sale of the Sold Shares.  The Company shall pay the Buy-In Adjustment Amount to the Holder in immediately available funds within five (5) business days of written demand by the Holder.  By way of illustration and not in limitation of the foregoing, if the Holder purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which the Company will be required to pay to the Holder will be $1,000.

 

(l)           The Company shall defend, protect, indemnify and hold harmless the Holder and all of  its shareholders, officers, directors, employees, counsel, and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Section 4.3(h) Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Section 4.3(h) Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the “Section 4.3(h)
Indemnified Liabilities"), incurred by any Section 4.3(h) Indemnitee as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii) any breach of any covenant, agreement, or obligation of the Company contained in the Transaction Documents or any other certificate, instrument, or document  contemplated hereby or thereby, (iii) any cause of action, suit, or claim brought or made against such Section 4.3(h) Indemnitee by a third party and arising out of or resulting from the execution, delivery, performance, or enforcement of the Transaction Documents or any other certificate, instrument, or document contemplated hereby or thereby, (iv) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Common Stock underlying the
Convertible Debenture (“Securities”), or (v) the status of the Holder or holder of the Securities as an investor in the Company, except insofar as any such misrepresentation, breach or any untrue statement, alleged untrue statement, omission, or alleged omission is made in reliance upon and in conformity with written information furnished to the Company by the Holder or the Investor which is specifically intended by the Holder or the Investor to be relied upon by the Company, including for use in the 

 

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preparation of any such registration statement, preliminary prospectus, or prospectus, or is based on illegal trading of the Common Stock by the Holder or the Investor. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law. The indemnity provisions contained herein shall be in addition to any cause of action or similar rights the Holder may have, and any liabilities the Holder may be subject to.

 

	
            Article 5
 	
            Additional Financing and Registration Statements
 

 

Section 5.1                    The Company will not enter into any additional financing agreements, debt or equity, without prior expressed written consent from the Holder, which shall not be unreasonably withheld.  Failure to do so will result in an Event of Default and the Holder may elect to take the action outlined in Article 4.  

 

Section 5.2                       The Company agrees that it shall not file any registration statement which includes any of its Common Stock, including those on Form S-8, until such time as the Face Amount is paid off in full ("Lock-Up Period") or without the prior written consent of the Holder.  

 

Section 5.3                       The Holder shall also reserve the right to switch to the terms of the new financing  If at any time while the Face Amount is outstanding, if the Company issues or agree to issue any common stock or securities convertible into or exercisable for shares of commons stock (or modify any of the foregoing which may be outstanding) to any person or entity.  Additionally, if the Company shall, issue or agree to issue any of the aforementioned services to any person, firm or corporation at terms deemed by the Holder to be more favorable to the other investor than the terms or conditions of this Agreement, then the Holder is granted the right to modify any such term or condition of the Agreement to be the same as
any such term or condition of any subsequent offering.  The rights of the Holder in this Section 5 are in addition to any other right the Holder has pursuant to this Agreement and the Security Agreement of even date between the Holder and the Company.

 

Section 5.4                       The Company agrees that any and all its officers, insiders, affiliates or other related parties shall refrain from selling any Stock, during the Lock-Up Period.

 

	
            Article 6
 	
            Notice.
 

 

Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided a confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:

 

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If to the Company:

 

Siena Technologies, Inc., Inc.

5625 SOUTH ARVILLE STREET

STE. E

LAS VEGAS NV 89118 

Telephone: 702-889-8777

 

If to the Holder:

 

	
             
 	
            Dutchess Capital Management
 

	
             
 	
            Douglas Leighton
 

	
             
 	
            50 Commonwealth Ave Suite 2
 

	
             
 	
            Boston, MA  02116
 

	
             
 	
            Phone: 617-301-4700
 

	
             
 	
            Facsimile: 617-249-0947
 

 

Each party shall provide five (5) business days prior notice to the other party of any change in address, phone number or facsimile number.

 

	
            Article 7
 	
            Time
 

Where this Agreement authorizes or requires the payment of money or the performance of a condition or obligation on a Saturday or Sunday or a public holiday, or authorizes or requires the payment of money or the performance of a condition or obligation within, before or after a period of time computed from a certain date, and such period of time ends on a Saturday or a Sunday or a public holiday, such payment may be made or condition or obligation performed on the next succeeding business day, and if the period ends at a specified hour, such payment may be made or condition performed, at or before the same hour of such next succeeding business day, with the same force and effect as if made or performed in accordance with the terms of this Agreement.  A “business day” shall mean a day on which the banks in New York are not required or allowed to be closed.               

 

	
            Article 8
 	
            No Assignment
 

	
             
 	
            This Agreement and the terms and conditions herein, shall not be assignable.
 

 

	
            Article 9
 	
            Rules of Construction.
 

In this Agreement, unless the context otherwise requires, words in the singular number include the plural, and in the plural include the singular, and words of the masculine gender include the feminine and the neuter, and when the sense so indicates, words of the neuter gender may refer to any gender.  The numbers and titles of sections contained in the Agreement are inserted for convenience of reference only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.  Wherever, in this Agreement, a determination of the Company is required or allowed, such determination shall be made by a 

 

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majority of the Board of Directors of the Company and if it is made in good faith, it shall be conclusive and binding upon the Company and the Holder of this Agreement.

 

	
            Article 10
 	
            Governing Law
 

The validity, terms, performance and enforcement of this Agreement shall be governed and construed by the provisions hereof and in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements that are negotiated, executed, delivered and performed solely in the State of Massachusetts. 

 

	
            Article 11
 	
            Litigation
 

 

The parties to this agreement will submit all disputes arising under this agreement to arbitration in Boston, Massachusetts before a single arbitrator of the American Arbitration Association (“AAA”).  The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the Commonwealth of Massachusetts.  No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section.   Nothing in this section shall limit the Holder's right to obtain an injunction for a breach of this Agreement from a court of law.

 

	
            Article 12  
 	
            Conditions to Closing
 

 

	
             
 	
            The Company shall have delivered the proper Collateral to the Holder before Closing.  
 

 

	
            Article 13
 	
            Fees & Expenses
 

 

	
             
  	
            Section 13.1 Administration Fee.
  

 

The Company agrees to pay for related expenses associated with the proposed transaction of $5,000. This amount shall cover, but is not limited to, the following: due diligence expenses, document creation expenses, closing costs, and transaction administration expenses. This shall be deducted from the first closing.

 

13.2       Misdirected Payment Fee.   Fifteen percent (15%) of the amount of any payment (but in no event less than $1,000) on account of a Collateral Account which has been received by Company and not delivered in kind to Holder on the next business day following the date of receipt by Company, or thirty percent (30%) of the amount of any such payment which has been received by Company as a result of any action taken by Company to cause such payment to be made to Company.

 

13.4      Out-of-Pocket Expenses.  The out-of-pocket expenses directly incurred by Holder in the administration of this Agreement such as wire transfer fees, postage and audit fees shall be the responsibility of the Company.  

 

 

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            Article 16  
 	
            Indemnification
 

 

In consideration of the Holder's execution and delivery of this Agreement and the acquisition and funding by the Holder hereunder and in addition to all of the Company's other obligations under the documents contemplated hereby, the Company shall defend, protect, indemnify and hold harmless the Holder and all of their shareholders, officers, directors, employees, counsel, and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "INDEMNITEES") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the “INDEMNIFIED LIABILITIES’), incurred by any Indemnitee as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company in the Agreement, or any other certificate, instrument or document contemplated hereby or thereby (ii) any breach of any covenant, agreement or obligation of the Company contained in the Agreement or any other certificate, instrument or document  contemplated hereby or thereby, except insofar as any such misrepresentation, breach or any untrue statement, alleged untrue statement, omission or alleged omission is made in reliance upon and in conformity with written information furnished to the Company by, or on behalf of, the Holder or based on illegal or alleged illegal trading of the Shares by the Holder. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The indemnity provisions contained herein shall be in addition to any cause of action or similar rights the Holder may have, and any liabilities the Holder may be subject to.

 

	
            Article 17
 	
            Waiver
 

 

The Holder's delay or failure at any time or times hereafter to require strict performance by Company of any undertakings, agreements or covenants shall not waiver, affect, or diminish any right of the Holder under this Agreement to demand strict compliance and performance herewith. Any waiver by the Holder of any Event of Default shall not waive or affect any other Event of Default, whether such Event of Default is prior or subsequent thereto and whether of the same or a different type. None of the undertakings, agreements and covenants of the Company contained in this Agreement, and no Event of Default, shall be deemed to have been waived by the Holder, nor may this Agreement be amended, changed or modified, unless such waiver, amendment, change or modification is evidenced by an instrument in writing specifying such waiver, amendment, change or modification and signed by the Holder. 

 

	
            Article 18
 	
            Senior Obligation
 

 

The Company shall cause this Agreement to be senior in right of payment to all other Indebtedness of the Company for the Collateral.

 

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            Article 19
 	
            Transactions With Affiliates  
 

 

The Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors, persons who were officers or directors at any time during the previous two years, shareholders who beneficially own five percent (5%) or more of the Common Stock, or affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a five percent (5%) or more beneficial interest (each a “Related Party”) during the Lock Up Period

 

	
            Article 20
 	
            Security
 

 

As security for the Face Amount, the Company grants to the Holder a continuing first priority in the Collateral.  Notwithstanding the creation of this security interest, the relationship of the parties shall be that of purchaser and seller of accounts, and not that of lender and borrower.  Company agrees to execute all documents appropriate and necessary in order to perfect Holder’s security interest in the Collateral.

 

	
            Article 21
 	
            Intentionally Omitted
 

 

	
            Article 22
 	
            Disputes on Collateral Accounts
 

 

Company shall notify Holder promptly of and, if requested by Holder, will settle all disputes concerning any Collateral Account at Company’s sole cost and expense.  Holder may, but is not required to, attempt to settle, compromise, or litigate (collectively, “Resolve”) the dispute upon such terms, as Holder in its sole discretion deems advisable, for Company’s account and risk and at Company’s sole expense.  Upon the occurrence of an Event of Default, Holder may resolve such issues with respect to any Account of Company. 

 

	
            Article 23
 	
            Representations and Warranties of the Company
 

 

	
             
 	
            a.
 	
            It is fully authorized to enter into this Agreement and to perform hereunder.
 

 

	
             
 	
            b.
 	
            This Agreement constitutes its legal, valid and binding obligation.
 

 

c.          Company is in good standing in the jurisdiction of its organization and in the Nevada.

 

	
             
 	
            d.
 	
            The Collateral Accounts are and will remain:
 

 

i.            Bona fide existing obligations created by the sale and delivery of goods or the rendition of services in the ordinary course of Company’s business and are valid, fully collectible obligations form the debtors and/or payors to the Company for the Collateral Accounts (“Account Debtors”).

 

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ii.          Unconditionally owed and to the best knowledge of Company will be paid to Holder without defenses, disputes, offsets, counterclaims, or rights of return or cancellation.

 

iii.         Not sales to any entity that is affiliated with Company or in any way not an “arm’s length” transaction.

 

iv.          No person has a lien or ownership interest in, or claim against, the Collateral Accounts.

 

v.           The Collateral Accounts have not been previously sold or factored by Company.

 

vi.         The Account Debtors have not paid to Company, or Company’s representatives, or otherwise for Company’s benefit, any part or all of the Face Amount of the Collateral Account except as reflected in the Statement of Accounts covering that Collateral Account.

 

vii.        There exist no circumstances, the Company’s best knowledge, that would entitle the Account Debtors to refuse to pay the amounts due on the Collateral Accounts, or to reduce the amounts due on the Collateral Accounts from those amounts shown in the Schedule of Accounts.

 

e.           Company has not received notice or otherwise learned of actual or imminent bankruptcy, insolvency, or material impairment of the financial condition of any applicable Account Debtor regarding the Collateral Accounts.

 

f.            The financial statements, Purchase Order / Invoices, orders, proofs of delivery, account ledgers and all other documents submitted by Company to Holder concerning the Collateral Accounts or otherwise required under this Agreement are true, accurate and genuine.

 

	
            Article 24
 	
            Miscellaneous
 

 

	
             
  	
            a.
 	
            All pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, impersonal, singular or plural, as the identity of the person or persons may require.
 

 

	
             
  	
            b.
 	
            Neither this Agreement nor any provision hereof shall be waived, modified, changed, discharged, terminated, revoked or canceled, except by an instrument in writing signed by the party effecting the same against whom any change, discharge or termination is sought.
 

 

	
             
  	
            c.
 	
            Notices required or permitted to be given hereunder shall be in writing and shall be deemed to be sufficiently given when personally delivered or sent by facsimile transmission:  (i) if to the Company, at its executive offices or (ii) if to the Holder, at the address for correspondence set forth in the Article 6, or at such other 
 

 

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address as may have been specified by written notice given in accordance with this paragraph.

 

	
             
  	
            d.
 	
            This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument.  Execution and delivery of this Agreement by exchange of facsimile copies bearing the facsimile signature of a party shall constitute a valid and binding execution and delivery of this Agreement by such party.  Such facsimile copies shall constitute enforceable original documents.
 

 

	
             
  	
            e.
 	
            This Written Agreement represent the FINAL AGREEEMENT between the Company and the Holders and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties, there are no unwritten oral agreements among the parties.
 

 

	
             
  	
            f.
 	
            The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Articles of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or (ii) conflict with, or constitute a material default (or an event which with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, contract, indenture mortgage, indebtedness or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree, including United States federal and state
securities laws and regulations and the rules and regulations of the principal securities exchange or trading market on which the Common Stock is traded or listed (the “Principal Market”), applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is in violation of any term of, or in default under, the Articles of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or their organizational charter or by-laws, respectively, or any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations, amendments, accelerations, cancellations and violations that would not individually or in the
aggregate have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, statute, ordinance, rule, order or regulation of any governmental authority or agency, regulatory or self-regulatory agency, or court, except for possible violations the sanctions for which either individually or in the aggregate would not have a Material Adverse Effect.  The Company is not required to obtain any consent, authorization, permit or order of, or make any filing or registration (except the filing of a registration statement)  with, any court, 
 

 

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governmental authority or agency, regulatory or self-regulatory agency or other third party in order for it to execute, deliver or perform any of its obligations under, or contemplated by, this Agreement in accordance with the terms hereof or thereof. All consents, authorizations, permits, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof and are in full force and effect as of the date hereof. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company is not, and will not be, in violation of the listing requirements of the Principal Market as in effect on the date hereof and on each of the Closing Dates and is not aware of any facts which would reasonably lead to delisting of the Common Stock by
the Principal Market in the foreseeable future.

 

	
             
  	
            g.
 	
            The Company and its “Subsidiaries” (which for purposes of this Agreement means any entity in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest) are corporations duly organized and validly existing in good standing under the laws of the respective jurisdictions of their incorporation, and have the requisite corporate power and authorization to own their properties and to carry on their business as now being conducted. Both the Company and its Subsidiaries are duly qualified to do business and are in good standing in every jurisdiction in which their ownership of property or the nature of the business conducted by them makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement,
“Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations, financial condition or prospects of the Company and its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or on the authority or ability of the Company to perform its obligations under the Agreement.
 

 

	
             
  	
            h.
 	
            Authorization; Enforcement; Compliance with Other Instruments.  (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement, and to issue the Agreement in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby, have been duly and validly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors, or its shareholders, (iii) the Agreement has been duly and validly executed and delivered by the Company, and (iv) the Agreement constitutes the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies.
 

 

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            i.
 	
            The execution and delivery of this Agreement shall not alter any prior written agreements between the Company and the Holder.
 

 

	
             
  	
            j.
 	
            There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants, auditors and lawyers formerly or presently employed by the Company, including but not limited to disputes or conflicts over payment owed to such accountants, auditors or lawyers.
 

 

	
             
  	
            k.
 	
            All representations made by or relating to the Company of a historical nature and all undertaking described herein shall relate and refer to the Company, its predecessors, and the Subsidiaries. 
 

 

	
             
  	
            l.
 	
            The only officer, director, employee and consultant stock option or stock incentive plan currently in effect or contemplated by the Company has been submitted to the Holder or is described with Reports.  No other plan will be adopted nor may any options.
 

 

m.     The Company hereby represent and warrants to the Holder that: (i) it has voluntarily entered into this Agreement of its own freewill, (ii) it is not entering into this Agreement under economic duress with this Agreement and anticipated continued financing, (iii) the terms of this Agreement are reasonable and fair to the Company, and (iv) the Company has had independent legal counsel of its own choosing review this Agreement, advise the Company with respect to this Agreement, and represent the Company in connection with its entering into this Agreement.

 

 

 

[BALANCE OF PAGE LEFT BLANK INTENTIONALLY]

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the date first written above.

	
             
 	
            Siena Technologies, Inc.
 

 

/s/  James Michael Kelley

Name:  James Michael Kelley

Title:  Director and Executive Vice President of Administration

 

DUTCHESS PRIVATE EQUITIES FUND, LTD.

 

	
             
 	
            /s/  Douglas H. Leighton
 

	
             
 	
            Name:  Douglas H. Leighton
 

	
             
 	
            Title:  Director
 

 

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EXHIBIT A 

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Inv # 
 	
            Amount 
 	
             
 	
            Job Name 
 	
            Customer Name 
 
	
            4028
 	
            21,000.00
 	
             
 	
            Aliante Station 
 	
            KGA Architects
 
	
            4056
 	
            18,900.00
 	
             
 	
            Aliante Station 
 	
            KGA Architects
 
	
            4050
 	
            13,365.00
 	
             
 	
            Bergamo Build 
 	
            JE Dunn
 
	
            4039
 	
            108,100.00
 	
             
 	
            Cosmo Design 
 	
            Cosmo Senior
 
	
            3960
 	
            22,432.50
 	
             
 	
            Houston Mosaic 
 	
            5925 Almeda 
 
	
            3959
 	
            20,449.12
 	
             
 	
            Houston Mosaic 
 	
            5925 Almeda 
 
	
            4019
 	
            14,515.94
 	
             
 	
            LVAC Speaker 
 	
            LVAC
 
	
            3967
 	
            38,128.31
 	
             
 	
            Miracle Mile 
 	
            Miracle Mile
 
	
            4034
 	
            21,885.53
 	
             
 	
            Miracle Mile 
 	
            Miracle Mile
 
	
            3966
 	
            58,350.00
 	
             
 	
            Miracle Mile 
 	
            Miracle Mile
 
	
            4035
 	
            128,088.09
 	
             
 	
            Miracle Mile 
 	
            Miracle Mile
 
	
            3965
 	
            6,809.00
 	
             
 	
            Miracle Mile 
 	
            Miracle Mile
 
	
            4036
 	
            21,784.73
 	
             
 	
            Miracle Mile 
 	
            Miracle Mile
 
	
            3940
 	
            35,395.50
 	
             
 	
            Miracle Mile 
 	
            Miracle Mile
 
	
            3968
 	
            2,650.00
 	
             
 	
            Miracle Mile 
 	
            Miracle Mile
 
	
            4033
 	
            23,403.60
 	
             
 	
            Miracle Mile 
 	
            Miracle Mile
 
	
            3999
 	
            9,100.00
 	
             
 	
            Mirage Spa Remodel 
 	
            Jeff Myher Architect
 
	
            3997
 	
            8,387.10
 	
             
 	
            Palms Buffet Remodel 
 	
            Gillett Construction 
 
	
            4026
 	
            4,673.24
 	
             
 	
            Palms Buffet Remodel 
 	
            Gillett Construction 
 
	
            4051
 	
            1,700.00
 	
             
 	
            Palms Cage Remodel 
 	
            Palms
 
	
            4043
 	
            14,095.56
 	
             
 	
            Palms Casino M & P
 	
            Palms
 
	
            4029
 	
            6,750.00
 	
             
 	
            Palms Place Villa 
 	
            Moser Architect
 
	
            4048
 	
            1,652.86
 	
             
 	
            Palms Pool Build 
 	
            Whiting Turner 
 
	
            4015
 	
            27,940.56
 	
             
 	
            Pinnacle Design 
 	
            Elysium 
 
	
            4021
 	
            1,280.92
 	
             
 	
            Red Rock Temp Plasma 
 	
            Red Rock 
 
	
            4022
 	
            23,481.53
 	
             
 	
            Red Rock R&S Relamp
 	
            Red Rock 
 
	
            4023
 	
            34,641.47
 	
             
 	
            Red Rock Japanese 
 	
            Station Casinos
 
	
            4020
 	
            2,571.13
 	
             
 	
            Red Rock Ticket Booth
 	
            Red Rock 
 
	
            4006
 	
            6,000.00
 	
             
 	
            Santa Fe Svce
 	
            Santa Fe Station 
 
	
            4004
 	
            15,643.75
 	
             
 	
            Santa Fe Re-lamp
 	
            Santa Fe Station 
 
	
            3992
 	
            2,740.93
 	
             
 	
            Cerno VC San Francisco
 	
            Cerno
 
	
            3956
 	
            64,987.50
 	
             
 	
            Silverton Casino Expansion
 	
            Precision Electric
 
	
            4014
 	
            2,063.61
 	
             
 	
            Jeff Bendavid SVCE
 	
            Jeff Bendavid
 
	
            4040
 	
            1,900.00
 	
             
 	
            Becky Binion  SVCE
 	
            Becky Binion
 
	
            3727
 	
            2,209.40
 	
             
 	
            David Thistle 
 	
            David Thistle 
 
	
            4046
 	
            2,500.00
 	
             
 	
            Wood Partners 
 	
            Wood Partners 
 
	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Total     $ 
 	
            789,576.88 
 	
             
 	
             
 	
             
 
	
             
 

 

We, the Company, do hereby agree to assign the above Accounts as Collateral as defined in Section 2 above, and do hereby, agree to make such payments to Holder from these Account Debtors as outlined in the Agreement.  We, the Company, realize that failure to make payments from the above orders to the Holder as outlined in the Agreement will result in an Event of Default  as outlined in Article 4 and the Holder may take actions against the Company.

 

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EXHIBIT B

 

ASSIGNMENT OF ACCOUNTS

 

AS OF May 29, 2007

FOR Kelley Communications (“COMPANY”) and

Dutchess Private Equities Fund, Ltd.(“HOLDER”)

 

FOR VALUE RECEIVED, Company unconditionally and irrevocably sells, bargains, transfers and assigns to Holder, with full recourse in Holder, as of the date shown above, all of Company’s right, title and interest in and to the Accounts enumerated in Exhibit “A” attached hereto (hereinafter “Collateral Accounts”), together with any security or guarantees associated with those Collateral Accounts, including the proceeds of credit insurance due and payable in connection with the Collateral Accounts.

 

Holder shall have the rights to the Collateral Accounts set forth in that certain Factoring and Security Agreement dated May 29, 2007 and to which Company and Holder are Parties including, but not limited to, (i) in Holder’s own name and for Holder’s own benefit, to make and effect collections from the Account Debtors and/or Payors of the Collateral Accounts; and, (ii) to receive, take possession of, endorse and deposit in Holder’s own bank account(s) any and all payments, commercial paper, notes or acceptances or other things of value received in payment of the Collateral Accounts.

 

By signing below, Holder accepts the assignment of the Accounts set out in the attached Exhibit “A”.

 

The terms “Account Debtors”, “Accounts”, “Parties”, “Payors” and “Collateral Accounts” shall have the same meaning as defined in the Factoring and Security Agreement dated May 29, 2007 and entered into by the Parties.

 

COMPANY

 

/s/  James Michael Kelley

Name:  James Michael Kelley

Title:  Director and Executive Vice President of Administration

 

 

 

DUTCHESS PRIVATE EQUITIES FUND, LTD.

 

/s/  Douglas H. Leighton

Name:  Douglas H. Leighton

Title:  Director          

 

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