Document:

grangercobbemplagree.htm

    
      
        
          

        

      

       Employment
        Agreement

       

      Granger
        Cobb

       

      August
        31, 2007

       

      This
        Employment Agreement (“Agreement”), effective as of the
        Effective Date (as defined below), sets forth the terms and conditions under
        which Emeritus Corporation, a Washington corporation,
        (“Emeritus”), and its subsidiaries (the
“Subsidiaries”), as designated from time to time by
        the Board
        of Directors of Emeritus (the “Board”), agree to employ Granger
        Cobb (“Employee”) to provide the services specified
        hereunder.  Emeritus and the Subsidiaries are sometimes collectively
        referred to herein as the “Company.”

       

      Each
        of
        Employee and Emeritus is sometimes referred to herein as a
“Party” and collectively referred to herein as the
“Parties.”

       

      RECITALS

       

      WHEREAS,
        Emeritus desires to employ Employee as President and Co-Chief Executive Officer
        of the Company and Employee desires to be employed as President and Co-Chief
        Executive Officer of the Company, pursuant to the terms and conditions set
        forth
        in this Agreement.

       

      NOW,
        THEREFORE, in consideration of the foregoing and the mutual covenants and
        agreements set forth herein, the Parties agree as follows:

       

      AGREEMENT

       

      
        	
                1.  

              	
                Service
                  Period.  Employee agrees to perform the duties of
                  the Company’s President and Co-Chief Executive Officer
                  (“CO-CEO”), for the period beginning on the Effective
                  Date and ending on December 31, 2011 or earlier termination pursuant
                  to
                  Section 7
                  below (the “Initial Service Period”); provided, however,
                  that, in the absence of termination, the Service Period shall be
                  extended
                  for successive 12-month terms (subject to the provisions of
                  Section 7
                  below) so long as neither Employee nor Emeritus gives written notice
                  of
                  non-renewal to the other Party not less than 90 days prior to the
                  then-current expiration date of the Service Period (each an
                  “Extension Period” and together with any and all other
                  Extension Periods, the “Extended Service
                  Period”).  The Initial Service Period and the Extended
                  Service Period, if any, are collectively referred to herein as
                  the
                  “Service Period.”  If such notice of
                  non-renewal is given, this Agreement shall expire at the end of
                  the
                  Initial Service Period or then-current Extension Period, as the
                  case may
                  be.  The last day of the Service Period, including any earlier
                  date of termination pursuant to Section 7,
                  is referred to as the “Termination
                  Date.”

              

      

       

      For
        purposes of this Agreement, "Effective Date" shall mean the
        date on which the merger of Boston Project Acquisition Corp., a wholly-owned
        subsidiary of the Company ("Merger Sub"), and Summerville
        Senior Living, Inc. ("Summerville"), pursuant to that certain
        Agreement and Plan of Merger dated as of March 29, 2007 among the Company,
        Merger Sub, Summerville and certain other parties, is effective.

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

       

      
        	
                2.  

              	
                Services.  During
                  the Service Period, Employee shall render services to the Company
                  consistent with the positions of President and Co-Chief Executive
                  Officer
                  of the Company and Employee shall devote substantially his whole
                  business
                  time and attention to performing Employee’s obligations hereunder with
                  regard to the business of the Company.  Notwithstanding the
                  foregoing, the Company hereby acknowledges and agrees that Employee
                  will
                  be permitted to manage his personal investments and real estate
                  transactions, during the Service Period to the extent that they
                  do not
                  materially interfere with Employee rendering services to the Company
                  as
                  described hereunder.

              

      

       

      
        	
                3.  

              	
                Basic
                  Service Compensation.  During the Initial Service
                  Period, the Company shall, in consideration for Employee’s services
                  hereunder, pay employee an annual base salary of $600,000, subject
                  to the
                  Company’s collection of all applicable withholding
                  taxes.  Employee shall be entitled to receive a cost of living
                  increase of no less than five percent (5%) per year annually and
                  for any
                  Extended Service Periods.  In addition, the Company shall
                  provide the following:

              

      

       

      
        	
                A.  

              	
                Company-paid
                  term life insurance on the Employee’s life in the amount of $5 million for
                  the benefit of Employee’s designated
                  beneficiaries.

              

      

       

      
        	
                B.  

              	
                Company-paid
                  long-term disability insurance providing disability pay at an annual
                  rate
                  equal to 75% of the Employee’s annual rate of base salary as in effect
                  from time to time under this
                  Agreement.

              

      

       

      
        	
                C.  

              	
                Health
                  insurance coverage for Employee and his dependants through one
                  of the
                  Company’s contracted plans.

              

      

       

      
        	
                D.  

              	
                Paid
                  vacation (based on the Employee’s annual rate of base salary in effect at
                  the time of payment) consistent with the Company’s policy for other senior
                  management employees.

              

      

       

      
        	
                E.  

              	
                In
                  addition, Employee is eligible to participate in any other Company
                  programs and/or benefits offered to senior management, including
                  the
                  executive non-qualified deferred compensation
                  plan.

              

      

       

      
        	
                4.  

              	
                Reimbursement
                  of Expenses.  The Company will reimburse Employee
                  for reasonable out-of-pocket expenses incurred on behalf of Employee
                  in
                  connection with the performance of services hereunder by Employee,
                  in each
                  case subject to and consistent with Company
                  policy.

              

      

       

      
        	
                5.  

              	
                Cash
                  Bonus.

              

      

       

      
        	
                A.  

              	
                Provided
                  Employee has rendered services to the Company through December 31 of
                  each year, and commencing in calendar year 2008, 3.5% of the annual
                  year
                  over year increase in EBITDA, capped at 75% of Employee’s annual base
                  salary in respect of such year’s service.  However, should
                  Employee services terminate prior to December 31 in any year by
                  reason of
                  his death or disability, then

              

      

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      Employee
        (or his estate) shall be entitled to a pro-rated amount to the time of
        termination of any bonus he would have otherwise earned for such year had
        he
        continued in the Company’s service through December 31 of that
        year.  Each bonus  payment under this Section 5.A
        shall be made no later than March 15 of the following year, unless it is
        not
        administratively feasible to do so, in which event the payment shall be made
        as
        soon as administratively practicable thereafter, but not later than the last
        day
        of such year. Notwithstanding any provision to the contrary, any grant of
        bonuses and any determination whether the bonus goal has been achieved, shall
        be
        made subject to the sole and absolute discretion of the Board.

       

      
        	
                B.  

              	
                Each
                  bonus payment under this Section 5
                  shall be subject to the Company’s collection of all applicable withholding
                  taxes.

              

      

       

      
        	
                6.  

              	
                Stock
                  Options.

              

      

       

      
        	
                A.  

              	
                Upon
                  the Effective Date (or the first business day following the Effective
                  Date, if such date is a Saturday, Sunday or holiday), the Company
                  shall
                  grant Employee stock options to purchase five hundred thousand
                  (500,000)
                  shares of Emeritus common stock under the Company’s employee stock option
                  plan (the “Employee Options”).   The Employee Options shall
                  have an exercise price per share equal to the closing selling price
                  per
                  share of Emeritus common stock on the date of grant and a maximum
                  term of
                  seven (7) years measured from such date.  The Employee Options
                  shall vest and become exercisable in accordance with the following
                  schedule:

              

      

       

      Grant
        Date:

       

      
        	
                (i)  

              	
                September
                  1,
                  2007                                                      20%

              

      

       

      
        	
                (ii)  

              	
                September
                  1,
                  2008:                                                      40%

              

      

       

      
        	
                (iii)  

              	
                September
                  1,
                  2009:                                                      60%

              

      

       

      
        	
                (iv)  

              	
                September
                  1,
                  2010:                                                      80%

              

      

       

      
        	
                (v)  

              	
                September
                  1,
                  2011:                                                      100%

              

      

       

      
        	
                B.  

              	
                The
                  shares of Emeritus common stock subject to the Employee Options
                  shall be
                  registered on a form S-8 registration statement (or any successor
                  form)
                  filed with the Securities and Exchange Commission and maintained
                  in effect
                  until the Employee Options are exercised or
                  terminate.

              

      

       

      
        	
                C.  

              	
                In
                  the event of a change of control (as defined below), the Employee
                  Options
                  immediately vest 100% and become exercisable for all of the option
                  shares.  For purposes of this Agreement, a Change in Control
                  shall be limited to the following events affecting the ownership
                  or
                  control of Emeritus:  (i) a merger or consolidation of
                  Emeritus in which securities possessing more than fifty
                  percent

              

      

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      (50%)
        or
        more of the total combined voting power or total combined fair market value
        of
        Emeritus’s outstanding securities are transferred to “person” (as defined in
        Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”) or “persons” different from the persons holding
        those securities immediately prior to such merger or consolidation,
        (ii) any “person” (as defined in Sections 13(d) and 14(d) of the
        Exchange Act) is permitted by the Board of Directors of Emeritus to become
        the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
        or indirectly, of either (a) 30% or more of the outstanding shares of
        common stock of Emeritus (other than persons that own in excess of 20% of
        the
        outstanding shares of common stock of Emeritus as of the Effective Date)
        or
        (b) 30% (by right to vote or grant or withhold any approval) of the
        outstanding securities of any other class or classes which individually or
        together have the power to elect a majority of the members of the Board of
        Directors of Emeritus, (iii) the Board of Directors of Emeritus determines
        to recommend the acceptance of any proposal set forth in a tender offer which
        indicates the intention on the part of that person to acquire, or acceptance
        of
        which would otherwise have the effect of acquiring control of Emeritus, or
        (iv) the sale, transfer or other disposition of all or substantially all of
        the assets of Emeritus.

       

      
        	
                D.  

              	
                Upon
                  Termination, Employee shall have a24-month period measured from
                  the
                  Termination Date to exercise all vested Employee
                  Options.

              

      

       

      
        	
                E.  

              	
                It
                  is the mutual intent of the Company and the Employee that Employee’s
                  participation in and entitlement to any monies from the Summerville
                  Profit
                  Participation Plan will cease as of the Effective
                  Date.

              

      

       

      
        	
                7.  

              	
                Termination.

              

      

       

      
        	
                A.  

              	
                Termination
                  in General.  The Service Period shall terminate on
                  the first to occur of (i) the scheduled expiration date of the
                  then-current Service Period, assuming notice of non-renewal by
                  one of the
                  Parties was provided in accordance with Section 1
                  above, (ii) Employee’s death or Disability (as defined below),
                  (iii) termination of the Service Period by Employee with or without
                  Good Reason (as defined below) or (iv) termination of the Service
                  Period by the Board with or without Cause (as defined
                  below).  Notwithstanding anything herein to the contrary, in the
                  event the Service Period terminates for any reason, Employee will
                  be
                  entitled to receive the Accrued Obligations (as defined
                  below).

              

      

       

      
        	
                B.  

              	
                Termination
                  by the Company for Cause.  If the Company
                  terminates the Service Period for Cause, Employee will be entitled
                  to
                  receive (i) all of the accrued but unpaid compensation pursuant to
                  Section 3
                  hereof as of the date of such termination, (ii) all of Employee’s
                  unreimbursed expenses as of the date of such termination, incurred
                  in
                  accordance with Section 4
                  hereof,  (iii) all earned but unpaid Cash Bonus pursuant to
                  Section 5
                  hereof and (iv) all Employee Options vested in accordance with
                  the
                  provisions of Section 6
                  hereof.  The amounts and the provisions specified in clause (i)
                  through (iv) are collectively

              

      

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      referred
        to herein as the “Accrued Obligations”.  The payments
        under clauses (i) through (iii) shall be made to Employee on the Termination
        Date or as soon as administratively practicable thereafter, but in no event
        later than the close of the calendar year in which such Termination Date
        occurs
        or (if later) the 15th day of the third calendar month following such
        Termination Date.

       

      
        	
                C.  

              	
                Termination
                  by Employee Without Good Reason.  If Employee
                  terminates the Service Period pursuant to Section 1
                  or this Section 7
                  for reasons other than Good Reason, Employee will be entitled to
                  receive
                  payment of the Accrued Obligations on the Termination Date or as
                  soon as
                  administratively practicable thereafter, but in no event later
                  than the
                  close of the calendar year in which such Termination Date occurs
                  or (if
                  later) the 15th day of the third calendar month following such
                  Termination
                  Date.

              

      

       

      
        	
                D.  

              	
                Termination
                  by the Company for Reasons Other than Cause; Termination by Employee
                  for
                  Good Reason.  If the Service Period is terminated
                  by the Company pursuant to Section 1
                  or this Section 7
                  for reasons other than for Cause, or by Employee for Good Reason,
                  Employee
                  will be entitled to (i) receive the Accrued Obligations,
                  (ii) receive a lump sum payment equal to the lesser of (a) $2
                  million and (b) the amount of Employee’s then current annual base
                  salary (prorated for partial years) otherwise payable through December
                  31,
                  2011 or the end of the current Extension Period, if applicable,
                  and
                  (iii) receive 100% vesting in the Employee Options.  Such
                  payments under clauses (i) and (ii) shall be made to Employee on
                  the
                  Termination Date or as soon as administratively practicable thereafter,
                  but in no event later than the close of the calendar year in which
                  such
                  Termination Date occurs or (if later) the 15th day of the third
                  calendar
                  month following such Termination
                  Date.

              

      

       

      
        	
                E.  

              	
                Termination
                  as a Consequence of Employee’s Death or
                  Disability.  If the Service Period is terminated as
                  a consequence of Employee’s Death or Disability (as defined below),
                  Employee will be entitled to (i) receive the Accrued Obligations and
                  (ii) receive a lump sum payment equal to the amount of Employee’s
                  then current annual base salary.  The payments under clauses (i)
                  and (ii) shall be made to Employee (or his estate) on the Termination
                  Date
                  or as soon as administratively practicable thereafter, but in no
                  event
                  later than the close of the calendar year in which such Termination
                  Date
                  occurs or (if later) the 15th day of the third calendar month following
                  such Termination Date.

              

      

       

      
        	
                F.  

              	
                Definitions.  For
                  purposes of this Agreement:

              

      

       

      
        	
                (i)  

              	
                “Cause”
                  shall mean:

              

      

       

      
        	
                (a)  

              	
                Employee’s
                  willful and repeated failure to comply with the lawful written
                  directives
                  of the Board;

              

      

       

      
        	
                (b)  

              	
                any
                  knowing, willful or intentional act of disloyalty or misconduct
                  by
                  Employee that is materially injurious to the
                  property,

              

      

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      operations,
        business or reputation of the Company, or Employee’s conviction for, or plea of
        guilty or nolo contendere to, a felony or for or of a crime involving moral
        turpitude; or

       

      
        	
                (c)  

              	
                Employee’s
                  material breach of the Agreement, provided that the Company has
                  provided
                  Employee with written notice of such material breach and Employee
                  shall
                  have failed to cure 30 business days after receipt by Employee
                  of such
                  written notice.

              

      

       

      A
        determination that “Cause” exists shall be made by the Board, acting reasonably
        and in good faith; provided, however, that Employee has not waived his right
        to
        contest any such determination by the Company in accordance with the provisions
        of Section 16
        below.

       

      
        	
                (ii)  

              	
                “Good
                  Reason” shall mean:

              

      

       

      
        	
                (a)  

              	
                any
                  reduction in (without Employee’s prior written consent), or failure by the
                  Company to timely pay the amounts specified in Sections 3,
                  4
                  or 5
                  hereof or timely effect the grant of the Employee Options in accordance
                  with Section 6
                  hereof;

              

      

       

      
        	
                (b)  

              	
                any
                  material change in Employee’s position and/or title (without Employee’s
                  prior written consent) or material diminution in Employee’s duties,
                  responsibilities and/or authority (without Employee’s prior written
                  consent);

              

      

       

      
        	
                (c)  

              	
                the
                  occurrence of any of the following:  (i) a merger or
                  consolidation of Emeritus into or with any other entity, but only
                  if
                  Emeritus or an entity, 50% or more of the total voting power of
                  which is
                  owned by Emeritus or its affiliates, is not the surviving entity
                  in such
                  merger or consolidation, (ii) a transfer to a third party which vests
                  in such third party 50% or more of the total voting power of all
                  classes
                  of stock of Emeritus, (iii) any third party acquires more than 50% of
                  the total number of shares of preferred stock of the Company that
                  are
                  issued and outstanding on the Effective Date, (iv) sale, transfer or
                  other disposition of all or substantially all of the assets of
                  Emeritus
                  (each a “Restructuring Event”), unless the entity which
                  survives the Restructuring Event shall assume and agree to perform
                  the
                  obligations of Emeritus hereunder pursuant to a written instrument
                  acceptable to Employee, at Employee’s sole discretion or (v) during
                  any period of 12 consecutive months, individuals who constitute
                  the Board
                  at the beginning of such period, together with any new directors
                  whose
                  election by the Board or whose nomination for election was previously
                  so
                  approved (collectively, the “Directors”), cease for any
                  reason to constitute a majority of the Board then in
                  office.  Notwithstanding any of the foregoing, the merger
                  between the

              

      

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      Company
        and Summerville shall not constitute a Restructuring Event.

       

      
        	
                (d)  

              	
                any
                  material breach by the Company of this Agreement, provided that
                  Employee
                  has provided the Company with written notice of such material breach
                  and
                  the Company has failed to cure such material breach, to Employee’s
                  reasonable satisfaction, within 30 business days after receipt
                  by the
                  Company of such written notice; or

              

      

       

      
        	
                (e)  

              	
                any
                  requirement by the Board that Employee relocate his principal residence
                  or
                  if the Company relocates its headquarters more than 20 miles from
                  its
                  location on the date hereof (without Employee’s prior written
                  consent).

              

      

       

      
        	
                (iii)  

              	
                “Disability”
                  shall mean Employee’s mental or physical disability for such
                  period of time and under such circumstances as entitle Employee
                  to receive
                  disability benefits under the terms of the long-term disability
                  insurance
                  policy then maintained by the Company.  If the Company does not
                  have a long-term disability insurance policy, Disability shall
                  mean
                  Employee shall be unable to perform substantially all of his duties
                  under
                  this Agreement due to accident or disability or physical or mental
                  illness
                  for a period in excess of 90 or more consecutive working days in
                  any
                  12-month period, or 120 or more total working days in any 12-month
                  period.

              

      

       

      
        	
                8.  

              	
                Confidential
                  Information.  Employee acknowledges that
                  information obtained by him during the Service Period concerning
                  the
                  business or affairs of the Company (“Confidential
                  Information”) is the property of the Company.  Employee
                  shall be prohibited at any time during or after the Service Period,
                  without the prior written consent of the Board, from disclosing
                  any
                  Confidential Information to any unauthorized person or use for
                  Employee’s
                  own account or for the account of any person other than the Company,
                  except (a) to the extent necessary to comply with applicable laws,
                  (b) to the extent necessary for Employee to render services hereunder
                  or (c) to the extent that such information becomes generally known to
                  and available for use by the public other than as a result of Employee’s
                  acts or failure to act.  Upon termination of the Service Period
                  or at the request of the Board at any time, Employee agrees to
                  deliver to
                  the Company all documents containing Confidential Information or
                  relating
                  to the business or affairs of the Company that Employee may then
                  possess
                  or have under his control.

              

      

       

      
        	
                9.  

              	
                Special
                  Tax Gross-Up.

              

      

       

      
        	
                A.  

              	
                In
                  the event that (i) one or more of the payments or benefits which
                  the
                  Employee becomes entitled under this Agreement are deemed, in the
                  opinion
                  of the Independent Auditors or by the Internal Revenue Service,
                  to
                  constitute a parachute payment under Section 280(G) of the Internal
                  Revenue Code (the “Code”) and (ii) it is determined that the aggregate
                  present value (as determined in accordance with Code Section 280G
                  and the
                  Treasury Regulations thereunder)

              

      

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      of
        any
        such parachute payment exceeds the maximum amount which the Employee can
        receive
        without the imposition of an excise tax under Code Section 4999 (the
“Maximum Permissible Parachute Amount”), then the Employee shall be entitled to
        receive from the Company an additional payment (the “Gross-Up Payment”) in a
        dollar amount determined pursuant to the following formula:

       

      X  =  Y  ÷  [1
        - (A + B + C)], where

       

      
        	
                 

              	
                X
                  is the total dollar payment of the Gross-up
                  Payment.

              

      

       

      
        	
                 

              	
                Y
                  is the total excise tax, together with all applicable interest
                  and
                  penalties (collectively, the “Excise Tax”), imposed on the Employee
                  pursuant to Code Section 4999 (or any successor provision) with
                  respect to
                  the excess parachute payment attributable to  one or more
                  payments provided the Employee under this Agreement or any other
                  agreement
                  with the Company.

              

      

       

      
        	
                 

              	
                A
                  is the Excise Tax rate in effect under Code Section 4999 for such
                  excess
                  parachute payment,

              

      

       

      
        	
                 

              	
                B
                  is the highest combined marginal federal income and applicable
                  state
                  income tax rate in effect for the Employee for the calendar year
                  in which
                  the Gross-Up Payment is made, determined after taking into account
                  (i) the
                  deductibility of state income taxes against federal income taxes
                  to the
                  extent actually allowable for that calendar year and (ii) any increase
                  in
                  effective tax rate due to the loss of itemized deductions by reason
                  of
                  applicable phase-out limitations,
                  and

              

      

       

      
        	
                 

              	
                C
                  is the applicable Hospital Insurance (Medicare) Tax Rate in effect
                  for the
                  Executive for the calendar year in which the Gross-Up Payment is
                  made.

              

      

       

      
        	
                 

              	
                For
                  purposes of this Section 9,
                  the Independent Auditors shall mean a  nationally-recognized
                  registered public accounting firm mutually acceptable to both the
                  Company
                  and the Employee, other than the firm serving as the independent
                  audit
                  firm for the Company or any other entity involved in the change
                  in control
                  transaction triggering the parachute payment under Code Section
                  280G.

              

      

       

      
        	
                B.  

              	
                All
                  determinations required to be made under this Section 9
                  shall be made by the Independent Auditors in accordance with the
                  following
                  procedures:

              

      

       

      
        	
                (i)  

              	
                Within
                  ten (10) business days after each receipt of written notice from
                  the
                  Company on or the Employee that a parachute payment under Code
                  Section
                  280G has or is to be made, then the Independent Auditors
                  shall

              

      

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      provide
        both the Employee and the Company with a written determination of such parachute
        payment, together with detailed supporting calculations with respect to the
        Gross-Up Payment to which the Executive is entitled by reason of that parachute
        payment.  The Company shall pay the resulting Gross-Up Payment to the
        Employee within three (3) business days after receipt of such determination
        or
        (if later) contemporaneously with the payment or benefit triggering such
        Gross-Up Payment.

       

      
        	
                (ii)  

              	
                In
                  the event the Treasury Regulations under Code Section 280G (or
                  applicable
                  judicial decisions) specifically address the status of any payment
                  or
                  benefit under Code Section 280G or the method of valuation therefor,
                  the
                  characterization afforded to such payment by those regulations
                  (or such
                  decisions) shall, together with the applicable valuation methodology,
                  be
                  controlling.  All other determinations by the Independent
                  Auditors shall be made on the basis of "substantial authority"
                  (within the
                  meaning of Section 6662 of the
                  Code).

              

      

       

      
        	
                (iii)  

              	
                The
                  Company and the Employee shall each provide the Independent Auditors
                  with
                  access to and copies of any books, records and documents in their
                  possession which may be reasonably requested by the Independent
                  Auditors
                  and shall otherwise cooperate with the Independent Auditors in
                  connection
                  with the preparation and issuance of the determinations contemplated
                  by
                  this Section 9.

              

      

       

      
        	
                (iv)  

              	
                All
                  fees and expenses of the Independent Auditors and the appraisers
                  shall be
                  borne solely by the Company, and to the extent those fees or expenses
                  are
                  treated as a parachute payment under Code Section 280G, they shall
                  be
                  taken into account in the calculation of the Gross-Up Payment to
                  which the
                  Employee is entitled under this Section 9.

              

      

       

      
        	
                C.  

              	
                The
                  Employee shall provide written notification to the Company of any
                  claim
                  made by the Internal Revenue Service which would, if successful,
                  require
                  the payment by the Company of an additional Gross-Up
                  Payment.  Such notification shall be given within ten (10)
                  business days after the Employee is informed in writing of such
                  claim and
                  shall apprise the Company of the nature of such claim and the date
                  on
                  which such claim is requested to be paid.  The Employee shall
                  not pay such claim prior to the expiration of the thirty (30)-day
                  period
                  following the date on which such notice is given to the Company
                  (or such
                  shorter period ending on the date that any payment of taxes, interest
                  and/or penalties with respect to such claim is
                  due).   Prior to the expiration of such thirty (30)-day or
                  shorter period, the Company shall ether (i) make the additional
                  Gross-Up
                  Payment to the Employee attributable to the Internal Revenue Service
                  claim
                  or (ii) provide written notice to the Employee that the Company
                  shall
                  contest the claim on the Employee’s behalf.  In the event, the
                  Company provides the Employee with such written notice,  the
                  Employee shall:

              

      

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      

       

      
        	
                (i)  

              	
                provide
                  the Company with any information reasonably requested by the Company
                  relating to such claim;

              

      

       

      
        	
                (ii)  

              	
                take
                  such action in connection with contesting such claim as the Company
                  may
                  reasonably request in writing from time to time, including (without
                  limitation) accepting legal representation with respect to such
                  claim by
                  an attorney reasonably selected by the Company and reasonably satisfactory
                  to the Employee, with the fees and expenses of such attorney to
                  be the
                  sole responsibility of the Company without any tax implications
                  to the
                  Employee in accordance with the same tax indemnity/gross-up arrangement
                  as
                  in effect under subparagraph (iv)
                  below;

              

      

       

      
        	
                (iii)  

              	
                cooperate
                  with the Company in good faith in order to effectively contest
                  such claim;
                  and

              

      

       

      
        	
                (iv)  

              	
                permit
                  the Company to participate in any proceedings relating to such
                  claim;
                  provided, however, that the Company shall bear
                  and pay directly all additional Excise Taxes imposed upon the Employee
                  and
                  all costs, legal fees and other expenses (including additional
                  interest
                  and penalties) incurred in connection with such contest and shall
                  indemnify the Employee for and hold him harmless from, on an after-tax
                  basis, any additional Excise Tax (including interest and penalties)
                  imposed upon the Employee and any Excise Tax or income or
                  employment tax (including interest and penalties)
                  attributable to the Company’s payment of that additional Excise Tax on
                  Employee’s behalf or imposed as a result of such
                  representation and payment of all related costs, legal fees and
                  expenses.  The amounts owed to the Employee by reason of the
                  foregoing shall be paid to him or on his behalf as they become
                  due and
                  payable. Without limiting the foregoing provisions
                  of this subparagraph (iv), the Company shall control all proceedings
                  taken
                  in connection with such contest and, at its sole option, may pursue
                  or
                  forgo any and all administrative appeals, proceedings, hearings
                  and
                  conferences with the taxing authority in respect of such claim
                  and may, at
                  the Company’s sole option, either direct the Employee to pay the tax
                  claimed and sue for a refund or contest the claim in any permissible
                  manner, and the Employee shall prosecute such contest to a determination
                  before any administrative tribunal, in a court of initial jurisdiction
                  and
                  in one or more appellate courts, as the Company shall determine;
                  provided, however, that should the Company
                  direct the Employee to pay such claim and sue for a refund, the
                  Company
                  shall advance the amount of such payment to the Employee, on an
                  interest-free basis, and shall indemnify the Employee for and hold
                  him
                  harmless from, on an after-tax basis, any Excise Tax or income
                  or
                  employment tax (including interest or penalties) imposed with respect
                  to
                  such advance or with respect to any imputed income with respect
                  to such
                  advance or any income resulting from the Company’s forgiveness of such
                  advance;

              

      

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      provided,
        further, that the Company’s control of the contest shall be
        limited to issues with respect to which a Gross-Up Payment would be payable
        hereunder, and the Employee shall be entitled to settle or contest, as the
        case
        may be, any other issue raised by the Internal Revenue Service or any other
        taxing authority.

       

      
        	
                10.  

              	
                D&O
                  Insurance.  The Company will
                  maintain at all times during the Service Period officer and director
                  liability insurance coverage for Employee, in the same aggregate
                  amount
                  and under the same terms as are maintained for the Company’s senior
                  officers and directors, and will otherwise indemnify Employee and
                  hold him
                  harmless (except for Employee’s gross negligence and/or willful
                  misconduct) to the fullest extent permitted by Delaware law for
                  all losses
                  and expenses incurred by them as a result of any suits or proceedings
                  relating to Employee’s rendering services to the Company
                  hereunder.

              

      

       

      
        	
                11.  

              	
                Section
                  409A. Certain payments contemplated by
                  this
                  Agreement may be “deferred compensation” for purposes of Section 409A of
                  the Code.  Accordingly, the following provisions shall be in
                  effect for purposes of avoiding or mitigating any adverse tax consequences
                  to the Employee under Code Section
                  409A.

              

      

       

      
        	
                A.  

              	
                It
                  is the intent of the parties that the provisions of this Agreement
                  comply
                  with all applicable requirements of Code Section
                  409A.  Accordingly, to the extent any provisions of this
                  Agreement would otherwise contravene one or more requirements or
                  limitations of Code Section 409A, then the Company and the Employee
                  shall,
                  within the remedial amendment period provided under the regulations
                  issued
                  under Code Section 409A, effect through mutual agreement the appropriate
                  amendments to those provisions which are necessary in order to
                  bring the
                  provisions of this Agreement into compliance with Section
                  409A.

              

      

       

      
        	
                B.  

              	
                Notwithstanding
                  any provision to the contrary in this Agreement, no payments or
                  benefits
                  to which the Employee becomes entitled under Section 7
                  of this Agreement shall be made or paid to the Employee prior to
                  the
                  earlier of (i) the expiration of the six
                  (6)-month period measured from the date of his “separation from service”
                  with the Company (as such term is defined in Treasury Regulations
                  issued
                  under Code Section 409A) or (ii) the date of his death, if  the
                  Employee is deemed at the time of such separation from service
                  a “key
                  employee” within the meaning of that term under Code Section 416(i) and
                  such delayed commencement is otherwise required in order to avoid
                  a
                  prohibited distribution under Code Section 409A(a)(2).  Upon the
                  expiration of the applicable Code Section 409A(a)(2) deferral period,
                  all payments deferred pursuant to this subsection 11.B
                  shall be paid in a lump sum to the Employee,  and any remaining
                  payments due under this Agreement shall be paid in accordance with
                  the
                  normal  payment dates specified for them
                  herein.

              

      

       

      
        	
                C.  

              	
                Should
                  the Employee comply with the provisions of subsections 11.A
                  and 11.B
                  above but nevertheless incur the  20% penalty tax imposed under
                  Section 409A with respect to one or more payments or benefits provided
                  to
                  him under this Agreement, then the Employee will be entitled to
                  receive an
                  additional payment

              

      

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      (the
        “409A Gross-Up Payment”) in an amount such that after payment by the Employee of
        all federal, state and local income and employment taxes (including any interest
        or penalties imposed with respect to such taxes), including any tax imposed
        upon
        the 409A Gross-Up Payment, the Employee retains an amount of the 409A Gross-Up
        Payment equal to the 20% tax imposed upon the Employee’s deferred
        compensation.  

       

      
        	
                12.  

              	
                No
                  Mitigation Duty.  The Company shall not be entitled
                  to set off any of the following amounts against the payments or
                  benefits
                  to which the Employee may become entitled under this Agreement:
                  (i) any
                  amounts which the Employee may subsequently earn through other
                  employment
                  or service following his Termination Date with the Company or (ii)
                  any
                  amounts which the Employee might have potentially earned in other
                  employment or service had he sought such other employment or
                  service.

              

      

       

      
        	
                13.  

              	
                Prior
                  Agreements.  This Agreement
                  embodies the complete agreement and understanding between the Parties
                  and
                  supersedes any and all prior agreements, arrangements or understandings,
                  written or oral, between Parties.  Any agreements and
                  understandings between Employee and Summerville pursuant to Employee’s
                  employment contract with that company (“Summerville Contract”) are hereby
                  considered null and void as of the Effective Date.  Employee
                  understands and agrees he shall not be entitled to any further
                  benefits
                  pursuant to the Summerville Contract as of the Effective
                  Date.  This Agreement may be amended or modified, and the terms
                  hereof may be waived, only in writing duly executed and delivered
                  by
                  Employee and Emeritus.

              

      

       

      
        	
                14.  

              	
                Survival.  The
                  provisions of Sections 5,
                  6,
                  7,
                  8,
                  9,
                  10,
                  11,
                  12,
                  13,
                  14,
                  15,
                  16,
                  17,
                  18
                  and 19
                  will survive any termination of this
                  Agreement.

              

      

       

      
        	
                15.  

              	
                Governing
                  Law.  All questions concerning the
                  construction, validity and interpretation of this Agreement shall
                  be
                  governed by the laws of the State of
                  Washington.

              

      

       

      
        	
                16.  

              	
                Notices.  Any
                  notices, consents or other communication required hereunder shall
                  be in
                  writing and shall be sufficiently given only if sent by overnight
                  courier
                  (such as Federal Express) or by registered or certified mail (return
                  receipt requested), postage prepaid, or by facsimile or by e-mail
                  addressed as follows (or to such other address or addresses as
                  may
                  hereafter be furnished in writing by notices similarly given by
                  one Party
                  to the other):

              

      

       

      
        To
          Employee:

        
 

        Granger
          Cobb

        42
          Tappan
          Lane

        Orinda,
          CA  94563

        E-mail:  granger.cobb@sslusa.com

      

      

      

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      

      

      

      To
        the Company or the Board:

      

      EMERITUS
        CORPORATION

      3131
        Elliott Avenue, Suite 500

      Seattle,
        Washington 98121

      Attn:
        Daniel R. Baty

      

      
        	
                17.  

              	
                Counterparts.  This
                  Agreement may be executed in two or more original counterparts,
                  each of
                  which shall constitute one and the same instrument.  Only one
                  such counterpart signed by the Party against whom enforceability
                  is sought
                  needs to be produced to evidence the existence of the
                  Agreement.  Signatures may be exchanged by telecopy, with
                  original signatures to follow.  Each party to this Agreement
                  agrees to be bound by its/his own telecopied signature and to accept
                  the
                  telecopied signature of the other Party to this
                  Agreement.

              

      

       

      
        	
                18.  

              	
                Severability.  The
                  various provisions of the Agreement are severable from each other
                  and from
                  the rest of this Agreement, and, in the event any part of this
                  Agreement
                  is held to be invalid or unenforceable by a court or otherwise,
                  the
                  remainder of this Agreement shall be fully effective, operative
                  and
                  enforceable.

              

      

       

      
        	
                19.  

              	
                Disputes;
                  Attorneys’ Fees.  Except as
                  otherwise provided in the last sentence hereof, the Parties agree
                  that any
                  claim, controversy or dispute arising out of, in connection with,
                  related
                  to or regarding the subject matter hereof (“Dispute(s)”)
                  shall be resolved by arbitration (“Arbitration”)
                  conducted by a single arbitrator engaged in the practice of law
                  (the
                  “Arbitrator”) under the Employment Arbitration Rules (the
                  “EAR”) of the American Arbitration Association
                  (“AAA”).  The Federal Arbitration Act, 9
                  U.S.C., Sections 1-16, not state law, shall govern all Arbitration
                  proceedings instituted hereunder.  The Arbitrator’s award or
                  ruling with respect to any Dispute shall be final, binding and
                  nonappealable and may be entered in any court having jurisdiction
                  thereof.  Each Party shall bear its own costs and attorneys’
                  fees of the Arbitration proceeding; provided, however, that, in
                  addition
                  to any damages awarded by the Arbitrator, the substantially prevailing
                  Party in the Dispute (as determined by the Arbitrator) shall be
                  entitled
                  to receive from the other Party its/his reasonable attorneys’ fees and
                  out-of-pocket costs.  The laws of the State of Washington shall
                  govern the construction and interpretation of this Agreement, and
                  any
                  Arbitration hereunder shall be conducted in Seattle,
                  Washington.  It is expressly agreed that a Party may seek
                  injunctive relief in the case of any dispute in Arbitration or
                  in an
                  appropriate court of law or equity, at the sole discretion of such
                  Party.

              

      

       

      
        	
                20.  

              	
                Assignment.  Except
                  as herein expressly provided, the respective rights and obligations
                  of the
                  Employee and the Company under this Agreement shall not be assignable
                  by
                  either party without the written consent of the other party and
                  shall,
                  subject to the foregoing, enure to the benefit of and be binding
                  upon the
                  Employee and the Company and their permitted successors or
                  assigns.  Nothing herein expressed or implied is intended
                  to

              

      

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      confer
        on
        any person other than the parties hereto any rights, remedies, obligations
        or
        liabilities under or by reason of this Agreement.

       

      
        	
                21.  

              	
                Waiver.  No
                  provision hereof shall be deemed waived and no breach excused,
                  unless such
                  waiver or consent excusing the breach is made in writing and signed
                  by the
                  party to be charged with such waiver or consent. A waiver by a
                  party of
                  any provision of this Agreement shall not be construed as a waiver
                  of a
                  further breach of the same
                  provision.

              

      

       

      

       

      [Signature
        Pages to Follow]

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      
        IN
          WITNESS WHEREOF, the parties have executed this Agreement on the dates
          set forth
          by their respective signatures:

         

        Emeritus:

         

        

         

        EMERITUS
          CORPORATION

         

        

         

        

         

        By:           /s/  Daniel
          R.
          Baty                                                                

         

        Name:      Daniel
          R. Baty

         

        Title:        Chairman
          and Co-CEO

         

        Employee:

         

        

         

        

         

        By:           /s/  Granger
          Cobb                                                                

         

        Granger
          Cobb

         

      

      

      

      
        
           

        

        
          15ex101.htm

    SUBSCRIPTION
      AGREEMENT

     

    SUBSCRIPTION
      AGREEMENT (this “Agreement”) made as of the last date set forth on the signature
      page hereof between Platinum Studios, Inc., a California corporation (the
“Company”), and the undersigned (the “Subscriber”).

     

    W
      I T N E
      S S E T H:

    WHEREAS,
      the Company is conducting a private offering (the “Offering”) consisting of up
      to 50,000,000 shares (the “Shares”) of common stock, $.0001 par value per share
      (“Common Stock”), pursuant to Section 4(2) of the Securities Act of 1933, as
      amended (the “Securities Act”) and Rule 506 promulgated thereunder;
      and

     

    WHEREAS,
      the Subscriber desires to purchase that number of Shares set forth on the
      signature page hereof on the terms and conditions hereinafter set
      forth.

     

    NOW,
      THEREFORE, in consideration of the premises and the mutual representations
      and
      covenants hereinafter set forth, the parties hereto do hereby agree as
      follows:

     

    
      	
              I.  

            	
              SUBSCRIPTION
                FOR SHARES AND REPRESENTATIONS BY
                SUBSCRIBER

            

    

     

    1.1  Subject
      to the terms and conditions hereinafter set forth and in the Confidential
      Private Placement Memorandum dated October 12, 2006 (such memorandum, together
      with all amendments thereof and supplements and exhibits thereto, the
“Memorandum”), the Subscriber hereby irrevocably subscribes for and agrees to
      purchase from the Company such number of Shares, and the Company agrees to
      sell
      to the Subscriber as is set forth on the signature page hereof, at a per share
      price equal to $0.10 per Share.  The purchase price is payable by wire
      transfer of immediately available funds to:

     

    Wire
      instructions:

    

    Account
      Name:      Platinum Studios, Inc.

    

    Account
      #              112642196   

    

    Routing
      #               122016066    

    

    Bank:                      City
      National Bank 

    

    Address:                 400
      N. Roxbury Dr.

                                                                
      Beverly Hills, CA  90210

    

    1.2  The
      Subscriber recognizes that the purchase of the Shares involves a high degree
      of
      risk including, but not limited to, the following: (a) the Company remains
      a
      development stage business with limited operating history and requires
      substantial funds in addition to the proceeds of the Offering; (b) an investment
      in the Company is highly speculative, and only investors who can afford the
      loss
      of their entire investment should consider investing in the Company and the
      Shares; (c) the Subscriber may not be able to liquidate its investment; (d)
      transferability of the Shares is extremely limited; (e) in the event of a
      disposition, the Subscriber could sustain the loss of its entire investment;
      (f)
      the Company has not paid any dividends since its inception and does not
      anticipate paying any dividends in the foreseeable future; and (g) the Company
      may issue additional securities in the future which have rights and preferences
      that are senior to those of the Common Stock.  Without limiting the
      generality of the representations set forth in Section 1.5 below, the Subscriber
      represents that the Subscriber has carefully reviewed the section of the
      Memorandum captioned “Risk Factors.”

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    1.3  The
      Subscriber represents that the Subscriber is an “accredited investor” as such
      term is defined in Rule 501 of Regulation D (“Regulation D”) promulgated under
      the Securities Act, as indicated by the Subscriber’s responses to the questions
      contained in Article VII hereof, and that the Subscriber is able to bear the
      economic risk of an investment in the Shares.

     

    1.4  The
      Subscriber hereby acknowledges and represents that (a) the Subscriber has
      knowledge and experience in business and financial matters, prior investment
      experience, including investment in securities that are non-listed, unregistered
      and/or not traded on a national securities exchange nor on the National
      Association of Securities Dealers, Inc. (the “NASD”) automated quotation system
      (“NASDAQ”), or the Subscriber has employed the services of a “purchaser
      representative” (as defined in Rule 501 of Regulation D), attorney and/or
      accountant to read all of the documents furnished or made available by the
      Company both to the Subscriber and to all other prospective investors in the
      Shares to evaluate the merits and risks of such an investment on the
      Subscriber’s behalf; (b) the Subscriber recognizes the highly speculative nature
      of this investment; and (c) the Subscriber is able to bear the economic risk
      that the Subscriber hereby assumes.

     

    1.5  The
      Subscriber hereby acknowledges receipt and careful review of this Agreement,
      the
      Memorandum (which includes the Risk Factors), including all exhibits thereto,
      and any documents which may have been made available upon request as reflected
      therein (collectively referred to as the “Offering Materials”) and hereby
      represents that the Subscriber has been furnished by the Company during the
      course of the Offering with all information regarding the Company, the terms
      and
      conditions of the Offering and any additional information that the Subscriber
      has requested or desired to know, and has been afforded the opportunity to
      ask
      questions of and receive answers from duly authorized officers or other
      representatives of the Company concerning the Company and the terms and
      conditions of the Offering.

     

    1.6  (a)           In
      making the decision to invest in the Shares the Subscriber has relied solely
      upon the information provided by the Company in the Offering
      Materials.  To the extent necessary, the Subscriber has retained, at
      its own expense, and relied upon appropriate professional advice regarding
      the
      investment, tax and legal merits and consequences of this Agreement and the
      purchase of the Shares hereunder.  The Subscriber disclaims reliance
      on any statements made or information provided by any person or entity in the
      course of Subscriber’s consideration of an investment in the Shares other than
      the Offering Materials.

     

    (b)           The
      Subscriber represents that (i) the Subscriber was contacted regarding the sale
      of the Shares by the Company (or an authorized agent or representative thereof)
      with whom the Subscriber had a prior substantial pre-existing relationship
      and
      (ii) no Shares were offered or sold to it by means of any form of general
      solicitation or general advertising, and in connection therewith, the Subscriber
      did not (A) receive or review any advertisement, article, notice or other
      communication published in a newspaper or magazine or similar media or broadcast
      over television or radio, whether closed circuit, or generally available; or
      (B)
      attend any seminar meeting or industry investor conference whose attendees
      were
      invited by any general solicitation or general advertising.

     

    1.7  The
      Subscriber hereby represents that the Subscriber, either by reason of the
      Subscriber’s business or financial experience or the business or financial
      experience of the Subscriber’s professional advisors (who are unaffiliated with
      and not compensated by the Company or any affiliate or selling agent of the
      Company, directly or indirectly), has the capacity to protect the Subscriber’s
      own interests in connection with the transaction contemplated
      hereby.

     

    1.8  The
      Subscriber hereby acknowledges that the Offering has not been reviewed by the
      United States Securities and Exchange Commission (the “SEC”) nor any state
      regulatory authority since the Offering is intended to be exempt from the
      registration requirements of Section 5 of the Securities Act, pursuant to
      Regulation D.  The Subscriber understands that the Shares have not
      been registered under the Securities Act or under any state securities or “blue
      sky” laws and agrees not to sell, pledge, assign or otherwise transfer or
      dispose of the Shares unless they are registered under the Securities Act and
      under any applicable state securities or “blue sky” laws or unless an exemption
      from such registration is available.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    1.9  The
      Subscriber understands that the Shares have not been registered under the
      Securities Act by reason of a claimed exemption under the provisions of the
      Securities Act that depends, in part, upon the Subscriber’s investment
      intention.  In this connection, the Subscriber hereby represents that
      the Subscriber is purchasing the Shares for the Subscriber’s own account for
      investment and not with a view toward the resale or distribution to
      others.  The Subscriber, if an entity, further represents that it was
      not formed for the purpose of purchasing the Shares.

     

    1.10  The
      Subscriber understands that the Common Stock is not currently traded or quoted
      on any market and that there is no market for the Common Stock.  The
      Subscriber understands that even if a public market develops for the Common
      Stock, Rule 144 (“Rule 144”) promulgated under the Securities Act requires for
      non-affiliates, among other conditions, a one-year holding period prior to
      the
      resale (in limited amounts) of securities acquired in a non-public offering
      without having to satisfy the registration requirements under the Securities
      Act.  The Subscriber understands and hereby acknowledges that the
      Company is under no obligation to register any of the Shares under the
      Securities Act or any state securities or “blue sky” laws other than as set
      forth in Article V.

     

    1.11  The
      Subscriber consents to the placement of a legend on any certificate or other
      document evidencing the Shares that such Shares have not been registered under
      the Securities Act or any state securities or “blue sky” laws and setting forth
      or referring to the restrictions on transferability and sale thereof contained
      in this Agreement.  The Subscriber is aware that the Company will make
      a notation in its appropriate records with respect to the restrictions on the
      transferability of such Shares. The legend to be placed on each certificate
      shall be in form substantially similar to the following:

     

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended and may not be sold, transferred, pledged,
      hypothecated or otherwise disposed of in the absence of (i) an effective
      registration statement for such securities under said act or (ii) an opinion
      of
      company counsel that such registration is not required.”

    

    1.12  The
      Subscriber understands that the Company will review this Agreement and is hereby
      given authority by the Subscriber to call Subscriber’s bank or place of
      employment or otherwise review the financial standing of the Subscriber; and
      it
      is further agreed that the Company, at its sole discretion, reserves the
      unrestricted right, without further documentation or agreement on the part
      of
      the Subscriber, to reject or limit any subscription, to accept subscriptions
      for
      fractional Shares and to close the Offering to the Subscriber at any time and
      that the Company will issue stop transfer instructions to its transfer agent
      with respect to such Shares.

     

    1.13  The
      Subscriber hereby represents that the address of the Subscriber furnished by
      Subscriber on the signature page hereof is the Subscriber’s principal residence
      if Subscriber is an individual or its principal business address if it is a
      corporation or other entity.

     

    1.14  The
      Subscriber represents that the Subscriber has full power and authority
      (corporate, statutory and otherwise) to execute and deliver this Agreement
      and
      to purchase the Shares.  This Agreement constitutes the legal, valid
      and binding obligation of the Subscriber, enforceable against the Subscriber
      in
      accordance with its terms.

     

    1.15  If
      the
      Subscriber is a corporation, partnership, limited liability company, trust,
      employee benefit plan, individual retirement account, Keogh Plan, or other
      tax-exempt entity, it is authorized and qualified to invest in the Company
      and
      the person signing this Agreement on behalf of such entity has been duly
      authorized by such entity to do so.

     

    1.16  The
      Subscriber acknowledges that if he or she is a Registered Representative of
      an
      NASD member firm, he or she must give such firm the notice required by the
      NASD’s Rules of Fair Practice, receipt of which must be acknowledged by such
      firm in Section 7.4 below.

     

    1.17  The
      Subscriber acknowledges that at such time, if ever, as the Shares are registered
      (as such term is defined in Article V hereof), sales of the Shares will be
      subject to state securities laws.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    1.18  (a)           The
      Subscriber agrees not to issue any public statement with respect to the
      Subscriber’s investment or proposed investment in the Company or the terms of
      any agreement or covenant between them and the Company without the Company’s
      prior written consent, except such disclosures as may be required under
      applicable law or under any applicable order, rule or regulation.

     

    (b)  The
      Company agrees not to disclose the names, addresses or any other information
      about the Subscribers, except as required by law; provided, that the Company
      may
      use the name of the Subscriber for any offering or in any registration statement
      filed pursuant to Article V in which the Subscriber’s shares are
      included.

     

    1.19  The
      Subscriber agrees to hold the Company and its directors, officers, employees,
      affiliates, controlling persons and agents and their respective heirs,
      representatives, successors and assigns harmless and to indemnify them against
      all liabilities, costs and expenses incurred by them as a result of (a) any
      sale
      or distribution of the Shares by the Subscriber in violation of the Securities
      Act or any applicable state securities or “blue sky” laws; or (b) any false
      representation or warranty or any breach or failure by the Subscriber to comply
      with any covenant made by the Subscriber in this Agreement (including the
      Confidential Investor Questionnaire contained in Article VII herein) or any
      other document furnished by the Subscriber to any of the foregoing in connection
      with this transaction.

     

    

    
      	
              II.  

            	
              REPRESENTATIONS
                BY AND COVENANTS OF THE COMPANY

            

    

     

    The
      Company hereby represents and warrants to the Subscriber that:

     

    2.1  Organization,
      Good Standing and Qualification.  The Company is a corporation
      duly organized, validly existing and in good standing under the laws of the
      State of California and has full corporate power and authority to conduct its
      business.

     

    2.2  Capitalization
      and Voting Rights.  The authorized, issued and outstanding capital
      stock of the Company is as set forth in the Confidential Private Placement
      Memorandum and all issued and outstanding shares of the
      Company are validly issued, fully paid and nonassessable. Except as set forth
      in
      the Offering Materials, there are no outstanding options, warrants, agreements,
      convertible securities, preemptive rights or other rights to subscribe for
      or to
      purchase any shares of capital stock of the Company.  Except as set
      forth in the Offering Materials and as otherwise required by law, there are
      no
      restrictions upon the voting or transfer of any of the shares of capital stock
      of the Company pursuant to the Company’s Articles of Incorporation (the
“Articles of Incorporation”), Bylaws or other governing documents or any
      agreement or other instruments to which the Company is a party or by which
      the
      Company is bound.

     

    2.3  Authorization;
      Enforceability.  The Company has all corporate right, power and
      authority to enter into this Agreement and to consummate the transactions
      contemplated hereby.  All corporate action on the part of the Company,
      its directors and stockholders necessary for the (a) authorization execution,
      delivery and performance of this Agreement by the Company; and (b)
      authorization, sale, issuance and delivery of the Shares contemplated hereby
      and
      the performance of the Company’s obligations hereunder has been
      taken.  This Agreement has been duly executed and delivered by the
      Company and constitutes a legal, valid and binding obligation of the Company,
      enforceable against the Company in accordance with its terms, subject to laws
      of
      general application relating to bankruptcy, insolvency and the relief of debtors
      and rules of law governing specific performance, injunctive relief or other
      equitable remedies, and to limitations of public policy.  The Shares,
      when issued and fully paid for in accordance with the terms of this Agreement,
      will be validly issued, fully paid and nonassessable.  The issuance
      and sale of the Shares contemplated hereby will not give rise to any preemptive
      rights or rights of first refusal on behalf of any person which have not been
      waived in connection with this offering.

     

    2.4  No
      Conflict; Governmental Consents.

     

    (a)  The
      execution and delivery by the Company of this Agreement and the consummation
      of
      the transactions contemplated hereby will not result in the violation of any
      material law, statute, rule, regulation, order, writ, injunction, judgment
      or
      decree of any court or governmental authority to or by which the Company is
      bound, or of any provision of the Articles of Incorporation or Bylaws of the
      Company, and will not conflict with, or result in a material breach or violation
      of, any of the terms or provisions of, or constitute (with due notice or lapse
      of time or both) a default under, any lease, loan agreement, mortgage, security
      agreement, trust indenture or other agreement or instrument to which the Company
      is a party or by which it is bound or to which any of its properties or assets
      is subject, nor result in the creation or imposition of any lien upon any of
      the
      properties or assets of the Company.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (b)  No
      consent, approval, authorization or other order of any governmental authority
      is
      required to be obtained by the Company in connection with the authorization,
      execution and delivery of this Agreement or with the authorization, issue and
      sale of the Shares, except such filings as may be required to be made with
      the
      SEC, NASD, NASDAQ and with any state or foreign blue sky or securities
      regulatory authority.

     

    2.5  Licenses.  Except
      as otherwise set forth in the Memorandum, the Company has sufficient licenses,
      permits and other governmental authorizations currently required for the conduct
      of its business or ownership of properties and is in all material respects
      in
      compliance therewith.

     

    2.6  Litigation.  The
      Company knows of no pending or threatened legal or governmental proceedings
      against the Company which could materially adversely affect the business,
      property, financial condition or operations of the Company or which materially
      and adversely questions the validity of this Agreement or any agreements related
      to the transactions contemplated hereby or the right of the Company to enter
      into any of such agreements, or to consummate the transactions contemplated
      hereby or thereby. The Company is not a party or subject to the provisions
      of
      any order, writ, injunction, judgment or decree of any court or government
      agency or instrumentality which could materially adversely affect the business,
      property, financial condition or operations of the Company. There is no action,
      suit, proceeding or investigation by the Company currently pending in any court
      or before any arbitrator or that the Company intends to initiate.

     

    2.7  Disclosure.  The
      information set forth in the Offering Materials as of the date hereof contains
      no untrue statement of a material fact nor omits to state a material fact
      necessary in order to make the statements contained therein, in light of the
      circumstances under which they were made, not misleading.

     

    2.8  Investment
      Company.  The Company is not an “investment company” within the
      meaning of such term under the Investment Company Act of 1940, as amended,
      and
      the rules and regulations of the SEC thereunder.

     

    2.9  Brokers.  Neither
      the Company nor any of the Company's officers, directors, employees or
      stockholders has employed or engaged any broker or finder in connection with
      the
      transactions contemplated by this Agreement and no fee or other compensation
      is
      or will be due and owing to any broker, finder, underwriter, placement agent
      or
      similar person in connection with the transactions contemplated by this
      Agreement.  The Company is not party to any agreement, arrangement or
      understanding whereby any person has an exclusive right to raise funds and/or
      place or purchase any debt or equity securities for or on behalf of the
      Company.

     

    
      	
              III.  

            	
              TERMS
                OF SUBSCRIPTION

            

    

     

    3.1  All
      funds
      paid hereunder shall be deposited with the Company in the account identified
      in
      Section 1.1 hereof.

     

    3.2  Certificates
      representing the Common Stock purchased by the Subscriber pursuant to this
      Agreement will be prepared for delivery to the Subscriber within 15 business
      days following the closing at which such purchase takes place. The Subscriber
      hereby authorizes and directs the Company to deliver the certificates
      representing the Common Stock purchased by the Subscriber pursuant to this
      Agreement directly to the Subscriber’s residential or business address indicated
      on the signature page hereto.

     

    

    
      	
              IV.  

            	
              CONDITIONS
                TO OBLIGATIONS OF THE
                SUBSCRIBERS

            

    

     

    4.1  The
      Subscriber’s obligation to purchase the Shares at the closing at which such
      purchase is to be consummated is subject to the fulfillment on or prior to
      such
      closing of the following conditions, which conditions may be waived at the
      option of each Subscriber to the extent permitted by law:

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (a)  Covenants.  All
      covenants, agreements and conditions contained in this Agreement to be performed
      by the Company on or prior to the date of such closing shall have been performed
      or complied with in all material respects.

     

    (b)  No
      Legal Order Pending.  There shall not then be in effect any legal
      or other order enjoining or restraining the transactions contemplated by this
      Agreement.

     

    (c)  No
      Law
      Prohibiting or Restricting Such Sale.  There shall not be in
      effect any law, rule or regulation prohibiting or restricting such sale or
      requiring any consent or approval of any person, which shall not have been
      obtained, to issue the Shares (except as otherwise provided in this
      Agreement).

     

    

    
      	
              V.  

            	
              REGISTRATION
                RIGHTS

            

    

     

    5.1  Definitions.  As
      used in this Agreement, the following terms shall have the following
      meanings.

     

    (a)  The
      term
“Holder” shall mean any person owning or having the right to acquire Registrable
      Securities or any permitted transferee of a Holder.

     

    (b)  The
      terms
“register,” “registered” and “registration” refer to a registration effected by
      preparing and filing a registration statement or similar document in compliance
      with the Securities Act, and the declaration or order of effectiveness of such
      registration statement or document.

     

    (c)  The
      term
“Registrable Securities” shall mean the Shares; provided, however, that
      securities shall only be treated as Registrable Securities if and only for
      so
      long as they (A) have not been disposed of pursuant to a registration statement
      declared effective by the SEC; (B) have not been sold in a transaction exempt
      from the registration and prospectus delivery requirements of the Securities
      Act
      so that all transfer restrictions and restrictive legends with respect thereto
      are removed upon the consummation of such sale; (C) are held by a Holder or
      a
      permitted transferee of a Holder pursuant to Section 5.10; and (D) may not
      be
      disposed of under Rule 144(k) under the Securities Act without
      restriction.

     

    5.2  Mandatory
      Registration.  The Company will use reasonable best efforts to
      file a registration statement with the Securities and Exchange Commission within
      one hundred and eighty (180) days after the closing, covering the resale of
      the
      Registrable Securities.

     

    5.3  Registration
      Procedures.  Whenever required under this Article V to include
      Registrable Securities in a Company registration statement, the Company shall,
      as expeditiously as reasonably possible:

     

    (a)  Use
      best
      efforts to (i) cause such registration statement to become effective, and (ii)
      cause such registration statement to remain effective until the earliest to
      occur of (A) such date as the sellers of Registrable Securities (the “Selling
      Holders”) have completed the distribution described in the registration
      statement and (B) such time that all of such Registrable Securities are no
      longer, by reason of Rule 144(k) under the Securities Act, required to be
      registered for the sale thereof by such Holders.  The Company will
      also use its best efforts to, during the period that such registration statement
      is required to be maintained hereunder, file such post-effective amendments
      and
      supplements thereto as may be required by the Securities Act and the rules
      and
      regulations thereunder or otherwise to ensure that the registration statement
      does not contain any untrue statement of material fact or omit to state a fact
      required to be stated therein or necessary to make the statements contained
      therein, in light of the circumstances under which they are made, not
      misleading; provided, however, that if applicable rules under the Securities
      Act
      governing the obligation to file a post-effective amendment permits, in lieu
      of
      filing a post-effective amendment that (i) includes any prospectus required
      by
      Section 10(a)(3) of the Securities Act or (ii) reflects facts or events
      representing a material or fundamental change in the information set forth
      in
      the registration statement, the Company may incorporate by reference information
      required to be included in (i) and (ii) above to the extent such information
      is
      contained in periodic reports filed pursuant to Section 13 or 15(d) of the
      Exchange Act in the registration statement.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (b)  Prepare
      and file with the SEC such amendments and supplements to such registration
      statement, and the prospectus used in connection with such registration
      statement, as may be necessary to comply with the provisions of the Securities
      Act with respect to the disposition of all securities covered by such
      registration statement.

     

    (c)  Make
      available for inspection upon reasonable notice during the Company’s regular
      business hours by each Selling Holder, any underwriter participating in any
      distribution pursuant to such registration statement, and any attorney,
      accountant or other agent retained by such Selling Holder or underwriter, all
      financial and other records, pertinent corporate documents and properties of
      the
      Company, and cause the Company’s officers, directors and employees to supply all
      information reasonably requested by any such Selling Holder, underwriter,
      attorney, accountant or agent in connection with such registration
      statement.

     

    (d)  Furnish
      to the Selling Holders such numbers of copies of a final prospectus, in
      conformity with the requirements of the Securities Act, and such other documents
      as they may reasonably request in order to facilitate the disposition of
      Registrable Securities owned by them.

     

    (e)  Use
      best
      efforts to register and qualify the securities covered by such registration
      statement under such other federal or state securities laws of such
      jurisdictions as shall be reasonably requested by the Selling Holders; provided,
      however, that the Company shall not be required in connection therewith or
      as a
      condition thereto to qualify to do business or to file a general consent to
      service of process in any such states or jurisdictions, unless the Company
      is
      already subject to service in such jurisdiction and except as may be required
      by
      the Securities Act.

     

    (f)  In
      the
      event of any underwritten public offering, enter into and perform its
      obligations under an underwriting agreement, in usual and customary form, with
      the managing underwriter of such offering.  Each Selling Holder
      participating in such underwriting shall also enter into and perform its
      obligations under such an agreement.

     

    (g)  Notify
      each Holder of Registrable Securities covered by such registration statement,
      at
      any time when a prospectus relating thereto is required to be delivered under
      the Securities Act, (i) when the registration statement or any post-effective
      amendment and supplement thereto has become effective; (ii) of the issuance
      by
      the SEC of any stop order or the initiation of proceedings for that purpose
      (in
      which event the Company shall make every effort to obtain the withdrawal of
      any
      order suspending effectiveness of the registration statement at the earliest
      possible time or prevent the entry thereof); (iii) of the receipt by the Company
      of any notification with respect to the suspension of the qualification of
      the
      Registrable Securities for sale in any jurisdiction or the initiation of any
      proceeding for such purpose; and (iv) of the happening of any event as a result
      of which the prospectus included in such registration statement, as then in
      effect, includes an untrue statement of a material fact or omits to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading in the light of the circumstances then
      existing.

     

    (h)  Cause
      all
      such Registrable Securities registered hereunder to be listed on each securities
      exchange or quotation service on which similar securities issued by the Company
      are then listed or quoted or, if no such similar securities are listed or quoted
      on a securities exchange or quotation service, apply for qualification and
      use
      best efforts to qualify such Registrable Securities for inclusion on the New
      York Stock Exchange, American Stock Exchange or listing on a quotation system
      of
      the National Association of Securities Dealers, Inc.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (i)  Cooperate
      with the Selling Holders and the managing underwriters, if any, to facilitate
      the timely preparation and delivery of certificates representing the Registrable
      Securities to be sold, which certificates will not bear any restrictive legends;
      and enable such Registrable Securities to be in such denominations and
      registered in such names as the managing underwriters, if any, shall request
      at
      least five business days prior to any sale of the Registrable Securities to
      the
      underwriters.

     

    (j)  In
      connection with an underwritten offering, cause the officers of the Company
      to
      provide reasonable assistance in the preparation of, any “road show”
presentation to potential investors as the managing underwriter may
      determine.

     

    (k)  Comply
      with all applicable rules and regulations of the SEC and make generally
      available to its security holders earning statements satisfying the provisions
      of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar
      rule promulgated under the Securities Act) no later than 50 calendar days after
      the end of any 3-month period (or 105 calendar days after the end of any
      12-month period if such period is a fiscal year) (i) commencing at the end
      of
      any fiscal quarter in which Registrable Securities are sold to underwriters
      in a
      firm commitment or best efforts underwritten offering, and (ii) if not sold
      to
      underwriters in such an offering, commencing on the first day of the first
      fiscal quarter of the Company, after the effective date of a registration
      statement, which statements shall cover said period.

     

    (l)  If
      the
      offering is underwritten and at the request of any Selling Holder, use its
      best
      efforts to furnish on the date that Registrable Securities are delivered to
      the
      underwriters for sale pursuant to such registration: (i) opinions dated such
      date of counsel representing the Company for the purposes of such registration,
      addressed to the underwriters and the transfer agent for the Registrable
      Securities so delivered, respectively, to the effect that such registration
      statement has become effective under the Securities Act and such Registrable
      Securities are freely tradable, and covering such other matters as are
      customarily covered in opinions of issuer’s counsel delivered to underwriters
      and transfer agents in underwritten public offerings and (ii) a letter dated
      such date from the independent public accountants who have certified the
      financial statements of the Company included in the registration statement
      or
      the prospectus, covering such matters as are customarily covered in accountants’
letters delivered to underwriters in underwritten public offerings.

     

    5.4  Furnish
      Information.  It shall be a condition precedent to the obligation
      of the Company to take any action pursuant to this Article V with respect to
      the
      Registrable Securities of any Selling Holder that such Holder shall furnish
      to
      the Company such information regarding the Holder, the Registrable Securities
      held by the Holder, and the intended method of disposition of such securities
      as
      shall be reasonably required by the Company to effect the registration of such
      Holder’s Registrable Securities.

     

    5.5  Registration
      Expenses.  The Company shall bear and pay all registration
      expenses incurred in connection with any registration, filing or qualification
      of Registrable Securities with respect to registrations pursuant to Section
      5.2
      for each Holder, but excluding underwriting discounts and commissions relating
      to Registrable Securities and excluding any professional fees or costs of
      accounting, financial or legal advisors to any of the Holders.

     

    

    5.6  Underwriting
      Requirements.  In connection with any offering involving an
      underwriting of shares of the Company’s capital stock, the Company shall not be
      required under Section 5.3 to include any of the Holders’ Registrable Securities
      in such underwriting unless they accept the terms of the underwriting as agreed
      upon between the Company and the underwriters selected by it (or by other
      persons entitled to select the underwriters), and then only in such quantity
      as
      the underwriters determine in their sole discretion will not jeopardize the
      success of the offering by the Company.  If the total amount of
      securities, including Registrable Securities, requested by stockholders to
      be
      included in such offering exceeds the amount of securities sold other than
      by
      the Company that the underwriters determine in their sole discretion is
      compatible with the success of the offering, then the Company shall be required
      to include in the offering only that number of such securities, including
      Registrable Securities, which the underwriters determine in their sole
      discretion will not jeopardize the success of the offering (the securities
      so
      included to be apportioned pro rata among the selling stockholders according
      to
      the total amount of securities entitled to be included therein owned by each
      selling stockholder or in such other proportions as shall mutually be agreed
      to
      by such selling stockholders).  For purposes of the preceding
      parenthetical concerning apportionment, for any selling stockholder who is
      a
      holder of Registrable Securities and is a partnership or corporation, the
      partners, retired partners and stockholders of such holder, or the estates
      and
      family members of any such partners and retired partners and any trusts for
      the
      benefit of any of the foregoing persons shall be deemed to be a single “selling
      stockholder,” and any pro-rata reduction with respect to such “selling
      stockholder” shall be based upon the aggregate amount of shares carrying
      registration rights owned by all entities and individuals included in such
      “selling stockholder,” as defined in this sentence.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    5.7  Delay
      of Registration.  No Holder shall have any right to obtain or seek
      an injunction restraining or otherwise delaying any such registration as the
      result of any controversy that might arise with respect to the interpretation
      or
      implementation of this Article.

     

    5.8  Indemnification.  In
      the event that any Registrable Securities are included in a registration
      statement under this Article V:

     

    (a)  To
      the
      extent permitted by law, the Company will indemnify and hold harmless each
      Holder, any underwriter (as defined in the Securities Act) for such Holder
      and
      each person, if any, who controls such Holder or underwriter within the meaning
      of the Securities Act or the Exchange Act, against any losses, claims, damages,
      or liabilities (joint or several) to which they may become subject under the
      Securities Act, or the Exchange Act, insofar as such losses, claims, damages,
      or
      liabilities (or actions in respect thereof) arise out of or are based upon
      any
      of the following statements, omissions or violations (collectively a
“Violation”):  (i) any untrue statement of a material fact contained
      in such registration statement, including any preliminary prospectus or final
      prospectus contained therein or any amendments or supplements thereto, (ii)
      the
      omission to state therein a material fact required to be stated therein, or
      necessary to make the statements therein not misleading, or (iii) any violation
      by the Company of the Securities Act, the Exchange Act, or any rule or
      regulation promulgated under the Securities Act, or the Exchange Act, and the
      Company will pay to each such Holder, underwriter or controlling person, as
      incurred, any legal or other expenses reasonably incurred by them in connection
      with investigating or defending any such loss, claim, damage, liability, or
      action; provided, however, that the indemnity agreement contained in this
      Section 5.9(a) shall not apply to amounts paid in settlement of any such loss,
      claim, damage, liability, or action if such settlement is effected without
      the
      consent of the Company (which consent shall not be unreasonably withheld),
      nor
      shall the Company be liable in any such case for any such loss, claim, damage,
      liability, or action to the extent that it arises out of or is based upon a
      Violation which occurs in reliance upon and in conformity with written
      information furnished expressly for use in connection with such registration
      by
      any such Holder, underwriter or controlling person.

     

    (b)  To
      the
      extent permitted by law, each Selling Holder will indemnify and hold harmless
      the Company, each of its directors, each of its officers, each person, if any,
      who controls the Company within the meaning of the Securities Act, any
      underwriter, any other Holder selling securities in such registration statement
      and any controlling person of any such underwriter or other Holder, against
      any
      losses, claims, damages, or liabilities (joint or several) to which any of
      the
      foregoing persons may become subject, under the Securities Act, or the Exchange
      Act, insofar as such losses, claims, damages, or liabilities (or actions in
      respect thereto) arise out of or are based upon any Violation, in each case
      to
      the extent (and only to the extent) that such Violation occurs in reliance
      upon
      and in conformity with written information furnished by such Holder expressly
      for use in connection with such registration; and each such Holder will pay,
      as
      incurred, any legal or other expenses reasonably incurred by any person intended
      to be indemnified pursuant to this Section 5.9(b), in connection with
      investigating or defending any such loss, claim, damage, liability, or action;
      provided, however, that the indemnity agreement contained in this
      Section 5.9(b) shall not apply to amounts paid in settlement of any such loss,
      claim, damage, liability or action if such settlement is effected without the
      consent of the Holder, which consent shall not be unreasonably withheld;
provided, further, that, in no event shall any indemnity under
      this Section 5.8(b) exceed the greater of the cash value of the (i) gross
      proceeds from the Offering received by such Holder or (ii) such Holder’s
      investment pursuant to this Agreement as set forth on the signature page
      attached hereto.

     

    (c)  Promptly
      after receipt by an indemnified party under this Section 5.9 of notice of the
      commencement of any action (including any governmental action), such indemnified
      party shall, if a claim in respect thereof is to be made against any
      indemnifying party under this Section 5.8, deliver to the indemnifying party
      a
      written notice of the commencement thereof and the indemnifying party shall
      have
      the right to participate in, and, to the extent the indemnifying party so
      desires, jointly with any other indemnifying party similarly notified, to assume
      the defense thereof with counsel selected by the indemnifying party and approved
      by the indemnified party (whose approval shall not be unreasonably withheld);
      provided, however, that an indemnified party (together with all other
      indemnified parties which may be represented without conflict by one counsel)
      shall have the right to retain one separate counsel, with the fees and expenses
      to be paid by the indemnifying party, if representation of such indemnified
      party by the counsel retained by the indemnifying party would be inappropriate
      due to actual or potential differing interests between such indemnified party
      and any other party represented by such counsel in such
      proceeding.  The failure to deliver written notice to the indemnifying
      party within a reasonable time of the commencement of any such action, if
      prejudicial to its ability to defend such action, shall relieve such
      indemnifying party of any liability to the indemnified party under this Section
      5.9, but the omission so to deliver written notice to the indemnifying party
      will not relieve it of any liability that it may have to any indemnified party
      otherwise than under this Section 5.9.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (d)  If
      the
      indemnification provided for in this Section 5.9 is held by a court of competent
      jurisdiction to be unavailable to an indemnified party with respect to any
      loss,
      liability, claim, damage, or expense referred to therein, then the indemnifying
      party, in lieu of indemnifying such indemnified party hereunder, shall
      contribute to the amount paid or payable by such indemnified party as a result
      of such loss, liability, claim, damage, or expense in such proportion as is
      appropriate to reflect the relative fault of the indemnifying party on the
      one
      hand and of the indemnified party on the other in connection with the statements
      or omissions that resulted in such loss, liability, claim, damage, or expense
      as
      well as any other relevant equitable considerations.  The relative
      fault of the indemnifying party and of the indemnified party shall be determined
      by reference to, among other things, whether the untrue or alleged untrue
      statement of a material fact or the alleged omission to state a material fact
      relates to information supplied by the indemnifying party or by the indemnified
      party and the parties’ relative intent, knowledge, access to information, and
      opportunity to correct or prevent such statement or omission.

     

    (e)  Notwithstanding
      the foregoing, to the extent that the provisions on indemnification and
      contribution contained in an underwriting agreement entered into in connection
      with an underwritten public offering are in conflict with the foregoing
      provisions, the provisions in such underwriting agreement shall
      control.

     

    (f)  The
      obligations of the Company and Holders under this Section 5.9 shall survive
      the
      completion or termination of the Offering.

     

    5.9  Reports
      Under Securities Exchange Act of 1934.  With a view to making
      available to the Holders the benefits of Rule 144 and any other rule or
      regulation of the SEC that may at any time permit a Holder to sell securities
      of
      the Company to the public without registration or pursuant to a registration
      on
      Form S-3 (or other applicable form), the Company agrees to:

     

    (a)  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144, at all times after 90 days after the effective date of the
      registration statement;

     

    (b)  file
      with
      the SEC all reports and other documents required of the Company under the
      Securities Act and the Exchange Act; and

     

    (c)  furnish
      to any Holder, so long as the Holder owns any Registrable Securities, forthwith
      upon request (i) a copy of the most recent annual or quarterly report of the
      Company and such other reports and documents so filed by the Company, and (ii)
      such other information as may be reasonably requested in availing any Holder
      of
      any rule or regulation of the SEC which permits the selling of any such
      securities without registration or pursuant to such form.

     

    5.10  Permitted
      Transferees.  The rights to cause the Company to register
      Registrable Securities granted to the Holders by the Company under this Article
      V may be assigned in full by a Holder in connection with a transfer by such
      Holder of its Registrable Securities if: (a) such Holder gives prior
      written notice to the Company; (b) such transferee agrees to comply with the
      terms and provisions of this Agreement; (c) such transfer is otherwise in
      compliance with this Agreement; and (d) such transfer is otherwise effected
      in accordance with applicable securities laws.  Except as specifically
      permitted by this Section 5.11, the rights of a Holder with respect to
      Registrable Securities as set out herein shall not be transferable to any other
      Person, and any attempted transfer shall cause all rights of such Holder therein
      to be forfeited.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
      	
              VI.  

            	
              MISCELLANEOUS

            

    

     

    6.1  Any
      notice or other communication given hereunder shall be deemed sufficient if
      in
      writing and sent by registered or certified mail, return receipt requested,
      or
      delivered by hand against written receipt therefor, addressed as
      follows:

     

    if
      to the
      Company, to it at:

    Platinum
      Studios, Inc.

    11400
      W.
      Olympic Blvd., Suite 1400

    Los
      Angeles, CA 90064

    Attn:  Brian
      Altounian

    

    With
      a
      copy to (which shall not constitute notice):

    

    Sichenzia
      Ross Friedman Ference LLP

    1065
      Avenue of the Americas

    New
      York,
      NY 10018

    Attn:  Gregory
      Sichenzia, Esq.

    

    if
      to the
      Subscriber, to the Subscriber’s address indicated on the signature page of this
      Agreement.

     

    Notices
      shall be deemed to have been given or delivered on the date of mailing, except
      notices of change of address, which shall be deemed to have been given or
      delivered when received.

     

    6.2  Except
      as
      otherwise provided herein, this Agreement shall not be changed, modified or
      amended except by a writing signed by the parties to be charged, and this
      Agreement may not be discharged except by performance in accordance with its
      terms or by a writing signed by the party to be charged.

     

    6.3  Subject
      to the provisions of Section 5.11, this Agreement shall be binding upon and
      inure to the benefit of the parties hereto and to their respective heirs, legal
      representatives, successors and assigns.  This Agreement sets forth
      the entire agreement and understanding between the parties as to the subject
      matter hereof and merges and supersedes all prior discussions, agreements and
      understandings of any and every nature among them.

     

    6.4  Upon
      the
      execution and delivery of this Agreement by the Subscriber, this Agreement
      shall
      become a binding obligation of the Subscriber with respect to the purchase
      of
      Shares as herein provided, subject, however, to the right hereby reserved by
      the
      Company to enter into the same agreements with other subscribers and to add
      and/or delete other persons as subscribers.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    6.5  NOTWITHSTANDING
      THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO,
      THE
      PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE
      CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA
      WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW.  IN THE
      EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING
      DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE COURTS STATE OF
      CALIFORNIA IN AND FOR THE COUNTY OF LOS ANGELES OR THE FEDERAL COURTS FOR SUCH
      STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY
      IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID
      VENUE.

     

    6.6  In
      order
      to discourage frivolous claims the parties agree that unless a claimant in
      any
      proceeding arising out of this Agreement succeeds in establishing his claim
      and
      recovering a judgment against another party (regardless of whether such claimant
      succeeds against one of the other parties to the action), then the other party
      shall be entitled to recover from such claimant all of its/their reasonable
      legal costs and expenses relating to such proceeding and/or incurred in
      preparation therefor.

     

    6.7  The
      holding of any provision of this Agreement to be invalid or unenforceable by
      a
      court of competent jurisdiction shall not affect any other provision of this
      Agreement, which shall remain in full force and effect.  If any
      provision of this Agreement shall be declared by a court of competent
      jurisdiction to be invalid, illegal or incapable of being enforced in whole
      or
      in part, such provision shall be interpreted so as to remain enforceable to
      the
      maximum extent permissible consistent with applicable law and the remaining
      conditions and provisions or portions thereof shall nevertheless remain in
      full
      force and effect and enforceable to the extent they are valid, legal and
      enforceable, and no provisions shall be deemed dependent upon any other covenant
      or provision unless so expressed herein.

     

    6.8  It
      is
      agreed that a waiver by either party of a breach of any provision of this
      Agreement shall not operate, or be construed, as a waiver of any subsequent
      breach by that same party.

     

    6.9  The
      parties agree to execute and deliver all such further documents, agreements
      and
      instruments and take such other and further action as may be necessary or
      appropriate to carry out the purposes and intent of this Agreement.

     

    6.10  This
      Agreement may be executed in two or more counterparts each of which shall be
      deemed an original, but all of which shall together constitute one and the
      same
      instrument.

     

    6.11  Nothing
      in this Agreement shall create or be deemed to create any rights in any person
      or entity not a party to this Agreement, except for the holders of Registrable
      Securities.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
      	
              VII.  

            	
              CONFIDENTIAL
                INVESTOR QUESTIONNAIRE

            

    

     

    7.1  The
      Subscriber represents and warrants that he, she or it comes within one category
      marked below, and that for any category marked, he, she or it has truthfully
      set
      forth, where applicable, the factual basis or reason the Subscriber comes within
      that category.  ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE
      KEPT STRICTLY CONFIDENTIAL.  The undersigned agrees to furnish any
      additional information which the Company deems necessary in order to verify
      the
      answers set forth below.

     

    
      	
              Category
                A  

            	
              The
                undersigned is an individual (not a partnership, corporation, etc.)
                whose
                individual net worth, or joint net worth with his or her spouse,
                presently
                exceeds $1,000,000.

            

    

    

    Explanation.  In
      calculating net worth you may include equity in personal property and real
      estate, including your principal residence, cash, short-term investments, stock
      and securities.  Equity in personal property and real estate should be
      based on the fair market value of such property less debt secured by such
      property.

    

    
      	
              Category
                B  

            	
              The
                undersigned is an individual (not a partnership, corporation, etc.)
                who
                had an income in excess of $200,000 in each of the two most recent
                years,
                or joint income with his or her spouse in excess of $300,000 in each
                of
                those years (in each case including foreign income, tax exempt income
                and
                full amount of capital gains and losses but excluding any income
                of other
                family members and any unrealized capital appreciation) and has a
                reasonable expectation of reaching the same income level in the current
                year.

            

    

    

    
      	
              Category
                C  

            	
              The
                undersigned is a director or executive officer of the Company which
                is
                issuing and selling the Shares.

            

    

    

    
      	
              Category
                D  

            	
              The
                undersigned is a bank; a savings and loan association; insurance
                company;
                registered investment company; registered business development company;
                licensed small business investment company (“SBIC”); or employee benefit
                plan within the meaning of Title 1 of ERISA and (a) the investment
                decision is made by a plan fiduciary which is either a bank, savings
                and
                loan association, insurance company or registered investment advisor,
                or
                (b) the plan has total assets in excess of $5,000,000 or (c) is a
                self
                directed plan with investment decisions made solely by persons that
                are
                accredited investors. (describe
                entity)

            

    

     

    
      	
              Category
                E  

            	
              The
                undersigned is a private business development company as defined
                in
                section 202(a)(22) of the Investment Advisors Act of 1940. (describe
                entity)

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
      	
              Category
                F  

            	
              The
                undersigned is either a corporation, partnership, Massachusetts business
                trust, or non-profit organization within the meaning of Section 501(c)(3)
                of the Internal Revenue Code, in each case not formed for the specific
                purpose of acquiring the Shares and with total assets in excess of
                $5,000,000. (describe entity)

            

    

    

    
      	
              Category
                G  

            	
              The
                undersigned is a trust with total assets in excess of $5,000,000,
                not
                formed for the specific purpose of acquiring the Shares, where the
                purchase is directed by a “sophisticated investor” as defined in
                Regulation 506(b)(2)(ii) under the
                Act.

            

    

     

    
      	
              Category
                H  

            	
              The
                undersigned is an entity (other than a trust) in which all of the
                equity
                owners are “accredited investors” within one or more of the above
                categories.  If relying upon this Category alone, each equity
                owner must complete a separate copy of this
                Agreement.  (describe
                entity)

            

    

    

    
      	
              Category
                I  

            	
              The
                undersigned is not within any of the categories above and is therefore
                not
                an accredited investor.

            

    

     

    The
      undersigned agrees that the undersigned will notify the Company at any time
      on
      or prior to the closing in the event that the representations and warranties
      in
      this Agreement shall cease to be true, accurate and complete.

     

    7.2  SUITABILITY
      (please answer each question)

     

    (a)           For
      an individual Subscriber, please describe your current employment, including
      the
      company by which you are employed and its principal business:

     

    (b)           For
      an individual Subscriber, please describe any college or graduate degrees held
      by you:

     

    (c)           For
      all Subscribers, please list types of prior investments:

     

    (d)           For
      all Subscribers, please state whether you have participated in other private
      placements before:

     

    YES_______                                                      NO_______

    (e)           If
      your answer to question (d) above was “YES”, please indicate frequency of such
      prior participation in private placements of:

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    
      	 	
               

              Public

              Companies

            	 	
               

              Private

              Companies

            	 	
              Public
                or Private Companies

              with
                no, or insignificant,

              assets
                and operations

            
	
              Frequently

            	 	 	 	 	 
	
              Occasionally

            	 	 	 	 	 
	
              Never

            	 	 	 	 	 

    

    

    (f)           For
      individual Subscribers, do you expect your current level of income to
      significantly decrease in the foreseeable future:

     

    YES_______                                                      NO_______

    (g)           For
      trust, corporate, partnership and other institutional Subscribers, do you expect
      your total assets to significantly decrease in the foreseeable
      future:

     

    YES_______                                                      NO_______

    (h)           For
      all Subscribers, do you have any other investments or contingent liabilities
      which you reasonably anticipate could cause you to need sudden cash requirements
      in excess of cash readily available to you:

     

    YES_______                                                      NO_______

    (i)           For
      all Subscribers, are you familiar with the risk aspects and the non-liquidity
      of
      investments such as the securities for which you seek to subscribe?

     

    YES_______                                                      NO_______

    (j)           
      For all Subscribers, do you understand that there is no guarantee of financial
      return on this investment and that you run the risk of losing your entire
      investment?

     

    YES_______                                                      NO_______

     

    7.3  MANNER
      IN WHICH TITLE IS TO BE HELD.  (circle one)

     

    (a)           Individual
      Ownership

    (b)           Community
      Property

    (c)           Joint
      Tenant with Right of

    Survivorship
      (both
      parties

    must
      sign)

    (d)           Partnership*

    (e)           Tenants
      in Common

    (f)           Company*

    (g)           Trust*

    (h)           Other*

    *If
      Securities are being subscribed for by an entity, the attached Certificate
      of
      Signatory must also be completed.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    7.4  NASD
      AFFILIATION.

     

    Are
      you
      affiliated or associated with an NASD member firm (please check
      one):

    Yes
      _________                                           No
      __________

     

    If
      Yes,
      please describe:

    _____________________________________________________________________________________

    _____________________________________________________________________________________

    _____________________________________________________________________________________

    

    *If
      Subscriber is a Registered Representative with an NASD member firm, have the
      following acknowledgment signed by the appropriate party:

     

    The
      undersigned NASD member firm acknowledges receipt of the notice required by
      Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

     

    _________________________________

    Name
      of
      NASD Member Firm

    

    By:
      ______________________________

    Authorized
      Officer

    

    Date:
      ____________________________

    

    7.5  The
      undersigned is informed of the significance to the Company of the foregoing
      representations and answers contained in the Confidential Investor Questionnaire
      contained in this Article VII and such answers have been provided under the
      assumption that the Company will rely on them.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    NUMBER
      OF SHARES _________ X $0.10 = $_________ (the “Purchase
      Price”)

     

    

    
      	 	 	 	 	 
	
              /s/

            	 	 	
              /s/
                

            	 
	
              Name

            	 	 	
              Name 

            	 
	
              Title 

            	 	 	
              Title

            	 
	Entity
              Name (if applicable)      	 	 	Entity
              Name (if applicable)      	 
	Address   	 	 	Address   	 
	City,
              State and Zip Code       	 	 	City,
              State and Zip Code	 
	Telephone-Business    	 	 	Telephone-Business     	 
	Telephone-Residence  	 	 	Telephone-Residence   	 
	Facsimile-Business  	 	 	Facsimile-Business   	 
	Facsimile-Residence    	 	 	Facsimile-Business   	 
	Tax
              ID # or Social Security
              #          	 	 	Tax
              ID # or Social Security #   	 
	Name
              in which securities should be issued:  	 	 	 	 

    

     

    This
      Subscription Agreement is agreed to and accepted
      as of ________________, 2006

    

    
      	 	GLOBAL
              AUTHENTICATION HOLDINGS, INC.	 
	 	 	 	 
	
              Dated:
                , 2006

            	
              By:
                

            	/s/ 	 
	 	 	Kevin
              Hammond	 
	 	 	Chief
              Executive Officer	 
	 	 	 	 

    

     

    (To
      be
      completed if Shares are

    being
      subscribed for by an entity)

    

    

    I,
      ____________________________, am the ____________________________ of
      __________________________________________ (the “Entity”).

    

    I
      certify
      that I am empowered and duly authorized by the Entity to execute and carry
      out
      the terms of the Subscription Agreement and to purchase and hold the Shares,
      and
      certify further that the Subscription Agreement has been duly and validly
      executed on behalf of the Entity and constitutes a legal and binding obligation
      of the Entity.

    

    IN
      WITNESS WHEREOF, I have set my hand this ________ day of _________________,
      2006

     

    
      	 	 
              
              _______________________________________

              (Signature)

            

    

     

     

    17

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