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                                                                    EXHIBIT 10.6

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                             INTERCREDITOR AGREEMENT

                                      among

                                BANK OF SCOTLAND,
                                   as Lender,

                              THE BANK OF NEW YORK,
                              as Collateral Agent,

                              EMPIRE RESORTS, INC.,
                                  as Borrower,
                        and certain of its SUBSIDIARIES,
                                  as Guarantors

                            Dated as January 11, 2005

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                             INTERCREDITOR AGREEMENT

            THIS  INTERCREDITOR  AGREEMENT  dated as of January  11,  2005 (this
"AGREEMENT")  is made by and  among  BANK OF  SCOTLAND,  as agent  to the  Banks
referred  to below  (the  "ORIGINAL  LENDER")  under  and  pursuant  to the Loan
Agreement (as hereinafter defined), THE BANK OF NEW YORK ("BNY"),  solely in its
capacity as collateral  agent under the Indenture Loan Documents (as hereinafter
defined) (in such capacity,  the "COLLATERAL  AGENT"),  Empire Resorts,  Inc., a
Delaware  corporation (the  "BORROWER"),  and those certain  subsidiaries of the
Borrower party hereto (the "GUARANTORS").

                                    RECITALS

            A. Borrower, Guarantors,  Collateral Agent, and BNY, in its capacity
as Trustee (in such capacity,  the  "TRUSTEE"),  have entered into an Indenture,
dated as of July 26,  2004 (the  "INDENTURE"),  pursuant  to which the  Borrower
incurred  indebtedness  for certain  notes (such notes,  together with all other
notes  issued  after the date  hereof  and  exchange  notes  issued in  exchange
therefore,  the "NOTES") in an aggregate  principal  amount of $65,000,000.  The
repayment of the  Indenture  Secured  Obligations  (as  hereinafter  defined) is
secured by security  interests  in and liens on the assets and  properties  (the
"COLLATERAL")  described in the Security  Agreement  dated as of the date hereof
(the "INDENTURE SECURITY  AGREEMENT") made by the Borrower and the Guarantors in
favor of the  Collateral  Agent for the  benefit of the  Collateral  Agent,  the
Trustee,  and the Noteholders,  the Pledge Agreement dated as of the date hereof
(the  "INDENTURE  PLEDGE  AGREEMENT"),  made by the Borrower and the  Guarantors
parties  thereto  in  favor  of the  Collateral  Agent  for the  benefit  of the
Collateral  Agent, the Trustee,  and the Noteholders,  and certain real property
mortgages  (made  prior to the date hereof and from time to time  hereafter,  in
each case, by the Borrower or a Guarantor in favor of the  Collateral  Agent for
the benefit of the Collateral  Agent, the Trustee,  and the Noteholders,  each a
"MORTGAGE" and, together with the Indenture,  the Indenture Security  Agreement,
the Indenture  Pledge  Agreement and all Control  Agreements  (as defined in the
Indenture Security  Agreement)  executed and delivered in connection  therewith,
the "INDENTURE LOAN DOCUMENTS").

            B. The  Borrower,  certain  lenders  (the  "Banks") and the Original
Lender  have  entered  into a Loan  Agreement  dated as of January 11, 2005 (the
"ORIGINAL  LOAN  AGREEMENT")  and the  Guarantors  and the Original  Lender have
entered into those  certain  guarantys and guarantor  security  agreements  (the
"GUARANTOR  DOCUMENTS")  pursuant to which the Original Lender agreed,  upon the
term and conditions  stated therein,  to make loans and advances to the Borrower
up to the principal  amount of  $10,000,000,  together with the fees,  interest,
expenses  and other  obligations  due under the  Original  Loan  Agreement.  The
repayment  of the  Obligations  (as that term is  defined in the  Original  Loan
Agreement) is secured by first priority  security  interests in and liens on the
Collateral.

            C. One of the  conditions of the Original Loan Agreement is that the
priority of the security  interests in and liens on the Collateral to secure the
Loan Agreement  Secured  Obligations be senior to the security  interests in and
liens  on the  Collateral  to  secure  the  Indenture  Secured  Obligations  (as
hereinafter  defined),  in the  manner  and  to  the  extent  provided  in  this
Agreement.

                                      -2-

            D. The Original Lender and the Collateral Agent desire to enter into
this Agreement concerning the respective rights of the Lender and the Collateral
Agent with respect to the priority of their respective security interests in and
liens on the Collateral.

            E. The terms of the Indenture permit the Borrower and the Guarantors
to enter into the Original Loan  Agreement,  subject to compliance  with certain
conditions,  and in connection  therewith  authorize  and direct the  Collateral
Agent to enter into a subordination  agreement substantially in the form of this
Agreement.

            F. In order to induce  the  Original  Lender and the Banks to extend
credit to the Borrower and the Guarantors and for purposes of certain conditions
precedent and covenants of the Original Loan Agreement,  the Original Lender and
the Collateral Agent hereby agree as follows:

                                   ARTICLE I.

                                   DEFINITIONS

            Section 1.01 TERMS  DEFINED  ABOVE AND IN THE  RECITALS.  As used in
this Agreement, the following terms shall have the respective meanings indicated
in the opening paragraph hereof and in the above Recitals:

                                   "Agreement"
                                   "Borrower"
                                   "Collateral"
                                   "Collateral Agent"
                                   "Guarantor Documents"
                                   "Original Loan Agreement"
                                   "Indenture Loan Documents"
                                   "Indenture"
                                   "Original Lender"
                                   "Original Loan Agreement"
                                   "Trustee"

            Section 1.02 LOAN AGREEMENT DEFINITIONS. All capitalized terms which
are used but not defined  herein  shall have the same meaning as in the Original
Loan Agreement, as in effect on the date hereof.

            Section  1.03  OTHER  DEFINITIONS.  As used in this  Agreement,  the
following terms shall have the meanings set forth below:

            "Capital  Stock" means (a) in the case of a  corporation,  corporate
stock, (b) in the case of an association or business entity, any and all shares,
interests,  participations,  rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability  company,
partnership  or membership  interests  (whether  general or limited) and (d) any
other interest or participation  that confers on a Person the right to receive a
share of the profits and losses of, or  distributions of property of the issuing
Person.

                                      -3-

            "CASH  COLLATERAL"  means any Collateral  consisting of cash or cash
equivalents,  any security  entitlement  (as defined in the New York  Commercial
Code) and any financial assets (as defined in the New York Commercial Code).

            "CONTROL   COLLATERAL"   means  any   Collateral   consisting  of  a
certificated  security (as defined in the New York Commercial Code),  investment
property (as defined in the New York  Commercial  Code),  a deposit  account (as
defined in the New York Commercial  Code) and any other Collateral as to which a
Lien may be perfected through possession or control by the secured party, or any
agent therefor.

            "DISCHARGE OF LOAN AGREEMENT SECURED  OBLIGATIONS"  means payment in
full in  cash  of the  Loan  Agreement  Secured  Obligations  (other  than  Loan
Agreement   Secured   Obligations   consisting  of  contingent   indemnification
obligations  under the Lender Loan  Documents)  up to (but not in excess of) the
Maximum Loan Agreement Debt Amount including,  with respect to amounts available
to  be  drawn  under  outstanding   letters  of  credit  issued  thereunder  (or
indemnities  issued  pursuant  thereto  in  respect  of  outstanding  letters of
credit),  delivery of cash  collateral or backstop  letters of credit in respect
thereof in compliance with the terms of the Loan Agreement,  in each case, after
or concurrently with termination of all commitments to extend credit thereunder.

            "EQUITY INTERESTS" means Capital Stock and all warrants,  options or
other rights to acquire  Capital Stock (but  excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

            "GUARANTOR"  means the  Subsidiaries  of  Borrower,  other  than the
Immaterial  Subsidiaries,  that are organized  under the laws of a  jurisdiction
within the United States.

            "INDENTURE   SECURED   OBLIGATIONS"   shall  mean  all  indebtedness
represented by the Notes,  together with  interest,  premiums,  fees,  costs and
expenses in respect thereof (including,  without limitation,  attorneys fees and
disbursements  and  including  interest  accrued  after  the  initiation  of any
Insolvency  Proceeding,  whether or not allowed or allowable  in any  Insolvency
Proceeding).

            "INSOLVENCY PROCEEDING" means any proceeding commenced by or against
any Person under any provision of the  Bankruptcy  Code or under any other state
or  federal  bankruptcy  or  insolvency  law,  assignments  for the  benefit  of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization,  arrangement, or other similar
relief.

            "LENDER" means the Original  Lender,  together with all  successors,
assigns, transferees,  participants,  replacement or refinancing lenders, of the
Original Lender, including any Person designated as a Lender or "Bank" under any
Loan  Agreement;  PROVIDED that for purposes of this  Agreement,  the Collateral
Agent shall be entitled to deal only with the Original Lender until such time as
the Original  Lender shall have assigned to another Lender all of its rights and
obligations  here under to such other Lender pursuant to an assignment which has
been provided by the Original  Lender to the Collateral  Agent and until receipt
thereof,  Collateral Agent shall not be liable for any such dealings  (including

                                      -4-

the turning over of any Collateral or proceeds thereof to the Original Lender at
a time when any other Lender and not the Original Lender was entitled thereto).

            "LENDER  COLLATERAL"  means all of Borrower's  and each  Guarantor's
right,  title and interest in, to, and under all real and personal  property and
assets of the Borrower and such Guarantor,  including,  without limitation,  all
Collateral and all "Collateral" as defined in the Loan Agreement.

            "LENDER  LOAN  DOCUMENTS"  means  the  Loan  Agreement,   the  "Loan
Documents" as defined in the Original Loan Agreement,  the collateral  documents
and instruments  executed and delivered in connection therewith or in connection
with any other Loan Agreement hereunder, and such other agreements,  instruments
and certificates as defined in a Loan Agreement.

            "LIEN" means any interest in an asset  securing an  obligation  owed
to, or a claim by, any Person other than the owner of the asset, irrespective of
whether (a) such interest is based on the common law, statute, or contract,  (b)
such interest is recorded or perfected, and (c) such interest is contingent upon
the  occurrence  of some future event or events or the  existence of some future
circumstance or circumstances. Without limiting the generality of the foregoing,
the term "Lien" includes the lien or security  interest arising from a mortgage,
deed  of  trust,  encumbrance,   pledge,  hypothecation,   assignment,   deposit
arrangement,  security  agreement,  conditional sale or trust receipt, or from a
lease,  consignment;  or  bailment  for  security  purposes  and  also  includes
reservations,  exceptions, encroachments,  easements, rights-of-way,  covenants,
conditions,  restrictions,  leases,  and other title exceptions and encumbrances
affecting Real Property.

            "LIEN  PRIORITY" means with respect to any Lien of the Lender or the
Collateral  Agent in the  Collateral,  the order,  of  priority  of such Lien as
specified in Section 2.01.

            "LOAN  AGREEMENT"  means the  Original  Loan  Agreement  as amended,
restated,  modified,  renewed, refunded,  replaced, or refinanced in whole or in
part from time to time,  including  any  agreement  extending  the  maturity of,
consolidating,   otherwise  restructuring   (including  adding  Subsidiaries  or
affiliates  of  the  Borrower  or any  other  persons  as  parties  thereto)  or
refinancing all or any portion of the  Obligations or Loan  Commitments as those
terms are defined in the Original Loan Agreement (or in any other agreement that
itself  is a Loan  Agreement  hereunder)  and  whether  by the same or any other
agent,  lender, or group, of lenders and whether or not increasing the amount of
indebtedness that may be incurred thereunder.

            "LOAN AGREEMENT SECURED  OBLIGATIONS"  means all Obligations and all
other amounts  owing or due under the terms of the Loan  Agreement and the other
Lender Loan Documents, including any and all amounts payable under or in respect
of the Lender Loan Documents, as amended, restated, modified, renewed, refunded,
replaced,  or  refinanced  in whole  or in part  from  time to  time,  including
principal,  premium,  interest, fees, attorneys' fees, costs, charges, expenses,
reimbursement obligations,  any obligation to post cash collateral in respect of
letters of credit or indemnities in respect  thereof,  indemnities,  guarantees,
and all other amounts payable  thereunder or in respect thereof  (including,  in
each case, all amounts  accruing on or after the  commencement of any Insolvency
Proceeding relating to Borrower,  any Guarantor or any other Person irrespective
of  whether a claim for all or any  portion  of such  amounts  is  allowable  or
allowed in any Insolvency Proceeding).

                                      -5-

            "LOAN  DOCUMENTS"  means the Lender Loan Documents and the Indenture
Loan Documents.

            MAXIMUM   PRIORITY   DEBT   AMOUNT"   means,   as  of  any  date  of
determination, (a) the principal amount of Loan Agreement Secured Obligations as
of such date up to, but not in excess  of,  $10,000,000,  PLUS (b) any  premium,
interest, fees, attorneys' fees, costs, charges, expenses,  indemnities, and all
other  amounts  payable  under  the Loan  Agreement  or the  other  Lender  Loan
Documents or in respect of the Loan Agreement Secured Obligations or clauses (a)
(including,  without  duplication,  all  guaranties  in  respect  thereof),  and
including, for each amount specified in clause (a) and (b), all amounts accruing
on or after the commencement of any Insolvency  Proceeding relating to Borrower,
any Guarantor or any other Person irrespective of whether a claim for all or any
portion of such amount is allowable or allowed in any Insolvency Proceeding.

            "NOTEHOLDERS" means each of the holders of the Notes.

            "ORIGINAL LOAN  AGREEMENT"  shall have the meaning  assigned to such
term in the recitals to this Agreement.

            "PARTY" means Lender and Collateral Agent.

            "PERSON" means any natural person,  corporation,  limited  liability
company,   limited   partnership,   general   partnership,   limited   liability
partnership,  joint  venture,  trust,  land  trust,  business  trust,  or  other
organization,  irrespective of whether such organization is a legal entity,  and
shall include a government and any agency or political subdivision thereof.

            "PROCEEDS"  means (i) all  "proceeds" as defined in Article 9 of the
New York Commercial  Code with respect to the  Collateral,  and (ii) whatever is
recoverable  or recovered  when  Collateral is sold,  exchanged,  collected,  or
disposed of, whether voluntarily or involuntarily.

            "RECOVERY" has the meaning set forth in Section 5.03.

            "STANDSTILL  NOTICE"  means a  written  notice  from or on behalf of
Lender to the Collateral Agent stating that an Event of Default has occurred and
stating that such written notice is a "Standstill Notice".

            "STANDSTILL PERIOD" has the meaning set forth in Section 2.03.

            RULES OF CONSTRUCTION.  Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular; references to
the singular include the plural,  the term "including" is not limiting,  and the
term  "or"  has,  except  where  otherwise  indicated,   the  inclusive  meaning
represented by the phrase  "and/or".  The words  "hereof,"  "herein,"  "hereby,"
"hereunder,"  and similar terms in this  Agreement  refer to this Agreement as a
whole and not to any particular provision of this Agreement.  Article,  section,
subsection,  clause,  schedule,  and  exhibit  references  herein  are  to  this
Agreement  unless  otherwise  specified.  Any reference in this Agreement to any
agreement,  instrument,  or document shall include all alterations,  amendments,
changes,  extensions,  modifications,  renewals,  replacements,   substitutions,
joinders,  and supplements  thereto and thereof,  as applicable  (subject to any

                                      -6-

restrictions   on   such   alterations,    amendments,    changes,   extensions,
modifications, renewals, replacements,  substitutions, joinders, and supplements
set forth  herein).  Any  reference  herein to any Person  shall be construed to
include such Person's successors and assigns.

                                  ARTICLE II.

                                  LIEN PRIORITY

            Section 2.01  AGREEMENT TO  SUBORDINATE.  Notwithstanding  the date,
time, method, manner or order of grant,  attachment,  or perfection of any Liens
granted to the Collateral  Agent, the Trustee,  or the Noteholders in respect of
all or any portion of the  Collateral  or of any Liens  granted to the Lender in
respect of all or any portion of the Lender Collateral,  or the order or time of
filing or  recordation of any document or instrument for perfecting the Liens in
favor of Lender or the  Collateral  Agent (or the Trustee or any  Noteholder) in
any  Collateral  or any  provision  of the Uniform  Commercial  Code,  any other
applicable  law, the  Indenture,  the Loan  Documents or any other  circumstance
whatsoever,  the Collateral  Agent,  on behalf of itself,  the Trustee,  and the
Noteholders, hereby agrees that:

            (a) (i) any Lien in respect of all or any portion of the  Collateral
now or hereafter held by or on behalf of the Collateral  Agent, the Trustee,  or
any  Noteholder  that  secures  all or any  portion  of  the  Indenture  Secured
Obligations,  shall in all  respects  be  junior  and  subordinate  to all Liens
granted to the Lender in the Lender  Collateral  to secure all or any portion of
the Loan Agreement Secured  Obligations up to (but not in excess of) the Maximum
Priority Debt Amount,  and (ii) any Lien in respect of all or any portion of the
Collateral  now or hereafter held by or on behalf of the Lender that secures all
or any  portion  of the Loan  Agreement  Secured  Obligations  in  excess of the
Maximum Priority Debt Amount, shall in all respects be junior and subordinate to
all Liens granted to the Collateral  Agent, the Trustee or any Noteholder in the
Collateral  to secure all or any portion of the Indenture  Secured  Obligations,
and

            (b) (i) any Lien in  respect  of all,  or any  portion of the Lender
Collateral  now or hereafter held by or on behalf of the Lender that secures all
or any  portion  of the Loan  Agreement  Secured  Obligations  up to (but not in
excess of) the Maximum Priority Debt Amount, shall in all respects be senior and
prior to all  Liens  granted  to the  Collateral  Agent (or the  Trustee  or any
Noteholder)  in the  Collateral  to secure all or any  portion of the  Indenture
Secured  Obligations,  and (ii) any Lien in respect of all or any portion of the
Collateral now or hereafter held by or on behalf of the  Collateral  Agent,  the
Trustee,  or any  Noteholder  that  secures all or any portion of the  Indenture
Secured  Obligations,  shall in all  respects  be senior  and prior to all Liens
granted to the Lender in the Collateral to secure all or any portion of the Loan
Agreement Secured Obligations in excess of the Maximum Priority Debt Amount.

            The Collateral  Agent, for and on behalf of itself,  the Trustee and
the Noteholders, acknowledges and agrees that, concurrently herewith, the Lender
has been granted Liens upon all of the Collateral in which the Collateral  Agent
has been granted Liens and the Collateral  Agent hereby  consents  thereto.  The
Lender  acknowledges  and agrees that the Collateral  Agent,  for the benefit of
itself, the Trustee, and the Noteholders, has been granted Liens upon all of the
Lender Collateral and the Lender hereby consents  thereto.  The subordination of
Liens (up to the Maximum  Priority  Debt  Amount) by the  Collateral  Agent,  on
behalf of itself, the Trustee, and the Noteholders in favor of the Lender herein

                                      -7-

shall not be deemed to subordinate the Collateral  Agent's Liens to the Liens of
any other Person.  The subordination of Liens (in excess of the Maximum Priority
Debt Amount) in favor of the Collateral  Agent,  for the benefit of itself,  the
Trustee  and the  Noteholders  herein  shall not be deemed to  subordinate  such
Lender's Liens to the Liens of any other Person.

            Section 2.02 WAIVER OF RIGHT TO CONTEST LIENS.  The Collateral Agent
agrees, on behalf of itself, the Trustee, and the Noteholders,  that it and they
shall not (and  hereby  waives,  on  behalf  of  itself,  the  Trustee,  and the
Noteholders  any right to) take any action to contest or challenge (or assist or
support any other Person in contesting or challenging),  directly or indirectly,
whether or not in any proceeding (including in any Insolvency  Proceeding),  the
validity, priority,  enforceability, or perfection of the Liens of the Lender in
respect of the Collateral. The Collateral Agent, for itself, the Trustee, and on
behalf  of the  Noteholders,  agrees  that  none of the  Collateral  Agent,  the
Trustee,  or the Noteholders will take any action that would hinder any exercise
of remedies undertaken by the Lender under the Lender Loan Documents,  including
any public or private sale, lease,  exchange,  transfer, or other disposition of
the Collateral,  whether by foreclosure or otherwise.  The Collateral Agent, for
itself, the Trustee, and on behalf of the Noteholders, hereby waives any and all
rights it, the Trustee, or the Noteholders may have as a junior lien creditor or
otherwise to contest, protest, object to, interfere with the manner in which the
Lender  seeks to enforce  the Liens in any portion of the  Collateral  (it being
understood and agreed that the terms of this Agreement shall govern with respect
to the  Collateral  even if any portion of the Liens securing the Loan Agreement
Secured Obligations are avoided, disallowed, set aside, or otherwise invalidated
in any judicial  proceeding or  otherwise).  The Lender agrees that it shall not
(and  hereby  waives any right to) take any action to contest or  challenge  (or
assist or support any other Person in  contesting or  challenging),  directly or
indirectly,  whether  or not  in any  proceeding  (including  in any  Insolvency
Proceeding), the validity, priority,  enforceability, or perfection of the Liens
of the Collateral Agent in respect of the Collateral. Following the Discharge of
Loan Agreement Secured Obligations,  the Lender agrees that it will not take any
action that would hinder any exercise of remedies  undertaken by the  Collateral
Agent,  the Trustee,  or any  Noteholder  under the  Indenture  Loan  Documents,
including  any public or  private  sale,  lease,  exchange,  transfer;  or other
disposition of the  Collateral,  whether by foreclosure or otherwise.  Following
the Discharge of Loan Agreement  Secured  Obligations,  the Lender hereby waives
any and all  rights  it may have as a  junior  lien  creditor  or  otherwise  to
contest,  protest,  object to, interfere with the manner in which the Collateral
Agent,  the Trustee or any Noteholder  seeks to enforce the Liens in any portion
of the  Collateral  (it  being  understood  and  agreed  that the  terms of this
Agreement shall govern with respect to the Collateral even if any portion of the
Liens securing the Indenture Secured  Obligations are avoided,  disallowed,  set
aside, or otherwise invalidated in any judicial proceeding or otherwise).

            Section 2.03 REMEDIES  STANDSTILL.  At any time after the occurrence
and  during  the  continuation  of an Event  of  Default  under  any of the Loan
Documents,  the Lender may send a Standstill Notice to the Collateral Agent. The
Collateral Agent, on behalf of itself, the Trustee, and the Noteholders, agrees,
that from and after the date of its receipt of any  Standstill  Notice,  none of
the Collateral  Agent,  the Trustee,  or any Noteholder will exercise any of its
rights or remedies in respect of the collection on, set off against, marshalling
of,  or  foreclosure  on the  Collateral  or any  other  right  relating  to any
Collateral  (including the exercise of any voting rights relating to any Capital

                                      -8-

Stock  constituting  Collateral) under the Indenture Loan Documents,  applicable
law or  otherwise  as a  secured  creditor  and  will not  take or  receive  any
Collateral  in  connection  with  the  exercise  of any  such  right  or  remedy
(including  recoupment or set-off),  whether under the Indenture Loan Documents,
applicable  law, in an Insolvency  Proceeding or otherwise  unless and until (a)
the Lender has expressly waived or acknowledged the cure of the applicable Event
of Default in writing or the Discharge of the Loan Agreement Secured Obligations
shall have  occurred,  or (b) 90 days shall  have  elapsed  from the date of the
Collateral Agent's receipt of such Standstill Notice, except with respect to any
Collateral  which the Lender is  pursuing  its rights or  remedies  as a secured
creditor to effect the collection,  foreclosure, sale, or other realization upon
or  disposition of such  collateral.  From and after the earlier to occur of (i)
the  Collateral  Agent's  receipt  of such  waiver or cure  notice,  or (ii) the
elapsing of such 90th day period,  any of the Collateral Agent, the Trustee,  or
any  Noteholder  may  commence to exercise  any of its rights and  remedies as a
secured creditor under the Indenture Loan Documents, applicable law or otherwise
(subject to the provisions of this Agreement,  including Section 4.02 hereof and
except with respect to any such  Collateral  as to which the Lender is effecting
the collection,  foreclosure, sale or other realization upon or disposition of).
The Lender may only send 3  Standstill  Notices  following  the date  hereof (it
being  understood and agreed as clarification to the foregoing that no more than
3 Standstill  Notices may be provided whether  delivered  hereunder or under any
corresponding  provision  of any  other  agreement  similar  hereto  that may be
delivered  pursuant  to Section  7.16) and no Event of Default  may serve as the
basis for any subsequent Standstill Notice unless 90 consecutive days shall have
elapsed  from the date that  such  Event of  Default  was cured or waived by the
Lender, and no more than one Standstill Notice may be given by the Lender in any
consecutive 365-day period. The time period during which the Collateral Agent is
not permitted to exercise  rights or remedies  under this section is referred to
herein as the "STANDSTILL PERIOD".

            Section 2.04 EXERCISE OF RIGHTS.

                (a) NO OTHER RESTRICTIONS. Except as expressly set forth in this
Agreement,  each of the Collateral Agent, the Trustee, the Noteholders,  and the
Lender  shall  have any and all rights  and  remedies  it may have as a creditor
under  applicable law,  including the rights to exercise all rights and remedies
in  foreclosure or otherwise  with respect to any of the  Collateral;  PROVIDED,
HOWEVER,  that any such  exercise by the  Collateral  Agent,  the Trustee or the
Noteholders,  and any collection or sale of all or any portion of the Collateral
by the Collateral Agent, the Trustee or the Noteholders, shall be subject to the
Liens of the Lender on the Collateral to the extent provided in Section 2.01 and
to the provisions of this Agreement including Section 4.02 hereof. In exercising
rights and remedies with respect to the  Collateral,  the Lender may enforce the
provisions of the Lender Loan Documents and exercise remedies thereunder, all in
such order and in such manner as it may  determine  in the  exercise of its sole
discretion.  Such  exercise  and  enforcement  shall  include  the sale,  lease,
license, or other disposition of all or any portion of the Collateral by private
or public sale or any other means  permissible  under applicable law;  PROVIDED,
that the Lender  agrees to provide  copies of any  notices  that it is  required
under  applicable  law to  deliver  to the  Borrower  or  any  Guarantor  to the
Collateral Agent; PROVIDED, FURTHER, that the failure to provide any such copies
to the Collateral Agent shall not impair any of the Lender's rights hereunder.

                                      -9-

                (b) RELEASE OF LIENS. In the event of any such private or public
sale,  Collateral  Agent  agrees,  on behalf of  itself,  the  Trustee,  and the
Noteholders,  that such sale  will be free and clear of the Liens  securing  the
Indenture Secured Obligations and, if the sale or other disposition includes the
Equity  Interests in Borrower or any  Guarantor,  agrees to release the entities
whose Equity Interests are sold from all Indenture  Secured  Obligations so long
as Lender also  releases the entities  whose Equity  Interests are sold from all
Loan Agreement Secured  Obligations.  In furtherance  thereof,  Collateral Agent
agrees  that it will  execute  any and all  Lien  releases  or  other  documents
reasonably requested by Lender in connection therewith,  so long as the proceeds
from such sale or other  disposition of the Collateral are applied in accordance
with the terms of this Agreement.

                (c) Subject to Section 3.01, the Collateral  Agent,  the Trustee
and the Noteholders may exercise,  and nothing herein shall  constitute a waiver
of, any right it may have at law or equity to receive  notice of, or to commence
or join with any creditor in commencing any Insolvency  Proceeding or to join or
participate in, any action or proceeding or other activity  described in Section
3.01; PROVIDED, HOWEVER, that exercise of any such right by the Collateral Agent
shall be subject to all of the terms and conditions of this Agreement, including
the  obligation  to  turn  over  Collateral  and  Proceeds  to  the  Lender  for
application  to the Loan  Agreement  Secured  Obligations as provided in Section
4.02.

                (d) The  Collateral  Agent  may make such  demands  or file such
claims in respect of the Indenture  Secured  Obligations  as may be necessary to
prevent  the  waiver  or  bar  of  such  claims  under  applicable  statutes  of
limitations or other statutes, court orders or rules of procedure, but except as
provided in this Section 2.04, the  Collateral  Agent shall not take any actions
restricted  by this  Agreement  until the  Discharge of Loan  Agreement  Secured
Obligations shall have occurred.

                (e)   Following  the   Discharge  of  Loan   Agreement   Secured
Obligations,  the other  provisions  of this  Section  2.04  shall  apply to the
Collateral Agent, for the benefit of itself,  the Trustee and the Noteholders as
if it was the Lender and the Lender was the Collateral Agent, MUTATIS MUTANDIS.

                                      -10-

                                  ARTICLE III.

                             ACTIONS OF THE PARTIES

            Section 3.01  LIMITATION  ON CERTAIN  ACTIONS.  Notwithstanding  any
other provision hereof,  during any Standstill Period prior to the date that the
Discharge of Loan Agreement  Secured  obligations  occurs,  the Collateral Agent
will not:

                (a) commence  receivership  or foreclosure  proceedings  against
Borrower, any Guarantor, or any Collateral;

                (b) sell,  collect,  transfer  or dispose of any  Collateral  or
Proceeds; or

                (c) notify third party account debtors to make payment  directly
to it or any of its agents or other Persons acting on its behalf.

            Section  3.02  AGENT  FOR  PERFECTION.  Each of the  Lender  and the
Collateral Agent, for and on behalf of itself, the Trustee, and each Noteholder,
as applicable,  agree to hold all Control Collateral and Cash Collateral that is
part of the Collateral in its respective possession,  custody, or control (or in
the  possession,  custody,  or  control  of agents or  bailees  for  either,  as
applicable)  as agent for the other  solely for the  purpose of  perfecting  the
security interest granted to each in such Control  Collateral or Cash Collateral
subject to the terms and  conditions of this Section  3.02.  None of the Lender,
the Collateral Agent, the Trustee, or the Noteholders, as applicable, shall have
any obligation whatsoever to the others to assure that the Control Collateral is
genuine or owned by Borrower,  any  Guarantor or any other Person or to preserve
rights or benefits of any Person. The duties or  responsibilities  of the Lender
and the Collateral Agent under this Section 3.02 are and shall be limited solely
to  holding  or  maintaining  control  of the  Control  Collateral  and the Cash
Collateral  as agent for the other for purposes of  perfecting  the Lien held by
the Collateral Agent or the Lender,  as applicable.  The Lender is not and shall
not be  deemed  to be a  fiduciary  of any kind for the  Collateral  Agent,  the
Trustee,  the Noteholders or any other Person.  The Collateral  Agent is not and
shall not be deemed to be a  fiduciary  of any kind for the  Lender or any other
Person. In the event that (a) any of the Collateral  Agent, the Trustee,  or any
Noteholder  receives any Proceeds or Lender  Collateral in  contravention of the
Lien  Priority,  or (b) the  Lender  receives  any  Proceeds  or  Collateral  in
contravention of the Lien Priority,  it shall promptly pay over such Proceeds or
Collateral to (i) in the case of clause (a), the Lender,  or (ii) in the case of
clause  (b),  the  Collateral  Agent,  in the  same  form as  received  with any
necessary  endorsements,  for  application in accordance  with the provisions of
Section 4.02 of this Agreement.

                                  ARTICLE IV.

                       NOTICES AND APPLICATION OF PROCEEDS

            Section 4.01 NOTICES OF EXERCISE.  Concurrently with any exercise by
the Collateral  Agent of any of its rights and remedies under the Indenture Loan
Documents  following  the  occurrence of any default  under the  Indenture,  the
Notes, or the Indenture Loan Documents,  the Collateral  Agent shall give notice
of such  exercise to the Lender and shall only  exercise such rights or remedies

                                      -11-

in a manner  consistent with the terms of this Agreement.  Concurrently with any
exercise by the Lender of any of its rights and  remedies  under the Lender Loan
Documents  following  the  occurrence  of any  default  under  the  Lender  Loan
Documents, the Lender shall give notice of such exercise to the Collateral Agent
and shall only exercise such rights or remedies in a manner  consistent with the
terms of this Agreement.

            Section 4.02 APPLICATION OF PROCEEDS.

                (a) REVOLVING NATURE OF LOAN AGREEMENT SECURED  OBLIGATIONS.  As
long as the Lender is not exercising  any of its remedies as a secured  creditor
under the Lender Loan Documents and including during any Standstill  Period, the
Lender may apply any and all of the  proceeds of the  Collateral  consisting  of
accounts  receivable,  other rights to payment or Cash  Collateral in accordance
with the provisions of the Lender Loan  Documents,  subject to the provisions of
this Agreement,  including  Sections 3.02 and 4.02 hereof. The Collateral Agent,
for and on  behalf  of  itself,  the  Trustee,  and the  Noteholders,  expressly
acknowledges  and  agrees  that  (a) any such  application  of the  proceeds  of
accounts  receivable,  other rights to payment or Cash Collateral or the release
of any Lien by the Lender upon any portion of the Collateral in connection  with
a Permitted  Disposition  (as that term is defined in the Lender Loan Documents)
shall not be considered to be the exercise of remedies under this Agreement; and
(b) all Proceeds or Cash Collateral  received by Lender in connection  therewith
may be applied,  reversed,  reapplied,  credited or reborrowed,  in, whole or in
part,  as Loan  Agreement  Secured  Obligations  without  reducing  the  Maximum
Priority Debt Amount.

                (b)  TURNOVER  OF  CASH  COLLATERAL  AFTER  PAYMENT.   Upon  the
Discharge of the Loan Agreement Secured Obligations, the Lender shall deliver to
the  Collateral  Agent or execute  such  documents as the  Collateral  Agent may
reasonably  request to cause the Collateral  Agent to have control over any Cash
Collateral  or  Control  Collateral  still in  Lender's  possession,  custody or
control in the same form as received,  with any necessary  endorsements  or as a
court of  competent  jurisdiction  may  otherwise  direct,  to be applied by the
Collateral Agent to the Indenture Secured Obligations.  Proceeds of any exercise
by the Lender or the Collateral Agent, as applicable, of any of their respective
secured  creditor  rights or  remedies  under any of the Loan  Documents,  under
applicable  law, or otherwise with respect to any Collateral or Proceeds,  shall
be (a) until the Discharge of the Loan Agreement Secured  Obligations,  retained
by the Lender or promptly turned over by the Collateral  Agent, the Trustee,  or
any Noteholder,  as the case may be, to the Lender in the same form as received,
with any necessary  endorsements,  (b) after the Discharge of the Loan Agreement
Secured  Obligations and until all Indenture Secured  Obligations have been paid
in full in cash, retained by the Collateral Agent or promptly turned over by the
Lender to the Collateral Agent in the same form as received,  with any necessary
endorsements,  and (c) if there are any  amounts  still  due or any  obligations
outstanding  to the Lender  under the  Lender  Loan  Documents  in excess of the
Maximum  Priority Debt Amount after the payment in full in cash of all Indenture
Secured Obligations,  shall be retained by the Lender or promptly turned over by
the  Collateral  Agent to the  Lender  in the same  form as  received,  with any
necessary endorsements.

                (c) APPLICATION OF PROCEEDS. The Lender and the Collateral Agent
hereby agree that all  Collateral  and all  Proceeds  received by either of them

                                      -12-

upon the exercise of any their secured  creditor rights or remedies under any of
the Loan Documents, applicable law, or otherwise shall be applied,

                FIRST, to the payment of costs and expenses of the Lender, or of
the Collateral  Agent,  the Trustee,  and the  Noteholders,  as  applicable,  in
connection with such exercise,

                SECOND, to the payment of the Loan Agreement Secured Obligations
up to (but not in excess of) the Maximum Priority Debt Amount,

                THIRD, to the payment of the Indenture Secured Obligations,  and

                FOURTH, to the payment of any Loan Agreement Secured Obligations
in excess of the Maximum Priority Debt Amount.

In exercising remedies,  whether as a secured creditor or otherwise,  the Lender
shall have no obligation or liability to the Collateral  Agent, the Trustee,  or
to any Noteholder and the Collateral Agent shall have no obligation or liability
to the  Lender  regarding  the  adequacy  of any  Proceeds  or for any action or
omission  save and except solely an action or omission that breaches the express
obligations undertaken by each Party under the terms of this Agreement.

            Section  4.03  SPECIFIC  PERFORMANCE.  Each  of the  Lender  and the
Collateral  Agent is hereby  authorized to demand  specific  performance of this
Agreement, whether or not the Borrower or any Guarantor shall have complied with
any of the provisions of any of the Lender Loan Documents,  at any time when the
other shall have failed to comply with any of the  provisions of this  Agreement
applicable to it; PROVIDED,  HOWEVER,  the remedy of specific  performance shall
not be available,  and the  asserting  party shall be free to assert any and all
legal  defenses it may  possess,  if such remedy  would  result in, or otherwise
constitute,  a violation of the Employee Retirement Income Security Act of 1974,
as  amended.  Each of the Lender and the  Collateral  Agent  hereby  irrevocably
waives any  defense  based on the  adequacy  of a remedy at law,  which might be
asserted as a bar to such remedy of specific performance.

                                   ARTICLE V.

                   INTERCREDITOR ACKNOWLEDGEMENTS AND WAIVERS

            Section 5.01 NOTICE OF ACCEPTANCE AND OTHER WAIVERS.

                (a) All Loan Agreement  Secured  Obligations at any time made or
incurred by Borrower,  any of its  Subsidiaries or any Guarantor shall be deemed
to have  been  made  or  incurred  in  reliance  upon  this  Agreement,  and the
Collateral Agent, on behalf of itself, the Trustee, and the Noteholders,  hereby
waives (i) notice of  acceptance,  or proof of  reliance,  by the Lender of this
Agreement,  and (ii)  notice  of the  existence,  renewal,  extension,  accrual,
creation,  or  non-payment  of all or any  part of the  Loan  Agreement  Secured
Obligations. Neither the Lender nor any of its affiliates,  directors, officers,
employees,  or agents shall be liable for failure to demand, collect, or realize
upon any of the  Collateral  or for any  delay in doing so or shall be under any
obligation to sell or otherwise  dispose of any  Collateral or to take any other
action  whatsoever with regard to the Collateral or any part thereof,  except as
specifically  provided  in this  Agreement.  If the  Lender  honors (or fails to
honor) a request by the Borrower for an extension of credit pursuant to the Loan
Agreement or any of the Lender Loan Documents, whether Lender has knowledge that
the  honoring  of (or  failure to honor) any such  request  would  constitute  a

                                      -13-

default under the terms of the  Indenture or any  Indenture  Loan Document or an
act, condition, or event that, with the giving of notice or the passage of time,
or both, would constitute such a default, or if Lender otherwise should exercise
any of its  contractual  rights or  remedies  under the  Lender  Loan  Documents
(subject to the express terms and conditions hereof),  Lender shall not have any
liability whatsoever to the Collateral Agent, the Trustee or any Noteholder as a
result of such action,  omission, or exercise (so long as any such exercise does
not breach the express terms and provisions of this Agreement).  The Lender will
be entitled to manage and supervise its loans and extensions of credit under the
Loan  Agreement  and other Lender Loan  Documents as the Lender may, in its sole
discretion, deem appropriate, and the Lender may manage its loans and extensions
of credit without  regard to any rights or interests that the Collateral  Agent,
the  Trustee,  or any of the  Noteholders  have in the  Collateral  or otherwise
except as otherwise expressly set forth in this Agreement. The Collateral Agent,
on behalf of itself,  the Trustee,  and the Noteholders,  agrees that the Lender
shall not incur any liability as a result of a sale,  lease,  license,  or other
disposition of the Collateral,  or any part thereof, pursuant to the Lender Loan
Documents conducted in accordance with mandatory provisions of applicable law.

                (b) None of Collateral Agent, Trustee, or any of the Noteholders
nor any of their affiliates,  directors, officers, employees, or agents shall be
liable for failure to demand,  collect, or realize upon any of the Collateral or
for any delay in doing so or shall be under any  obligation to sell or otherwise
dispose of any Collateral or to take any other action  whatsoever with regard to
the  Collateral or any part  thereof,  except as  specifically  provided in this
Agreement.  If  Collateral  Agent,  Trustee,  or any of the  Noteholders  should
exercise any of their  contractual  rights or remedies  under the Indenture Loan
Documents  (subject  to the  express  terms  and  conditions  hereof),  none  of
Collateral  Agent,  Trustee or any of the  Noteholders  shall have any liability
whatsoever to the Lender as a result of such action,  omission,  or exercise (so
long as any such exercise  does not breach the express  terms and  provisions of
this Agreement). The Collateral Agent, Trustee, and Noteholders will be entitled
to manage and supervise their loans and extensions of credit under the Indenture
Loan Documents as they may, in their sole discretion, deem appropriate, and they
may manage their loans and  extensions of credit without regard to any rights or
interests that the Lender has in the Collateral or otherwise except as otherwise
expressly  set forth in this  Agreement.  Subject  to Section  2.03,  the Lender
agrees that none of the Collateral Agent, the Trustee,  or the Noteholders shall
incur any liability as a result of a sale, lease,  license, or other disposition
of the Collateral, or any part thereof, pursuant to the Indenture Loan Documents
conducted in accordance with mandatory provisions of applicable law.

            Section 5.02  MODIFICATIONS  TO LENDER LOAN  DOCUMENTS AND INDENTURE
                          LOAN DOCUMENTS.

                (a) The Collateral Agent, on behalf of itself, the Trustee,  and
the Noteholders,  hereby agrees that,  without  affecting the obligations of the
Collateral Agent, the Trustee and the Noteholders hereunder,  the Lender may, at
any time and from time to time, in its sole discretion without the consent of or
notice to the Collateral  Agent,  the Trustee or any  Noteholder  (except to the
extent such notice or consent is required pursuant to the express  provisions of
this Agreement),  and without  incurring any liability to the Collateral  Agent,
the Trustee or any  Noteholder  or  impairing  or  releasing  the  subordination
provided for herein, amend, restate,  supplement,  replace,  refinance,  extend,

                                      -14-

consolidate,  restructure,  or otherwise modify the Loan Agreement or any of the
Lender Loan Documents in any manner whatsoever, including to

                        (i) change the manner,  place, time, or terms of payment
                or renew or  alter,  all or any of the  Loan  Agreement  Secured
                Obligations  or  otherwise  amend,   restate,   supplement,   or
                otherwise  modify in any manner,  or grant any waiver or release
                with respect to, all or any part of the Loan  Agreement  Secured
                Obligations or any of the Lender Loan Documents,

                        (ii)  retain  or  obtain a Lien on any  property  of any
                Person to secure any of the Loan Agreement Secured  Obligations,
                and in that connection to enter into any additional  Lender Loan
                Documents,

                        (iii) amend, or grant any waiver, compromise or release,
                with respect to, or consent to any departure  from, any guaranty
                or other obligations of any Person obligated in any manner under
                or in respect of the Loan Agreement Secured Obligations,

                        (iv)  release  its  Lien  on  any  Collateral  or  other
                property,

                        (v)  exercise  or  refrain  from  exercising  any rights
                against Borrower, any Guarantor or any other Person,

                        (vi)   retain  or  obtain  the   primary  or   secondary
                obligation  of any other  Person with respect to any of the Loan
                Agreement Secured Obligations, and

                        (vii) otherwise  manage and supervise the Loan Agreement
                Secured Obligations as the Lender shall deem appropriate.

                (b) The Lender hereby agrees that Collateral Agent, on behalf of
itself, the Trustee, and the Noteholders may, at any time and from time to time,
in its sole discretion without the consent of or notice to the Lender (except to
the extent such notice or consent is required pursuant to the express provisions
of this  Agreement),  and  without  incurring  any  liability  to the  Lender or
impairing or releasing the subordination  provided for herein,  amend,  restate,
supplement,  replace, refinance, extend, consolidate,  restructure, or otherwise
modify the Indenture Loan Documents in any manner whatsoever provided,  however,
that in no event shall Collateral Agent, the Trustee, or any Noteholder obtain a
Lien on any assets of  Borrower or any  Guarantor  not  constituting  Collateral
unless (i) Lender also obtains a Lien on such assets or (ii) Lender  declines in
a writing to Collateral Agent to obtain a Lien on such assets.

                (c)  Notwithstanding  anything  to  the  contrary  herein,  this
Section  5.02 shall not be construed  to  constitute a waiver by the  Collateral
Agent, the Trustee, or any Noteholder of Section 4.12 of the Indenture.

                (d) Notwithstanding anything to the contrary herein, in no event
shall  Indebtedness  represented by any Notes issued  pursuant to the Indenture,
including any Notes (or  represented by any other evidence of  indebtedness  for
borrowed money under the Notes or the Indenture) at any time exceed an aggregate
principal amount equal to $65,000,000.

                                      -15-

            Section 5.03 REINSTATEMENT AND CONTINUATION OF AGREEMENT.

                (a) If  Lender  is  required  in any  Insolvency  Proceeding  or
otherwise to turn over or otherwise  pay to the estate of the  Borrower,  any of
its  Subsidiaries,  any Guarantor or any other Person any amount (a "RECOVERY"),
then the Loan Agreement Secured Obligations shall be reinstated to the extent of
such  Recovery.  If this  Agreement  shall  have been  terminated  prior to such
Recovery,  this Agreement shall be reinstated in full force and effect, and such
prior termination shall not diminish, release,  discharge,  impair, or otherwise
affect the  obligations of the parties  hereto from such date of  reinstatement.
All rights, interests,  agreements, and obligations of the Collateral Agent, the
Trustee,  the Lender,  and the Noteholders  under this Agreement shall remain in
full force and effect and shall continue irrespective of the commencement of, or
any  discharge,  confirmation,   conversion,  or  dismissal  of  any  Insolvency
Proceeding by or against  Borrower,  any of its Subsidiaries or any Guarantor or
any other  circumstance which otherwise might constitute a defense available to,
or a discharge of the  Borrower,  any  Subsidiary or any Guarantor in respect of
the Loan Agreement Secured Obligations. No priority or right of the Lender shall
at any time be prejudiced or impaired in any way by any act or failure to act on
the part of the  Borrower,  any of its  Subsidiaries  or any Guarantor or by the
noncompliance by any Person with the terms, provisions, or covenants of the Loan
Agreement,  the Indenture or any of the other Loan Documents,  regardless of any
knowledge thereof which the Lender may have.

                (b) If  Collateral  Agent,  the Trustee,  or any  Noteholder  is
required in any Insolvency Proceeding or otherwise to turn over or otherwise pay
to the estate of the  Borrower,  any of its  Subsidiaries,  any Guarantor or any
other  Person  a  Recovery,  then the  Indenture  Secured  Obligations  shall be
reinstated  to the  extent  of  such  Recovery.  No  priority  or  right  of the
Collateral Agent, the Trustee, or any Noteholder shall at any time be prejudiced
or impaired in any way by any act or failure to act on the part of the Borrower,
any of its  Subsidiaries or any Guarantor or by the  noncompliance by any Person
with the terms, provisions, or covenants of the Loan Agreement, the Indenture or
any of the other Indenture Loan Documents,  regardless of any knowledge  thereof
which the Collateral Agent, the Trustee, or any Noteholder may have.

                                  ARTICLE VI.

                             INSOLVENCY PROCEEDINGS

            Section 6.01 DIP FINANCING.  If the Borrower or any Guarantor  shall
be subject to any Insolvency  Proceeding  and the Lender shall desire,  prior to
the Discharge of Loan Agreement Secured  Obligations,  to permit the use of cash
collateral  or to permit  Borrower or any  Guarantor to obtain  financing  under
Section 363 or Section 364 of Title 11 of the United  States Code or any similar
provision  under  the  law  applicable  to  any  Insolvency   Proceeding   ("DIP
FINANCING")  to be secured by all or any  portion  of the  Collateral,  then the
Collateral Agent, on behalf of itself, the Trustee, and the Noteholders,  agrees
that it will raise no objection to such use of cash  collateral or DIP Financing
and will not request adequate  protection or any other relief in connection with
its or their interest in any such Collateral  except to the extent  specified in
this Section 6.01. To the extent the Liens securing the Loan  Agreement  Secured
Obligations  are  subordinated  or pari  passu  with  such  DIP  Financing,  the

                                      -16-

Collateral Agent, for and on behalf of itself, the Trustee, and the Noteholders,
hereby agrees that its Liens in the Collateral shall be subordinated to such DIP
Financing (and all obligations  relating  thereto) upon the terms and conditions
specified  in this  Agreement.  Until the  Discharge of Loan  Agreement  Secured
Obligations  has  occurred,  the  Collateral  Agent,  on behalf of  itself,  the
Trustee,  and the  Noteholders,  agrees that none of them shall seek relief from
the automatic stay or any other stay in any Insolvency  Proceeding in respect of
the  Collateral  and will not  provide  or offer to  provide  any DIP  Financing
secured  by a Lien  senior to or pari  passu  with the Liens  securing  the Loan
Agreement  Secured  Obligations,  in each case unless the Lender  otherwise  has
provided its express written consent.

            Section 6.02 NO CONTEST.  The Collateral Agent, on behalf of itself,
the Trustee,  and the  Noteholders,  agrees that, prior to the Discharge of Loan
Agreement Secured Obligations,  none of them shall contest (or support any other
Person contesting) (a) any request by the Lender for adequate protection, or (b)
any objection by the Lender to any motion,  relief,  action, or proceeding based
on  Lender  claiming  that its  interest  in the  Collateral  is not  adequately
protected or any other similar request under any law applicable to an Insolvency
Proceeding.  Notwithstanding the foregoing, in any Insolvency Proceeding, if the
Lender is granted  adequate  protection in the form of additional  collateral in
connection with any DIP Financing or use of cash collateral under Section 363 or
Section 364 of Title 11 of the United States Code or any similar law  applicable
to any Insolvency  Proceeding,  then the Collateral  Agent, on behalf of itself,
the Trustee, or any of the Noteholders,  may seek or request adequate protection
in the form of a Lien on such  additional  collateral,  which Lien hereby is and
shall be deemed to be  subordinated  to the Liens  securing  the Loan  Agreement
Secured  Obligations  up to (but not in excess  of) the  Maximum  Priority  Debt
Amount and such DIP Financing (and all obligations relating thereto) on the same
basis as the Lien  Priority.  In the event the  Collateral  Agent,  on behalf of
itself, the Trustee, and the Noteholders,  seeks or requests adequate protection
and such  adequate  protection  is  granted  in the form of Liens in  respect of
additional  collateral,  then the  Collateral  Agent,  on behalf of itself,  the
Trustee,  and each of the  Noteholders,  agrees  that the  Lender  also shall be
granted a senior Lien on such  additional  collateral  as security  for the Loan
Agreement Secured Obligations (and for any such DIP Financing) and that any Lien
on such additional  collateral  securing the Indenture Secured Obligations shall
be subordinated to the Liens in respect of such additional  collateral  securing
the Loan Agreement Secured  Obligations and any such DIP Financing and any other
Liens  granted to the  Lender as  adequate  protection  on the same basis as the
other Liens securing the Indenture  Secured  Obligations are subordinated to the
Loan  Agreement  Secured  Obligations  under this  Agreement  up to the  Maximum
Priority  Debt Amount.  Nothing  contained  herein shall  prohibit or in any way
limit the Lender,  prior to the Discharge of Loan Agreement Secured Obligations,
from objecting in any Insolvency  Proceeding or otherwise to any action taken by
the  Collateral  Agent,  the Trustee or any of the  Noteholders,  including  the
seeking by the  Collateral  Agent,  the  Trustee or any  Noteholder  of adequate
protection  or the  asserting  by  the  Collateral  Agent,  the  Trustee  or any
Noteholder of any of its rights and remedies  under the Indenture Loan Documents
or otherwise.

            Section 6.03 ASSET SALES. The Collateral Agent agrees,  on behalf of
itself,  the  Trustee,  and the  Noteholders,  that it will not  oppose any sale
consented to by Lender of Collateral  pursuant to Section  365(f) of Title 11 of
the  United  States  Code (or any  similar  provision  in any  other  applicable
Bankruptcy  Law) so long as the proceeds of such sale are applied in  accordance
with this Agreement.

                                      -17-

            Section 6.04  ENFORCEABILITY.  The  provisions of this Agreement are
intended  to be and shall be  enforceable  under  Section 510 of Title 11 of the
United States Code. The Collateral Agent, on behalf of itself, the Trustee,  and
the Noteholders,  agrees that all  distributions  that the Collateral Agent, the
Trustee, or any Noteholder  receives in any Insolvency  Proceeding on account of
the Collateral or Proceeds shall be held in trust by such Person and turned over
to the Lender for application in accordance with Section 4.02 of this Agreement.
To the extent that any amounts received by the Collateral Agent, the Trustee, or
any Noteholder are paid over in connection with this provision,  the obligations
owed by the  Borrower  to such  Person  will be deemed to be  reinstated  to the
extent of the amounts so paid over.

                                  ARTICLE VII.

                                  MISCELLANEOUS

            Section 7.01 RIGHTS OF SUBROGATION. The Collateral Agent agrees that
no payment or  distribution  to the Lender  pursuant to the  provisions  of this
Agreement shall entitle the Collateral Agent, the Trustee,  or any Noteholder to
exercise any rights of  subrogation  in respect  thereof  until the Discharge of
Loan Agreement Secured Obligations shall have occurred.  Following the Discharge
of Loan  Agreement  Secured  Obligations,  the  Lender  agrees to  execute  such
documents,  agreements and instruments as the Collateral  Agent,  the Trustee or
any Noteholder may reasonably request to evidence the transfer by subrogation to
any such  Person  of an  interest  in the  Loan  Agreement  Secured  Obligations
resulting from payments or distributions  to the Lender by such Person,  so long
as  all  costs  and  expenses   (including   all   reasonable   legal  fees  and
disbursements)  incurred in connection  therewith by the Lender are paid by such
Person upon request for payment thereof.

            Section  7.02 FURTHER  ASSURANCES.  The Parties  will,  at their own
expense and at any time and from time to time,  promptly execute and deliver all
further  instruments  and documents,  and take all further  action,  that may be
necessary or desirable, or that either Party may reasonably request, in order to
protect any right or interest  granted or purported  to be granted  hereby or to
enable the Lender or the Collateral Agent to exercise and enforce its rights and
remedies hereunder;  PROVIDED,  HOWEVER,  that no Party shall be required to pay
over any payment or distribution,  execute any instruments or documents, or take
any other action referred to in this Section 7.02 to the extent that such action
would contravene any law, order or other legal requirement,  and in the event of
a controversy or dispute,  such Party may interplead any payment or distribution
in any  court of  competent  jurisdiction,  without  further  responsibility  in
respect of such payment or distribution under this Section 7.02.

            Section 7.03  REPRESENTATIONS.  The Original  Lender  represents and
warrants to the Collateral  Agent that it has the requisite  power and authority
under the Original Loan Agreement to enter into, execute, deliver, and carry out
the terms of this Agreement.  The Collateral  Agent represents and warrants that
it has the  requisite  power and  authority  under the  Indenture to enter into,
execute, deliver, and carry out the terms of this Agreement on behalf of itself,
the Trustee, and the Noteholders.

            Section 7.04 AMENDMENTS.  No amendment or waiver of any provision of
this  Agreement  nor  consent  to any  departure  by any Party  hereto  shall be
effective unless it is in a written  agreement  executed by the Collateral Agent

                                      -18-

and the Lender,  and then such waiver or consent shall be effective  only in the
specific instance and for the specific purpose for which given.

            Section 7.05 ADDRESSES FOR NOTICES.  All demands,  notices and other
communications  provided  for  hereunder  shall  be in  writing  and,  if to the
Collateral Agent, mailed or sent by telecopy or delivered to it, addressed to it
as follows:

                           The Bank of New York
                           101 Barclay Street,
                           Floor 8 West, New York, NY 10286
                           Fax 212-815-5704

and if to the Lender,  mailed,  sent or  delivered  thereto,  addressed to it as
follows:

                          Bank of Scotland
                          565 Fifth Avenue
                          New York, NY 10017
                          Telephone: (212) 450-0879
                          Fax: (212) 682-5720

With a copy to:

                           Sullivan & Worcester LLP
                           One Post Office Square
                           Boston, MA  02109
                           Attention: Duncan T. O'Brien, Esq.
                           Facsimile: 617-338-2880

or as to any party at such other address as shall be designated by such party in
a written notice to the other parties complying as to delivery with the terms of
this Section 7.05. All such demands,  notices and other  communications shall be
effective,  when mailed two business  days after  deposit in the mails,  postage
prepaid,  when sent by telecopy,  when receipt is  acknowledged by the receiving
telecopy  equipment  (or at the opening of the next  business  day if receipt is
after normal business hours),  or when delivered,  as the case may be, addressed
as aforesaid.

            Section  7.06 NO  WAIVER,  REMEDIES.  No  failure on the part of any
Party to exercise,  and no delay in exercising any right hereunder shall operate
as a waiver  thereof;  nor shall any  single or  partial  exercise  of any right
hereunder  preclude any other or further exercise thereof or the exercise of any
other right.  The remedies  herein  provided are cumulative and not exclusive of
any remedies provided by law.

            Section 7.07 CONTINUING  AGREEMENT TRANSFER OF SECURED  OBLIGATIONS.
This Agreement is a continuing  agreement and shall (i) remain in full force and
effect until the Discharge of the Loan Agreement Secured  Obligations shall have
occurred and the  Indenture  Secured  Obligations  shall have been paid in full,
(ii) be binding upon the Parties and their  successors  and  assigns,  and (iii)
inure to the benefit of and be enforceable  by the Parties and their  respective
successors,  transferees  and assigns.  Without  limiting the  generality of the
foregoing  clause (iii),  subject to the Lender Loan Documents and the Indenture

                                      -19-

Loan  Documents,  the  Lender  or the  Collateral  Agent,  the  Trustee,  or any
Noteholder  may  assign or  otherwise  transfer  all or any  portion of the Loan
Agreement  Secured  Obligations  or  the  Indenture  Secured   Obligations,   as
applicable,  to any other  Person  (other than  Borrower,  any  Guarantor or any
Affiliate of Borrower and any Subsidiary of Borrower or any Guarantor), and such
other Person shall  thereupon  become vested with all the rights and obligations
in respect thereof granted to the Lender or the Collateral  Agent,  the Trustee,
or any Noteholder, as the case may be, herein or otherwise.

            Section 7.08 GOVERNING LAW: ENTIRE  AGREEMENT.  This Agreement shall
be governed by, and construed in accordance  with,  the laws of the State of New
York except as otherwise  preempted by applicable  federal law.  This  Agreement
constitutes  the entire  agreement  and  understanding  among the  Parties  with
respect to the  subject  matter  hereof  and  supersedes  any prior  agreements,
written or oral, with respect thereto.

            Section 7.09  COUNTERPARTS.  This  Agreement  maybe  executed in any
number of  counterparts,  and it is not  necessary  that the  signatures  of all
Parties be contained on any one counterpart  hereof,  each  counterpart  will be
deemed to be an original,  and all together  shall  constitute  one and the same
document.

            Section 7.10 NO THIRD PARTY  BENEFICIARY.  This  Agreement is solely
for the benefit of the Parties (and their permitted assignees).  No other Person
(including  Borrower,  any  Guarantor  or any  Affiliate  of  Borrower  and  any
Subsidiary  of  Borrower or any  Guarantor)  shall be deemed to be a third party
beneficiary of this Agreement.

            Section 7.11 HEADINGS. The headings, of the articles and sections of
this  Agreement are inserted for purposes of  convenience  only and shall not be
construed to affect the meaning or construction of any of the provisions hereof.

            Section  7.12  SEVERABILITY.  If  any  of  the  provisions  in  this
Agreement  shall, for any reason,  be held invalid,  illegal or unenforceable in
any respect,  such invalidity,  illegality or unenforceability  shall not affect
any other provision of this Agreement and shall not invalidate the Lien Priority
or any other priority set forth in this Agreement.

            Section 7.13  COLLATERAL  AGENT  STATUS.  Nothing in this  Agreement
shall be construed to operate as a waiver by the Collateral  Agent, with respect
to the Borrower, any Guarantor,  the Trustee, or any Noteholder,  of the benefit
of any exculpatory  rights,  privileges,  immunities,  indemnities,  or reliance
rights  contained in the Indenture or any of the other Indenture Loan Documents.
For all purposes of this  Agreement,  the Collateral  Agent may (a) rely in good
faith,  as to matters of fact,  on any  representation  of fact  believed by the
Collateral  Agent to be true  (without  any duty of  investigation)  and that is
contained in a written  certificate  of, any  authorized  representative  of the
Borrower or of the  Lender,  and (b) assume in good faith  (without  any duty of
investigation),  and rely upon, the genuineness,  due authority,  validity,  and
accuracy of any certificate,  instrument,  notice, or other document believed by
it in good faith to be genuine and presented by the proper person.  Borrower and
Lender expressly  acknowledge that the subordination and related  agreements set
forth  herein  by the  Collateral  Agent  are made  solely  in its  capacity  as
Collateral Agent under the Indenture with respect to the Notes issued thereunder

                                      -20-

and the other Indenture Loan Documents and are not made by the Collateral  Agent
in its individual commercial capacity.

            Section 7.14  ACKNOWLEDGMENT.  Each of Borrower  and each  Guarantor
hereby  acknowledges  that it has received a copy of this Agreement and consents
thereto,  and agrees to recognize all rights  granted  thereby to the Lender and
the Collateral  Agent and will not do any act or perform any obligation which is
not in  accordance  with the  agreements  set forth in this  Agreement.  Each of
Borrower and each Guarantor  further  acknowledges  and agrees that it is not an
intended beneficiary or third party beneficiary under this Agreement.

            Section 7.15 VENUE; JURY TRIAL WAIVER.

                (a) THE PARTIES  HERETO  AGREE THAT ALL  ACTIONS OR  PROCEEDINGS
ARISING IN CONNECTION  WITH THIS AGREEMENT  SHALL BE TRIED AND LITIGATED ONLY IN
THE STATE AND  FEDERAL  COURTS  LOCATED IN THE CITY OF NEW YORK OR THE  SOUTHERN
DISTRICT  OF NEW YORK,  PROVIDED,  HOWEVER,  THAT ANY SUIT  SEEKING  ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT,  AT LENDER'S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE
SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH PARTY HERETO WAIVES, TO THE
EXTENT  PERMITTED  UNDER  APPLICABLE  LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE  OF FORUM  NON  CONVENIENS  OR TO  OBJECT  TO VENUE TO THE  EXTENT  ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 7.15.

                (b) EACH PARTY HERETO HEREBY WAIVES ITS  RESPECTIVE  RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION  BASED  UPON OR  ARISING  OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS  CONTEMPLATED  HEREIN,  INCLUDING  CONTRACT
CLAIMS,  TORT  CLAIMS,  BREACH  OF DUTY  CLAIMS,  AND ALL  OTHER  COMMON  LAW OR
STATUTORY CLAIMS.  EACH PARTY HERETO REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
AND IT  KNOWINGLY  AND  VOLUNTARILY  WAIVES  ITS  JURY  TRIAL  RIGHTS  FOLLOWING
CONSULTATION  WITH LEGAL  COUNSEL.  IN THE EVENT OF  LITIGATION,  A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

            Section  7.16  INTERCREDITOR   AGREEMENT.   This  Agreement  is  the
Intercreditor  Agreement referred to in the Indenture.  If this Agreement or all
of any portion of either Party's rights or obligations hereunder are assigned or
otherwise  transferred to any other Person,  such other Person shall execute and
deliver an agreement containing terms substantially identical to those contained
in this Agreement.

                                      -21-

            IN WITNESS WHEREOF,  the Lender,  the Collateral Agent, the Borrower
and each  Guarantor has caused this  Agreement to be duly executed and delivered
as of the date first above written.

LENDER:                               BANK OF SCOTLAND
                                      individually and as Agent

                                      By: /s/ Karen Weich
                                          ---------------------------------
                                          Name:   Karen Weich
                                          Title:  Assistant Vice President

COLLATERAL
AGENT:                                THE BANK OF NEW YORK
                                      solely in its capacity as Collateral Agent
                                      (and not individually)

                                      By: /s/ Kisha A. Holder
                                          -------------------------------------
                                          Name:  Kisha A. Holder
                                          Title: Assistant Vice President

BORROWER:                             EMPIRE RESORTS, INC.
                                      a Delaware corporation

                                      By: /s/ Scott A. Kaniewski
                                          ------------------------------------
                                          Name:  Scott A. Kaniewski
                                          Title: CFO

GUARANTORS:                           ALPHA MONTICELLO, INC.
                                      a Delaware corporation

                                      By: /s/ Scott A. Kaniewski
                                          -------------------------------------
                                          Name:   Scott A. Kaniewski
                                          Title:  President

                                      ALPHA CASINO MANAGEMENT INC.
                                      a Delaware corporation

                                      By: /s/ Scott A. Kaniewski
                                          ------------------------------------
                                          Name:   Scott A. Kaniewski
                                          Title:  President

                                      -22-

                                      MOHAWK MANAGEMENT, LLC
                                      a New York limited liability company

                                      By: /s/ Scott A. Kaniewski
                                          -------------------------------------
                                          Name:   Scott A. Kaniewski
                                          Title:  Manager

                                      MONTICELLO CASINO
                                      MANAGEMENT, LLC
                                      a New York limited liability Company

                                      By: /s/ Scott A. Kaniewski
                                          ------------------------------------
                                          Name:   Scott A. Kaniewski
                                          Title:  Manager

                                      MONTICELLO RACEWAY
                                      DEVELOPMENT COMPANY, LLC
                                      a New York limited liability Company

                                      By: /s/ Scott A. Kaniewski
                                          -------------------------------------
                                          Name:   Scott A. Kaniewski
                                          Title:  Manager

                                      MONTICELLO RACEWAY
                                      MANAGEMENT, INC
                                      a New York corporation

                                      By: /s/ Thomas W. Aro
                                          -------------------------------------
                                          Name:  Thomas W. Aro
                                          Title: President

                                      -23-EXHIBIT 10.1

                            ASSET PURCHASE AGREEMENT
                            ------------------------

         THIS AGREEMENT is entered into as of September ___, 2004 by and among
INK SOURCE, INC., a Wisconsin corporation ("Seller"), MICHAEL SLOAN
("Shareholder") and NOR-COTE INTERNATIONAL INC., an Indiana corporation
("Purchaser").

                                    PREAMBLE

         Subject to the terms and conditions hereof, Purchaser desires to
purchase and Seller desires to sell substantially all of the assets and rights
relating to or used or useful in connection with Seller's business of
manufacturing and selling UV curable printing inks and coatings (the
"Business");

                                    AGREEMENT

         NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:

                                    SECTION 1
                                PURCHASE AND SALE OF ASSETS

         1.1 Sale of Assets. Subject to the provisions of this Agreement, Seller
agrees to sell and Purchaser agrees to purchase, on such date (the "Closing
Date"), all of Seller's right, title and interest in and to substantially all of
its assets of every kind and description, tangible and intangible, personal or
mixed, and wherever located, including but not limited to Seller's goodwill,
backlog, customer lists, customer deposits, telephone numbers, trade and product
names (including, but not limited to, all rights to the name "Ink Source" and
any derivatives thereof), proprietary property and products, prepaid expenses,
formulas, technologies, software, web page and rights therein, furniture,
equipment, machinery and other intellectual property, except in each case
Excluded Assets (as defined below). All of the assets described or referred to
in this Section 1.1 (except Excluded Assets) are hereinafter referred to as the
"Subject Assets" and include, without limitation, those assets set forth below:

         (a) All furniture, equipment and machinery as set forth in Schedule
1.1(a);

         (b) All Intellectual Property (as defined in Section 2.6);

         (c) All accounts receivable (the "Accounts Receivable"),
work-in-process and all intangible assets each of which is set forth in Schedule
1.1(c);

         (d) All cash and cash equivalents as set forth in Schedule 1.1(d); and

         (e) All inventory in Seller's actual or constructive possession as set
forth in Schedule 1.1(e); and

         (f) To the extent permitted by the terms of each Assumed Contract (as
defined below) and applicable law, all outstanding sales proposals, purchase

<PAGE>

orders, agreements or contracts to provide or receive goods and/or services, all
customer agreements, vendor agreements, commitments, agreements and licenses
relating to the Intellectual Property, as set forth in Schedule 1.1(f) (the
"Assumed Contracts").

         1.2 Excluded Assets. Purchaser and Seller agree and acknowledge that,
Seller is not transferring to Purchaser and Purchaser is not purchasing the
corporate minute book or other corporate records that are not necessary for the
continued operation of the Business (hereinafter referred to as the "Excluded
Assets").

         1.3 Assumption of Liabilities. It is expressly understood and agreed
that Purchaser is not assuming or becoming liable for any liabilities of Seller
of any kind or nature at any time existing or asserted, whether known or
unknown, fixed, contingent or otherwise not specifically assumed herein by
Purchaser. Notwithstanding the foregoing, upon the sale and purchase of the
Subject Assets, Purchaser shall accept and assume and, as the case may be, pay,
discharge, perform and observe in the ordinary course, the following, and only
the following liabilities, duties and obligations (the "Assumed Liabilities"):

         (a) Seller's current liabilities set forth in Schedule 1.3(a) in an
amount not to exceed $80,000.00.

         (b) Seller's liabilities to F&M Bank in an amount not to exceed
$159,747.00.

         (c) All of Seller's rights and executory obligations under the Assumed
Contracts to be performed after the Closing Date (excluding any obligations or
liabilities of Seller under any Assumed Contract that were to have been
performed, fulfilled or satisfied on or prior to the Closing Date).

         1.4 Excluded Liabilities. The liabilities and obligations of Seller,
whether fixed, contingent, known or unknown and whether existing as of the
Closing Date or arising thereafter which are not specifically assumed by
Purchaser under Section 1.3 of this Agreement are hereinafter referred to as the
"Excluded Liabilities." Seller hereby acknowledges and agrees that, except for
the Assumed Liabilities, Purchaser is not assuming or becoming liable for, and
Seller shall remain exclusively liable for, all of the Excluded Liabilities.

         1.5 Purchase Price. In consideration of the sale by Seller to Purchaser
of the Subject Assets, and subject to the other terms and conditions contained
herein, Purchaser agrees to pay, the sum of Two Hundred Thirty Nine Thousand
Seven Hundred Forty Seven Dollars ($239,747.00) (the "Purchase Price") to
Seller. This Purchase Price shall be paid by Purchaser assuming the liabilities
set forth in Schedules 1.3(a) and 1.3(b). No cash shall be paid.

         Purchaser and Seller hereby agree to allocate the Purchase Price, as
set forth on Schedule 1.5 among the classes of Subject Assets and to file its
federal income tax returns and its other tax returns reflecting such allocation,
including Form 8594 and any other reports required by Section 1060 of the
Internal Revenue Code of 1986, as amended ("Code").

         1.6. Transfer of Subject Assets. On the Closing Date, Seller shall
deliver or cause to be delivered to Purchaser good and sufficient instruments of

                                       2
<PAGE>

transfer, transferring to Purchaser title to all of the Subject Assets. Such
instruments of transfer (a) shall be in the form and will contain the
warranties, covenants and other provisions (not inconsistent with the provisions
hereof) which are usual and customary for transferring the type of property
involved under the laws of the jurisdictions applicable to such transfers, (b)
shall be in form and substance reasonably satisfactory to Purchaser and its
counsel, and (c) except as otherwise provided in this Agreement, shall
effectively vest in Purchaser good and marketable title to all the Subject
Assets free and clear of all licenses, liens, encumbrances, mortgages and
security interests whatsoever (collectively "Liens") other than Assumed
Liabilities.

                                    SECTION 2
            SELLER'S AND SHAREHOLDER'S REPRESENTATIONS AND WARRANTIES
            ---------------------------------------------------------

         Seller and Shareholder hereby jointly and severally represent and
warrant to Purchaser as of the date of this Agreement as follows:

         2.1 Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Wisconsin. Seller is
duly qualified to conduct the Business in all states in which the failure to so
qualify would have a material adverse effect on this Agreement or the assets
purchase hereunder.

         2.2 Authority of Seller and Shareholder. Seller and Shareholder have
the full right, authority and power to enter into this Agreement and each
agreement, document and instrument to be executed and delivered by or on behalf
of Seller or Shareholder pursuant to this Agreement (the "Seller Documents") and
to carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance by Seller and Shareholder of this Agreement and Seller
Documents have been duly authorized by all necessary action of Seller and
Shareholder and no other action on the part of Seller or Shareholder is required
in connection therewith. This Agreement and Seller Documents executed and
delivered by Seller and Shareholder pursuant to this Agreement constitute, or
when executed and delivered will constitute, valid and binding obligations of
Seller and Shareholder enforceable in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency or other similar laws affecting creditors' rights. The execution,
delivery and performance by Seller and Shareholder of this Agreement, Seller
Documents and the consummation of the transactions contemplated hereby or
thereby:

         (a) Does not and will not violate any provision of the Articles of
Incorporation or Bylaws of Seller, in each case as amended to date;

         (b) Does not and will not violate any laws of the United States, or any
state or other jurisdiction applicable to Seller or require Seller to obtain any
approval, consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made;

         (c) Does not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of any indenture, loan or credit agreement or any other agreement, contract
instrument mortgage, lien, lease, permit authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which Seller is a

                                       3
<PAGE>

party or by which any of the property of Seller is bound or affected, or result
in the creation or imposition of any Lien (except for Assumed Liabilities) on
any of the Subject Assets. The officers or agents of Seller who execute this
Agreement and Seller Documents contemplated hereby on behalf of Seller have and
shall have all requisite power to do so in the name of and on behalf of Seller.

         2.3 Absence of Restrictions. Neither Seller or Shareholder has made any
other agreement with any other party with respect to the sale or any other
disposition or encumbrance of the Business or the Subject Assets.

         2.4 Title to Assets. Except as set forth in Schedule 2.4, Seller has
good, marketable and indefeasible title to all of the Subject Assets, free and
clear of all claims, liabilities, restrictions and Liens. Upon the sale,
assignment, transfer and delivery of the Subject Assets to Purchaser under and
in accordance with this Agreement and Seller Documents, there will be vested in
Purchaser good, marketable and indefeasible title to the Subject Assets, free
and clear of all Liens. The Subject Assets: (i) include all assets and
properties used or held for use by Seller to conduct the Business as currently
conducted; and (ii) include all assets and properties necessary for Purchaser to
operate the Business in the same manner as Seller.

         2.5 Liabilities Related to Assets. Except as specifically stated in
this Agreement and/or Seller Documents, Seller has no liabilities of any nature,
whether accrued, absolute, contingent or otherwise, asserted or unasserted,
known or unknown (including without limitation liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for taxes due or
then accrued or to become due or contingent or potential liabilities relating to
activities of the Business or the conduct of the Business) which will materially
and adversely affect the Subject Assets subsequent to Closing.

         2.6 Intellectual Property.

         (a) Seller has exclusive ownership of, or valid license or authority to
use, all trade secrets, know how, computer software, licenses, trademarks, trade
or product names, company names, logos, customer lists, mailing lists, sales and
advertising material, formulas, technology, drawings and designs, customer
specifications, supplier information, systems, data compilations, research
results or other proprietary rights, (collectively, "Intellectual Property")
sold under this Agreement, including but not limited to those set forth in
Schedule 2.6(a). Seller has the non-exclusive right to use, free and clear of
claims or rights of other persons, all of the Intellectual Property without
payments to or consents from any other party.

         (b) Seller's use of any Intellectual Property does not infringe any
rights of any other person. Seller is not making unauthorized use of any
confidential information or trade secrets of any person, including without
limitation any former employer or any past or present employee of Seller.

         2.7 Assumed Contracts. All of the Assumed Contracts have been entered
into in the ordinary course of business, are in full force and effect and have
not been amended, extended or otherwise modified (whether orally or in writing),
except for amendments, extensions, and modifications made in the ordinary course

                                       4
<PAGE>

of business consistent with past practices. Neither Seller nor any other party
thereto is in default under any such Assumed Contracts (a "default" being
defined for purposes hereof as an actual default, other than late payment of an
Account Receivable, or any set of facts which would, upon receipt of notice or
passage of time or both, constitute a default, other than late payment of an
Account Receivable). Seller is not a party to or subject to any contract or
agreement that will impose any material obligations on Purchaser (except for the
obligations to be performed under the Assumed Contracts in the ordinary course
of business) or otherwise materially impair the value of the Subject Assets
after the Closing Date. All of the terms of each Assumed Contract as amended,
are set forth in writing and true and complete written copies of all of the
Assumed Contracts have been provided to Purchaser.

         2.8 No Litigation; Compliance. There is no litigation or governmental
or administrative proceeding or investigation pending or, to Seller's knowledge,
threatened against Seller or any of its affiliates which may have an adverse
effect on the Subject Assets subsequent to Closing, or which would prevent the
consummation of the transactions contemplated by this Agreement or the Seller
Documents. Seller has not received notice of any violation or alleged violation
of any applicable statute, ordinance, order, rule or regulation.

         2.9 Taxes. Seller has paid or caused to be paid any and all federal,
state, local, foreign and other taxes, and all deficiencies, or other additions
to tax, interest, fines and penalties that are due and payable by Seller through
the Closing Date, whether disputed or not. Seller has, in accordance with all
applicable law, filed all federal, state, local, foreign and other tax returns
required to be filed by Seller through the Closing Date, and all such returns
correctly and accurately set forth the amount of any taxes relating to the
applicable period. There is no unassessed tax deficiency proposed or threatened
against Seller. None of the Subject Assets are or will be subject to any lien or
encumbrance for taxes which are past due or which became payable or accrued on
or prior to the Closing Date.

         2.10 Warranty or Other Claims. There are no existing or threatened
errors or omissions, warranty or other similar claims against Seller or any
Subject Asset. Seller shall be responsible for any errors or omissions claims,
warranty claims or any other claims relating to products or services that it
sold or provided prior to the Closing Date.

         2.11 Environmental Matters.

         (a) (i) Seller has no liability under, nor has it violated, any
Environmental Law; (ii) Seller has never entered into or been subject to any
judgment, consent decree, compliance order, or administrative order with respect
to any environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law, and (iii) none of the
items enumerated in clause (ii) of this subsection will to the knowledge of
Seller be forthcoming.

         (b) Schedule 2.11(b) attached hereto and made a part hereof sets forth
copies of all documents, records and information available to Seller concerning
any environmental or health and safety matter relevant to Seller, whether

                                       5
<PAGE>

generated by Seller or others, including without limitation environmental
audits, environmental risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials, spill control plans and
reports, correspondence, permits, licenses, approvals, consents and other
authorizations related to environmental or health and safety matters issued by
any governmental agency.

         (c) For purposes of this Section, (i) "Hazardous Material" shall mean
and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste", shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller and all other entities for whose conduct Seller is or may be held
responsible under any Environmental Law.

         2.12 Transactions with Interested Persons. Neither Seller nor any
principal, officer, supervisory employee or director of Seller or any of their
respective spouses or family members owns directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer or
director or in another similar capacity of, any competitor or supplier of
Seller, or any organization which has a material contract or arrangement with
Seller.

         2.13 Accounts Receivable. All of the Accounts Receivable of Seller are
bona fide, valid and enforceable claims not subject to any setoffs or
counterclaims . Seller has no accounts or loans receivable from any person, firm
or corporation which is affiliated with Seller or from any director, officer or
employee of Seller, or from any of their respective spouses or family members
(excluding travel advances).

          2.14 Compliance with Laws. Seller has complied in all material
respects with all applicable domestic and foreign laws; and Seller has not
received any written notice, order or other written communication from any
governmental agency or instrumentality of any alleged, actual or potential
violation of or failure to comply with any law. All federal, foreign, state,
local and other governmental consents, licenses, permits, franchises, grants and
authorizations (collectively, "Authorizations") required for the operation of
the Business as currently conducted, are in full force and effect without any
default or violation thereunder by Seller or by any other party thereto.

         2.15 Financial Statements.

         (a) Schedule 2.15(a) includes financial statements of Seller as of
December 31, 2003 ("Seller Year-End Financial Statements"). Seller Year-End
Financial Statements accurately and fairly present the financial condition and
results of the operations of Seller as of the date thereof and for the period
referred to.

                                       6
<PAGE>

         (b) Schedule 2.15(b) includes financial statements of Seller as of
August 31, 2004 ("Seller Interim Financial Statements"). The Seller Interim
Financial Statements accurately and fairly present the financial condition and
results of the operations of Seller as of the date thereof and for the period
referred to.

         2.16 Material Adverse Change. Since December 31, 2003, there has been
no material change in the business, assets, prospects, condition (financial or
otherwise) or results of operations of Seller. Seller has not omitted or failed
to disclose any material fact or contingency. Since June 1, 2004, there have not
been any dividends, distributions, disbursements, reimbursements, bonuses, loan
repayments (either principal or interest) or other payments paid to any of
Seller's shareholders.

         2.17 Accuracy of Information. No information, exhibit or report
furnished by Seller or Shareholder to Purchaser in connection with the
negotiation of, or compliance with, this Agreement, contained any material
misstatement of fact or omitted to state a material fact necessary to make the
statements contained therein not misleading.

                                    SECTION 3
                  REPRESENTATIONS AND WARRANTIES OF PURCHASER
                  -------------------------------------------

         Purchaser hereby represents and warrants to Seller as of the date of
this Agreement as follows:

         3.1 Organization of Purchaser. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana with full corporate power to conduct its business in the manner and in
the places where such business is conducted.

         3.2 Authority of Purchaser. Purchaser has full right, authority and
power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by Purchaser pursuant to this Agreement (the
"Purchaser Documents") and to carry out the transactions contemplated hereby and
thereby. The execution, delivery and performance by Purchaser of this Agreement
and Purchaser Documents have been duly authorized by all necessary action of
Purchaser and no other action on the part of Purchaser is required in connection
therewith. This Agreement and Purchaser Documents executed and delivered by
Purchaser pursuant to this Agreement constitute, or when executed and delivered
will constitute, valid and binding obligations of Purchaser enforceable in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditor's
rights. The execution, delivery and performance by Purchaser of this Agreement
and Purchaser Documents and the consummation of the transactions contemplated
hereby or thereby:

         (a) does not and will not violate any provision of the Articles of
Incorporation or By-laws of Purchaser, in each case as amended to date;

         (b) does not and will not violate any laws of the United States, or any
state or other jurisdiction applicable to Purchaser or require Purchaser to
obtain any material approval, consent or waiver of, or make any filing with, any

                                       7
<PAGE>

person or entity (governmental or otherwise) that has not been obtained or made;
and

         (c) does not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction decree, determination or arbitration award to which Purchaser is a
party and which is material to the business and financial condition of
Purchaser.

The officers or agents who execute this Agreement and the Related Agreements on
behalf of Purchaser have and shall have all requisite power to do so in the name
of and on behalf of Purchaser.

         3.3 No Litigation. There is no litigation or governmental or
administrative proceeding or investigation pending or, to Purchaser's knowledge,
threatened against Purchaser or any of his affiliates which would prevent or
hinder the consummation of the transactions contemplated by this Agreement or
the Related Agreements.

                                    SECTION 4
                RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING DATE
                -------------------------------------------------

         4.1 Further Assurances. Seller, from time to time after the Closing
Date at the request of Purchaser and without further consideration, shall
execute and deliver further instruments of transfer and assignment and take such
other action as Purchaser may reasonably require to more effectively transfer
and assign to, and invest in, Purchaser each of the Subject Assets.

         4.2 Collection of Assets. Subsequent to the Closing Date, Purchaser
shall have the right and authority to collect all Accounts Receivable and other
items transferred and assigned to it by Seller and Seller agrees hereunder to
endorse with the name of Seller any checks received on account of such
receivables or other items, and Seller agrees that it will promptly transfer or
deliver to Purchaser from time to time any property that Seller may receive with
respect to any claims, contracts, licenses, leases, commitments, sales orders,
purchase orders, or any other items included in the Subject Assets.

         4.3 Names and Marks. Subsequent to the Closing Date, Seller shall not
use any names or marks containing the words "Ink Source" and shall not use any
other corporate, business or assumed name, or name or mark containing the words
"Ink Source" without the prior written consent of Purchaser.

                                       8
<PAGE>

                                    SECTION 5
                                     CLOSING
                                     -------

         5.1 Time. The Closing hereunder shall occur on or before September 30,
2004, and be effective as of 12:01 a.m. on October 1, 2004.

         5.2 Deliveries.

         (a) At the Closing, Purchaser shall receive all of the following, in
form and substance reasonably satisfactory to Purchaser:

                  (i) a Bill of Sale executed by Seller;

                  (ii) an Employment Agreement executed by Shareholder;

                  (iii) a certified copy of resolutions of the Board of
         Directors of Seller authorizing the execution, delivery and performance
         of this Agreement and the Related Agreements to which Seller is a
         party; and

                  (iv) releases of any security interests in the Subject Assets
         (including but not limited to F&M Bank).

         (b) At the Closing, Seller and Shareholder shall receive all of the
following, in form and substance reasonably satisfactory to Seller and
Shareholder:

                  (i) Employment Agreement executed by Purchaser; and

                  (ii) a certified copy of resolutions of the Board of Directors
         of Purchaser authorizing the execution, delivery and performance of
         this Agreement and the Related Agreements to which Purchaser is a
         party.

                                    SECTION 6
                                 INDEMNIFICATION
                                 ---------------

         6.1 Indemnification by Seller and Shareholder. In addition to and in no
way limiting any other provisions of this Agreement:

         (a) Seller and Shareholder hereby jointly and severally agree,
subsequent to the Closing Date, to indemnify and hold Purchaser and persons
serving as shareholders, officers, directors, employees or agents thereof
(individually a "Purchaser Indemnified Party" and collectively, the "Purchaser
Indemnified Parties") harmless from, and against any damages, liabilities,
losses, taxes, fines, penalties, costs, and expenses (including, without
limitation, reasonable fees of counsel) (collectively, "Purchaser Indemnified
Losses") of any kind or nature whatsoever (whether or not arising out of third
party claims and including all amounts paid in investigation, defense or

                                       9
<PAGE>

settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon any of the following matters:

                  (i) fraud or intentional misrepresentation by Seller or
         Shareholder in or of any of its/his representations, warranties or
         covenants under this Agreement or any Related Agreement or in any
         certificate, schedule, exhibit or financial statement delivered
         pursuant hereto or thereto;

                  (ii) any other breach of any representation, warranty or
         covenant of Seller or Shareholder under this Agreement or any Related
         Agreement or in any certificate, schedule, exhibit or financial
         statement delivered pursuant hereto or thereto, or by reason of any
         claim, action or proceedings asserted or instituted growing out of any
         matter or thing constituting a breach of such representations or
         warranties or covenants or any conduct by Seller or Shareholder or
         performance by Seller or Shareholder under any Assumed Contract prior
         to closing; and

                  (iii) any liability obligation of Seller or Shareholder
         relating to any Excluded Liabilities.

         (b) Seller and Shareholder shall have no obligation to indemnify the
Purchaser Indemnified Parties against Purchaser Indemnified Losses pursuant to
Section 6.1(a) unless and until the aggregate of all such Purchaser Indemnified
Losses suffered or incurred by the Purchaser Indemnified Parties exceeds $5,000
in which event the Purchaser Indemnified Parties shall be entitled to
indemnification for the full amount of all Purchaser Indemnified Losses suffered
or incurred.

         6.2 Indemnification by Purchaser.

         (a) Purchaser agrees subsequent to the Closing Date to indemnify and
hold Seller and persons serving as shareholders, officers, directors, employees
or agents thereof (individually a "Seller Indemnified Party" and collectively
the "Seller Indemnified Parties") harmless from and against any damages,
liabilities, losses, taxes, fines, penalties, costs and expenses (including
without limitation, reasonable fees of counsel) ("Seller Indemnified Losses") of
any kind or nature whatsoever (whether or not arising out of third party claims
and including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any of the following matters:

                  (i) fraud or intentional misrepresentation by Purchaser in or
         of any of its representations, warranties or covenants under this
         Agreement or any Related Agreements or in any certificate, schedule,
         exhibit or financial statement delivered pursuant hereto or thereto;
         and

                  (ii) any other breach of any representation, warranty or
         covenant of Purchaser under this Agreement or any Related Agreements or
         in any certificate, schedule, exhibit or financial statement delivered
         pursuant hereto, or by reason of any claim, action or proceeding

                                       10
<PAGE>

         asserted or instituted growing out of any matter or thing constituting
         a breach of such representations, warranties or covenants.

         6.3 Notice: Defense of Claims. If indemnification is sought for a claim
or liability asserted by a third party, the indemnified party shall give written
notice thereof to the indemnifying party within ten (10) days after it receives
notice of the claim or liability being asserted, but the failure to do so shall
not relieve the indemnifying party from any liability except to the extent that
it is prejudiced by the failure or delay in giving such notice. Such notice
shall summarize the basis for the claim for indemnification and any claim or
liability being asserted by the third party. Within ten (10) days after
receiving such notice, the indemnifying party shall give written notice to the
indemnified party stating whether it will defend against any third party claim
or liability at its own cost and expense. If the indemnifying party gives notice
to the indemnified party of its intent to defend such claim within such ten (10)
day period, the indemnifying party shall be entitled to direct the defense
against the third party claim or liability with counsel selected by it (subject
to the consent of the indemnified party, which consent shall not be unreasonably
withheld) as long as the indemnifying party is conducting a good faith defense.
The indemnified party shall at all times have the right to fully participate in
the defense of a third party claim or liability at its own expense directly or
through counsel; provided however, that if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party is advised by its counsel that representation of both parties
by the same counsel would be inappropriate under applicable standards of
professional conduct, the indemnified party may engage separate counsel at the
expense of the indemnifying party. If no such notice of intent to defend a third
party claim or liability is given by the indemnifying party, or if such good
faith defense is not being or ceases to be conducted by the indemnifying party,
the indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party). If the third party claim or liability is one
that by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense at the expense of the indemnifying party.
Neither the indemnifying party nor the indemnified party shall settle any third
party claim without the consent of the other (which consent shall not be
unreasonably withheld.)

                                    SECTION 7
                            CONFIDENTIAL INFORMATION
                            ------------------------

                    For purposes of this Agreement, "Confidential Information"
shall be deemed to include all information and materials with respect to the
Business, including, but not limited to, all proprietary information,
specifications, models, diagrams, flow charts, videotapes, audio tapes, forms,
data structures, graphics, other original works of authorship, product plans,
technologies, formulas, trade secrets, trade names or proposed trade names,
knowhow, ideas, marketing materials, lists of potential or actual customers,
contracts, pricing information, financial information, business plans and

                                       11
<PAGE>

strategies, and other financial and intellectual property with respect to the
Business.

         Except as authorized in writing by Purchaser, Seller shall not
disclose, communicate, publish or use for the benefit of itself or any third
party any Confidential Information received, acquired, or obtained with respect
to the Business. Seller also agrees that: a) the Confidential Information will
be held in confidence by Seller using the same degree of care, but no less than
a reasonable degree of care, as Seller uses to protect its own confidential
information of a like nature; b) it will take such steps as may be reasonably
necessary to prevent disclosure of the Confidential Information to others; and
c) in the event Seller is legally required to disclose any portion of the
Confidential Information, it shall promptly notify Purchaser so that Purchaser
may take steps to protect its Confidential Information.

         The obligations of this Section 7 shall terminate with respect to any
particular portion of Confidential Information which: a) is in the public
domain; b) entered the public domain through no fault of Seller ; or c) was
rightfully communicated by a third party to Seller free of any obligation of
confidence.

         In no event shall Seller be deemed by virtue hereof to have acquired
any right or interest in or to the Confidential Information. Seller agrees that
for a period of ten (10) years following the date of this Agreement, it will use
its best efforts to maintain the confidentiality of the Confidential
Information.

                                    SECTION 8
                                 NON-COMPETITION
                                 ---------------

         For a period commencing on the Closing Date and ending on the tenth
(10th) anniversary of the Closing Date, without the prior written consent of
Purchaser (which consent may be withheld in Purchaser's sole and absolute
discretion) Seller shall not, directly or indirectly, for itself or for any
other person, proprietorship, partnership, corporation or trust, or any other
entity, as an individual or as an owner, employee, agent, officer, director,
trustee, or in any other capacity:

         (a) solicit, participate or aid in the solicitation of orders for
Restricted Products or Services, or perform or sell any Restricted Products or
Services to any of Purchaser's customers who were serviced by Seller , solicited
by Seller or who became customers of Seller as a result of any actions taken by
Seller ;

         (b) solicit, participate or aid in the solicitation of, or perform or
sell any Restricted Products or Services to any of Purchaser's customers who
were customers, or had an ongoing business relationship with Seller , at any
time during the three (3) year period preceding the Closing Date;

         (c) contact, or aid or participate in the contact, including allowing
the use of Seller's name in connection with the contact of, any of Purchaser's
customers who were customers, or had an ongoing business relationship with
Seller, at any time during the three (3) year period preceding the Closing Date,

                                       12
<PAGE>

for the purpose of diverting their purchases of Restricted Products or Services
from Purchaser;

         (d) sell or perform any Restricted Products or Services for any of
Purchaser's customers who were customers, or had an ongoing business
relationship with Seller, at any time during the three (3) year period preceding
the Closing Date;

         (e) solicit or contact or aid or participate in the contact, including
allowing the use of Seller's name in connection with the contact of, Purchaser's
employees, for the purpose of inducing them to terminate their employment with
Purchaser; or

         (f) engage in, conduct, promote, or participate in either as an owner,
investor, employee, officer, director, trustee, or agent, or in any other
capacity whatsoever, a business in competition with Purchaser in the sale and
offering of Restricted Products or Services either directly or indirectly. The
prohibitions and covenants enumerated in this Section 8(f) shall bind Seller in
the following geographic area: the United States.

         "Restricted Products and Services" shall be defined as any product sold
or service performed in the business of manufacturing or selling UV curable
printing inks and coatings.

         Seller and Purchaser agree that due to the nature of Purchaser's
business and its scope of operations, and due to Seller's knowledge of
Confidential Information of Purchaser, and in further consideration of
Purchaser's legitimate protectible interests in a highly competitive business
environment, the covenants and restrictions, placed on Seller's ability to
engage in any activity competitive with Purchaser, are required to be broad in
scope and the parties acknowledge that such breadth is reasonable. Seller
further acknowledges and agrees that the breadth of such restrictions is
reasonable because it has become acquainted with the affairs of Purchaser, its
officers and employees, its services, products, business practices, business
relationships, and the needs and requirements of its customers and prospective
customers, trade secrets, intellectual property, Confidential Information, and
other information proprietary to Purchaser. Seller acknowledges and agrees that
Purchaser has a need to protect, through the above restrictions, each of the
foregoing interests and Purchaser's goodwill, and to prevent unfair competition
and the inevitable use or disclosure of Confidential Information or trade
secrets.

         Purchaser and Seller agree that in the event of a breach of any of the
covenants and prohibitions contained in Sections 7 or 8 by Seller, Purchaser
shall suffer immediate, immeasurable and irreparable harm and damage, and
accordingly, the parties agree as follows:

         (a) These covenants shall be construed as agreements independent of any
other provision of this Agreement, and the existence of any claim or cause of
action by Seller against Purchaser, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement of these covenants
by Purchaser;

         (b) In the event of a violation of any of these covenants, the terms of
all covenants shall be automatically extended for a period equal to the
violation, and Purchaser shall be entitled to recover reasonable attorney's fees
incurred in the enforcement of these covenants;

                                       13
<PAGE>

         (c) Each covenant is separate and distinct from every other covenant,
and in the event of the invalidity of any one covenant, the remaining covenants
shall be deemed independent and enforceable. Further, although the parties agree
that the scope, duration and territorial restrictions herein are reasonable and
necessary for the protection of Purchaser, in the event a Court should consider
the scope, duration or territory too extensive, the Court shall modify the
provisions so as to be valid and fully enforceable for the maximum scope,
duration and territory (but never for a greater scope, longer period or larger
territory than set forth above) as the Court shall find to be reasonable,
necessary, valid and legally enforceable;

         (d) These covenants are reasonable and necessary for the protection of
Purchaser's business interests, that irreparable injury will result to Purchaser
if Seller breaches any of these covenants, and that in the event of actual or
threatened breach of any of these covenants, Purchaser will have no adequate
remedy at law. Seller accordingly agrees that in the event of any actual or
threatened breach by it of any of these covenants, Purchaser shall be entitled
to immediate temporary injunctive and other equitable relief, subject to hearing
as soon thereafter as possible. Nothing contained herein shall be construed as
prohibiting Purchaser from pursuing any other remedies available to it for such
breach or threatened breach, including the recovery of any damages which it is
able to prove; and

         (e) Purchaser would not have entered into this Agreement but for
Seller's agreement to be bound by and comply with the terms and conditions of
this Agreement, including, without limitation, Sections 7 and 8 hereof, and for
Seller's agreement that the scope, duration and territorial restrictions of
these covenants are reasonable.

                                    SECTION 9
                                  MISCELLANEOUS
                                  -------------

         9.1 Fees and Expenses. Each of the parties will bear its own expenses
in connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, including but not limited to fees for attorneys,
accountants and other advisers.

         9.2 Governing Law. This Agreement and the Related Agreements and all
disputes, whether equitable or legal in nature, that arise under this Agreement
that relate in any way to the rights or duties of the parties hereto or thereto,
shall be governed by the internal laws of the State of Indiana, without regard
to the conflict or choice of laws provisions thereof.

         9.3 Entire Agreement. This Agreement and the schedules and exhibits
referred to herein are complete and reflect the entire agreement of the parties
with respect to their subject matter and supersede all previous written or oral
negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by either of the
parties except as referred to in this Agreement or in such schedules or exhibits
or Related Agreements, and all inducements to the making of this Agreement
relied upon by either party hereto have been expressed therein or herein or in
such schedules or exhibits or Related Agreements.

                                       14
<PAGE>

         9.4 Assignability; Binding Effect. This Agreement shall be assignable
by Purchaser to a corporation, partnership or entity, within its control group
provided that such assignment shall not release Purchaser of its obligations
hereunder prior to the assignment. This Agreement shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.

         9.5 Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction of or interpretation of
any term or provision hereof. The use in this Agreement of the masculine pronoun
in reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.

         9.6 Execution in Counterparts. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.

         9.7 Amendments. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.

         9.8 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.

                                       15
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above.

                                 INK SOURCE, INC.

                                 By:  ______________________________________

                                 NOR-COTE INTERNATIONAL INC.

                                 By:  ______________________________________

                                 --------------------------------------
                                 Michael Sloan

[SIGNATURE PAGE FOR ASSET PURCHASE AGREEMENT BY AND AMONG INK SOURCE, INC.,
MICHAEL SLOAN AND NOR-COTE INTERNATIONAL, INC.]

                                       16

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