Document:

FORM OF SECURITY AGREEMENT

    Exhibit
      10.5

    EXHIBIT
      E

    

    SECURITY
      AGREEMENT

    

    This
      SECURITY AGREEMENT, dated as of October 25, 2006 (this “Agreement”),
      is
      among Oxis International, Inc., a Delaware corporation
      (the
      “Company”),
      the
      Subsidiaries of the Company
      signatory hereto (such subsidiaries,
      the
“Guarantors”
      and
      together with the Company,
      the
“Debtors”)
      and
      the holders of the Company’s Original Issue Discount Secured Convertible
      Debentures due October 25, 2008 and issued on October 25, 2006 in the original
      aggregate principal amount of $[_____ (collectively, the “Debentures”)
      signatory hereto, their endorsees, transferees and assigns (collectively, the
      “Secured
      Parties”).

    

    W
      I T N E S S E T H:

    

    WHEREAS,
      pursuant to the Debentures, the Secured Parties have severally agreed to extend
      the loans to the Company evidenced by the Debentures; 

    

    WHEREAS,
      pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the
      “Guarantee”),
      the
      Guarantors
      have
      jointly and severally agreed to guarantee and act as surety for payment of
      such
      Debentures; and

    

    WHEREAS,
      in order to induce the Secured Parties to extend the loans evidenced by the
      Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
      this Agreement and to grant the Secured Parties, pari passu
      with
      each other Secured Party and through the Agent, a security interest in certain
      property of such Debtor to secure the prompt payment, performance and discharge
      in full of all of the Company’s obligations under the Debentures and the
      Guarantors’ obligations under the Guarantee.

    

    NOW,
      THEREFORE, in consideration of the agreements herein contained and for other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto hereby agree as follows:

    

    1. Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
      Section 1. Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
      tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
      intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
      the respective meanings given such terms in Article 9 of the UCC.

    

    (a) “Collateral”
means
      the collateral in which the Secured Parties are granted a security interest
      by
      this Agreement and which shall include the following personal property of the
      Debtors, whether presently owned or existing or hereafter acquired or coming
      into existence, wherever situated, and all additions and accessions thereto
      and
      all substitutions and replacements thereof, and all proceeds, products and
      accounts thereof, including, without limitation, all proceeds from the sale
      or
      transfer of the Collateral and 

    
      
        
        

      

      
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    of
      insurance covering the same and of any tort claims in connection
      therewith,
      and all
      dividends, interest, cash, notes, securities, equity interest or other property
      at any time and from time to time acquired, receivable or otherwise distributed
      in respect of, or in exchange for, any or all of the Pledged Securities (as
      defined below):

    

    (i) All
      goods, including, without limitation, (A) all machinery, equipment, computers,
      motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
      and
      general tools, fixtures, test and quality control devices and other equipment
      of
      every kind and nature and wherever situated, together with all documents of
      title and documents representing the same, all additions and accessions thereto,
      replacements therefor, all parts therefor, and all substitutes for any of the
      foregoing and all other items used and useful in connection with any Debtor’s
      businesses and all improvements thereto; and (B) all inventory;

    

    (ii) All
      contract rights and other general intangibles, including, without limitation,
      all partnership interests, membership interests, stock or other securities,
      rights
      under any of the Organizational Documents, agreements related to the Pledged
      Securities, licenses,
      distribution and other agreements, computer software (whether “off-the-shelf”,
      licensed from any third party or developed by any Debtor), computer software
      development rights, leases, franchises, customer lists, quality control
      procedures, grants and rights, goodwill, trademarks, service marks, trade
      styles, trade names, patents, patent applications, copyrights, and income tax
      refunds; 

     

    (iii) All
      accounts, together with all instruments, all documents of title representing
      any
      of the foregoing, all rights in any merchandising, goods, equipment, motor
      vehicles and trucks which any of the same may represent, and all right, title,
      security and guaranties with respect to each account, including any right of
      stoppage in transit; 

    

    (iv) All
      documents, letter-of-credit rights, instruments and chattel paper;

    

    (v) All
      commercial tort claims;

    

    (vi) All
      deposit accounts and all cash (whether or not deposited in such deposit
      accounts);

    

    (vii) All
      investment property;

    

    (viii) All
      supporting obligations; and

    

    (ix) All
      files, records, books of account, business papers, and computer programs;
      and

    

    (x) the
      products and proceeds of all of the foregoing Collateral set forth in clauses
      (i)-(ix) above.

    
      
        
        

      

      
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    Without
      limiting the generality of the foregoing, the “Collateral”
shall
      include all investment property and general intangibles respecting ownership
      and/or other equity interests in each Guarantor and other Subsidiaries,
      including, without limitation, the shares of capital stock and the other equity
      interests listed on Schedule
      H
      hereto
      (as the same may be modified from time to time pursuant to the terms hereof),
      and any other shares of capital stock and/or other equity interests of any
      other
      direct or indirect subsidiary of any Debtor obtained in the future, and, in
      each
      case, all certificates representing such shares and/or equity interests and,
      in
      each case, all rights, options, warrants, stock, other securities and/or equity
      interests that may hereafter be received, receivable or distributed in respect
      of, or exchanged for, any of the foregoing and all rights arising under or
      in
      connection with the Pledged Securities, including, but not limited to, all
      dividends, interest and cash.
      Notwithstanding the foregoing, to the extent prohibited pursuant to the terms
      of
      the loan agreement entered into with Bridge Bank on December 6, 2005, and
      related note, “Collateral” shall not include that certain certificate of deposit
      of the Company in the original amount of $3,000,000, issued by Key Bank, that
      the Company granted a security interest in to Bridge Bank in connection with
      such loan. 

     

    Notwithstanding
      the foregoing, nothing herein shall be deemed to constitute an assignment of
      any
      asset which, in the event of an assignment, becomes void by operation of
      applicable law or the assignment of which is otherwise prohibited by applicable
      law (in each case to the extent that such applicable law is not overridden
      by
      Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
      provided, however, that to the extent permitted by applicable law, this
      Agreement shall create a valid security interest in such asset and, to the
      extent permitted by applicable law, this Agreement shall create a valid security
      interest in the proceeds of such asset.

    

    (b)     “Intellectual
      Property”
means
      the collective reference to all rights, priorities and privileges relating
      to
      intellectual property, whether arising under United States, multinational or
      foreign laws or otherwise, including, without limitation, (i) all copyrights
      arising under the laws of the United States, any other country or any political
      subdivision thereof, whether registered or unregistered and whether published
      or
      unpublished, all registrations and recordings thereof, and all applications
      in
      connection therewith, including, without limitation, all registrations,
      recordings and applications in the United States Copyright Office, (ii) all
      letters patent of the United States, any other country or any political
      subdivision thereof, all reissues and extensions thereof, and all applications
      for letters patent of the United States or any other country and all divisions,
      continuations and continuations-in-part thereof, (iii) all trademarks, trade
      names, corporate names, company names, business names, fictitious business
      names, trade dress, service marks, logos, domain names and other source or
      business identifiers, and all goodwill associated therewith, now existing or
      hereafter adopted or acquired, all registrations and recordings thereof, and
      all
      applications in connection therewith, whether in the United States Patent and
      Trademark Office or in any similar office or agency of the United States, any
      State thereof or any other country or any political subdivision thereof,

    
      
        
        

      

      
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    or
      otherwise, and all common law rights related thereto, (iv) all trade secrets
      arising under the laws of the United States, any other country or any political
      subdivision thereof, (v) all rights to obtain any reissues, renewals or
      extensions of the foregoing, (vi) all licenses for any of the foregoing, and
      (vii) all causes of action for infringement of the foregoing.

    

    (c)    “Majority
      in Interest”
means,
      at any time of determination, the majority in interest (based on
      then-outstanding principal amounts of Debentures at the time of such
      determination) of the Secured Parties.

    

    (d)    “Necessary
      Endorsement”
means
      undated stock powers endorsed in blank or other proper instruments of assignment
      duly executed and such other instruments or documents as the Agent (as that
      term
      is defined below) may reasonably request.

    

    (e)    “Obligations”
means
      all of the liabilities
      and obligations (primary, secondary, direct, contingent, sole, joint or several)
      due or to become due, or that are now or may be hereafter contracted or
      acquired, or owing to, of any Debtor to the Secured Parties, including, without
      limitation, all
      obligations under this Agreement, the Debentures, the Guarantee and any other
      instruments, agreements or other documents executed and/or delivered in
      connection herewith or therewith, in each case, whether now or hereafter
      existing, voluntary or involuntary, direct or indirect, absolute or contingent,
      liquidated or unliquidated, whether or not jointly owed with others, and whether
      or not from time to time decreased or extinguished and later increased, created
      or incurred, and all or any portion of such obligations or liabilities that
      are
      paid, to the extent all or any part of such payment is avoided or recovered
      directly or indirectly from any of the Secured Parties as a preference,
      fraudulent transfer or otherwise as such obligations may be amended,
      supplemented, converted, extended or modified from time to time. Without
      limiting the generality of the foregoing, the term “Obligations” shall include,
      without limitation: (i) principal of, and interest on the Debentures and the
      loans extended pursuant thereto; (ii) any and all other fees, indemnities,
      costs, obligations and liabilities of the Debtors from time to time under or
      in
      connection with this Agreement, the Debentures, the Guarantee and any other
      instruments, agreements or other documents executed and/or delivered in
      connection herewith or therewith; and (iii) all amounts (including but not
      limited to post-petition interest) in respect of the foregoing that would be
      payable but for the fact that the obligations to pay such amounts are
      unenforceable or not allowable due to the existence of a bankruptcy,
      reorganization or similar proceeding involving any Debtor.

    

    (f)    “Organizational
      Documents”
means
      with respect to any Debtor, the documents by which such Debtor was organized
      (such as a certificate of incorporation, certificate of limited partnership
      or
      articles of organization, and including, without limitation, any certificates
      of
      designation for preferred stock or other forms of preferred equity) and which
      relate to the internal governance of such Debtor (such as bylaws, a partnership
      agreement or an operating, limited liability or members
      agreement).

    
      
        
        

      

      
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    (g)     “Pledged
      Securities”
shall
      have the meaning ascribed to such term in Section 4(i).

    

    (h)    “UCC”
means
      the Uniform Commercial Code of the State of New York and or any other applicable
      law of any state or states which has jurisdiction with respect to all, or any
      portion of, the Collateral or this Agreement, from time to time. It is the
      intent of the parties that defined terms in the UCC should be construed in
      their
      broadest sense so that the term “Collateral” will be construed in its broadest
      sense. Accordingly if there are, from time to time, changes to defined terms
      in
      the UCC that broaden the definitions, they are incorporated herein and if
      existing definitions in the UCC are broader than the amended definitions, the
      existing ones shall be controlling. 

    

    2.    Grant
      of Security Interest in Collateral.
      As an
      inducement for the Secured Parties to extend the loans as evidenced by the
      Debentures and to secure the complete and timely payment, performance and
      discharge in full, as the case may be, of all of the Obligations, each Debtor
      hereby unconditionally and irrevocably pledges, grants and hypothecates to
      the
      Secured Parties a security interest in and to, a lien upon and a right of
      set-off against all of their respective right, title and interest of whatsoever
      kind and nature in and to, the Collateral (a “Security
      Interest”
and
      collectively, the “Security
      Interests”).

    

    3.    Delivery
      of Certain Collateral.
      Contemporaneously or prior to the execution of this Agreement, each Debtor
      shall
      deliver or cause to be delivered to the Agent (a) any and all certificates
      and
      other instruments representing or evidencing the Pledged Securities, and (b)
      any
      and all certificates and other instruments or documents representing any of
      the
      other Collateral, in each case, together with all Necessary Endorsements. The
      Debtors are, contemporaneously with the execution hereof, delivering to Agent,
      or have previously delivered to Agent, a true and correct copy of each
      Organizational Document governing any of the Pledged Securities.

    

    4.    Representations,
      Warranties, Covenants and Agreements of the Debtors.
      Except
      as set forth under the corresponding section of the disclosure schedules
      delivered to the Secured Parties concurrently herewith (the “Disclosure
      Schedules”),
      which
      Disclosure Schedules shall be deemed a part hereof, each Debtor represents
      and
      warrants to, and covenants and agrees with, the Secured Parties as
      follows:

    

    (a)    Each
      Debtor has the requisite corporate, partnership, limited liability company
      or
      other power and authority to enter into this Agreement and otherwise to carry
      out its obligations hereunder. The execution, delivery and performance by each
      Debtor of this Agreement and the filings contemplated therein have been duly
      authorized by all necessary action on the part of such Debtor and no further
      action is required by such Debtor. This Agreement has been duly executed by
      each
      Debtor. This Agreement constitutes the legal, valid and binding obligation
      of
      each Debtor, enforceable against each Debtor in accordance with its terms except
      as such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization and similar laws of general application relating to or affecting
      the rights and remedies of creditors and by general principles of
      equity.

    
      
        
        

      

      
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    (b)    The
      Debtors have no place of business or offices where their respective books of
      account and records are kept (other than temporarily at the offices of its
      attorneys or accountants) or places where Collateral is stored or located,
      except as set forth on Schedule
      A
      attached
      hereto. Except as specifically set forth on Schedule
      A,
      each
      Debtor is the record owner of the real property where such Collateral is
      located, and there exist no mortgages or other liens on any such real property
      except for Permitted Liens (as defined in the Debentures). Except as disclosed
      on Schedule
      A,
      none of
      such Collateral is in the possession of any consignee, bailee, warehouseman,
      agent or processor.

    

    (c)    Except
      for Permitted Liens (as defined in the Debentures) and except as set forth
      on
Schedule
      B
      attached
      hereto, the Debtors are the sole owner of the Collateral (except for
      non-exclusive licenses granted by any Debtor in the ordinary course of
      business), free and clear of any liens, security interests, encumbrances, rights
      or claims, and are fully authorized to grant the Security Interests. Except
      as
      set forth on Schedule
      B
      attached
      hereto, there is not on file in any governmental or regulatory authority, agency
      or recording office an effective financing statement, security agreement,
      license or transfer or any notice of any of the foregoing (other than those
      that
      will be filed in favor of the Secured Parties pursuant to this Agreement)
      covering or affecting any of the Collateral. Except as set forth on Schedule
      B
      attached hereto and except pursuant to this Agreement, as long as this Agreement
      shall be in effect, the Debtors shall not execute and shall not knowingly permit
      to be on file in any such office or agency any other financing statement or
      other document or instrument (except to the extent filed or recorded in favor
      of
      the Secured Parties pursuant to the terms of this Agreement).

    

    (d)    No
      written claim has been received that any Collateral or Debtor's use of any
      Collateral violates the rights of any third party. There has been no adverse
      decision to any Debtor's claim of ownership rights in or exclusive rights to
      use
      the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding involving
      said rights pending or, to the best knowledge of any Debtor, threatened before
      any court, judicial body, administrative or regulatory agency, arbitrator or
      other governmental authority.

    

    (e)    Each
      Debtor shall at all times maintain its books of account and records relating
      to
      the Collateral at its principal place of business and its Collateral at the
      locations set forth on Schedule
      A
      attached
      hereto and may not relocate such books of account and records or tangible
      Collateral unless it delivers to the Secured Parties at least 30 days prior
      to
      such relocation (i) written notice of such relocation and the new location
      thereof (which must be within the United States) and (ii) evidence that
      appropriate financing statements under the UCC and other necessary documents
      have been filed and recorded and other steps have been taken to perfect the
      Security Interests to create in favor of the Secured Parties a valid, perfected
      and continuing perfected first priority lien in the Collateral.

    

    (f)    This
      Agreement creates in favor of the Secured Parties a valid, security interest
      in
      the Collateral, subject only to Permitted Liens (as defined in the Debentures)
      securing the payment and performance of the Obligations. Upon making the filings
      

    
      
        
        

      

      
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    described
      in the immediately following paragraph, all security interests created hereunder
      in any Collateral which may be perfected by filing Uniform Commercial Code
      financing statements shall have been duly perfected. Except for the filing
      of
      the Uniform Commercial Code financing statements referred to in the immediately
      following paragraph, the recordation of the Intellectual Property Security
      Agreement (as defined below) with respect to copyrights and copyright
      applications in the United States Copyright Office referred to in paragraph
      (m),
the
      execution and delivery of deposit account control agreements satisfying the
      requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
      account of the Debtors,
      and the
      delivery of the certificates and other instruments provided in Section
      3,
      no
      action is necessary to create, perfect or protect the security interests created
      hereunder. Without limiting the generality of the foregoing, except for the
      filing of said financing statements, the recordation of said Intellectual
      Property Security Agreement, and the execution and delivery of said deposit
      account control agreements, no consent of any third parties and no
      authorization, approval or other action by, and no notice to or filing with,
      any
      governmental authority or regulatory body is required for (i) the execution,
      delivery and performance of this Agreement, (ii) the creation or perfection
      of
      the Security Interests created hereunder in the Collateral or (iii) the
      enforcement of the rights of the Agent and the Secured Parties
      hereunder.

    

    (g)    Each
      Debtor hereby authorizes the Agent to file one or more financing statements
      under the UCC, with respect to the Security Interests with the proper filing
      and
      recording agencies in any jurisdiction deemed proper by it.

    

    (h)    The
      execution, delivery and performance of this Agreement by the Debtors does not
      (i) violate any of the provisions of any Organizational Documents of any Debtor
      or any judgment, decree, order or award of any court, governmental body or
      arbitrator or any applicable law, rule or regulation applicable to any Debtor
      or
      (ii) conflict with, or constitute a default (or an event that with notice or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing any Debtor's debt or otherwise) or other understanding
      to
      which any Debtor is a party or by which any property or asset of any Debtor
      is
      bound or affected. If any, all required consents (including, without limitation,
      from stockholders or creditors of any Debtor) necessary for any Debtor to enter
      into and perform its obligations hereunder have been obtained.

    

    (i)    The
      capital stock and other equity interests listed on Schedule
      H
      hereto
      (the “Pledged
      Securities”)
      represent all of the capital stock and other equity interests of the Guarantors
      and other Subsidiaries, and represent all capital stock and other equity
      interests owned, directly or indirectly, by the Company. All of the Pledged
      Securities are validly issued, fully paid and nonassessable, and the Company
      is
      the legal and beneficial owner of the Pledged Securities, free and clear of
      any
      lien, security interest or other encumbrance except for the security interests
      created by this Agreement and other Permitted Liens (as defined in the
      Debentures). 

    
      
        
        

      

      
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    (j)    The
      ownership and other equity interests in partnerships and limited liability
      companies (if any)
      included
      in the Collateral
      (the
“Pledged
      Interests”)
      by
      their express terms do not provide that they are securities governed by Article
      8 of the UCC and are not held in a securities account or by any financial
      intermediary.

    

    (k)    Except
      for Permitted Liens (as defined in the Debentures), each Debtor shall at all
      times maintain the liens and Security Interests provided for hereunder as valid
      and perfected first priority liens and security interests in the Collateral
      in
      favor of the Secured Parties until this Agreement and the Security Interest
      hereunder shall be terminated pursuant to Section 11 hereof. Each Debtor hereby
      agrees to defend the same against the claims of any and all persons and
      entities. Each Debtor shall safeguard and protect all Collateral for the account
      of the Secured Parties. At the request of the Agent, each Debtor will sign
      and
      deliver to the Agent on behalf of the Secured Parties at any time or from time
      to time one or more financing statements pursuant to the UCC in form reasonably
      satisfactory to the Agent and will pay the cost of filing the same in all public
      offices wherever filing is, or is deemed by the Agent to be, necessary or
      desirable to effect the rights and obligations provided for herein. Without
      limiting the generality of the foregoing, each Debtor shall pay all fees, taxes
      and other amounts necessary to maintain the Collateral and the Security
      Interests hereunder, and each Debtor shall obtain and furnish to the Agent
      from
      time to time, upon demand, such releases and/or subordinations of claims and
      liens which may be required to maintain the priority of the Security Interests
      hereunder.

    

    (l)    No
      Debtor
      will transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose
      of any of the Collateral (except for non-exclusive licenses granted by a Debtor
      in its ordinary course of business and sales of inventory by a Debtor in its
      ordinary course of business) without the prior written consent of a Majority
      in Interest.

    

    (m)    Each
      Debtor shall keep and preserve its equipment, inventory and other tangible
      Collateral in good condition, repair and order and shall not operate or locate
      any such Collateral (or cause to be operated or located) in any area excluded
      from insurance coverage.

    

    (n)    Each
      Debtor shall maintain with financially sound and reputable insurers, insurance
      with respect to the Collateral, including Collateral hereafter acquired, against
      loss or damage of the kinds and in the amounts customarily insured against
      by
      entities of established reputation having similar properties similarly situated
      and in such amounts as are customarily carried under similar circumstances
      by
      other such entities and otherwise as is prudent for entities engaged in similar
      businesses but in any event sufficient to cover the full replacement cost
      thereof. Each Debtor shall cause each insurance policy issued in connection
      herewith to provide, and the insurer issuing such policy to certify to the
      Agent
      that (a) the Agent will be named as lender loss payee and additional insured
      under each such insurance policy; (b) if such insurance be proposed to be
      cancelled or materially changed for any reason whatsoever, such insurer will
      promptly notify the Agent and such cancellation or change shall not be effective
      as to the Agent for at least thirty (30) days after receipt by the Agent of
      such
      notice, unless the effect of such change 

    
      
        
        

      

      
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    is
      to
      extend or increase coverage under the policy; and (c) the Agent will have the
      right (but no obligation) at its election to remedy any default in the payment
      of premiums within thirty (30) days of notice from the insurer of such default.
      If no Event of Default (as defined in the Debentures) exists and if the proceeds
      arising out of any claim or series of related claims do not exceed $100,000,
      loss payments in each instance will be applied by the applicable Debtor to
      the
      repair and/or replacement of property with respect to which the loss was
      incurred to the extent reasonably feasible, and any loss payments or the balance
      thereof remaining, to the extent not so applied, shall be payable to the
      applicable Debtor, provided, however, that payments received by any Debtor
      after
      an Event of Default occurs and is continuing or in excess of $100,000 for any
      occurrence or series of related occurrences shall be paid to the Agent on behalf
      of the Secured Parties and, if received by such Debtor, shall be held in trust
      for the Secured Parties and immediately paid over to the Agent unless otherwise
      directed in writing by the Agent. Copies of such policies or the related
      certificates, in each case, naming the Agent as lender loss payee and additional
      insured shall be delivered to the Agent at least annually and at the time any
      new policy of insurance is issued.

    

    (o)    Each
      Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
      Secured Parties promptly, in sufficient detail, of any material adverse change
      in the Collateral, and of the occurrence of any event which would have a
      material adverse effect on the value of the Collateral or on the Secured
      Parties’ security interest, through the Agent, therein.

    

    (p)    Each
      Debtor shall promptly execute and deliver to the Agent such further deeds,
      mortgages, assignments, security agreements, financing statements or other
      instruments, documents, certificates and assurances and take such further action
      as the Agent may from time to time request and may in its sole discretion deem
      necessary to perfect, protect or enforce the Secured Parties’ security interest
      in the Collateral including, without limitation, if applicable, the execution
      and delivery of a separate security agreement with respect to each Debtor’s
      Intellectual Property (“Intellectual
      Property Security Agreement”)
      in
      which the Secured Parties have been granted a security interest hereunder,
      substantially in a form reasonably acceptable to the Agent, which Intellectual
      Property Security Agreement, other than as stated therein, shall be subject
      to
      all of the terms and conditions hereof.

    

    (q)    Each
      Debtor shall permit the Agent and its representatives and agents to inspect
      the
      Collateral during normal business hours and upon reasonable prior notice, and
      to
      make copies of records pertaining to the Collateral as may be reasonably
      requested by the Agent from time to time.

    

    (r)    Each
      Debtor shall take all steps reasonably necessary to diligently pursue and seek
      to preserve, enforce and collect any rights, claims, causes of action and
      accounts receivable in respect of the Collateral.

    

    (s)    Each
      Debtor shall promptly notify the Secured Parties in sufficient detail upon
      becoming aware of any attachment, garnishment, execution or other legal process
      

    
      
        
        

      

      
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    levied
      against any Collateral and of any other information received by such Debtor
      that
      may materially affect the value of the Collateral, the Security Interest or
      the
      rights and remedies of the Secured Parties hereunder.

    

    (t)    All
      information heretofore, herein or hereafter supplied to the Secured Parties
      by
      or on behalf of any Debtor with respect to the Collateral is accurate and
      complete in all material respects as of the date furnished.

    

    (u)    The
      Debtors shall at all times preserve and keep in full force and effect their
      respective valid existence and good standing and any rights and franchises
      material to its business.

    

    (v)    No
      Debtor
      will change its name, type of organization, jurisdiction of organization,
      organizational identification number (if it has one), legal or corporate
      structure, or identity, or add any new fictitious name unless it provides at
      least 30 days prior written notice to the Secured Parties of such change and,
      at
      the time of such written notification, such Debtor provides any financing
      statements or fixture filings necessary to perfect and continue the perfection
      of the Security Interests granted and evidenced by this Agreement.

    

    (w)    Except
      in
      the ordinary course of business, no Debtor may consign any of its Inventory
      or
      sell any of its Inventory on bill and hold, sale or return, sale on approval,
      or
      other conditional terms of sale without the consent of the
      Agent
      which shall not be unreasonably withheld.

    

    (x)    No
      Debtor
      may relocate its chief executive office to a new location without providing
      30
      days prior written notification thereof to the Secured Parties and so long
      as,
      at the time of such written notification, such Debtor provides any financing
      statements or fixture filings necessary to perfect and continue the perfection
      of the Security Interests granted and evidenced by this Agreement.

    

    (y)    Each
      Debtor was organized and remains organized solely under the laws of the state
      set forth next to such Debtor’s name in Schedule
      D
      attached
      hereto, which Schedule
      D
      sets
      forth each Debtor’s organizational identification number or, if any Debtor does
      not have one, states that one does not exist.

    

    (z)    (i)
      The
      actual name of each Debtor is the name set forth in Schedule
      D
      attached
      hereto; (ii) no Debtor has any trade names except as set forth on Schedule
      E
      attached
      hereto; (iii) no Debtor has used any name other than that stated in the preamble
      hereto or as set forth on Schedule
      E
      for the
      preceding five years; and (iv) no entity has merged into any Debtor or been
      acquired by any Debtor within the past five years except as set forth on
Schedule
      E.

    

    (aa)    At
      any
      time and from time to time that any Collateral consists of instruments,
      certificated securities or other items that require or permit possession by
      the

    
      
        
        

      

      
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    secured
      party to perfect the security interest created hereby, the applicable Debtor
      shall deliver such Collateral to the Agent.

    

    (bb)    Each
      Debtor, in its capacity as issuer, hereby agrees to comply with any and all
      orders and instructions of Agent regarding the Pledged Interests consistent
      with
      the terms of this Agreement without the further consent of any Debtor as
      contemplated by Section 8-106 (or any successor section) of the UCC. Further,
      each Debtor agrees that it shall not enter into a similar agreement (or one
      that
      would confer “control” within the meaning of Article 8 of the UCC) with any
      other person or entity.

     

    (cc)    Each
      Debtor shall cause all tangible chattel paper constituting Collateral to be
      delivered to the Agent, or, if such delivery is not possible, then to cause
      such
      tangible chattel paper to contain a legend noting that it is subject to the
      security interest created by this Agreement. To the extent that any Collateral
      consists of electronic chattel paper, the applicable Debtor shall cause the
      underlying chattel paper to be “marked” within the meaning of Section 9-105 of
      the UCC (or successor section thereto).

    

    (dd)    If
      there
      is any investment property or deposit account included as Collateral that can
      be
      perfected by “control” through an account control agreement, the applicable
      Debtor shall cause such an account control agreement, in form and substance
      in
      each case satisfactory to the Agent, to be entered into and delivered to the
      Agent for the benefit of the Secured Parties.

    

    (ee)    To
      the
      extent that any Collateral consists of letter-of-credit rights, the applicable
      Debtor shall cause the issuer of each underlying letter of credit to consent
      to
      an assignment of the proceeds thereof to the Secured Parties.

    

    (ff)    To
      the
      extent that any Collateral is in the possession of any third party, the
      applicable Debtor shall join with the Agent in notifying such third party of
      the
      Secured Parties’ security interest in such Collateral and shall use its best
      efforts to obtain an acknowledgement and agreement from such third party with
      respect to the Collateral, in form and substance reasonably satisfactory to
      the
      Agent.

    

    (gg)    If
      any
      Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
      shall promptly notify the Secured Parties in a writing signed by such Debtor
      of
      the particulars thereof and grant to the Secured Parties in such writing a
      security interest therein and in the proceeds thereof, all upon the terms of
      this Agreement, with such writing to be in form and substance satisfactory
      to
      the Agent.

    

    (hh)    Each
      Debtor shall immediately provide written notice to the Secured Parties of any
      and all accounts which arise out of contracts with any governmental authority
      and, to the extent necessary to perfect or continue the perfected status of
      the
      Security Interests in such accounts and proceeds thereof, shall execute and
      deliver to the Agent an assignment of claims for such accounts and cooperate
      with the Agent in taking any other steps required, in its judgment, under the
      Federal Assignment of Claims Act or any similar federal, state or local statute
      or rule to perfect or continue the perfected status of the Security Interests
      in
      such accounts and proceeds thereof.

    
      
        
        

      

      
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    (ii)    Each
      Debtor shall cause each subsidiary
      of such
      Debtor to immediately become a party hereto (an “Additional
      Debtor”),
      by
      executing and delivering an Additional Debtor Joinder in substantially the
      form
      of Annex A attached hereto and comply with the provisions hereof applicable
      to
      the Debtors. Concurrent therewith, the Additional Debtor shall deliver
      replacement schedules for, or supplements to all other Schedules to (or referred
      to in) this Agreement, as applicable, which replacement schedules shall
      supersede, or supplements shall modify, the Schedules then in effect. The
      Additional Debtor shall also deliver such opinions of counsel, authorizing
      resolutions, good standing certificates, incumbency certificates, organizational
      documents, financing statements and other information and documentation as
      the
      Agent may reasonably request. Upon delivery of the foregoing to the Agent,
      the
      Additional Debtor shall be and become a party to this Agreement with the same
      rights and obligations as the Debtors, for all purposes hereof as fully and
      to
      the same extent as if it were an original signatory hereto and shall be deemed
      to have made the representations, warranties and covenants set forth herein
      as
      of the date of execution and delivery of such Additional Debtor Joinder, and
      all
      references herein to the “Debtors” shall be deemed to include each Additional
      Debtor.

    

    (jj)    Each
      Debtor shall vote the Pledged Securities to comply with the covenants and
      agreements set forth herein and in the Debentures.

    

    (kk)    Each
      Debtor shall register the pledge of the applicable Pledged Securities on the
      books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
      to register the pledge of the applicable Pledged Securities in the name of
      the
      Secured Parties on the books of such issuer. Further, except with respect to
      certificated securities delivered to the Agent, the applicable Debtor shall
      deliver to Agent an acknowledgement of pledge (which, where appropriate, shall
      comply with the requirements of the relevant UCC with respect to perfection
      by
      registration) signed by the issuer of the applicable Pledged Securities, which
      acknowledgement shall confirm that: (a) it has registered the pledge on its
      books and records; and (b) at any time directed by Agent during the continuation
      of an Event of Default, such issuer will transfer the record ownership of such
      Pledged Securities into the name of any designee of Agent, will take such steps
      as may be necessary to effect the transfer, and will comply with all other
      instructions of Agent regarding such Pledged Securities without the further
      consent of the applicable Debtor.

    

    (ll)    In
      the
      event that, upon an occurrence of an Event of Default, Agent shall sell all
      or
      any of the Pledged Securities to another party or parties (herein called the
      “Transferee”)
      or
      shall purchase or retain all or any of the Pledged Securities, each Debtor
      shall, to the extent applicable: (i) deliver to Agent or the Transferee, as
      the
      case may be, the articles of incorporation, bylaws, minute books, stock
      certificate books, corporate seals, deeds, leases, indentures, agreements,
      evidences of indebtedness, books of account, financial records and all other
      Organizational Documents and records of the Debtors and their direct and
      indirect subsidiaries; (ii) use its best efforts to obtain resignations of
      the
      persons then serving as officers and directors of the Debtors and their direct
      and indirect 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    subsidiaries,
      if so requested; and (iii) use its best efforts to obtain any approvals that
      are
      required by any governmental or regulatory body in order to permit the sale
      of
      the Pledged Securities to the Transferee or the purchase or retention of the
      Pledged Securities by Agent and allow the Transferee or Agent to continue the
      business of the Debtors and their direct and indirect subsidiaries.

     

    (mm)    Without
      limiting the generality of the other obligations of the Debtors hereunder,
      each
      Debtor shall promptly (i) cause to be registered at the United States Copyright
      Office all of its material copyrights, (ii) cause the security interest
      contemplated hereby with respect to all Intellectual Property registered at
      the
      United States Copyright Office or United States Patent and Trademark Office
      to
      be duly recorded at the applicable office, and (iii) give the Agent notice
      whenever it acquires (whether absolutely or by license) or creates any
      additional material Intellectual Property.

    

    (nn)    Each
      Debtor will from time to time, at the joint and several expense of the Debtors,
      promptly execute and deliver all such further instruments and documents, and
      take all such further action as may be necessary or desirable, or as the Agent
      may reasonably request, in order to perfect and protect any security interest
      granted or purported to be granted hereby or to enable the Secured Parties
      to
      exercise and enforce their rights and remedies hereunder and with respect to
      any
      Collateral or to otherwise carry out the purposes of this
      Agreement.

    

    (oo)    Schedule
      F
      attached
      hereto lists all of the patents, patent applications, trademarks, trademark
      applications, registered copyrights, and domain names owned by any of the
      Debtors as of the date hereof. Schedule
      F
      lists
      all material licenses in favor of any Debtor for the use of any patents,
      trademarks, copyrights and domain names as of the date hereof. All material
      patents and trademarks of the Debtors have been duly recorded at the United
      States Patent and Trademark Office and all material copyrights of the Debtors
      have been duly recorded at the United States Copyright Office.

    

    (pp)    Except
      as
      set forth on Schedule
      G
      attached
      hereto, none of the account debtors or other persons or entities obligated
      on
      any of the Collateral is a governmental authority covered by the Federal
      Assignment of Claims Act or any similar federal, state or local statute or
      rule
      in respect of such Collateral.

    

    5.    Effect
      of Pledge on Certain Rights. If
      any of
      the Collateral subject to this Agreement consists of nonvoting equity or
      ownership interests (regardless of class, designation, preference or rights)
      that may be converted into voting equity or ownership interests upon the
      occurrence of certain events (including, without limitation, upon the transfer
      of all or any of the other stock or assets of the issuer), it is agreed that
      the
      pledge of such equity or ownership interests pursuant to this Agreement or
      the
      enforcement of any of Agent’s rights hereunder shall not be deemed to be the
      type of event which would trigger such conversion rights notwithstanding any
      provisions in the Organizational Documents or agreements to which any Debtor
      is
      subject or to which any Debtor is party.

    

    6.     Defaults.
      The
      following events shall be “Events
      of Default”:

    

    
      
        
        

      

      
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    (a)    The
      occurrence of an Event of Default (as defined in the Debentures) under the
      Debentures;

    

    (b)    Any
      representation or warranty of any Debtor in this Agreement shall prove to have
      been incorrect in any material respect when made;

    

    (c)    The
      failure by any Debtor to observe or perform any of its obligations hereunder
      for
      five (5) days after delivery to such Debtor of notice of such failure by or
      on
      behalf of a Secured Party unless such default is capable of cure but cannot
      be
      cured within such time frame and such Debtor is using best efforts to cure
      same
      in a timely fashion; or

    

    (d)    If
      any
      provision of this Agreement shall at any time for any reason be declared to
      be
      null and void, or the validity or enforceability thereof shall be contested
      by
      any Debtor, or a proceeding shall be commenced by any Debtor, or by any
      governmental authority having jurisdiction over any Debtor, seeking to establish
      the invalidity or unenforceability thereof, or any Debtor shall deny that any
      Debtor has any liability or obligation purported to be created under this
      Agreement.

    

    7.     Duty
      To Hold
      In Trust.
      

    

    (a)    Upon
      the
      occurrence of any Event of Default and at any time thereafter, each Debtor
      shall, upon receipt of any revenue, income,
      dividend, interest
      or other
      sums subject to the Security Interests, whether payable pursuant to the
      Debentures or otherwise, or of any check, draft, note, trade acceptance or
      other
      instrument evidencing an obligation to pay any such sum, hold the same in trust
      for the Secured Parties and shall forthwith endorse and transfer any such sums
      or instruments, or both, to the Secured Parties, pro-rata in proportion to
      their
      respective then-currently outstanding principal amount of Debentures for
      application to the satisfaction of the Obligations (and if any Debenture is
      not
      outstanding, pro-rata in proportion to the initial purchases of the remaining
      Debentures). 

    

    (b)    If
      any
      Debtor shall become entitled to receive or shall receive any securities or
      other
      property (including, without limitation, shares of Pledged Securities or
      instruments representing Pledged Securities acquired after the date hereof,
      or
      any options, warrants, rights or other similar property or certificates
      representing a dividend, or any distribution in connection with any
      recapitalization, reclassification or increase or reduction of capital, or
      issued in connection with any reorganization of such Debtor or any of its direct
      or indirect subsidiaries) in respect of the Pledged Securities (whether as
      an
      addition to, in substitution of, or in exchange for, such Pledged Securities
      or
      otherwise), such Debtor agrees to (i) accept the same as the agent of the
      Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
      of
      the Secured Parties; and (iii) to deliver any and all certificates or
      instruments evidencing the same to Agent on or before the close of business
      on
      the fifth business day following the receipt thereof by such Debtor, in the
      exact form received together with the Necessary Endorsements, to be held by
      Agent subject to the terms of this Agreement as Collateral.

    
      
        
        

      

      
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    8.     Rights
      and Remedies Upon Default.
      

    

    (a)    Upon
      the
      occurrence of any Event of Default and at any time thereafter, the Secured
      Parties, acting through the Agent, shall have the right to exercise all of
      the
      remedies conferred hereunder and under the Debentures, and the Secured Parties
      shall have all the rights and remedies of a secured party under the UCC. Without
      limitation, the Agent, for the benefit of the Secured Parties, shall have the
      following rights and powers:

    

    (i)     The
      Agent
      shall have the right to take possession of the Collateral and, for that purpose,
      enter, with the aid and assistance of any person, any premises where the
      Collateral, or any part thereof, is or may be placed and remove the same, and
      each Debtor shall assemble the Collateral and make it available to the Agent
      at
      places which the Agent shall reasonably select, whether at such Debtor's
      premises or elsewhere, and make available to the Agent, without rent, all of
      such Debtor’s respective premises and facilities for the purpose of the Agent
      taking possession of, removing or putting the Collateral in saleable or
      disposable form.

    

    (ii)    Upon
      notice to the Debtors by Agent, all rights of each Debtor to exercise the voting
      and other consensual rights which it would otherwise be entitled to exercise
      and
      all rights of each Debtor to receive the dividends and interest which it would
      otherwise be authorized to receive and retain, shall cease. Upon such notice,
      Agent shall have the right to receive, for the benefit of the Secured Parties,
      any interest, cash dividends or other payments on the Collateral and, at the
      option of Agent, to exercise in such Agent’s discretion all voting rights
      pertaining thereto. Without limiting the generality of the foregoing, Agent
      shall have the right (but not the obligation) to exercise all rights with
      respect to the Collateral as it were the sole and absolute owner thereof,
      including, without limitation, to vote and/or to exchange, at its sole
      discretion, any or all of the Collateral in connection with a merger,
      reorganization, consolidation, recapitalization or other readjustment concerning
      or involving the Collateral or any Debtor or any of its direct or indirect
      subsidiaries.

    

    (iii)    The
      Agent
      shall have the right to operate the business of each Debtor using the Collateral
      and shall have the right to assign, sell, lease or otherwise dispose of and
      deliver all or any part of the Collateral, at public or private sale or
      otherwise, either with or without special conditions or stipulations, for cash
      or on credit or for future delivery, in such parcel or parcels and at such
      time
      or times and at such place or places, and upon such terms and conditions as
      the
      Agent may deem commercially reasonable, all without (except as shall be required
      by applicable statute and cannot be waived) advertisement or demand upon or
      notice to any Debtor or right of redemption of a Debtor, which are hereby
      expressly waived. Upon each such sale, lease, assignment or other transfer
      of
      Collateral, the Agent, for the benefit of the Secured Parties, may, unless
      prohibited by applicable law which cannot be waived, purchase all or any part
      of
      the Collateral

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    being
      sold, free from and discharged of all trusts, claims, right of redemption and
      equities of any Debtor, which are hereby waived and released.

    

    (iv)    The
      Agent
      shall have the right (but not the obligation) to notify any account debtors
      and
      any obligors under instruments or accounts to make payments directly to the
      Agent, on behalf of the Secured Parties, and to enforce the Debtors’ rights
      against such account debtors and obligors.

    

    (v)    The
      Agent, for the benefit of the Secured Parties, may (but is not obligated to)
      direct any financial intermediary or any other person or entity holding any
      investment property to transfer the same to the Agent, on behalf of the Secured
      Parties, or its designee.

    

    (vi)    The
      Agent
      may (but is not obligated to) transfer any or all Intellectual Property
      registered in the name of any Debtor at the United States Patent and Trademark
      Office and/or Copyright Office into the name of the Secured Parties or any
      designee or any purchaser of any Collateral.

    

    (b)    The
      Agent
      shall comply with any applicable law in connection with a disposition of
      Collateral and such compliance will not be considered adversely to affect the
      commercial reasonableness of any sale of the Collateral. The Agent may sell
      the
      Collateral without giving any warranties and may specifically disclaim such
      warranties. If the Agent sells any of the Collateral on credit, the Debtors
      will
      only be credited with payments actually made by the purchaser. In addition,
      each
      Debtor waives any and all rights that it may have to a judicial hearing in
      advance of the enforcement of any of the Agent’s rights and remedies hereunder,
      including, without limitation, its right following an Event of Default to take
      immediate possession of the Collateral and to exercise its rights and remedies
      with respect thereto.

    

    (c)    For
      the
      purpose of enabling the Agent to further exercise rights and remedies under
      this
      Section 8 or elsewhere provided by agreement or applicable law, each Debtor
      hereby grants to the Agent, for the benefit of the Agent and the Secured
      Parties, an irrevocable, nonexclusive license (exercisable without payment
      of
      royalty or other compensation to such Debtor) to use, license or sublicense
      following an Event of Default, any Intellectual Property now owned or hereafter
      acquired by such Debtor, and wherever the same may be located, and including
      in
      such license access to all media in which any of the licensed items may be
      recorded or stored and to all computer software and programs used for the
      compilation or printout thereof.

    

    9.     Applications
      of Proceeds.
      The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder or from payments made on account of any insurance policy insuring
      any
      portion of the Collateral shall be applied first, to the expenses of retaking,
      holding, storing, processing and preparing for sale, selling, and the like
      (including, without limitation, any taxes, fees and other costs incurred in
      connection therewith) of the Collateral, to the reasonable attorneys’ fees and
      expenses incurred by the Agent in enforcing the Secured Parties’ rights
      hereunder and in connection with collecting, storing and disposing of the
      Collateral, and then to satisfaction of the Obligations pro rata among the
      Secured Parties (based 

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    on
      then-outstanding principal amounts of Debentures at the time of any such
      determination), and to the payment of any other amounts required by applicable
      law, after which the Secured Parties shall pay to the applicable Debtor any
      surplus proceeds. If, upon the sale, license or other disposition of the
      Collateral, the proceeds thereof are insufficient to pay all amounts to which
      the Secured Parties are legally entitled, the Debtors will be liable for the
      deficiency, together with interest thereon, at the rate of 18% per annum or
      the
      lesser amount permitted by applicable law (the “Default Rate”), and the
      reasonable fees of any attorneys employed by the Secured Parties to collect
      such
      deficiency. To the extent permitted by applicable law, each Debtor waives all
      claims, damages and demands against the Secured Parties arising out of the
      repossession, removal, retention or sale of the Collateral, unless due solely
      to
      the gross negligence or willful misconduct of the Secured Parties as determined
      by a final judgment (not subject to further appeal) of a court of competent
      jurisdiction.

    

    10.     Securities
      Law Provision.
      Each
      Debtor recognizes that Agent may be limited in its ability to effect a sale
      to
      the public of all or part of the Pledged Securities by reason of certain
      prohibitions in the Securities Act of 1933, as amended, or other federal or
      state securities laws (collectively, the “Securities
      Laws”),
      and
      may be compelled to resort to one or more sales to a restricted group of
      purchasers who may be required to agree to acquire the Pledged Securities for
      their own account, for investment and not with a view to the distribution or
      resale thereof. Each Debtor agrees that sales so made may be at prices and
      on
      terms less favorable than if the Pledged Securities were sold to the public,
      and
      that Agent has no obligation to delay the sale of any Pledged Securities for
      the
      period of time necessary to register the Pledged Securities for sale to the
      public under the Securities Laws. Each Debtor shall cooperate with Agent in
      its
      attempt to satisfy any requirements under the Securities Laws (including,
      without limitation, registration thereunder if requested by Agent) applicable
      to
      the sale of the Pledged Securities by Agent.

     

    11    Costs
      and Expenses.
      Each
      Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
      incurred in connection with any filing required hereunder, including without
      limitation, any financing statements pursuant to the UCC, continuation
      statements, partial releases and/or termination statements related thereto
      or
      any expenses of any searches reasonably required by the Agent, up to a maximum
      of $5,000. The Debtors shall also pay all other claims and charges which in
      the
      reasonable opinion of the Agent is reasonably likely to prejudice, imperil
      or
      otherwise affect the Collateral or the Security Interests therein. The Debtors
      will also, upon demand, pay to the Agent the amount of any and all reasonable
      expenses, including the reasonable fees and expenses of its counsel and of
      any
      experts and agents, which the Agent, for the benefit of the Secured Parties,
      may
      incur in connection with (i) the enforcement of this Agreement, (ii) the custody
      or preservation of, or the sale of, collection from, or other realization upon,
      any of the Collateral, or (iii) the exercise or enforcement of any of the rights
      of the Secured Parties under the Debentures. The Debtors shall notify the
      Company in writing of any such fees, costs, expenses, claims and charges when
      incurred by Debtors, and if any undisputed amounts of the foregoing are not
      paid
      by the Company within 30 calendar days following such notice, such amounts
      shall
      be added to the principal amount of the Debentures and shall bear interest
      at
      the Default Rate.

    

    12.    Responsibility
      for Collateral.
      The
      Debtors assume all liabilities and responsibility in connection with all
      Collateral, and the Obligations shall in no way be affected or diminished by
      reason of the loss, destruction, damage or theft of any of the Collateral or
      its

    
      
        
        

      

      
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    unavailability
      for any reason. Without limiting the generality of the foregoing, (a) neither
      the Agent nor any Secured Party (i) has any duty (either before or after an
      Event of Default) to collect any amounts in respect of the Collateral or to
      preserve any rights relating to the Collateral, or (ii) has any obligation
      to
      clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor
      shall
      remain obligated and liable under each contract or agreement included in the
      Collateral to be observed or performed by such Debtor thereunder. Neither the
      Agent nor any Secured Party shall have any obligation or liability under any
      such contract or agreement by reason of or arising out of this Agreement or
      the
      receipt by the Agent or any Secured Party of any payment relating to any of
      the
      Collateral, nor shall the Agent or any Secured Party be obligated in any manner
      to perform any of the obligations of any Debtor under or pursuant to any such
      contract or agreement, to make inquiry as to the nature or sufficiency of any
      payment received by the Agent or any Secured Party in respect of the Collateral
      or as to the sufficiency of any performance by any party under any such contract
      or agreement, to present or file any claim, to take any action to enforce any
      performance or to collect the payment of any amounts which may have been
      assigned to the Agent or to which the Agent or any Secured Party may be entitled
      at any time or times.

    

    13.    Security
      Interests Absolute.
      All
      rights of the Secured Parties and all obligations of the Debtors hereunder,
      shall be absolute and unconditional, irrespective of: (a) any lack of validity
      or enforceability of this Agreement, the Debentures or any agreement entered
      into in connection with the foregoing, or any portion hereof or thereof; (b)
      any
      change in the time, manner or place of payment or performance of, or in any
      other term of, all or any of the Obligations, or any other amendment or waiver
      of or any consent to any departure from the Debentures or any other agreement
      entered into in connection with the foregoing; (c) any exchange, release or
      nonperfection of any of the Collateral, or any release or amendment or waiver
      of
      or consent to departure from any other collateral for, or any guarantee, or
      any
      other security, for all or any of the Obligations; (d) any action by the Secured
      Parties to obtain, adjust, settle and cancel in its sole discretion any
      insurance claims or matters made or arising in connection with the Collateral;
      or (e) any other circumstance which might otherwise constitute any legal or
      equitable defense available to a Debtor, or a discharge of all or any part
      of
      the Security Interests granted hereby. Until the Obligations shall have been
      paid and performed in full, the rights of the Secured Parties shall continue
      even if the Obligations are barred for any reason, including, without
      limitation, the running of the statute of limitations or bankruptcy. Each Debtor
      expressly waives presentment, protest, notice of protest, demand, notice of
      nonpayment and demand for performance. In the event that at any time any
      transfer of any Collateral or any payment received by the Secured Parties
      hereunder shall be deemed by final order of a court of competent jurisdiction
      to
      have been a voidable preference or fraudulent conveyance under the bankruptcy
      or
      insolvency laws of the United States, or shall be deemed to be otherwise due
      to
      any party other than the Secured Parties, then, in any such event, each Debtor’s
      obligations hereunder shall survive cancellation of this Agreement, and shall
      not be discharged or satisfied by any prior payment thereof and/or cancellation
      of this Agreement, but shall remain a valid and binding obligation enforceable
      in accordance with the terms and provisions hereof. Each Debtor waives all
      right
      to require the Secured Parties to proceed against any other person or
entity
      or
to
      apply
      any Collateral which the Secured Parties may hold at any time, or to marshal
      assets, or to pursue any other remedy. Each Debtor waives any defense arising
      by
      reason of the application of the statute of limitations to any obligation
      secured hereby.

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    14.     Term
      of Agreement.
      This
      Agreement and the Security Interests shall terminate on the date on which all
      payments under the Debentures have been indefeasibly paid in full and all other
      Obligations have been paid or discharged; provided, however, that all
      indemnities of the Debtors contained in this Agreement (including, without
      limitation, Annex B hereto) shall survive and remain operative and in full
      force
      and effect regardless of the termination of this Agreement.

    

    15.     Power
      of Attorney; Further Assurances.

    

    (a)    Each
      Debtor authorizes the Agent, and does hereby make, constitute and appoint the
      Agent and its officers, agents, successors or assigns with full power of
      substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
      the name of the Agent or such Debtor, to, after the occurrence and during the
      continuance of an Event of Default, (i) endorse any note, checks, drafts, money
      orders or other instruments of payment (including payments payable under or
      in
      respect of any policy of insurance) in respect of the Collateral that may come
      into possession of the Agent; (ii) to sign and endorse any financing statement
      pursuant to the UCC or any invoice, freight or express bill, bill of lading,
      storage or warehouse receipts, drafts against debtors, assignments,
      verifications and notices in connection with accounts, and other documents
      relating to the Collateral; (iii) to pay or discharge taxes, liens, security
      interests or other encumbrances at any time levied or placed on or threatened
      against the Collateral; (iv) to demand, collect, receipt for, compromise, settle
      and sue for monies due in respect of the Collateral; (v) to transfer any
      Intellectual Property or provide licenses respecting any Intellectual Property;
      and (vi) generally, at the option of the Agent, and at the expense of the
      Debtors, at any time, or from time to time, to execute and deliver any and
      all
      documents and instruments and to do all acts and things which the Agent deems
      necessary to protect, preserve and realize upon the Collateral and the Security
      Interests granted therein in order to effect the intent of this Agreement and
      the Debentures all as fully and effectually as the Debtors might or could do;
      and each Debtor hereby ratifies all that said attorney shall lawfully do or
      cause to be done by virtue hereof. This power of attorney is coupled with an
      interest and shall be irrevocable for the term of this Agreement and thereafter
      as long as any of the Obligations shall be outstanding. The
      designation set forth herein shall be deemed to amend and supersede any
      inconsistent provision in the Organizational Documents or other documents or
      agreements to which any Debtor is subject or to which any Debtor is a party.
      Without
      limiting the generality of the foregoing, after the occurrence and during the
      continuance of an Event of Default, each Secured Party is specifically
      authorized to execute and file any applications for or instruments of transfer
      and assignment of any patents, trademarks, copyrights or other Intellectual
      Property with the United States Patent and Trademark Office and the United
      States Copyright Office.

    

    (b)    On
      a
      continuing basis, each Debtor will make, execute, acknowledge, deliver, file
      and
      record, as the case may be, with the proper filing and recording agencies in
      any
      jurisdiction, including, without limitation, the jurisdictions indicated on
      Schedule
      C
      attached
      hereto, all such instruments, and take all such action as may reasonably be
      

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    deemed
      necessary or advisable, or as reasonably requested by the Agent, to perfect
      the
      Security Interests granted hereunder and otherwise to carry out the intent
      and
      purposes of this Agreement, or for assuring and confirming to the Agent the
      grant or perfection of a perfected security interest in all the Collateral
      under
      the UCC.

    

    (c)     Each
      Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
      with full authority in the place and instead of such Debtor and in the name
      of
      such Debtor, from time to time in the Agent’s discretion, to take any action and
      to execute any instrument which the Agent may deem necessary or advisable to
      accomplish the purposes of this Agreement, including the filing, in its sole
      discretion, of one or more financing or continuation statements and amendments
      thereto, relative to any of the Collateral without the signature of such Debtor
      where permitted by law, which financing statements may (but need not) describe
      the Collateral as “all assets” or “all personal property” or words of like
      import, and ratifies all such actions taken by the Agent. This power of attorney
      is coupled with an interest and shall be irrevocable for the term of this
      Agreement and thereafter as long as any of the Obligations shall be
      outstanding.

    

    16.    Notices.
      All
      notices, requests, demands and other communications hereunder shall be subject
      to the notice provision of the Purchase Agreement (as such term is defined
      in
      the Debentures).

    

    17.    Other
      Security.
      To the
      extent that the Obligations are now or hereafter secured by property other
      than
      the Collateral or by the guarantee, endorsement or property of any other person,
      firm, corporation or other entity, then the Agent shall have the right, in
      its
      sole discretion, to pursue, relinquish, subordinate, modify or take any other
      action with respect thereto, without in any way modifying or affecting any
      of
      the Secured Parties’ rights and remedies hereunder.

    

    18.     Appointment
      of Agent.
      The
      Secured Parties hereby appoint Bristol Investment Fund, Ltd. to act as their
      agent (“Bristol”
or
      “Agent”)
      for
      purposes of exercising any and all rights and remedies of the Secured Parties
      hereunder. Such appointment shall continue until revoked in writing by a
Majority
      in Interest, at which time a Majority in Interest
      shall
      appoint a new Agent, provided that Bristol may not be removed as Agent unless
      Bristol shall then hold less than $75,000 in principal amount of
      Debentures;
      provided,
      further,
      that
      such removal may occur only if each of the other Secured Parties shall then
      hold
      not less than an aggregate of $250,000 in principal amount of Debentures.
The
      Agent
      shall have the rights, responsibilities and immunities set forth in Annex
      B
      hereto.

     

    19.    Miscellaneous.

    

    (a)    No
      course
      of dealing between the Debtors and the Secured Parties, nor any failure to
      exercise, nor any delay in exercising, on the part of the Secured Parties,
      any
      right, power or privilege hereunder or under the Debentures shall operate as
      a
      waiver thereof; nor shall any single or partial exercise of any right, power
      or
      privilege hereunder or thereunder preclude any other or further exercise thereof
      or the exercise of any other right, power or privilege.

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    (b)    All
      of
      the rights and remedies of the Secured Parties with respect to the Collateral,
      whether established hereby or by the Debentures or by any other agreements,
      instruments or documents or by law shall be cumulative and may be exercised
      singly or concurrently.

    

    (c)    This
      Agreement,
      together with the exhibits and schedules hereto, contain the entire
      understanding of the parties with respect to the subject matter hereof and
      supersede all prior agreements and understandings, oral or written, with respect
      to such matters, which the parties acknowledge have been merged into this
      Agreement and the exhibits and schedules hereto.
      No
      provision of this Agreement may be waived, modified, supplemented or amended
      except in a written instrument signed, in the case of an amendment, by the
      Debtors and the Secured Parties or, in the case of a waiver, by the party
      against whom enforcement of any such waived provision is sought. 

    

    (d)    If
      any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their commercially reasonable
      efforts to find and employ an alternative means to achieve the same or
      substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

    

    (e)    No
      waiver
      of any default with respect to any provision, condition or requirement of this
      Agreement shall be deemed to be a continuing waiver in the future or a waiver
      of
      any subsequent default or a waiver of any other provision, condition or
      requirement hereof, nor shall any delay or omission of any party to exercise
      any
      right hereunder in any manner impair the exercise of any such
      right.

    

    (f)    This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company and the Guarantors may
      not
      assign this Agreement or any rights or obligations hereunder without the prior
      written consent of each Secured Party (other than by merger). Any Secured Party
      may assign any or all of its rights under this Agreement to any Person to whom
      such Secured Party assigns or transfers any Securities, provided such transferee
      agrees in writing to be bound, with respect to the transferred Securities,
      by
      the provisions of this Agreement that apply to the “Secured
      Parties.”

    

    (g)    Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    (h)    All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each Debtor agrees that all proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and the Debentures (whether brought against
      a
      party hereto or its respective affiliates, directors, officers, shareholders,
      partners, members, employees or agents) shall be commenced exclusively in the
      state and federal courts sitting in the City of New York, Borough of Manhattan.
      Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the
      state and federal courts sitting in the City of New York, Borough of Manhattan
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any proceeding, any claim that it is not
      personally subject to the jurisdiction of any such court, that such proceeding
      is improper. Each party hereto hereby irrevocably waives personal service of
      process and consents to process being served in any such proceeding by mailing
      a
      copy thereof via registered or certified mail or overnight delivery (with
      evidence of delivery) to such party at the address in effect for notices to
      it
      under this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall
      be deemed to limit in any way any right to serve process in any manner permitted
      by law. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury in any legal
      proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby. If any party shall commence a proceeding to enforce any
      provisions of this Agreement, then the prevailing party in such proceeding
      shall
      be reimbursed by the other party for its reasonable attorney’s fees and other
      costs and expenses incurred with the investigation, preparation and prosecution
      of such proceeding.

    

    (i)    This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

    

    (j)    All
      Debtors shall jointly and severally be liable for the obligations of each Debtor
      to the Secured Parties hereunder.

    

    (k)    Each
      Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
      Parties and their respective partners, members, shareholders, officers,
      directors, employees and agents (and any other persons with other titles that
      have similar functions) (collectively, “Indemnitees”)
      from
      and against any and all losses, claims, liabilities, damages, penalties, suits,
      costs and expenses, of any kind or nature, (including fees relating to the
      cost
      of investigating and defending any of the foregoing) imposed on, incurred by
      or
      asserted against such Indemnitee in any way related to or arising from or
      alleged to arise from this Agreement or the Collateral, except any such losses,
      claims, 

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    liabilities,
      damages, penalties, suits, costs and expenses which result from the gross
      negligence or willful misconduct of the Indemnitee as determined by a final,
      nonappealable decision of a court of competent jurisdiction. This
      indemnification provision is in addition to, and not in limitation of, any
      other
      indemnification provision in the Debentures, the Purchase Agreement (as such
      term is defined in the Debentures) or any other agreement, instrument or other
      document executed or delivered in connection herewith or therewith.

    

    (l)    Nothing
      in this Agreement shall be construed to subject Agent or any Secured Party
      to
      liability as a partner in any Debtor or any if its direct or indirect
      subsidiaries that is a partnership or as a member in any Debtor or any of its
      direct or indirect subsidiaries that is a limited liability company, nor shall
      Agent or any Secured Party be deemed to have assumed any obligations under
      any
      partnership agreement or limited liability company agreement, as applicable,
      of
      any such Debtor or any if its direct or indirect subsidiaries or otherwise,
      unless and until any such Secured Party exercises its right to be substituted
      for such Debtor as a partner or member, as applicable, pursuant
      hereto.

    

    (m)    To
      the
      extent that the grant of the security interest in the Collateral and the
      enforcement of the terms hereof require the consent, approval or action of
      any
      partner or member, as applicable, of any Debtor or any direct or indirect
      subsidiary of any Debtor or compliance with any provisions of any of the
      Organizational Documents, the Debtors hereby grant such consent and approval
      and
      waive any such noncompliance with the terms of said documents.

    

    [SIGNATURE
      PAGES FOLLOW]

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Security
      Agreement to be duly executed on the day and year first above
      written.

    

    

    
      	
              OXIS
                INTERNATIONAL, INC.

            
	
              By:__________________________________________

              Name:
                Marvin Hausman

              Title:
                Chief Executive Officer 

            
	 
	
              OXIS
                THERAPEUTICS, INC.

               

            
	
              By:__________________________________________

              Name:
                Marvin Hausman

              Title:
                Chief Executive Officer 

            
	
              OXIS
                ISLE OF MAN LIMITED

               

            
	
              By:__________________________________________

              Name:
                Marvin Hausman

              Title:
                Chief Executive Officer

            

    

    

     

    

    

    [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO OXIS SA]

     

    Name
      of
      Investing Entity: __________________________

    Signature
      of Authorized Signatory of Investing entity:
      _________________________

    Name
      of
      Authorized Signatory: _________________________

    Title
      of
      Authorized Signatory: __________________________

     

    [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

    

    

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    ANNEX
      A

    to

    SECURITY

    AGREEMENT

    

    FORM
      OF ADDITIONAL DEBTOR JOINDER

    

    Security
      Agreement dated as of October 25, 2006 made by

    Oxis
      International, Inc.

    and
      its
      subsidiaries party thereto from time to time, as Debtors

    to
      and in
      favor of

    the
      Secured Parties identified therein (the “Security
      Agreement”)

    

    Reference
      is made to the Security Agreement as defined above; capitalized terms used
      herein and not otherwise defined herein shall have the meanings given to such
      terms in, or by reference in, the Security Agreement.

    

    The
      undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
      to the Secured Parties referred to above, the undersigned shall (a) be an
      Additional Debtor under the Security Agreement, (b) have all the rights and
      obligations of the Debtors under the Security Agreement as fully and to the
      same
      extent as if the undersigned was an original signatory thereto and (c) be deemed
      to have made the representations and warranties set forth therein as of the
      date
      of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
      THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
      SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
      IN
      THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
      PROVISIONS SET FORTH THEREIN.

    

    Attached
      hereto are supplemental and/or replacement Schedules to the Security Agreement,
      as applicable.

    

    An
      executed copy of this Joinder shall be delivered to the Secured Parties, and
      the
      Secured Parties may rely on the matters set forth herein on or after the date
      hereof. This Joinder shall not be modified, amended or terminated without the
      prior written consent of the Secured Parties.

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
      the
      name and on behalf of the undersigned.

    

    [Name
      of
      Additional Debtor]

    

    By:       

    Name:

    Title:

    

    Address:

    

    

    

    

    

    Dated:   

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      B

    to

    SECURITY

    AGREEMENT

    

    THE
      AGENT

    

    1.
      Appointment. The
      Secured Parties (all capitalized terms used herein and not otherwise defined
      shall have the respective meanings provided in the Security Agreement to which
      this Annex B is attached (the "Agreement")),
      by
      their acceptance of the benefits of the Agreement, hereby designate Bristol
      Investment Fund, Ltd. (“Bristol”
or
      “Agent”)
      as the
      Agent to act as specified herein and in the Agreement. Each Secured Party shall
      be deemed irrevocably to authorize the Agent to take such action on its behalf
      under the provisions of the Agreement and any other Transaction Document (as
      such term is defined in the Debentures) and to exercise such powers and to
      perform such duties hereunder and thereunder as are specifically delegated
      to or
      required of the Agent by the terms hereof and thereof and such other powers
      as
      are reasonably incidental thereto. The Agent may perform any of its duties
      hereunder by or through its agents or employees.

    

    2.
      Nature
      of Duties.
      The
      Agent shall have no duties or responsibilities except those expressly set forth
      in the Agreement. Neither the Agent nor any of its partners, members,
      shareholders, officers, directors, employees or agents shall be liable for
      any
      action taken or omitted by it as such under the Agreement or hereunder or in
      connection herewith or therewith, be responsible for the consequence of any
      oversight or error of judgment or answerable for any loss, unless caused solely
      by its or their gross negligence or willful misconduct as determined by a final
      judgment (not subject to further appeal) of a court of competent jurisdiction.
      The duties of the Agent shall be mechanical and administrative in nature; the
      Agent shall not have by reason of the Agreement or any other Transaction
      Document a fiduciary relationship in respect of any Debtor or any Secured Party;
      and nothing in the Agreement or any other Transaction Document, expressed or
      implied, is intended to or shall be so construed as to impose upon the Agent
      any
      obligations in respect of the Agreement or any other Transaction Document except
      as expressly set forth herein and therein.

    

    3.
      Lack
      of Reliance on the Agent.
      Independently and without reliance upon the Agent, each Secured Party, to the
      extent it deems appropriate, has made and shall continue to make (i) its own
      independent investigation of the financial condition and affairs of the Company
      and its subsidiaries in connection with such Secured Party’s investment in the
      Debtors, the creation and continuance of the Obligations, the transactions
      contemplated by the Transaction Documents, and the taking or not taking of
      any
      action in connection therewith, and (ii) its own appraisal of the
      creditworthiness of the Company and its subsidiaries, and of the value of the
      Collateral from time to time, and the Agent shall have no duty or
      responsibility, either initially or on a continuing basis, to provide any
      Secured Party with any credit, market or other information with respect thereto,
      whether coming into its possession before any Obligations are incurred or

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    at
      any
      time or times thereafter. The Agent shall not be responsible to the Debtors
      or
      any Secured Party for any recitals, statements, information, representations
      or
      warranties herein or in any document, certificate or other writing delivered
      in
      connection herewith, or for the execution, effectiveness, genuineness, validity,
      enforceability, perfection, collectibility, priority or sufficiency of the
      Agreement or any other Transaction Document, or for the financial condition
      of
      the Debtors or the value of any of the Collateral, or be required to make any
      inquiry concerning either the performance or observance of any of the terms,
      provisions or conditions of the Agreement or any other Transaction Document,
      or
      the financial condition of the Debtors, or the value of any of the Collateral,
      or the existence or possible existence of any default or Event of Default under
      the Agreement, the Debentures or any of the other Transaction
      Documents.

    

    4.
      Certain
      Rights of the Agent.
      The
      Agent shall have the right to take any action with respect to the Collateral,
      on
      behalf of all of the Secured Parties. To the extent practical, the Agent shall
      request instructions from the Secured Parties with respect to any material
      act
      or action (including failure to act) in connection with the Agreement or any
      other Transaction Document, and shall be entitled to act or refrain from acting
      in accordance with the instructions of Secured Parties holding a majority in
      principal amount of Debentures (based on then-outstanding principal amounts
      of
      Debentures at the time of any such determination); if such instructions are
      not
      provided despite the Agent’s request therefor, the Agent shall be entitled to
      refrain from such act or taking such action, and if such action is taken, shall
      be entitled to appropriate indemnification from the Secured Parties in respect
      of actions to be taken by the Agent; and the Agent shall not incur liability
      to
      any person or entity by reason of so refraining. Without limiting the foregoing,
      (a) no Secured Party shall have any right of action whatsoever against the
      Agent
      as a result of the Agent acting or refraining from acting hereunder in
      accordance with the terms of the Agreement or any other Transaction Document,
      and the Debtors shall have no right to question or challenge the authority
      of,
      or the instructions given to, the Agent pursuant to the foregoing and (b) the
      Agent shall not be required to take any action which the Agent believes (i)
      could reasonably be expected to expose it to personal liability or (ii) is
      contrary to this Agreement, the Transaction Documents or applicable
      law.

    

    5.
      Reliance.
      The
      Agent shall be entitled to rely, and shall be fully protected in relying, upon
      any writing, resolution, notice, statement, certificate, telex, teletype or
      telecopier message, cablegram, radiogram, order or other document or telephone
      message signed, sent or made by the proper person or entity, and, with respect
      to all legal matters pertaining to the Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of counsel selected by it
      and
      upon all other matters pertaining to this Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of other experts selected
      by
      it. Anything to the contrary notwithstanding, the Agent shall have no obligation
      whatsoever to any Secured Party to assure that the Collateral exists or is
      owned
      by the Debtors or is cared for, protected or insured or that the liens granted
      pursuant to the Agreement have been properly or sufficiently or lawfully
      created, perfected, or enforced or are entitled to any particular
      priority.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    6.
      Indemnification.
      To the
      extent that the Agent is not reimbursed and indemnified by the Debtors, the
      Secured Parties will jointly and severally reimburse and indemnify the Agent,
      in
      proportion to their initially purchased respective principal amounts of
      Debentures, from and against any and all liabilities, obligations, losses,
      damages, penalties, actions, judgments, suits, costs, expenses or disbursements
      of any kind or nature whatsoever which may be imposed on, incurred by or
      asserted against the Agent in performing its duties hereunder or under the
      Agreement or any other Transaction Document, or in any way relating to or
      arising out of the Agreement or any other Transaction Document except for those
      determined by a final judgment (not subject to further appeal) of a court of
      competent jurisdiction to have resulted solely from the Agent's own gross
      negligence or willful misconduct. Prior to taking any action hereunder as Agent,
      the Agent may require each Secured Party to deposit with it sufficient sums
      as
      it determines in good faith is necessary to protect the Agent for costs and
      expenses associated with taking such action.

    

    7.
      Resignation
      by the Agent. 

     

    (a)
      The
      Agent may resign from the performance of all its functions and duties under
      the
      Agreement and the other Transaction Documents at any time by giving 30 days'
      prior written notice (as provided in the Agreement) to the Debtors and the
      Secured Parties. Such resignation shall take effect upon the appointment of
      a
      successor Agent pursuant to clauses (b) and (c) below.

    

    (b)
      Upon
      any such notice of resignation, the Secured Parties, acting by a Majority
      in Interest,
      shall
      appoint a successor Agent hereunder.

    

    (c)
      If a
      successor Agent shall not have been so appointed within said 30-day period,
      the
      Agent shall then appoint a successor Agent who shall serve as Agent until such
      time, if any, as the Secured Parties appoint a successor Agent as provided
      above. If a successor Agent has not been appointed within such 30-day period,
      the Agent may petition any court of competent jurisdiction or may interplead
      the
      Debtors and the Secured Parties in a proceeding for the appointment of a
      successor Agent, and all fees, including, but not limited to, extraordinary
      fees
      associated with the filing of interpleader and expenses associated therewith,
      shall be payable by the Debtors on demand.

    

    8.
      Rights
      with respect to Collateral.
      Each
      Secured Party agrees with all other Secured Parties and the Agent (i) that
      it
      shall not, and shall not attempt to, exercise any rights with respect to its
      security interest in the Collateral, whether pursuant to any other agreement
      or
      otherwise (other than pursuant to this Agreement), or take or institute any
      action against the Agent or any of the other Secured Parties in respect of
      the
      Collateral or its rights hereunder (other than any such action arising from
      the
      breach of this Agreement) and (ii) that such Secured Party has no other rights
      with respect to the Collateral other than as set forth in this Agreement and
      the
      other Transaction Documents. Upon the acceptance of any appointment as Agent
      hereunder by a successor Agent, such 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    successor
      Agent shall thereupon succeed to and become vested with all the rights, powers,
      privileges and duties of the retiring Agent and the retiring Agent shall be
      discharged from its duties and obligations under the Agreement.  After any
      retiring Agent’s resignation or removal hereunder as Agent, the provisions of
      the Agreement including this Annex B shall inure to its benefit as to any
      actions taken or omitted to be taken by it while it was Agent.Exhibit 10.1

    Exhibit
      10.1

    Sierra
      Health Services, Inc.

    

    Supplemental
      Executive Retirement Plan III

    

    Effective
      January 1, 2005

    

    

    

    

    

    

    

    TABLE
      OF CONTENTS

    

    
      	 	 	
              Page

            
	
              Purpose

            	 	
              1

            
	 	 	 
	
              ARTICLE 1
                Definitions

            	
              1

            
	 	 	 
	
              ARTICLE 2
                Eligibility

            	
              6

            
	 	 	 
	 	
              2.1

            	
              Selection
                for Participation

            	
              6

            
	 	
              2.2

            	
              Enrollment
                Requirements

            	
              6

            
	 	
              2.3

            	
              Commencement
                of Participation

            	
              6

            
	 	 	 
	
              ARTICLE 3
                Vesting; Additional Years of Participation

            	
              7

            
	 	 	 
	 	
              3.1

            	
              Vesting

            	
              7

            
	 	
              3.2

            	
              Crediting
                of Additional Years of Participation

            	
              7

            
	 	 	 
	
              ARTICLE 4
                Benefits

            	
              7

            
	 	 	 
	 	
              4.1

            	
              Eligibility
                for Benefits

            	
              7

            
	 	
              4.2

            	
              Reemployment
                of Participant Who Has Received Benefits

            	
              9

            
	 	
              4.3

            	
              Alternative
                Lump Sum Payout

            	
              9

            
	 	
              4.4

            	
              Withholding
                and Payroll Taxes

            	
              9

            
	 	 	 
	
              ARTICLE 5
                Termination or Amendment of Plan or Agreements 

            	
              10

            
	 	 	 
	 	
              5.1

            	
              Termination

            	
              10

            
	 	
              5.2

            	
              Amendment

            	
              10

            
	 	
              5.3

            	
              Termination
                of Plan Participation

            	
              10

            
	 	 	 
	
              ARTICLE 6
                Other Benefits and Agreements

            	
              10

            
	 	 	 
	
              ARTICLE 7
                Administration of the Plan

            	
              11

            
	 	 	 
	 	
              7.1

            	
              Plan
                Administrator Duties

            	
              11

            
	 	
              7.2

            	
              Agents

            	
              11

            
	 	
              7.3

            	
              Binding
                Effect of Decisions

            	
              11

            
	 	
              7.4

            	
              Indemnity
                of Plan Administrator

            	
              11

            
	 	
              7.5

            	
              Employer
                Information

            	
              11

            
	 	 	 
	
              ARTICLE 8
                Claims Procedures

            	
              11

            
	 	 	 
	 	
              8.1

            	
              Presentation
                of Claim

            	
              11

            
	 	
              8.2

            	
              Notification
                of Decision

            	
              12

            
	 	
              8.3

            	
              Review
                of a Denied Claim

            	
              12

            
	 	
              8.4

            	
              Decision
                on Review

            	
              12

            
	 	
              8.5

            	
              Legal
                Action

            	
              13

            
	 	 	 
	
              ARTICLE
                9 Beneficiary Designation

            	
              13

            
	 	 	 
	 	
              9.1

            	
              Beneficiary

            	
              13

            
	 	
              9.2

            	
              Beneficiary
                Designation; Change; Spousal Consent

            	
              13

            
	 	
              9.3

            	
              Acknowledgment

            	
              14

            
	 	
              9.4

            	
              No
                Beneficiary Designation

            	
              14

            
	 	
              9.5

            	
              Doubt
                as to Beneficiary

            	
              14

            
	 	
              9.6

            	
              Discharge
                of Obligations

            	
              14

            
	 	 	 
	
              ARTICLE 10
                Trust

            	
              14

            
	 	 	 
	 	
              10.1

            	
              Establishment
                of the Trust

            	
              14

            
	 	
              10.2

            	
              Interrelationship
                of the Plan and the Trust

            	
              14

            
	 	 	 
	
              ARTICLE 11
                Miscellaneous

            	
              14

            
	 	 	 
	 	
              11.1

            	
              Unsecured
                General Creditor

            	
              14

            
	 	
              11.2

            	
              Employer's
                Liability

            	
              15

            
	 	
              11.3

            	
              Nonassignability

            	
              15

            
	 	
              11.4

            	
              Not
                a Contract of Employment

            	
              15

            
	 	
              11.5

            	
              Furnishing
                Information

            	
              15

            
	 	
              11.6

            	
              Terms

            	
              15

            
	 	
              11.7

            	
              Captions

            	
              15

            
	 	
              11.8

            	
              Governing
                Law

            	
              16

            
	 	
              11.9

            	
              Validity

            	
              16

            
	 	
              11.10

            	
              Notice

            	
              16

            
	 	
              11.11

            	
              Successors

            	
              16

            
	 	
              11.12

            	
              Spouse's
                Interest

            	
              16

            
	 	
              11.13

            	
              Incompetent

            	
              16

            
	 	
              11.14

            	
              Court
                Order

            	
              17

            
	 	
              11.15

            	
              Compliance
                with Code Section 409A

            	
              17

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    SIERRA
      HEALTH SERVICES, INC.

    

    SUPPLEMENTAL
      EXECUTIVE RETIREMENT PLAN III

    

    Effective
      as of January 1, 2005

    

    Purpose

    

    The
      purpose of this Plan is to provide specified benefits to a select group of
      management and highly compensated employees of Sierra Health Services, Inc.,
      a
      Nevada corporation, and its subsidiaries, if any, that sponsor this Plan. This
      Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA.
      

    

    

    ARTICLE
      1

    Definitions

    

    For
      purposes hereof, unless otherwise clearly apparent from the context, the
      following phrases or terms shall have the following indicated
      meanings:

    

    
      	
              1.1

            	
              "Assumed
                Interest Rate" means a rate of 6%, or such other interest rate as
                the Plan
                Administrator deems necessary or appropriate, adjusted from time
                to time
                to an amount that does not exceed the then-current prime interest
                rate of
                Bank of America. No Participant shall be deemed to have any right,
                vested
                or nonvested, regarding the continued use of any previously adopted
                Assumed Interest Rate.

            

    

    

    
      	
              1.2

            	
              "Beneficiary"
                means the individual designated, in accordance with Article 9, that
                is
                entitled to receive benefits under this Plan upon the death of a
                Participant.

            

    

    

    
      	
              1.3

            	
              "Beneficiary
                Designation Form" means the form established from time to time by
                the Plan
                Administrator that a Participant completes, signs and returns to
                the Plan
                Administrator to designate a
                Beneficiary.

            

    

    

    
      	1.4	
              "Board"
                means the board of directors of the
                Company.

            

    

    

    
      	
              1.5

            	
              "Cause"
                means: 

            

    

    

    
      	 	
              (i)

            	
              the
                Executive's willful and material breach of the Executive’s agreement to
                refrain from competition with
                Employers;

            

    

    

    
      	 	
              (ii)

            	
              the
                Executive, while an employee, is convicted of, or pleads guilty or
                nolo contendere
                to, a felony; 

            

    

    

    
      	 	
              (iii)

            	
              The
                Executive's commission of a fraud or misappropri-ation which causes
                material and demonstrable injury to any Employer;
                or

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	
              (iv)

            	
              The
                Executive commits a willful act of dishonesty, including but not
                limited
                to embezzlement, resulting or intended to result, directly or indirectly,
                in material personal gain or enrichment at the expense of any
                Employer.

            

    

    

    For
      purposes of this definition, an act or failure to act on the Executive's part
      shall be considered "willful" if it was done or omitted to be done by the
      Executive intentionally and not in good faith, and shall not include any act
      or
      failure to act resulting from any incapacity of the Executive.

    

    
      	
              1.6

            	
              "Change
                in Control" shall mean the earliest transaction or event occurring
                after
                the effective date of the Plan in which (i) the Company shall merge
                or
                consolidate with any other corporation and shall not be the surviving
                corporation; (ii) the Company shall transfer all or substantially
                all of
                its assets to any other person; or (iii) any person shall have become
                the
                beneficial owner of more than 50% of the voting power of outstanding
                voting securities of the Company.

            

    

    

    
      	
              1.7

            	
              "Claimant"
                shall have the meaning set forth in
                Section 8.1.

            

    

    

    
      	
              1.8

            	
              "Code"
                means the Internal Revenue Code of 1986, as amended from time to
                time,
                including regulations thereunder and successor provisions and regulations
                thereto.

            

    

    

    
      	
              1.9

            	
              "Company"
                means Sierra Health Services, Inc., a Nevada corporation.
                

            

    

    

    
      	
              1.10

            	
              "Disability"
                means a period of disability during which a Participant qualifies
                for
                benefits under the Participant's Employer's long-term disability
                plan or,
                if a Participant does not participate in such a plan, a period of
                disability during which the Participant would have qualified for
                benefits
                under such a plan had the Participant been a participant in such
                a plan,
                as determined in the sole discretion of the Plan Administrator. If
                the
                Participant's Employer does not sponsor such a plan or discontinues
                sponsorship of such a plan, Disability shall be determined by the
                Plan
                Administrator in its sole
                discretion.

            

    

    

    
      	
              1.11

            	
              "Employer(s)"
                means the Company and any subsidiaries of the Company that have been
                selected by the Board and have agreed to participate in the
                Plan.

            

    

    

    
      	
              1.12

            	
              "ERISA"
                means the Employee Retirement Income Security Act of 1974, as amended
                from
                time to time.

            

    

    

    
      	
              1.13

            	
              "Exchange
                Act" means the Securities Exchange Act of 1934, as amended from time
                to
                time, including rules thereunder and successor provisions and rules
                thereto.

            

    

    

    
      	
              1.14

            	
              "Participant"
                means any employee (i) who is selected to participate in the Plan,
                (ii) who elects to participate in the Plan by signing the Notice of
                Participation acknowledging the employee’s participation, a Beneficiary
                Designation Form and other documents required under Article II,
                (iii) whose signed acknowledgement of participation and Beneficiary
                Designation Form are accepted by the Plan Administrator, and (iv)
                whose
                participation in

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    the
      Plan
      has not terminated. If a Participant has a Termination of Employment and
      thereafter becomes reemployed by an Employer, he or she must be reselected
      to
      participate and again meet the other requirements of this definition in order
      to
      accrue benefits under the Plan beyond the Participant's Vested SERP Benefit
      prior to such reemployment.

    

    
      	
              1.15

            	
              "Plan"
                means this Supplemental Executive Retirement Plan III of the Company,
                as
                amended from time to time. The Plan is a different plan from the
                Company’s
                Supplemental Executive Retirement Plan effective July 1, 1997 and
                Supplemental Executive Retirement Plan II effective March 1,
                1998.

            

    

    

    
      	
              1.16

            	
              "Plan
                Administrator" means the plan administrator described in
                Article 7.

            

    

    

    
      	
              1.17

            	
              "Preretirement
                Survivor Benefit" means, in the case of a Participant who dies prior
                to a
                Termination of Employment and not during a Disability, the Participant's
                SERP Benefit as of the date of death (which becomes Vested upon death)
                that is payable to such Participant's Beneficiary, in accordance
                with
                Section 4.1(c). 

            

    

    

    
      	
              1.18

            	
              "Present
                Value" means the present value at a specified date of a Participant's
                Vested SERP Benefit calculated using the Assumed Interest Rate (i),
                in the
                case of a Participant (or beneficiary) to whom payments have already
                begun, based on the period over which such SERP Benefit remains payable
                assuming the payment of the SERP Benefit will continue in quarterly
                installments, and (ii), in the case of a Participant (or beneficiary)
                to
                whom payments have not already begun, based on the payment of such
                SERP
                Benefit in quarterly installments for an eight-year period assuming
                such
                quarterly installments begin on the later of the first day of the
                next
                calendar quarter which begins at least 30 days after such specified
                date
                or the first day of the calendar quarter which begins immediately
                at or
                after the Participant would have completed five Years of Service
                but for
                the Participant’s Termination of
                Employment.

            

    

    

    
      	
              1.19

            	
              "Retirement"
                or "Retires" means, in each instance, a Participant ceasing to be
                an
                employee of all Employers on or after the attainment of age sixty-five
                (65) for any reason other than a leave of absence, death, or Disability.
                

            

    

    

    
      	
              1.20

            	
              "SERP
                Benefit" means an amount payable each year in quarterly installments
                over
                a period of eight years to a Participant and, following the Participant's
                death, his or her Beneficiary(ies). Each Participant shall be notified
                of
                the maximum potential amount of his or her SERP Benefit at the time
                the
                Participant is designated for participation under Article II. At
                the time
                of Participant’s Termination of Employment or Disability, the
                Participant’s SERP Benefit shall be determined by multiplying his or her
                maximum potential SERP Benefit by 12.5% times the number of the
                Participant’s Years of Participation as of that date, up to the maximum
                SERP Benefit (in other words, the SERP Benefit accrues in equal annual
                amounts over eight Years of Participation). When used in this Plan,
                the
                term “SERP Benefit” (when not modified by the word “potential”) means only
                that portion of the maximum potential SERP Benefit that has accrued.
                

            

    

    

    
      	
              1.21

            	
              "Termination
                of Employment" means Participant’s “separation from service” within the
                meaning of Proposed Treasury Regulation § 1.409A-1(h) and any successor or
                other

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    applicable
      regulation under Code Section 409A, regardless of the reason for such separation
      from service (including due to death or Disability).

    

    
      	
              1.22

            	
              "Trust"
                means the trust established pursuant to that certain Master Trust
                Agreement, dated as of May 1, 1996, between the Company and Imperial
                Trust
                Company (and any successor trustee), as it may be amended from time
                to
                time.

            

    

    

    
      	
              1.23

            	
              "Vested"
                means that portion of a Participant's SERP Benefit under this Plan
                in
                which the Participant has a nonfor-feitable right and vested interest,
                as
                determined in accordance with Article 3
                below.

            

    

    

    
      	
              1.24

            	
              “Vesting
                Period” means the number of years (or other designated period) from the
                commencement of participation specified by the Committee as required
                in
                order that the Participant’s SERP Benefit be Vested (other than for
                Vesting upon death, Disability or in connection with a Change in
                Control).
                

            

    

    

    
      	
              1.25

            	
              “Years
                of Participation” at a specified date means the total number of full years
                from the date of the Participant’s commencement of participation during
                which the Participant has been employed by one or more Employers
                through
                such date plus any additional Years of Participation credited to
                such
                Partici-pant under Section 3.2; provided, however, that a Participant
                who
                has ceased to be designated for participation for purposes of further
                accruals of benefits upon reemployment shall not be credited with
                additional Years of Participation upon such reemployment. For purposes
                of
                this definition, a year of "Participation" shall be a 365-day period
                (or
                366-day period in the case of a leap year) commencing on the date
                of the
                Participant’s commencement of participation (as designated by the Board)
                and each anniversary thereof (subject to adjustment by the Plan
                Administrator to reflect leaves of absence), during which period
                the
                Participant has been employed full-time (or, if so specified in the
                Participant’s notice of participation under Section 2.1, at any lesser
                level that qualifies for crediting of Years of Participation under
                the
                Participant’s notice of participation). In the case of a Participant who
                has suffered a Disability but thereafter returns to service or becomes
                reemployed by an Employer promptly after the Disability ended, the
                period(s) of such Disability in the year in which the Disability
                began and
                the year in which the Disability ended will be counted as employment
                solely for purposes of this definition, but any other period (i.e.
                full years) of Disability shall not count as employment and therefore
                shall not be treated as Years of Participation. In the case of a
                Participant who has a Termination of Employment for any reason, other
                than
                death or Disability, following a Change in Control (including as
                provided
                in Section 4.1(b)), (i) if the Participant was not employed for a
                full
                365- (or 366-) day period that includes the date of the Change in
                Control,
                such Participant shall be deemed to have completed a full Year of
                Participation in respect of that period which includes the Change
                in
                Control, and (ii), if the Participant qualifies for payment of his
                or her
                SERP Benefit (whether or not the SERP Benefit represents his or her
                maximum potential SERP Benefit) under Section 4.1(b) or under Section
                4.1(a) within six years after the Change in Control, such Participant
                shall be credited with an additional Year of Participation as of
                the date
                immediately prior to his or her Termination of Employment. Except
                as
                provided in this definition, no partial year of employment shall
                be
                counted as a Year of Participation. A Participant's paid leave of
                absence
                or unpaid leave of absence for 90 days or less shall constitute employment
                for

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    purposes
      of this definition, but a Participant's unpaid leave of absence for more than
      90
      days shall not constitute employment for purposes of this
      definition.

    

    
      	
              1.26

            	
              "Years
                of Service" at a specified date means the total number of full years
                during which the Participant has been employed by one or more Employers
                through such date; provided, however, that a Participant who has
                ceased to
                be designated for participation for purposes of further accruals
                of
                benefits upon reemployment shall not be credited with additional
                Years of
                Service upon such reemployment. For purposes of this definition,
                a year of
                "Service" shall be a 365-day period (or 366-day period in the case
                of a
                leap year) commencing on the date of hiring and each anniversary
                thereof
                (subject to adjustment by the Plan Administrator to reflect leaves
                of
                absence or, with respect to employment prior to commencement of
                participation in the Plan, breaks in service). In the case of a
                Participant who has suffered a Disability but thereafter returns
                to
                service or becomes reemployed by an Employer promptly after the Disability
                ended, the period(s) of such Disability in the year in which the
                Disability began and the year in which the Disability ended will
                be
                counted as employment solely for purposes of this definition, but
                any
                other period (i.e.
                full years) of Disability shall not count as employment and therefore
                shall not be treated as Years of Service. In the case of a Participant
                who
                has a Termination of Employment for any reason, other than death
                or
                Disability, following a Change in Control (including as provided
                in
                Section _4.1(b)), (i) if the Participant was not employed for a full
                365-
                (or 366-) day period that includes the date of the Change in Control,
                such
                Participant shall be deemed to have completed a full Year of Service
                in
                respect of that period which includes the Change in Control, and
                (ii), if
                the Participant qualifies for payment of his or her SERP Benefit
                under
                Section 4.1(b) or under Section 4.1(a) within six years after the
                Change
                in Control, such Participant shall be credited with an additional
                Year of
                Service as of the date immediately prior to his or her Termination
                of
                Employment. Except as provided in this definition, no partial year
                of
                employment shall be counted as a Year of Service. A Participant's
                paid
                leave of absence or unpaid leave of absence for 90 days or less shall
                constitute employment for purposes of this definition, but a Participant's
                unpaid leave of absence for more than 90 days shall not constitute
                employment for purposes of this
                definition.

            

    

    

    ARTICLE
      2

    Eligibility

    

    
      	
              2.1

            	
              Selection
                for Participation.
                Participation in the Plan shall be limited to a select group of management
                and highly compensated employees of the Employers. An employee from
                that
                group shall become Participant only if the employee has been previously
                selected and approved for participation by the Compensation Committee
                of
                the Board of Directors. The Plan Administrator will provide to the
                Participant a notice of participation, which for each Participant
                is
                incorporated herein by reference and deemed part of the Plan, setting
                forth the following terms as designated by the Committee: The
                Participant’s date of commencement of participation, maximum SERP Benefit,
                Vesting Period, deemed Years of Participation (if any) to be credited
                under Section 3.2 and the conditions and terms upon which such deemed
                Years of Participation will be credited, any terms with respect to
                the
                number of work hours in a given year for which a Year of Participation
                or
                a Year of Service will be credited, the terms of the agreement requiring
                non-competition and related
                Participant

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    agreements
      for the protection of the business of the Company, and other terms applicable
      to
      the Participant.

    

    
      	
              2.2

            	
              Enrollment
                Requirements.
                As a condition to participa-tion, each selected employee shall complete,
                execute and return to the Plan Administrator an acknowledgement of
                participation and a Beneficiary Designation Form and the separate
                non-competition agreement referenced in Section 2.1. In addition,
                the Plan
                Administrator shall establish from time to time such other enrollment
                requirements as it determines in its sole discretion are
                necessary.

            

    

    

    
      	
              2.3

            	
              Commencement
                of Participation.
                Provided an employee selected to participate in the Plan has met
                all
                enrollment requirements set forth in this Plan and required by the
                Plan
                Administrator at the times required by the Plan Administrator, that
                employee shall commence participation in the Plan on the date specified
                by
                the Plan Administrator.

            

    

    

    

    ARTICLE
      3

    Vesting;
      Additional Years of Participation

    

    
      	
              3.1

            	
              Vesting.
                Each Participant shall become Vested in his or her SERP Benefit beginning
                at the earlier of (i) the time such Participant has performed service
                for
                the full Vesting Period and remains employed by an Employer at the
                end of
                such Vesting Period , (ii) the termination of such Participant's
                employment with all Employers due to death, (iii) upon the occurrence
                of a
                Disability, (iii) upon the occurrence of a Change in Control, or
                (iv) the
                termination of the Participant’s employment with all Employers by his or
                her respective Employer(s) not for Cause in the 90-day period preceding
                a
                Change in Control. Service that counts toward Vesting shall be the
                same as
                service that counts toward Years of Participation, except that it
                shall
                exclude any Additional Years of Participation credited under Section
                3.2.
                

            

    

    

    
      	
              3.2

            	
              Crediting
                of Additional Years of Participation.
                Prior to commencement of payment of a Participant's Vested SERP Benefit,
                a
                Participant may be credited with additional "deemed" Years of
                Participation, if recommended by the Plan Administrator and approved
                by
                the Compensation Committee of the Board of Directors. In no event
                may the
                number of such additional "deemed" Years of Participation exceed
                four for
                any one Participant. Unless otherwise specified in the Participant’s
                notice of participation under Section 2.1, deemed Years of Participation
                that have been authorized for a Participant but to be credited at
                a
                specified future date will be credited immediately upon a Change
                in
                Control if he or she remains employed at that time (or is deemed
                to remain
                so employed under Section 4.1(b) in the case of termination without
                cause
                during the 90-day period preceding the Change in Control).
                

            

    

    

    ARTICLE
      4

    Benefits

    

    
      	4.1	
              Eligibility
                for Benefits.

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a) Benefit
      Upon Retirement or Disability.
      If a
      Participant Retires or suffers a Disability, the Participant shall be entitled
      to payment of his or her Vested SERP Benefit in quarterly installments to the
      Participant and, following Participant's death, to his or her Beneficiary(ies),
      for a period of eight years. Payment of benefits under this Section 4.1(a)
      shall
      commence on the first day of the next calendar quarter that begins at least
      six
      months after such Retirement, or which begins at least 30 days after the Plan
      Adminis-trator's receipt of written proof or determination of such Participant's
      Disability if the Participant also is “Disabled” within the meaning of Section
      409A(a)(2)(C) of the Internal Revenue Code, or which begins at least six months
      after the Plan Administrator’s receipt of written proof or determination of such
      Participant’s Termination due to a Disability that does not come within the
      meaning of Code Section 409A(a)(2)(C). 

    

    (b) Benefit
      Upon Termination Following a Change in Control.
      If a
      Participant has a Termination of Employment within six years following a Change
      in Control, other than a Retirement or Termination due to death or Disability,
      he or she shall be paid, as a lump-sum cash payment-, the Present Value of
      his
      or her Vested SERP Benefit determined as of the date of such Termination of
      Employment, in full settlement of the Participant’s rights under the Plan. Such
      lump-sum cash payment shall be made at the date six months after such
      Termination of Employment. For purposes of this Plan, a Participant who is
      terminated not for Cause by his or her Employer(s) in conjunction with a Change
      in Control or during the 90-day period preceding the Change in Control will
      be
      deemed to have remained employed until, and had such Termination of Employment
      immediately following, the Change in Control. 

    

    (c) Survivors'
      Benefit.
      If a
      Participant dies prior to his or her Termination of Employment and not while
      the
      Participant is receiving benefits under Section 4.1(a) due to a Disability,
      the
      Participant's Beneficiary shall be entitled to receive the Participant's Vested
      SERP Benefit in the form of a Preretirement Survivor Benefit, payable in
      quarterly installments for a period of eight years. Payments of benefits under
      this Section 4.1(c) shall commence on the first day of the next calendar quarter
      that begins at least 60 days after the Plan Administrator has received written
      proof of such Participant's death. The foregoing notwithstanding, a Beneficiary
      then entitled to receive a SERP Benefit may petition the Plan Administrator
      in
      writing requesting payment of such SERP Benefit in a lump-sum due to the
      financial hardship of the Beneficiary or his or her dependents, stating with
      particularity the reasons giving rise to constituting such hardship. The Plan
      Administrator shall approve such request if and only if the hardship constitutes
      an unforeseeable financial emergency within the meaning of Code Section
      409A(a)(2)(B)(ii), and any resulting distributions shall be limited as provided
      in that Code provision. If approved, such Beneficiary shall be paid, as a
      lump-sum cash payment, the amount determined to be payable, which amount shall
      not exceed the Present Value of such SERP Benefit determined as of the payment
      date specified by the Plan Administrator, in settlement of the Beneficiary's
      rights under the Plan. Other provisions of the Plan notwithstanding, any
      remaining undistributed portion of such SERP Benefit shall be payable in
      accordance with the applicable provisions of this Plan. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    (d) Benefit
      Upon Other Termination of Employment.
      If a
      Participant has a Termination of Employment which does not give rise to payment
      of benefits under

    Section
      4.1(a) or (b) and which is not due to death and is not a termination by the
      Company for Cause, the Participant shall be entitled to payment of his or her
      Vested SERP Benefit in quarterly installments to the Participant and, following
      Participant's death, to his or her Beneficiary(ies), for a period of eight
      years. Payment of benefits under this Section 4.1(d) shall commence on the
      later
      of the first day of the next calendar quarter that begins at least six months
      after such Termination of Employment or the first day of the next calendar
      quarter that begins immediately at or after the Participant would have completed
      five Years of Service but for the Participant’s Termination of Employment.

    

    (e) Circumstances
      in Which No Benefit is Payable.
      Upon
      a
      Participant’s Termination of Employment, the Participant (including his or her
      Beneficiaries) will forfeit all rights to a SERP Benefit if such SERP Benefit
      did not become Vested prior to or as a result of such Termination of Employment.
      In addition, in the event of a Participant’s Termination of Employment by the
      Company for Cause which both is prior to a Change in Control (and not covered
      by
      Section 4.1(b)) and does not qualify as a Retirement, the Par-ticipant
      (including his or her Beneficiaries) will forfeit all rights to a SERP Benefit
      whether or not such SERP Benefit had become Vested.

    

    
      	
              4.2

            	
              Reemployment
                of Participant Who Has Received Benefits.
                Other provisions of the Plan notwithstanding, if a Participant who
                has
                received payments of his or her SERP Benefit thereafter becomes reemployed
                by any Employer (i.e.,
                following the end of a Disability or as a result of being rehired),
                payments of such SERP Benefit will continue without regard to such
                reemployment. Upon a subsequent Termination of Employment or Disability,
                if the Participant accrued further benefits under the Plan following
                such
                reemployment and if such subsequent Termination of Employment or
                Disability gives rise to benefits under Section 4.1, the Participant's
                additional or incremental SERP Benefit shall become payable in accordance
                with Section 4.1. 

            

    

    

    
      	
              4.3

            	
              Alternative
                Lump Sum Payout.
                If a Participant's Vested SERP Benefit under this Plan at the time
                he or
                she, or his or her Beneficiary (whether primary or contingent), becomes
                eligible to receive a distribution under this Plan, when expressed
                on a
                Present Value basis as a lump sum, is less than $50,000, the Plan
                Administrator shall pay that benefit in a lump sum at the time that
                benefit payments would otherwise
                commence.

            

    

    

    
      	
              4.4

            	
              Withholding
                and Payroll Taxes.
                The Participant’s Employer shall withhold from any and all benefits paid
                under this Article 4 all federal, state and local income, employment
                and other taxes required to be withheld by the Employer in connection
                with
                the benefits hereunder, in amounts to be determined in the sole discretion
                of the Employer.

            

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      5

    Termination,
      Amendment or Modification of the Plan

    

    
      	
              5.1

            	
              Termination.
                Each Employer reserves the right to terminate the Plan at any time
                with
                respect to its participating employees by the action of its board
                of
                directors. A termination of the Plan shall have the effect of terminating
                further accruals of Years of Service and Years of Participation that
                would
                accrue as a result of Participant’s continued employment during periods
                more than six months after the termination of the Plan (including
                for
                purposes of Vesting), provided that, if the termination of the Plan
                occurs
                at or after a Change in Control or at the request of a person acquiring
                control of the Company in a Change in Control, the period of six
                months
                referred to in this sentence instead shall be one year. A termination
                of
                the Plan shall not otherwise materially adversely affect the
                --a
                Participant’s SERP Benefit or rights under the Plan or, in the case of a
                Beneficiary who has become entitled to the payment of benefits under
                the
                Plan as of the date of termination, the rights of such Beneficiary
                under
                the Plan.

            

    

    

    
      	
              5.2

            	
              Amendment.
                Any Employer may, at any time, amend or modify the Plan in whole
                or in
                part with respect to its participating employees and former employees
                by
                the actions of its board of directors; provided, however, that, without
                the consent of the affected Participant (or Beneficiary who has become
                entitled to the payment of benefits under the Plan), no amendment
                or
                modification shall be effective to decrease or materially adversely
                affect
                a Participant's SERP Benefit or rights under the Plan (to the extent
                then
                accrued) or, in the case of a Beneficiary who has become entitled
                to the
                payment of benefits under the Plan as of the date of amendment or
                modification, the rights of such Beneficiary under the
                Plan.

            

    

    

    
      	
              5.3

            	
              Termination
                of Plan Participation.
                Absent the earlier termination, modification or amendment of the
                Plan, the
                participation of any Participant in the Plan shall terminate upon
                the full
                payment of the applicable Vested SERP Benefit as provided under
                Article 4 or other time at which the Participant has no further right
                to benefits hereunder.

            

    

    

    

    ARTICLE
      6

    Other
      Benefits and Agreements

    

    The
      benefits provided for a Participant under this Plan are in addition to any
      other
      benefits available to such Participant under any other plan or program for
      employees of the Employers. The Plan shall supplement and shall not supersede,
      modify or amend any other such plan or program except as may otherwise be
      expressly provided. The benefits shall not be considered salary or bonus or
      otherwise be included as compensation under any other plan or compensatory
      arrangement that calculates compensation or benefits based on the amount of
      the
      Participant’s compensation.

    

    

    ARTICLE
      7

    Administration
      of the Plan

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
              7.1

            	
              Plan
                Administrator Duties.
                This Plan shall be administered by a Plan Administrator which shall
                consist of the Compensation Committee of the Board or such committee
                as
                the Board or the Compensation Committee shall appoint. Members of
                the Plan
                Administrator may be Participants under this Plan. The Plan Administrator
                shall also have the discretion and authority to (i) make, amend,
                interpret
                and enforce all appropriate rules and regulations for the administra-tion
                of this Plan and (ii) decide or resolve any and all ques-tions including
                interpretations of this Plan, as may arise in connection with the
                Plan.

            

    

    

    
      	
              7.2

            	
              Agents.
                In the administration of this Plan, the Plan Administrator may employ
                agents and delegate to them such administrative duties as it sees
                fit,
                (including acting through a duly appointed representative), and may
                from
                time to time consult with counsel, who may be counsel to any Employer,
                or
                a compensation consultant, who may be a consultant to any
                Employer.

            

    

    

    
      	
              7.3

            	
              Binding
                Effect of Decisions.
                The decision or action of the Plan Administrator with respect to
                any
                question arising out of or in connection with the administration,
                interpretation, and application of the Plan and the rules and regulations
                promulgated hereunder shall be final and conclusive and binding upon
                all
                persons having any interest in the
                Plan.

            

    

    

    
      	
              7.4

            	
              Indemnity
                of Plan Administrator.
                All Employers shall indemnify and hold harmless the members of the
                Plan
                Administrator against any and all claims, losses, damages, expenses
                or
                liabilities arising from any action or failure to act with respect
                to this
                Plan, except in the case of willful misconduct by the Plan Administrator
                or any of its members.

            

    

    

    
      	
              7.5

            	
              Employer
                Information.
                To enable the Plan Administrator to perform its functions, each Employer
                shall supply full and timely information to the Plan Administrator
                on all
                matters relating to the compensation of its Participants, the date
                and
                circum-stances of the Retirement, Disability, death or other Termina-tion
                of Employment of its Participants, and such other pertinent information
                as
                the Plan Administrator may reasonably
                require.

            

    

    

    

    ARTICLE
      8

    Claims
      Procedures

    

    
      	
              8.1

            	
              Presentation
                of Claim.
                Any Participant or Beneficiary of a deceased Participant (such Participant
                or Beneficiary being referred to below as a "Claimant") may deliver
                to the
                Plan Administrator a written claim for a determination with respect
                to the
                amounts distributable to such Claimant from the Plan. If such a claim
                relates to the contents of a notice received by the Claimant, the
                claim
                must be made within 60 days after such notice was received by the
                Claimant. The claim must state with particularity the determination
                desired by the Claimant. All other claims must be made within 180
                days of
                the date on which the event that caused the claim to arise occurred.
                The
                claim must state with particularity the determination desired by
                the
                Claimant.

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
              8.2

            	
              Notification
                of Decision.
                The Plan Administrator shall consider a Claimant's claim within a
                reasonable time, and shall notify the Claimant in
                writing:

            

    

    

    
      	 	
              (i)

            	
              that
                the Claimant's requested determination has been made, and that the
                claim
                has been allowed in full; or

            

    

    

    
      	 	
              (ii)

            	
              that
                the Plan Administrator has reached a conclusion contrary, in whole
                or in
                part, to the Claimant's requested determination, and such notice
                must set
                forth in a manner calculated to be understood by the
                Claimant:

            

    

    

    
      	 	
              (1)

            	
              the
                specific reason(s) for the denial of the claim, or any part of
                it;

            

    

    

    
      	 	
              (2)

            	
              specific
                reference(s) to pertinent provisions of the Plan upon which such
                denial
                was based;

            

    

    

    
      	 	
              (3)

            	
              a
                description of any additional material or information necessary for
                the
                Claimant to perfect the claim, and an explanation of why such material
                or
                information is necessary; and

            

    

    

    
      	 	
              (4)

            	
              an
                explanation of the claim review procedure set forth in Section 8.3
                below.

            

    

    

    
      	
              8.3

            	
              Review
                of a Denied Claim.
                Within 60 days after receiving a notice from the Plan Administrator
                that a claim has been denied, in whole or in part, a Claimant (or
                the
                Claimant's duly authorized representative) may file with the Plan
                Administrator a written request for a review of the denial of the
                claim.
                There-after, but not later than 30 days after the review procedure
                began, the Claimant (or the Claimant's duly authorized
                representative):

            

    

    

    
      	 	
              (i)

            	
              may
                review pertinent documents;

            

    

    

    
      	 	
              (ii)

            	
              may
                submit written comments or other documents;
                and/or

            

    

    

    
      	 	
              (iii)

            	
              may
                request a hearing, which the Plan Administrator, in its sole discretion,
                may grant.

            

    

    

    
      	
              8.4

            	
              Decision
                on Review.
                The Plan Administrator shall render its decision on review promptly,
                and
                not later than 60 days after the filing of a written request for
                review of the denial, unless a hearing is held or other special
                circumstances require additional time, in which case the Plan
                Administrator's decision must be rendered within 120 days after such
                date. Such decision must be written in a manner calculated to be
                understood by the Claimant, and it must
                contain:

            

    

    

    
      	 	
              (i)

            	
              specific
                reasons for the decision;

            

    

    

    
      	 	
              (ii)

            	
              specific
                reference(s) to the pertinent Plan provisions upon which the decision
                was
                based; and

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	 	
              (iii)

            	
              such
                other matters as the Plan Administrator deems
                relevant.

            

    

    

    
      	
              8.5

            	
              Legal
                Action.
                A
                Claimant's compliance with the foregoing provisions of this Article
                8 is a
                mandatory prerequisite to a Claimant's right to commence any legal
                action
                with respect to any claim for benefits under this Plan. Except to
                the
                extent otherwise required by law, any dispute or controversy arising
                under
                the Plan or in connection with a Participant’s participation shall be
                settled exclusively by arbitration in Las Vegas, Nevada, in accordance
                with the rules of the American Arbitration Association in effect
                at the
                time of submission to arbitration. Judgment may be entered on the
                arbitrators' award in any court having jurisdiction.
                

            

    

    

    

    ARTICLE
      9

    Beneficiary
      Designation

    

    
      	
              9.1

            	
              Beneficiary.
                Each Participant shall have the right, at any time, to designate
                his or
                her Beneficiary(ies) (both primary as well as contingent) to receive
                any
                benefits payable under the Plan to a beneficiary upon the death of
                a
                Participant. The Beneficiary designated under this Plan may be the
                same as
                or different from the Beneficiary designation under any other plan
                of an
                Employer in which the Participant
                participates.

            

    

    

    
      	
              9.2

            	
              Beneficiary
                Designation; Change; Spousal Consent.
                A
                Participant shall designate his or her Beneficiary by completing
                and
                signing the Beneficiary Designation Form, and returning it to the
                Plan
                Administrator or its designated agent. A Participant shall have the
                right
                to change a Beneficiary by completing, signing and otherwise complying
                with the terms of the Beneficiary Designation Form and the Plan
                Administrator's rules and procedures, as in effect from time to time.
                If
                the Participant names someone other than his or her spouse as a
                Beneficiary, a spousal consent, in the form designated by the Plan
                Administrator, must be signed by that Participant's spouse and returned
                to
                the Plan Administrator. Upon the acceptance by the Plan Administrator
                of a
                new Beneficiary Designation Form filed by the Participant, all Beneficiary
                designations previously filed by the Participant shall be cancelled.
                The
                Plan Administrator shall be entitled to rely on the last Beneficiary
                Designation Form filed by the Participant and accepted by the Plan
                Administrator prior to the Participant's
                death.

            

    

    

    
      	
              9.3

            	
              Acknowledgment.
                No designation or change in designation of a Beneficiary shall be
                effective until received, accepted and acknowledged in writing by
                the Plan
                Administrator or its designated
                agent.

            

    

    

    
      	
              9.4

            	
              No
                Beneficiary Designation.
                If a Participant fails to designate a Beneficiary as provided in
                Sections 9.1, 9.2 and 9.3 above or, if all designated Beneficiaries
                predecease the Participant or die prior to complete distribution
                of the
                Participant's benefits, then the Participant's spouse and children
                shall
                be the designated Beneficiary.

            

    

    

    
      	
              9.5

            	
              Doubt
                as to Beneficiary.
                If the Plan Administrator has any doubt as to the proper Beneficiary
                to
                receive payments pursuant to this Plan, the Plan Administrator shall
                have
                the

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    right,
      exercisable in its discretion, to cause the Participant's Employer to withhold
      such payments until this matter is resolved to the Plan Administrator's
      satisfaction.

    

    
      	
              9.6

            	
              Discharge
                of Obligations.
                The payment of benefits under the Plan to a Beneficiary shall fully
                and
                completely discharge all Employers and the Plan Administrator from
                all
                further obligations under this Plan with respect to the Participant,
                and
                that Participant's participation in the Plan shall terminate upon
                such
                full payment of benefits.

            

    

    

    

    ARTICLE
      10

    Trust

    

    
      	
              10.1

            	
              Establishment
                of the Trust.
                The Company shall have established and shall maintain the Trust.
                The
                Employers shall transfer over to the Trust such assets, if any, as
                the
                Employers determine, in their sole discretion.

            

    

    

    
      	
              10.2

            	
              Interrelationship
                of the Plan and the Trust.
                The provisions of the Plan, the Participant’s notice of participation and
                any other document hereunder shall govern the rights of a Participant
                to
                receive distributions pursuant to the Plan. The provisions of the
                Trust
                shall govern the rights of the Employers, Participants and the creditors
                of the Employers to the assets transferred to the Trust. Each Employer
                shall at all times remain liable to carry out its obligations under
                the
                Plan. Each Employer's obligations under the Plan may be satisfied
                with
                Trust assets distributed pursuant to the terms of the Trust, and
                any such
                distribution shall reduce the Employer's obligations under this
                Agreement.

            

    

    

    

    ARTICLE
      11

    Miscellaneous

    

    
      	
              11.1

            	
              Unsecured
                General Creditor.
                Participants and their Beneficiaries successors and assigns shall
                have no
                legal or equitable rights, interests or claims in any property or
                assets
                of an Employer. Any and all of an Employer's assets shall be, and
                remain,
                the general, unpledged, unrestricted assets of the Employer. An Employer's
                obligation under the Plan shall be merely that of an unfunded and
                unsecured promise to pay money in the future.

            

    

    

    
      	
              11.2

            	
              Employer's
                Liability.
                An Employer's liability for the payment of benefits shall be defined
                only
                by the Plan and other documents specifying the terms of a Participant’s
                participation in the Plan, as entered into between the Employer and
                a
                Participant. An Employer shall have no obligation to a Participant
                under
                the Plan except as expressly provided in the Plan and such other
                governing
                documents.

            

    

    

    
      	
              11.3

            	
              Nonassignability.
                Neither a Participant nor any other person shall have any right to
                commute, sell, assign, transfer, pledge, anticipate, mortgage or
                otherwise
                encumber, transfer, hypothecate or convey in advance of actual receipt,
                the amounts, if any, payable hereunder, or any part thereof, which
                are,
                and all rights to which are, expressly declared to be, unassignable
                and
                non-transfer-able. No part of the amounts payable shall, prior to
                actual
                payment, be subject to seizure or sequestration for the payment of
                any
                debts, judgments, alimony or separate maintenance owed by a Participant
                or
                any other person, nor be

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    transferable
      by operation of law in the event of a Participant's or any other person's
      bankruptcy or insolvency.

    

    
      	
              11.4

            	
              Not
                a Contract of Employment.
                The terms and conditions of this Plan shall not be deemed to constitute
                a
                contract of employment between any Employer and the Participant.
                Such
                employment is hereby acknowledged to be an "at will" employment
                relationship that can be terminated at any time for any reason, with
                or
                without cause, unless otherwise expressly provided in a written employment
                agreement. Nothing in this Plan shall be deemed to give a Participant
                the
                right to be retained in the service of any Employer or to inter-fere
                with
                the right of any Employer to discipline or discharge the Participant
                at
                any time.

            

    

    

    
      	
              11.5

            	
              Furnishing
                Information.
                A
                Participant or his or her Beneficiary will cooperate with the Plan
                Administrator by furnishing any and all information requested by
                the Plan
                Administrator and take such other actions as may be requested in
                order to
                facilitate the administra-tion of the Plan and the payments of benefits
                hereunder, including but not limited to taking such physical examinations
                as the Plan Administrator may deem
                necessary.

            

    

    

    
      	
              11.6

            	
              Terms.
                Whenever any words are used herein in the mascu-line, they shall
                be
                construed as though they were in the feminine in all cases where
                they
                would so apply; and wherever any words are used herein in the singular
                or
                in the plural, they shall be construed as though they were used in
                the
                plural or the singular, as the case may be, in all cases where they
                would
                so apply.

            

    

    

    
      	
              11.7

            	
              Captions.
                The captions of the articles, sections and paragraphs of this Plan
                are for
                convenience only and shall not control or affect the meaning or
                construction of any of its
                provisions.

            

    

    

    
      	
              11.8

            	
              Governing
                Law.
                Subject to ERISA, the provisions of this Plan shall be construed
                and
                interpreted according to the internal laws of the State of Nevada
                without
                regard to its conflict of laws
                principles.

            

    

    

    
      	
              11.9

            	
              Validity.
                In case any provision of this Plan shall be illegal or invalid for
                any
                reason, said illegality or invalidity shall not affect the remaining
                parts
                hereof, but this Plan shall be construed and enforced as if such
                illegal
                and invalid provision had never been inserted
                herein.

            

    

    

    
      	
              11.10

            	
              Notice.
                Any notice or filing required or permitted to be given to the Plan
                Administrator under this Plan shall be sufficient if in writing and
                hand-delivered, or sent by registered or certified mail, to the address
                below:

            

    

    

    
      	
              Sierra
                Health Services, Inc.

            
	
              2724
                North Tenaya Way

            
	
              Las
                Vegas, Nevada 89128

            
	
              Attn:
                Office of General Counsel

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Such
      notice shall be deemed given as of the date of delivery or, if delivery is
      made
      by mail, as of the date shown on the postmark on the receipt for registration
      or
      certification.

    

    Any
      notice or filing required or permitted to be given to a Participant under this
      Plan shall be sufficient if in writing and hand-delivered, or sent by mail,
      to
      the last known address of the Participant.

    

    
      	
              11.11

            	
              Successors.
                The provisions of this Plan shall bind and inure to the benefit of
                the
                Participant's Employer and its successors and assigns and the Participant
                and the Participant's Beneficiary(ies).

            

    

    

    
      	
              11.12

            	
              Spouse's
                Interest.
                The interest in the benefits hereunder of a spouse of a Participant
                who
                has predeceased the Participant shall automatically pass to the
                Participant and shall not be transferable by such spouse in any manner,
                including but not limited to such spouse's will, nor shall such interest
                pass under the laws of intestate
                succession.

            

    

    

    
      	
              11.13

            	
              Incompetent.
                If the Plan Administrator determines in its discretion that a benefit
                under this Plan is to be paid to a minor, a person declared incompetent
                or
                to a person incapable of handling the disposition of that person's
                property, the Plan Administrator may direct payment of such benefit
                to the
                guardian, legal representative or person having the care and custody
                of
                such minor, incompetent or incapable person. The Plan Administrator
                may
                require proof of minority, incompetency, incapacity or guardianship,
                as it
                may deem appropriate prior to distribution of the benefit. Any payment
                of
                a benefit shall be a payment for the account of the Participant and
                the
                Participant's Beneficiary, as the case may be, and shall be a complete
                discharge of any liability under the Plan for such payment
                amount.

            

    

    

    
      	
              11.14

            	
              Court
                Order.
                The Plan Administrator is authorized to make any payments directed
                by
                court order in any action in which the Plan or Plan Administrator
                has been
                named as a party.

            

    

     

    
      	
              11.15

            	
              Compliance
                with Code Section 409A.
                It is intended that the terms of this Plan and Participant rights
                hereunder meet applicable requirements of Code Section 409A so that
                a
                Participant is not deemed to be in constructive receipt of compensation
                or
                tax penalties with respect to Plan benefits under Section 409A until
                such
                time as benefits are distributed to the Participant in accordance
                with the
                terms of this Plan. For this purpose, the following terms
                apply:

            

    

    

    
      	 	
              (i)

            	
              The
                Plan will be administered in 2005 and 2006 in good faith compliance
                with
                Section 409A and any IRS guidance thereunder, and will be administered
                in
                2007 and thereafter in compliance with Section 409A and regulations
                thereunder. 

            

    

    

    
      	 	
              (ii)

            	
              Benefits
                and Participant rights thereto are intended to meet the requirements
                for
                deferred compensation under Section 409A. Participant and Company
                elections, if any, permitted hereunder must comply with applicable
                requirements of 409A. In particular, any distribution triggered by
                a
                Termination of Employment will occur only if the Termination constitutes
                a
                “separation from service” under Section 409A(a)(2)(A)(i) or results from a
                Disability under Section 409A(a)(2)(C), and if, at the time of such
                separation from service the Participant is a “specified employee” under
                Code Section 409A(a)(2)(B)(i) and a delay in distribution is required
                in
                order that the Participant will not be subject to a tax penalty under
                Section 409A, any

            

    

    distribution
      that otherwise would occur less than six months after such separation from
      service will instead occur six months after such separation from service
      (without affecting the timing of any subsequent distribution). The Company
      will
      have no authority to accelerate distributions except as may be permitted under
      Section 409A. Any other rights of a Participant or retained authority of the
      Company hereunder shall be automatically modified and limited to the extent
      necessary so that the Participant will not be deemed to be in constructive
      receipt of income relating to benefits prior to the distribution of the benefits
      and so that the Participant will not be subject to any penalty under Code
      Section 409A. 

    

    
      	
              11.15

            	
              Distribution
                in the Event of Taxation.
                If, for any reason, all or any portion of a Participant's benefit
                under
                this Plan becomes taxable to the Participant prior to receipt under
                Code
                Section 409A, a Participant may petition the Plan Administrator for
                a
                distribution of that portion of his or her benefit that has become
                taxable. Such petition shall be granted if the Company reasonably
                determines that the condition specified in the first sentence of
                this
                Section 11.15 has been met. Thereupon, a Participant's Employer shall
                distribute to the Participant immediately available funds in an amount
                equal to (but not exceeding) the taxable portion of his or her benefit
                (which amount shall not exceed the Present Value of the Participant's
                Vested SERP Benefit that then remains unpaid under the Plan). This
                authorization shall be subject to Proposed Treasury Regulation §
                1.409A-3(h)(2)(vi) and any successor regulation thereto. If the petition
                is granted, the tax liability distribution shall be made within 90
                days of
                the date when the Participant's petition is granted. Such a distribution
                shall affect and reduce the benefits to be paid under this Plan.
                

            

    

    

    IN
      WITNESS WHEREOF, Sierra Health Services, Inc. has signed this Plan document
      on
      September 20, 2006.

    

    

    
      	
              SIERRA
                HEALTH SERVICES, INC.

            
	
              A
                Nevada corporation

            
	 
	 
	
              By:
                /s/ Anthony M. Marlon, M.D.

            
	
              Name:
                Anthony M. Marlon, M.D.

            
	
              Title:
                Chief Executive Officer

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