Document:

exhibit10_1.htm

    Exhibit 10.1

     

     

    
      CHARTER COMMUNICATIONS,
INC

       

      AMENDED AND RESTATED 2009
STOCK INCENTIVE PLAN

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      CHARTER COMMUNICATIONS,
INC.

      AMENDED AND RESTATED 2009
STOCK INCENTIVE PLAN

       

      
        	
                1.  

              	
                Purpose.

              

      

       

      The
purpose of this Plan is to strengthen Charter Communications, Inc., a Delaware
corporation (the “Company”), by providing an incentive to the employees,
officers, consultants and directors of the Company, its Subsidiaries and
Affiliates and thereby encouraging them to devote their abilities and industry
to the success of the Company’s business enterprise.  It is intended
that this purpose be achieved by extending to employees (including future
employees who have received a written offer of employment), officers,
consultants and directors of the Company, its Subsidiaries and Affiliates an
added long-term incentive for high levels of performance and unusual efforts
through the grant of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Dividend Equivalent Rights, Performance Units and
Performance Shares, Share Awards, Phantom Stock, Restricted Stock Units and
Restricted Stock (as each term is herein defined).

       

      
        	
                2.  

              	
                Definitions.

              

      

       

      For
purposes of the Plan:

       

      “Affiliate”
means, with respect to any person or entity, any entity, directly or indirectly,
controlled by, controlling or under common control with such person or
entity.

       

      “Agreement”
means the written agreement or other instrument evidencing the grant of an
Option or Award and setting forth the terms and conditions
thereof.  An Agreement may be in the form of an agreement to be agreed
to by both the Optionee or Grantee and the Company (or an authorized
representative of the Company) or certificates, notices or similar instruments
as approved by the Committee.

       

      “Award”
means a grant of Restricted Stock, a Restricted Stock Unit, Phantom Stock, a
Stock Appreciation Right, a Performance Award, a Dividend Equivalent Right, a
Share Award or any or all of them.

       

      “Board”
means the Board of Directors of the Company.

       

      “Cause”
means:

       

      (a)           in
the case of a Participant whose employment with the Company or a Subsidiary is
subject to the terms of an employment agreement between such Participant and the
Company or Subsidiary, which employment agreement includes a definition of
“Cause” (or similar term), the term “Cause” as used in this Plan or any
Agreement shall have the meaning set forth in such employment agreement during
the period that such employment agreement remains in effect; and

       

      (b)           in
all other cases, the Participant (i) has committed any crime; (ii) has committed
any act of fraud knowing material misrepresentation or concealment, embezzlement
or gross dishonesty; (iii) has committed any act of sex discrimination or sexual
harassment under 

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

         

        the
provisions of any Federal, state or local law, resulting in any of the above
cases in a material financial loss to the Company or damage to the reputation of
the Company; (iv) has refused to comply with the lawful directives of the Board
or of the Participant’s supervisors; (v) has breached any fiduciary duty to the
Company or has engaged in conduct which constitutes gross negligence or willful
misconduct; (vi) fails to adhere in any material respect to (x) the Company’s
Code of Conduct in effect from time to time or (y) any written Company policy,
if such policy is material to the effective performance by Participant of
Participant’s duties; (vii) Participant’s conviction of, the entering of a
guilty plea or plea or nolo contendere or no contest (or the equivalent), or
entering into any pretrial diversion program or agreement or suspended
imposition of sentence, with respect to either a felony or a crime that
adversely affects or could reasonably be expected to adversely affect the
Company or its business reputation; or the institution of criminal charges
against Participant which are not dismissed within sixty (60) days after
institution, for fraud, embezzlement, any felony offense involving dishonesty or
constituting a breach of trust, or any felony (including without limitation a
crime in any jurisdiction other than the United States or any state thereof in
which Company does business which would constitute such a felony under the laws
of the United States or any state thereof); (viii) Participant’s admission of
liability of, or finding of liability, for a knowing and deliberate violation of
any “Securities Laws” (as used herein, the term “Securities Laws” means any
federal or state law, rule or regulation governing generally the issuance or
exchange of securities, including without limitation the Securities Act of 1933,
the Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder); or (ix) Participant’s illegal possession or use of any controlled
substance, or excessive use of alcohol at a work function, in connection with
Participant’s duties, or on Company premises; “excessive” meaning either
repeated unprofessional use or any single event of consumption giving rise to
significant intoxication or unprofessional behavior.

      

       

      “Change
in Capitalization” means any increase or reduction in the number of Shares, or
any change (including, but not limited to, in the case of a spin-off, dividend
or other distribution in respect of Shares, a change in value) in the Shares or
exchange of Shares for a different number or kind of shares or other securities
of the Company or another corporation, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debentures, stock dividend, stock split or
reverse stock split, property dividend, cash dividend (other than regular,
quarterly dividends), combination or exchange of Shares, repurchase of Shares,
change in corporate structure or otherwise.

       

      A “Change
in Control” means:

       

      (a)           in
the case of a Participant whose employment with the Company or a Subsidiary is
subject to the terms of an employment agreement between such Participant and the
Company or a Subsidiary, which employment agreement includes a definition of
“Change in Control” (or similar term), the term “Change in Control” as used in
this Plan or any Agreement shall have the meaning set forth in such employment
agreement during the period that such employment agreement remains in effect;
and

       

      (b)           in
all other cases, the occurrence of any of the following:

       

       

      
        
          
          

        

        
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      (i)           an
acquisition of any voting securities of the Company by any “Person” or “Group”
(as those terms are used for purposes of Section 13(d) or 14(d) of the Exchange
Act), immediately after which such Person has “Beneficial Ownership” (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%)
or more of the combined voting power of the Company’s then outstanding voting
securities; provided, however, in determining whether a Change in Control has
occurred pursuant to this definition, Shares or voting securities which are
acquired in a “Non-Control Acquisition” (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control.  A
“Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit
plan (or a trust forming a part thereof) maintained by (A) the Company or (B)
any Subsidiary or Affiliate of the Company, (ii) the Company or any Subsidiary
of the Company, (iii) an underwriter acquiring such voting securities in
connection with a public offering of such securities; or (iv) any Person in
connection with a “Non-Control Transaction” (as hereinafter
defined);

       

      (ii)           The
individuals who, as of June 30, 2009 are members of the Board (the “Incumbent
Board”), cease for any reason to constitute at least one half of the members of
the Board or, following a Merger which results in a Parent Corporation (as
defined in paragraph (iii)(A)(l) below), the board of directors of the Parent
Corporation; provided, however, that if the election, or nomination for election
by the Company’s common stockholders, of any new director was approved by a vote
of at least one half of the Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the Incumbent Board;
provided further, however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a “Proxy Contest”) including by reason
of any agreement intended to avoid or settle any Proxy Contest; or

       

      (iii)           The
consummation of:

       

      (A)           A
merger, consolidation, reorganization or similar transaction involving the
Company or in which securities of the Company are issued (a “Merger”), unless
such Merger is a “Non-Control Transaction.”  A “Non-Control
Transaction” shall mean a Merger where:

       

      (1)           the
stockholders of the Company, immediately before such Merger own directly or
indirectly immediately following such Merger more than fifty percent (50%) of
the combined voting power of the outstanding voting securities of (x) the
corporation resulting from such Merger (the “Surviving Corporation”), or (y) if
any Person or Group, directly or indirectly, owns fifty percent (50%) or more of
the combined voting power of the then outstanding voting securities of the
Surviving Corporation (such Person or Group shall be defined as a “Parent
Corporation”), the Parent Corporation;

       

      (2)           the
individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement 

       

       

      
        
          
          

        

        
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        providing
for such Merger constitute at least a majority of the members of the board of
directors of (x) the Surviving Corporation, or (y) the Parent Corporation, if
the Parent Corporation, directly or indirectly, owns fifty percent (50%) or more
of the combined voting power of the then outstanding voting securities of the
Surviving Corporation; and

      

       

      (3)           no
Person other than (a) the Company, (b) any Subsidiary of the Company, (c) any
employee benefit plan (or any trust forming a part thereof) that, immediately
prior to such Merger was maintained by the Company or any Subsidiary or
Affiliate of the Company, or (d) any Person who, immediately prior to such
Merger had Beneficial Ownership of fifty percent (50%) or more of the then
outstanding voting securities or Shares, has Beneficial Ownership of fifty
percent (50%) or more of the combined voting power of the outstanding voting
securities or common stock of (x) the Surviving Corporation, or (y) the Parent
Corporation, if the Parent Corporation, directly or indirectly, owns fifty
percent (50%) or more of the combined voting power of the then outstanding
voting securities of the Surviving Corporation.

       

      (B)           A
complete liquidation or dissolution of the Company (other than where assets of
the Company are transferred to or remain with Subsidiaries of the Company);
or

       

      (C)           The
sale or other disposition of all or substantially all of the assets of the
Company, directly or indirectly, to any Person (other than a transfer to a
Subsidiary of the Company, including, without limitation, the Allen Entities, if
and only if the Allen Entities are Affiliates (individually or collectively) of
the Company immediately prior to such sale or other disposition, or under
conditions that would constitute a Non-Control Transaction with the disposition
of assets being regarded as a Merger for this purpose or the distribution to the
Company’s stockholders of the stock of a Subsidiary or Affiliate of the Company
or any other assets).

       

      Notwithstanding
the foregoing, for 409A Awards that are settled or distributed upon a “Change in
Control,” the foregoing definition shall only apply to the extent the applicable
event otherwise constituting a “Change in Control” would also constitute a
“change in control event” under Code Section 409A.

       

      Unless
otherwise provided in an employment agreement between a Participant and the
Company, notwithstanding the foregoing a Change in Control shall not be deemed
to occur solely because any Person (the “Subject Person”) acquired Beneficial
Ownership of more than the permitted amount of the then outstanding Shares or
voting securities as a result of the acquisition of Shares or voting securities
by the Company which, by reducing the number of Shares or voting securities then
outstanding, increases the proportional number of Shares Beneficially Owned by
the Subject Persons, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Shares or
voting securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes 

       

       

      
        
          
          

        

        
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        the
Beneficial Owner of any additional Shares or voting securities which increases
the percentage of the then outstanding Shares or voting securities Beneficially
Owned by the Subject Person, then a Change in Control shall
occur.

      

       

      Unless
otherwise provided in an employment agreement between the Participants and the
Company, if a Participant’s employment is terminated (A) by the Company without
Cause within the thirty (30) day period immediately preceding a Change in
Control or (B) by the Company without Cause preceding a Change in Control at the
written request of a third party (or such third party’s agent) who has indicated
an intention or taken steps reasonably calculated to effect a Change in Control,
such termination shall be deemed to have occurred after a Change in Control for
purposes of this Plan provided a Change in Control shall actually have
occurred.

       

      “Code”
means the Internal Revenue Code of 1986, as amended.  Reference to a
specific section of the Code or regulation thereunder shall include such section
or regulation, any valid regulation or other guidance promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.

       

      “Committee”
means at least one committee, as described in Section 3.1, appointed by the Board from time to time to
administer the Plan and to perform the functions set forth herein.

       

      “Company”
means Charter Communications, Inc., a Delaware Corporation.

       

      “Director”
means a director of the Company.

       

      “Disability”
means:

       

      (a)           in
the case of a Participant whose employment with the Company or a Subsidiary is
subject to the terms of an employment agreement between such Participant and the
Company or Subsidiary, which employment agreement includes a definition of
“Disability” (or similar term), the term “Disability” as used in this Plan or
any Agreement shall have the meaning set forth in such employment agreement
during the period that such employment agreement remains in effect;
or

       

      (b)           in
all other cases, the term “Disability” as used in this Plan or any Agreement
shall mean a physical or mental infirmity which impairs the Participant’s
ability to perform substantially his or her duties, and for which the
Participant is also receiving benefits under the Company’s long-term disability
plan, if any, then in effect.

       

      Notwithstanding
the foregoing, for 409A Awards that are settled or distributed upon a
“Disability,” “Disability” shall mean that a Participant is disabled under
Treasury Regulation Section 1.409A-3(i)(4)(i).

       

      “Division”
means any of the operating units or divisions of the Company or Subsidiary
designated as a Division by the Committee in its discretion.

       

       

      
        
          
          

        

        
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      “Dividend
Equivalent Right” means a right to receive all or some portion of the dividends
that are or would be payable with respect to Shares, payable in either cash or
Shares.

       

      “Eligible
Individual” means any of the following individuals who is designated by the
Committee in its discretion as eligible to receive Options or Awards subject to
the conditions set forth herein:  (a) any director, officer or
employee of the Company or a Subsidiary or Affiliate of the Company, (b) any
individual to whom the Company, or a Subsidiary or an Affiliate of the Company,
has extended a formal offer of employment, so long as the grant of any Option or
Award shall not become effective until the individual commences employment or
(c) any consultant or advisor of the Company or a
Subsidiary.  Notwithstanding the foregoing, the eligibility and/or
participation of those employees represented by a collective bargaining
representative shall be governed solely by the results of good faith
negotiations between the Company and such employees’ representative and/or by
the express terms of any collective bargaining agreement resulting
therefrom.

       

      “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

       

      “Fair
Market Value” on any date means the average of the high and low sales prices of
the Shares on such date on the principal national securities exchange on which
such Shares are listed or admitted to trading, or if there were no reported
transaction for such date, the opening transaction price as reported by such
exchange for the first trading date following the date by which such value is
being determined on the next preceding date, or if such Shares are not so listed
or admitted to trading, the average of the high and low sales price per Share on
such date as quoted on the National Association of Securities Dealers Automated
Quotation System or such other market in which such prices are regularly quoted
or, if there have been no regularly quoted or reported high and low sales prices
with respect to Shares on such date, the Fair Market Value shall be the value
established by the Board or the Committee in good
faith.  Notwithstanding the foregoing, Fair Market Value relating to
the exercise price or base price of any Non-409A Option or SAR may be determined
in any manner permitted by Code Section 409A.

       

      “Good
Reason” means the occurrence after a Change in Control of any of the events or
conditions described in subsections (1) through (8) hereof, so long as, in the case of events or conditions described in
subsections (2) through (8) hereof, the Participant provides notice of
the existence of such breach within ninety (90) days of the Participant’s
knowledge of such breach, and the Company does not remedy such breach within
ninety (90) days of receipt of such notice:

       

      (1)           in
the case of a Participant whose employment with the Company or a Subsidiary is
subject to the terms of an employment agreement between such Participant and the
Company or Subsidiary, which employment agreement includes a definition of “Good
Reason” (or similar term), the term “Good Reason” as used in this Plan or any
Agreement shall have the meaning set forth in such employment agreement during
the period that such employment agreement remains in effect;

       

      (2)           a
change in the Participant’s status, title, position or responsibilities
(including reporting responsibilities) which represents an adverse change

       

       

      
        
          
          

        

        
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        from his
status, title, position or responsibilities as in effect at any time within
ninety (90) days preceding the date of a Change in Control or at any time
thereafter; the assignment to the Participant of any duties or responsibilities
which are inconsistent with his status, title, position or responsibilities as
in effect at any time within ninety (90) days preceding the date of a Change in
Control or at any time thereafter; or any removal of the Participant from or
failure to reappoint or reelect him to any of such offices or positions, except
in connection with the termination of his employment for Disability, Cause, as a
result of his death or by the Participant other than for Good
Reason;

      

       

      (3)           a
reduction in the Participant’s base salary or any failure to pay the Participant
any compensation or benefits to which he is entitled within five (5) days of
notice thereof;

       

      (4)           the
Company’s or any Subsidiary’s requiring the Participant to be based at any place
more than fifty (50) miles from the Participant’s principal place of employment,
except for reasonably required travel on the Company’s business which is not
materially greater than such travel requirements prior to the Change in Control
or relocation pursuant to a voluntary change in position;

       

      (5)           the
failure by the Company, any Subsidiary or an Affiliate to provide the
Participant with compensation and benefits, in the aggregate, at least equal (in
terms of benefit levels and/or reward opportunities) to those provided for under
each other employee benefit plan, program and practice in which the Participant
was participating at any time within ninety (90) days preceding the date of a
Change in Control or at any time thereafter;

       

      (6)           the
insolvency or the filing (by any party, including the Company) of a petition for
bankruptcy of the Company or Subsidiary, which petition is not dismissed within
sixty (60) days;

       

      (7)           any
purported termination of the Participant’s employment for Cause by the Company
which does not comply with the terms of such definition; or

       

      (8)           the
failure of the Company or Successor to obtain an agreement from any Successors
and Assigns to assume and agree to perform this Plan, as contemplated in Section
16 hereof.

       

      Any event
or condition described in subsections (1) through (8) hereof which occurs prior
to a Change in Control but which the Participant reasonably demonstrates (A) was
at the request of a third party, or (B) otherwise arose in connection with,
or in anticipation of, a Change in Control which actually occurs, shall
constitute Good Reason for purposes of the Plan notwithstanding that it occurred
prior to the Change in Control.

       

      “Grantee”
means a person to whom an Award has been granted under the Plan.

       

      “Incentive
Stock Option” or “ISO” means any Option designated as an incentive stock option
within the meaning of Code Section 422 and qualifying thereunder.

       

       

      
        
          
          

        

        
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      “Nonemployee
Director” means a director of the Company who is a “non-employee director” under
Rule 16b-3 of the Exchange Act.

       

      “Nonqualified
Stock Option” means an Option which is not an incentive stock option as defined
under Code Section 422.

       

      “Option”
means a Nonqualified Stock Option or an ISO.

       

      “Optionee”
means a person to whom an Option has been granted under the Plan.

       

      “Outside
Director” means a director of the Company who is an “outside director” within
the meaning of Code Section 162(m) and the regulations promulgated
thereunder.

       

      “Participant”
means any Eligible Individual to whom Options and/or Awards have been granted
from time to time by the Committee and any authorized transferee of such
individual.

       

      “Performance
Awards” means Performance Units, Performance Shares or either or both of
them.

       

      “Performance-Based
Compensation” means any Option or Award that is intended to constitute
“performance based compensation” within the meaning of Code Section 162(m)(4)(C)
and the regulations promulgated thereunder.

       

      “Performance
Cycle” means the time period specified by the Committee in its discretion at the
time Performance Awards are granted during which the performance of the Company,
a Subsidiary or a Division will be measured.

       

      “Performance
Objectives” has the meaning set forth in Section 10.

       

      “Performance
Shares” means Shares issued or transferred to an Eligible Individual under
Section 10.

       

      “Performance
Units” means Performance Units granted to an Eligible Individual under Section
10.

       

      “Phantom
Stock” means a right granted to an Eligible Individual under Section 11 representing a number of hypothetical
Shares.

       

      “Plan”
means this Charter Communications, Inc. 2009 Stock Incentive Plan, as amended
from time to time.

       

      “Restricted
Stock” means Shares issued or transferred to an Eligible Individual pursuant to
Section 9.

       

      “Restricted
Stock Unit” means an Award granted to an Eligible Individual pursuant to Section
9 pursuant to which Shares or cash in lieu thereof
may be issued in the future.

       

       

      
        
          
          

        

        
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      “Retirement”
means a termination of employment with the Company or a Subsidiary (i) after age
55, (ii) with the sum of the employee’s age and years of service equaling 70 or
more, and (iii) following one or more years of service from the date of
grant.  For the purposes of this definition, “years of service” shall
include years of service with the Company, as well as any years of service with
an Affiliate or Subsidiary but only during such time as those entities are
Affiliates or Subsidiaries.

       

      “Share
Award” means an Award of Shares granted pursuant to Section 11.

       

      “Shares”
means the Class A Common Stock, par value $.01 per share, of the Company and any
other securities into which such shares are changed or for which such shares are
exchanged.

       

      “Stock
Appreciation Right” or “SAR” means a right to receive all or some portion of the
increase in the value of the Shares as provided in Section 7 hereof.

       

      “Subsidiary”
means any entity, whether or not incorporated, in which the Company, directly or
indirectly, (i) owns thirty-five percent (35%) or more of the outstanding equity
or other ownership interests, (ii) owns thirty-five percent (35%) or more of the
outstanding voting power, or (iii) has sole management
responsibility.  With respect to the grant and administration of
Incentive Stock Options, “Subsidiary” shall have the meaning set forth in Code
Section 424(f).

       

      “Successors
and Assigns” for purposes of the Plan, shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company or a
Subsidiary whether by operation of law or otherwise, and any affiliate of such
Successors and Assigns.

       

      “Ten
Percent Holder” means an employee (together with persons whose stock ownership
is attributed to the employee pursuant to Code Section 424(d)) who, at the time
an Option is granted, owns stock representing more than ten percent of the
voting power of all classes of stock of the Company.

       

      “409A
Awards” means Awards that constitute a deferral of compensation under Code
Section 409A and regulations thereunder. “Non-409A Awards” means Awards other
than 409A Awards. Although the Committee retains authority under the Plan to
grant Options, SARs and Restricted Stock units on terms that will qualify those
Awards as 409A Awards, Options, SARs exercisable for Stock, and Restricted Stock
units are intended to be designed to qualify as Non-409A Awards unless otherwise
expressly specified by the Committee.

       

      
        	
                3.  

              	
                Administration.

              

      

       

      3.1. The Plan
shall be administered by the Committee, which shall hold meetings at such times
as may be necessary for the proper administration of the Plan.  The
Committee shall keep minutes of its meetings.  If the Committee
consists of more than one (1) member, a quorum shall consist of not fewer than
two (2) members of the Committee and a majority of a quorum may authorize any
action.  Any decision or determination reduced to writing and signed
by all of the members of the Committee shall be as fully effective as if made

       

       

      
        
          
          

        

        
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        by a
majority vote at a meeting duly called and held.  The Committee shall
consist of one (1) or more Directors and may consist of the entire Board;
provided, however, (A) if the Committee consists of less than the entire Board,
then with respect to any Option or Award to an Eligible Individual who is
subject to Section 16 of the Exchange Act, the Committee shall consist of at
least two (2) Directors, each of whom shall be a Nonemployee Director and (B) to
the extent necessary for any Option or Award intended to qualify as
Performance-Based Compensation to so qualify, the Committee shall consist of at
least two (2) Directors, each of whom shall be an Outside
Director.  For purposes of the preceding sentence, if one or more
members of the Committee is not a Nonemployee Director and an Outside Director
but recuses himself or herself or abstains from voting with respect to a
particular action taken by the Committee, then the Committee, with respect to
that action, shall be deemed to consist only of the members of the Committee who
have not recused themselves or abstained from voting.

      

       

      3.2. Subject
to applicable law, the Committee may delegate its authority under the Plan to
any other person or persons, including but not limited to, a subcommittee
comprised of one or more member(s) of the Committee, pursuant to such conditions
or limitations as the Committee may establish, and may grant authority to
officers or subcommittee members to grant Awards and/or execute agreements or
other documents on behalf of the Committee; provided that (i) the Committee may
not authorize any such officer or subcommittee member to designate himself or
herself as a recipient of any Option or Award and (ii) the resolution
authorizing any officer or subcommittee member to grant Options or Awards shall
specify the total number of Options or Awards such officer may
grant.  In the event that the Committee’s authority is delegated to
officers or subcommittee members in accordance with the foregoing, all
provisions of the Plan relating to the Committee shall be interpreted in a
manner consistent with the foregoing by treating any such reference as a
reference to such individual for such purpose.  Any action undertaken
in accordance with the Committee’s delegation of authority hereunder shall have
the same force and effect as if such action was undertaken directly by the
Committee and shall be deemed for all purposes of the Plan to have been taken by
the Committee.

       

      3.3. No member
of the Committee or the Board or any person designated pursuant to Section 3.2 shall be liable for any action, failure to act,
determination or interpretation made in good faith with respect to this Plan or
any transaction hereunder.  The Company hereby agrees to indemnify
each member of the Committee for all costs and expenses and, to the extent
permitted by applicable law, any liability incurred in connection with defending
against, responding to, negotiating for the settlement of or otherwise dealing
with any claim, cause of action or dispute of any kind arising in connection
with any actions in administering this Plan or in authorizing or denying
authorization to any transaction hereunder.

       

      3.4. Subject
to the express terms and conditions set forth herein, the Committee shall have
the power and the discretion from time to time to:

       

      (a) determine
those Eligible Individuals to whom Options shall be granted under the Plan and
the number of such Options to be granted and to prescribe the terms and
conditions (which need not be identical) of each such Option, (including, but
not limited to, the exercise or purchase price (if any), the duration of each
Option, any restriction or limitation, any vesting schedule or acceleration
thereof, or any forfeiture restrictions or waiver thereof, regarding any Option
and the Shares relating thereto, based on such factors, if any, as the

       

      
        
          
          

        

        
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        Committee
shall determine, in its sole discretion), and make any amendment or modification
to any Option Agreement consistent with the terms of the
Plan;

      

       

      (b) select
those Eligible Individuals to whom Awards shall be granted under the Plan and to
determine the number of Shares in respect of which each Award is granted, the
terms and conditions (which need not be identical) of each such
Award  (including, but not limited to, the exercise or purchase price
(if any), the duration of each Award, any restriction or limitation, any vesting
schedule or acceleration thereof, or any forfeiture restrictions or waiver
thereof, regarding any Award and the Shares relating thereto, based on such
factors, if any, as the Committee shall determine, in its sole discretion), and
make any amendment or modification to any Agreement consistent with the terms of
the Plan;

       

      (c) to
construe and interpret the Plan and the Options and Awards granted hereunder and
to establish, amend and revoke rules and regulations for the administration of
the Plan, including, but not limited to, correcting any defect or supplying any
omission, or reconciling any inconsistency in the Plan or in any Agreement, in
the manner and to the extent it shall deem necessary or advisable, including so
that the Plan and the operation of the Plan complies with Rule 16b-3 under the
Exchange Act, the Code to the extent applicable and other applicable law, and
otherwise to make the Plan fully effective.  All decisions and
determinations by the Committee in the exercise of this power shall be final,
binding and conclusive upon the Company, its Subsidiaries, the Optionees and
Grantees, and all other persons having any interest therein;

       

      (d) to
determine the duration and purposes for leaves of absence which may be granted
to an Optionee or Grantee on an individual basis without constituting a
termination of employment or service for purposes of the Plan;

       

      (e) to
exercise its discretion with respect to the powers and rights granted to it as
set forth in the Plan;

       

      (f) generally,
to exercise such powers and to perform such acts as are deemed necessary or
advisable to promote the best interests of the Company with respect to the
Plan;

       

      (g) engage an
agent to (i) maintain records of Participants and holdings under the Plan, (ii)
execute sales transactions in Shares at the direction of an Optionee or Grantee,
(iii) deliver sales proceeds as directed by an Optionee or Grantee, (iv) hold
Shares owned without restriction at the direction of the Optionee or Grantee and
(v) engage in such other activities as the Committee determines from time to
time necessary to administer the Plan; and

       

      (h) generally,
to exercise such powers and to perform such acts as are deemed necessary or
advisable to promote the best interests of the Company with respect to the
Plan.

       

      Notwithstanding
the foregoing, the participation of an Eligible Individual represented by a
collective-bargaining representative shall also be governed by the results of
good-faith collective bargaining and/or any collective bargaining agreement
resulting therefrom.

       

      
        	
                4.  

              	
                Stock Subject to the
      Plan; Grant Limitations.

              

      

       

       

      
        
          
          

        

        
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      4.1. Awards
under the Plan may be in the form of Nonqualified Stock Options, Incentive Stock
Options, Stock Appreciation Rights, Dividend Equivalent Rights, Performance
Units and Performance Shares, Share Awards, Phantom Stock, Restricted Stock
Units and Restricted Stock, cash payments and such other forms as the Committee
in its discretion deems appropriate, including any combination of the
above.  Unless otherwise determined by the Committee, no fractional
Shares shall be issued under the Plan nor shall any right be exercised under the
Plan with respect to a fractional Share.

       

      4.2. Subject
to adjustment pursuant to Section 13, the maximum
number of Shares that may be made the subject of Options and Awards granted
under the Plan is 7,696,786.  The Company shall reserve for the
purposes of the Plan, out of its authorized but unissued Shares or out of Shares
held in the Company’s treasury, or partly out of each, such number of Shares as
shall be determined by the Board in its discretion.  The aggregate
number of Shares subject to Options and/or Stock Appreciation Rights granted
under this Plan during any calendar year to any one Participant shall not exceed
1,000,000 which number shall be calculated and adjusted pursuant to Section 13 only to the extent that such calculation or
adjustment will not affect the status of any Option and/or Award intended to
qualify as “performance-based compensation” under Code Section
162(m).  The maximum number of Shares that may be granted under this
Plan during any calendar year to any one Participant as Performance Shares or
Performance Units (in either case, denominated in Shares) shall not exceed
1,000,000, which number shall be calculated and adjusted pursuant to Section 13 only to the extent that such calculation or
adjustment will not affect the status of any such Performance Shares or
Performance Units intended to qualify as “performance-based compensation” under
Code Section 162(m).  The aggregate number of Shares that may be
issued pursuant to the exercise of Incentive Stock Options granted under this
Plan shall not exceed 7,696,786 which number shall be calculated and adjusted
pursuant to Section 13 only to the extent that such
calculation or adjustment will not affect the status of any Option intended to
qualify as an Incentive Stock Option under Code Section 422. The maximum cash
amount payable pursuant to an Award denominated in cash and granted in any
calendar year to any Participant under this Plan that is intended to satisfy the
requirements for “performance-based compensation” under Code Section 162(m)
shall not exceed $6,000,000.

       

      4.3. Upon the
granting of an Option or an Award, the number of Shares available under Section
4.2 for the granting of further Options and Awards
shall be reduced as follows:  in connection with the granting of an
Option or an Award (other than the granting of a Performance Unit denominated in
dollars), the number of Shares shall be reduced by the number of Shares in
respect of which the Option or Award is granted or denominated; provided,
however, that (i) if any Option is exercised by tendering Shares, either
actually or by attestation, to the Company as full or partial payment of the
exercise price, the maximum number of Shares available under Section 4.2 shall be increased by the number of Shares so
tendered and (ii) upon settlement of Stock Appreciation Rights, the maximum
number of Shares available under Section 4.2 shall
be increased by the excess of (x) the number of Shares covered by portion of the
Stock Appreciation Right exercised, over (y) the number of Shares delivered in
connection with the settlement of the Stock Appreciation Right.

       

      4.4. Whenever
any outstanding Option or Award or portion thereof expires, is canceled, is
settled in cash (including the settlement of tax withholding obligations using
Shares) 

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

         

         

        or is
otherwise terminated for any reason without having been exercised or payment
having been made by issuance of Shares in respect of the Option or Award, the
Shares allocable to the expired, canceled, settled or otherwise terminated
portion of the Option or Award may again be the subject of Options or Awards
granted hereunder.

      

       

      
        	
                5.  

              	
                Option Grants for
      Eligible Individuals.

              

      

       

      5.1. Authority of
Committee.  Subject
to the provisions of the Plan, the Committee shall have full and final authority
to select those Eligible Individuals who will receive Options, and the terms and
conditions of the grant to such Eligible Individuals shall be set forth in an
Agreement.  An Award of Options may include Incentive Stock Options,
Non-Qualified Stock Options, or a combination thereof; provided, however, that
an Incentive Stock Option may only be granted to an employee of the Company or a
Subsidiary and no Incentive Stock Option shall be granted more than ten years
after the earlier of (i) the date this Plan is adopted by the Board or (ii) the
date this Plan is approved by the Company’s shareholders.

       

      5.2. Exercise
Price.  Subject
to Section 6.5, the purchase price or the manner in
which the exercise price is to be determined for Shares under each Option shall
be determined by the Committee in its discretion and set forth in the Agreement;
provided, however, unless otherwise determined by the Committee, the exercise
price per Share under each Option shall not be less than one hundred percent
(100%) of the Fair Market Value of a Share on the date the Option is granted
unless the Options are substituted for options issued by another company where
the Company or a Subsidiary acquires (whether by purchase, merger, or otherwise)
all or substantially all of outstanding capital stock or assets of another
company or in the event of any reorganization or other transaction qualifying
under Code Section 424.

       

      5.3. Maximum
Duration.  Options
granted hereunder shall be for such term as the Committee shall determine in its
discretion, provided that an Option shall not be exercisable after the
expiration of ten (10) years from the date it is granted.  Unless the
Committee provides otherwise in the Agreement or in an employment agreement
between the Optionee and the Company, subject to the preceding sentence in this
Section 5.3, an Option (i) may, upon the death,
Disability or Retirement of the Optionee prior to the expiration of the Option,
be exercised for up to two (2) years following the date of the Optionee’s death,
Disability or Retirement, as applicable, but in any event no later than the
original expiration date, (ii) may, following the voluntary termination of
service by the Optionee or a termination other than for Cause, be exercised for
up to sixty (60) days following the date of termination, but in any event no
later than the original expiration date, and (iii) shall, in the event of a
termination of service for Cause, be terminated effective immediately prior to
such termination, whether or not such Option was then exercisable and, provided
further, that termination for this purpose is the later of (x) with respect to
an Optionee who upon termination of employment as an employee remains an
Eligible Individual shall occur only when the Optionee is no longer an Eligible
Individual and (y) with respect to an Optionee who is receiving severance
payments shall occur when such payments cease, provided Optionee enters into a
release in the form acceptable to the Company. The Committee may, in its
discretion, subsequent to the granting of any Option, extend the term thereof,
but in no event shall the term as so extended exceed the maximum term provided
for in the first sentence hereof.

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      5.4. Vesting.  Subject
to Section 6.4 addressing the effect of a Change in
Control, each Option shall entitle the Eligible Individual to purchase, in whole
at any time or in part from time to time, twenty-five percent (25%) of the total
number of Shares covered by the Option as of the first anniversary of the date
of grant and an additional twenty-five percent (25%) of the total number of
Shares covered by the Option after the expiration of each of the second, third
and fourth anniversaries of the date of grant while the Optionee is an Eligible
Individual; provided however, that Options (i) may become exercisable in such
other installments (which need not be equal) and at such times as may be
designated by the Committee in its discretion and set forth in the Agreement and
(ii) unless the Committee provides otherwise in the Agreement or in an
employment agreement between the Optionee and the Company, shall continue to
vest only while the Optionee is an Eligible
Individual.  Notwithstanding the foregoing, the vesting of any Option
shall continue during the period the Optionee is receiving severance payments
provided Optionee enters into a release in the form acceptable to the
Company.  To the extent not exercised, installments shall accumulate
and be exercisable, in whole or in part, at any time after becoming exercisable,
but not later than the date the Option expires.  The Committee may, in
its discretion permit the continued vesting or, accelerate the exercisability of
any Option or portion thereof at any time.

       

      5.5. Option
Repricing.  Notwithstanding
anything contained in this Plan to the contrary, the Committee may, in its sole
discretion, approve an Option repricing without stockholder
approval.  For the purposes of the preceding sentence, an “Option
repricing” shall include reducing the exercise price per share of any
outstanding Option, permitting the cancellation, forfeiture or tender of
outstanding Options in exchange for other Awards or for new Options with a lower
exercise price per Share, by any other method repricing or replacing any
outstanding Option, or taking any other action deemed to be a “repricing” under
the rules of the national securities exchange or other market on which the
Shares are listed or admitted to trading.

       

      
        	
                6.  

              	
                Terms and Conditions
      Applicable to All Options.

              

      

       

      6.1. Non-Transferability.

       

      (a) No Option
shall be transferable by the Optionee otherwise than by will or by the laws of
descent and distribution or pursuant to a domestic relations order (within the
meaning of Rule 16a-12 promulgated under the Exchange Act), and an Option shall
be exercisable during the lifetime of such Optionee only by the Optionee or his
or her guardian or legal representative.  Notwithstanding the
foregoing, the Committee may, in its discretion, set forth in the Agreement
evidencing an Option at the time of grant or thereafter, that the Option may be
transferred to members of the Optionee’s immediate family, to trusts solely for
the benefit of such immediate family members and to partnerships in which such
family members and/or trusts are the only partners, and for purposes of this
Plan, a transferee of an Option shall be deemed to be the
Optionee.  For this purpose, immediate family means the Optionee’s
spouse, parents, children, stepchildren and grandchildren and the spouses of
such parents, children, stepchildren and grandchildren.  The terms of
an Option shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the Optionee.

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      (b) Notwithstanding
anything to the contrary herein, including, without limitation, the provisions
of Section 5.3, if an Option has been transferred
in accordance with this Section 6.1, the Option
shall be exercisable solely by the transferee.  The Option shall
remain subject to the provisions of the Plan, including that it shall be
exercisable only to the extent that the Optionee or Optionee’s estate would have
been entitled to exercise it if the Optionee had not transferred the
Option.  Unless otherwise provided in the Optionee’s Agreement, in the
event of the death of the Optionee prior to the expiration of the right to
exercise the transferred Option, the period during which the Option shall be
exercisable shall terminate on the date one (1) year following the date of the
Optionee’s death.  In the event of the death of the transferee prior
to the expiration of the right to exercise the Option, the period during which
the Option shall be exercisable by the executors, administrators, legatees and
distributees of the transferee’s estate, as the case may be, shall terminate on
the date one (1) year following the date of the transferee’s
death.  In no event, however, shall the Option be exercisable after
the expiration of the Option period set forth in the terms and conditions of the
Agreement.  The Option shall be subject to such other rules as the
Committee shall determine in its discretion.

       

      6.2. Method of
Exercise.  The
exercise of an Option shall be made only by a written notice delivered in
person, electronically or by mail to the Company (or its designee) specifying
the number of Shares to be exercised and, to the extent applicable, accompanied
by payment therefor and otherwise in accordance with the Agreement pursuant to
which the Option was granted; provided, however, that Options may not be
exercised by an Optionee for six (6) months following a hardship distribution to
the Optionee, to the extent such exercise is prohibited under Treasury
Regulation § 1.401(k)-1(d)(3)(B)(2)(iv)(E)(2).  The exercise price for
any Shares purchased pursuant to the exercise of an Option shall be paid, in any
of the following forms (or any combination thereof): (a) cash, (b) the transfer
of Shares, either actually or by attestation, to the Company, such transfer to
be upon such terms and conditions as determined by the Committee in its
discretion, (c) withholding of Shares deliverable upon exercise or (d) a
combination of any of the foregoing or such other methods as determined by the
Committee in its discretion; provided, however, that the Committee may determine
at any time in its discretion that the exercise price shall be paid only in
cash.  In addition, if Shares are regularly traded on an established
securities market at the time of exercise, Options may be exercised through a
registered broker-dealer pursuant to such “same day sale” procedures which are,
from time to time, deemed acceptable by the Committee in its
discretion.  Any Shares transferred to or withheld by the Company as
payment of the exercise price under an Option shall be valued at their Fair
Market Value on the date of exercise of such Option.  If requested by
the Committee in its discretion, the Optionee shall deliver the Agreement
evidencing the Option to the Company (or its designee) who shall endorse thereon
a notation of such exercise and return such Agreement to the
Optionee.  Unless otherwise determined by the Committee in its
discretion, no fractional Shares (or cash in lieu thereof) shall be issued upon
exercise of an Option and the number of Shares that may be purchased upon
exercise shall be rounded to the nearest number of whole Shares.

       

      6.3. Rights of
Optionees.  No
Optionee shall be deemed for any purpose to be the owner of any Shares subject
to any Option unless and until (a) the Option shall have been exercised pursuant
to the terms thereof, (b) the Company shall have issued and delivered Shares to
the Optionee, and (c) the Optionee’s name shall have been entered as a
stockholder of record on the books of the Company.  Thereupon, the
Optionee shall have full voting, dividend and 

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

         

         

        other
ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.

      

       

      6.4. Effect of Change in
Control.  Notwithstanding
any other provision contained in this Plan, except as otherwise provided in an
Agreement or employment agreement between the Optionee and the Company, in the
event of a Change in Control, any unvested Options issued under this Plan to any
Optionee shall vest and become fully exercisable, subject to the provisions of
Section 12.2, upon (i) the termination by the
Company, Subsidiary, or Affiliate of the Optionee’s employment other than for
Cause during the thirteen (13)  month period following the Change in
Control (taking into account the deemed termination provisions of the last
paragraph of such definition) or (ii) the termination of the Optionee’s
employment for Good Reason, during the thirteen (13)  month period
following the Change in Control (taking into account the deemed termination
provisions of the last paragraph of such definition).  Except as
otherwise provided in an employment agreement between the Optionee and the
Company, in the event of a Change in Control, the Committee may, in its
discretion, do one or more of the following:  (i) shorten the period
during which Options are exercisable (provided they remain exercisable for at
least thirty (30) days after the date on which notice of such shortening is
given to the Optionees); (ii) arrange to have the surviving or successor entity
assume the Options or grant replacement options with appropriate adjustments in
the Option prices and adjustments in the number and kind of securities issuable
upon exercise so that the options or their replacements either (A) represent the
right to purchase the shares of stock, securities or other property (including
cash) as may be issuable or payable as a result of a Change in Control with
respect to or in exchange for the number of Shares purchasable and receivable
upon the exercise of the Options had such exercise occurred in full prior to
such Change in Control, or (B) represent the right to purchase equity securities
of such surviving or successor entity, but only if such equity securities are
actively traded on an established securities market or (iii) cancel the Options
upon the payment to the Optionee in cash and/or securities of the surviving or
successor entity (but only if such securities are actively traded on an
established securities market) with respect to each Option to the extent then
exercisable (including any Options as to which the exercise has been accelerated
in accordance with this Section 6.4), of an amount
that is equal to the Fair Market Value of the Shares subject to the Option or
portion thereof over the aggregate exercise price for such Shares under the
Option or portion thereof surrendered at the effective time of the Change in
Control.  The Committee may, in its discretion, also provide for one
or more of the foregoing alternatives in any particular Option
Agreement.

       

      6.5. ISOs.  Notwithstanding
anything to the contrary in Section 5 and this
Section 6, in the case of the grant of an Option
intending to quality as an ISO: (i) if the Optionee is a Ten Percent Holder, the
purchase price of such Option must be at least one hundred and ten percent
(110%) of the Fair Market Value of the Shares on the date of grant and the
Option must expire within a period of not more than five (5) years from the date
of grant, and (ii) termination of employment will occur when the person to whom
an ISO was granted ceases to be an employee (as determined in accordance with
Code Section 3401(c) and the regulations promulgated thereunder) of the Company
and its Subsidiaries.  Notwithstanding anything in Section 5 and this Section 6 to
the contrary, Options designated as ISOs shall not be eligible for treatment
under the Code as ISOs to the extent that either (a) the aggregate Fair Market
Value of Shares (determined as of the time of grant) with respect to which such
Options are exercisable for the first time by the Participant during any
calendar year (under all plans of the Company and 

       

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

         

         

        any
Subsidiary) exceeds $100,000, taking Options into account in the order in which
they were granted, or (b) such Options otherwise remain exercisable but are not
exercised within three (3) months of termination of employment (or such other
period of time provided in Code Section 422).  Should any Option
granted under this Plan be designated an “Incentive Stock Option,” but fail, for
any reason, to meet the requirements of the Code for such a designation, then
such Option shall be deemed to be a Non-Qualified Stock Option and shall be
valid as such according to its terms.

      

       

      
        	
                7.  

              	
                Stock Appreciation
      Rights.

              

      

       

      The
Committee may, in its discretion, either alone or in connection with the grant
of an Option, grant Stock Appreciation Rights in accordance with the Plan, the
terms and conditions of which shall be set forth in an Agreement.  If
granted in connection with an Option, a Stock Appreciation Right shall cover the
same Shares covered by the Option (or such lesser number of Shares as the
Committee may determine in its discretion) and shall, except as provided in this
Section 7, be subject to the same terms and
conditions as the related Option.

       

      7.1. Time of
Grant.  A
Stock Appreciation Right may be granted (a) at any time if unrelated to an
Option, or (b) if related to an Option, either at the time of grant or at any
time thereafter during the term of the Option.

       

      7.2. Stock Appreciation Right
Related to an Option.

       

      (a) Exercise.  A
Stock Appreciation Right granted in connection with an Option shall be
exercisable at such time or times and only to the extent that the related
Options are exercisable, and will not be transferable except to the extent the
related Option may be transferable.

       

      (b) Amount
Payable.  Upon the exercise of a Stock Appreciation Right
related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (i) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the per Share exercise price under the related Option, by (ii) the number of
Shares as to which such Stock Appreciation Right is being
exercised.  Notwithstanding the foregoing, the Committee may, in its
discretion, limit in any manner the amount payable with respect to any Stock
Appreciation Right by including such a limit in the Agreement evidencing the
Stock Appreciation Right at the time it is granted.

       

      (c) Treatment of Related Options
and Stock Appreciation Rights Upon Exercise.  Upon the exercise
of a Stock Appreciation Right granted in connection with an Option, the Option
shall be canceled to the extent of the number of Shares as to which the Stock
Appreciation Right is exercised, and upon the exercise of an Option granted in
connection with a Stock Appreciation Right, the Stock Appreciation Right shall
be canceled to the extent of the number of Shares as to which the Option is
exercised or surrendered.

       

      7.3. Stock
Appreciation Right Unrelated to an Option.The
Committee may, in its discretion, grant to Eligible Individuals Stock
Appreciation Rights unrelated to Options.  Stock Appreciation Rights
unrelated to Options shall contain such terms and conditions as to
exercisability (subject to Section 7.7), vesting
and duration as the Committee shall determine in 

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

         

         

        its
discretion, but in no event shall they have a term of greater than ten (10)
years.  Unless the Committee provides otherwise in the Agreement or in
an employment agreement between the Grantee and the Company, subject to the
preceding sentence in this Section 7.3, a Stock
Appreciation Right (i) may, upon the death, Disability or Retirement of the
Grantee prior to the expiration of the Stock Appreciation Right, be exercised
for up to two (2) years following the date of the Grantee’s death, Disability or
Retirement, but in any event no later than the expiration date, as applicable,
(ii) may, following the voluntary termination of service by the Grantee or a
termination other than for Cause, be exercised for up to sixty (60) days
following the date of termination, but in any event no later than the expiration
date, and (iii) shall, in the event of a termination of service for Cause, be
terminated effective immediately prior to such termination, whether or not such
Stock Appreciation Right was then exercisable.  Upon exercise of a
Stock Appreciation Right unrelated to an Option, the Grantee shall be entitled
to receive an amount determined by multiplying (a) the excess of the Fair Market
Value of a Share on the date preceding the date of exercise of such Stock
Appreciation Right over the Fair Market Value of a Share on the date the Stock
Appreciation Right was granted, by (b) the number of Shares as to which the
Stock Appreciation Right is being exercised.

      

       

      7.4. Non-Transferability.  No
Stock Appreciation Right shall be transferable by the Grantee otherwise than by
will or by the laws of descent and distribution or pursuant to a domestic
relations order (within the meaning of Rule 16a-12 promulgated under the
Exchange Act), and such Stock Appreciation Right shall be exercisable during the
lifetime of such Grantee only by the Grantee or his or her guardian or legal
representative.  The terms of such Stock Appreciation Right shall be
final, binding and conclusive upon the beneficiaries, executors, administrators,
heirs and successors of the Grantee.

       

      7.5. Method of
Exercise.  Stock
Appreciation Rights shall be exercised by a Grantee only by a written notice
delivered in person, electronically or by mail to the Company (or its designee)
specifying the number of Shares with respect to which the Stock Appreciation
Right is being exercised.  If requested by the Committee in its
discretion, the Grantee shall deliver the Agreement evidencing the Stock
Appreciation Right being exercised and the Agreement evidencing any related
Option to the Company (or its designee) who shall endorse thereon a notation of
such exercise and return such Agreement to the Grantee.

       

      7.6. Form of
Payment.  Payment
of the amount determined under Sections 7.2(b) or
7.3 may be made in the discretion of the Committee
solely in whole Shares in a number determined at their Fair Market Value on the
date preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in a combination of cash and Shares.  If the Committee, in
its discretion, decides to make full payment in Shares and the amount payable
results in a fractional Share, payment for the fractional Share will be made in
cash.

       

      7.7. Effect of Change in
Control.  Notwithstanding
any other provision contained in this Plan, except as otherwise provided in an
Agreement or employment agreement between the Grantee and the Company, in the
event of a Change in Control, any unvested Stock Appreciation Rights issued
under this Plan to any Grantee shall vest and become fully exercisable, subject
to the provisions of Section 12.2, upon (i) the
termination by the Company, Subsidiary, or Affiliate of the Grantee’s employment
other than for Cause, during the thirteen (13)  month period following
the Change in Control (taking into account the deemed termination provisions of
the last paragraph of such definition) or (ii) the termination of the Grantee’s
employment for Good Reason, during the thirteen (13)  month period
following the Change in Control (taking into account the deemed termination

       

      
        
          
          

        

        
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        provisions
of the last paragraph of such definition).  Except as otherwise
provided in an employment agreement between the Grantee and the Company, in the
event of a Change in Control, the Committee may, in its discretion, do one or
more of the following:  (i) shorten the period during which Stock
Appreciate Rights are exercisable (provided they remain exercisable for at least
thirty (30) days after the date on which notice of such shortening is given to
the Grantees); (ii) arrange to have the surviving or successor entity assume the
Stock Appreciation Rights or grant replacement Stock Appreciation Rights with
appropriate adjustments so that the Stock Appreciation Rights or their
replacements represent the right to receive cash as may be payable as a result
of a Change in Control with respect to the amount of cash receivable upon the
exercise of the Stock Appreciation Rights had such exercise occurred in full
prior to such Change in Control, or (iii) cancel Stock Appreciation Rights upon
the payment to the Grantees in cash and/or securities of the surviving or
successor entity (but only if such securities are actively traded on an
established securities market) with respect to each Stock Appreciation Rights to
the extent then exercisable (including any Stock Appreciation Rights as to which
the exercise has been accelerated in accordance with this Section 7.7), of an amount that is equal to the Fair Market
Value of the Shares subject to the Stock Appreciation Right or portion thereof
over the aggregate exercise price for such Shares under the Stock Appreciation
Right or portion thereof surrendered at the effective time of the Change in
Control.  The Committee may, in its discretion, also provide for one
or more of the foregoing alternatives in any particular
Agreement.

      

       

      
        	
                8.  

              	
                Dividend Equivalent
      Rights.

              

      

       

      Dividend
Equivalent Rights may be granted to Eligible Individuals in tandem with an
Option or Award or as a separate Award.  The terms and conditions
applicable to each Dividend Equivalent Right shall be specified in the Agreement
under which the Dividend Equivalent Right is granted.  Amounts payable
in respect of Dividend Equivalent Rights may be payable currently or deferred
until the lapsing of restrictions on such Dividend Equivalent Rights or until
the vesting, exercise, payment, settlement or other lapse of restrictions on the
Option or Award to which the Dividend Equivalent Rights relate.  In
the event that the amount payable in respect of Dividend Equivalent Rights is to
be deferred, the Committee shall, in its discretion, determine whether such
amount is to be held in cash or reinvested in Shares or deemed (notionally) to
be reinvested in Shares.  If amounts payable in respect of Dividend
Equivalent Rights are to be held in cash, there may be credited at the end of
each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum as the Committee may, in its
discretion, determine.  Dividend Equivalent Rights may be settled in
cash or Shares or a combination thereof, in a single installment or multiple
installments as the Committee, in its discretion, determines.

       

      
        	
                9.  

              	
                Restricted Stock and
      Restricted Stock Units.

              

      

       

      9.1. Grant.  The
Committee may, in its discretion, grant Awards to Eligible Individuals of
Restricted Stock and/or Restricted Stock Units, which shall be evidenced by an
Agreement.  Restricted Stock is a grant or issuance of Shares the
retention, vesting and/or transferability of which is subject during specified
periods of time to such conditions (including 

       

      
        
          
          

        

        
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        continued
employment or performance conditions) and terms as the Committee deems
appropriate. Restricted Stock Units are Awards denominated in units of Shares
under which the issuance of Shares is subject to such conditions (including
continued employment or performance conditions) and terms as the Committee deems
appropriate. Each Agreement shall contain such restrictions, terms and
conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share certificates of Restricted
Stock.  For example, the Committee may determine that some or all
certificates representing Shares of Restricted Stock shall bear the following
legend: “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VESTING
CONDITIONS AND CERTAIN RESTRICTIONS ON TRANSFER, SALE AND HYPOTHECATION AND
CERTAIN REPURCHASE RIGHTS.  A COMPLETE STATEMENT OF THE TERMS AND
CONDITIONS GOVERNING SUCH RESTRICTIONS IS SET FORTH IN THE CHARTER
COMMUNICATIONS, INC. 2009 STOCK INCENTIVE PLAN AND IN A RESTRICTED STOCK AWARD
AGREEMENT. A COPY OF THE PLAN AND AWARD AGREEMENT ARE ON FILE AT THE
CORPORATION’S PRINCIPAL OFFICE.”  Awards of Restricted Stock and
Restricted Stock Units shall be subject to the terms and provisions set forth
below in this Section 9.

      

       

      9.2. Rights of
Grantee.  Shares
of Restricted Stock granted pursuant to an Award hereunder shall be issued in
the name of the Grantee as soon as reasonably practicable after the Award is
granted provided that the Grantee, to the extent required by the Committee and
in the manner specified by the Committee, has executed an Agreement evidencing
the Award, the appropriate blank stock powers and, in the discretion of the
Committee, an escrow agreement and any other documents which the Committee may,
in its discretion, require as a condition to the issuance of such
Shares.  If a Grantee shall fail, to the extent required by the
Committee, to execute the Agreement evidencing a Restricted Stock Award, or any
documents which the Committee may, in its discretion, require within the time
period prescribed by the Committee at the time the Award is granted, the Award
shall be null and void.  At the discretion of the Committee, Shares
issued in connection with a Restricted Stock Award shall be deposited together
with the stock powers with an escrow agent (which may be the Company) designated
by the Committee.  Unless the Committee in its discretion determines
otherwise and as set forth in the Agreement, upon delivery of the Shares to the
escrow agent, the Grantee shall have all of the rights of a stockholder with
respect to such Shares, including the right to vote the Shares and to receive
all dividends or other distributions paid or made with respect to the
Shares.  Participants shall have no rights as a stockholder with
respect to Shares underlying Restricted Stock Units unless and until such Shares
are reflected as issued and outstanding Shares on the Company’s stock
ledger.

       

      9.3. Non-Transferability.  Until
all restrictions upon the Shares of Restricted Stock awarded to a Grantee shall
have lapsed in the manner set forth in Section 9.4,
such Shares shall not be sold, transferred or otherwise disposed of and shall
not be pledged or otherwise hypothecated.  No Restricted Stock Unit
shall be transferable by the Optionee otherwise than by will or by the laws of
descent and distribution or pursuant to a domestic relations order (within the
meaning of Rule 16a-12 promulgated under the Exchange Act).

       

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      9.4. Lapse of
Restrictions.

       

      (a) Generally.  Restrictions
upon Shares of Restricted Stock awarded hereunder shall lapse, and Restricted
Stock Units shall vest, at such time or times and on such terms and conditions
as the Committee may determine in its discretion.  The Agreement
evidencing the Award shall set forth any such restrictions.

       

      (b) Effect of Change in
Control.  Notwithstanding any other provision contained in this
Plan, except as otherwise provided in an Agreement or employment agreement
between the Grantee and the Company, in the event of a Change in Control, any
restrictions with respect to Restricted Stock issued under this Plan to any
Grantee shall lapse and Restricted Stock Units issued under this Plan to any
Grantee shall vest, subject to the provisions of Section 12.2, upon (i) the termination by the Company,
Subsidiary, or Affiliate of the Optionee’s employment other than for Cause,
during the thirteen (13)  month period following the Change in Control
(taking into account the deemed termination provisions of the last paragraph of
such definition) or (ii) the termination of the Optionee’s employment for Good
Reason, during the thirteen (13) month period following the Change in Control
(taking into account the deemed termination provisions of the last paragraph of
such definition).  Except as otherwise provided in an employment
agreement between the Grantee and the Company, in the event of a Change in
Control, the Committee may, in its discretion, do one or more of the
following:  (i) arrange to have the surviving or successor entity
assume the Restricted Stock or Restricted Stock Units or grant replacement
Restricted Stock or Restricted Stock Units with appropriate adjustments in the
number and kind of securities so that the Restricted Stock or Restricted Stock
Unit Award or its replacement either (x) represents the right to receive cash or
Shares as may be payable as a result of a Change in Control with respect to the
amount of cash or Shares receivable upon the lapse of the restrictions on the
Restricted Stock or Restricted Stock Units had such lapse occurred prior to such
Change in Control, or (y) represents the right to the equity securities of the
surviving or successor entity, but only if such equity securities are actively
traded on an established securities market, or (ii) cancel the Restricted Stock
or Restricted Stock Unit Award upon the payment to the Grantees in cash and/or
securities of the surviving or successor entity (but only if such securities are
actively traded on an established securities market), with respect to each
Restricted Stock and Restricted Stock Unit Award to the extent then lapsed
(including any Restricted Stock and Restricted Stock Units as to which the lapse
of restrictions has been accelerated in accordance with this Section 9.4(b)), of an amount
that is equal to the Fair Market Value of the Shares subject to the Restricted
Stock or Restricted Stock Unit Award surrendered at the effective time of the
Change in Control.  The Committee may, in its discretion, also provide
for one or more of the foregoing alternatives in any particular
Agreement.

       

      9.5. Treatment of
Dividends.  At
the time an Award of Shares of Restricted Stock is granted, the Committee may,
in its discretion, determine that the payment to the Grantee of dividends, or a
specified portion thereof, declared or paid on such Shares by the Company shall
be (a) deferred until the lapsing of the restrictions imposed upon such Shares
and (b) held by the Company for the account of the Grantee until such
time.  In the event that dividends are to be deferred, the Committee
shall, in its discretion, determine whether such dividends are to be reinvested
in Shares (which shall be held as additional Shares of Restricted Stock) or held
in cash, or, if such dividends are paid in Shares, whether the Shares shall be
deposited with the Company and subject to the same restrictions on
transferability and forfeitability as the Shares of 

       

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

         

         

        Restricted
Stock with respect to which they were paid.  If deferred dividends are
to be held in cash, there may be credited at the end of each year (or portion
thereof) interest on the amount of the account at the beginning of the year at a
rate per annum as the Committee may, in its discretion,
determine.  Payment of deferred dividends in respect of Shares of
Restricted Stock (whether held in cash or as additional Shares of Restricted
Stock), together with interest accrued thereon, if any, shall be made upon the
lapsing of restrictions imposed on the Shares in respect of which the deferred
dividends were paid, and any dividends deferred (together with any interest
accrued thereon) in respect of any Shares of Restricted Stock shall be forfeited
upon the forfeiture of such Shares.  Shares underlying Restricted
Stock Units shall be entitled to dividends or dividend equivalents only to the
extent and under the terms provided by the Committee.

      

       

      9.6. Delivery of
Shares.  Upon
the lapse of the restrictions on Shares of Restricted Stock and upon the vesting
of Restricted Stock Units, the Committee shall cause a stock certificate to be
promptly delivered to the Grantee with respect to such Shares, free of the
restrictions set forth in this Section 9.  Notwithstanding the foregoing, the
Committee may impose such additional restrictions as it may deem advisable,
including, but not limited to, restrictions related to applicable federal
securities laws, the requirements of any national securities exchange or system
upon which Shares are then listed or traded, or any blue sky or state securities
laws.

       

      
        	
                10.  

              	
                Performance
      Awards.

              

      

       

      10.1. Performance
Units.  The
Committee may, in its discretion, grant Awards of Performance Units to Eligible
Individuals, the terms and conditions of which shall be set forth in an
Agreement.  Performance Units may be denominated in Shares or a
specified dollar amount and, contingent upon the attainment of specified
Performance Objectives within the Performance Cycle, represent the right to
receive payment as provided in Section 10.3(c) of
(i) in the case of Share-denominated Performance Units, the Fair Market Value of
a Share on the date the Performance Unit was granted, the date the Performance
Unit became vested or any other date specified by the Committee in its
discretion, (ii) in the case of dollar-denominated Performance Units, the
specified dollar amount or (iii) a percentage (which may be more than one
hundred percent (100%)) of the amount described in clause (i) or (ii) depending
on the level of Performance Objective attainment; provided, however, that, the
Committee may, in its discretion, at the time a Performance Unit is granted
specify a maximum amount payable in respect of a vested Performance
Unit.  Each Agreement shall specify the number of Performance Units to
which it relates, the Performance Objectives which must be satisfied in order
for the Performance Units to vest and the Performance Cycle within which such
Performance Objectives must be satisfied.

       

      (a) Vesting and
Forfeiture.  Subject to Sections 10.3(c) and 10.4, a
Grantee shall become vested with respect to the Performance Units to the extent
that the Performance Objectives set forth in the Agreement are satisfied for the
Performance Cycle.

       

      (b) Payment of
Awards.  Subject to Section 10.3(c), payment to Grantees in respect of vested
Performance Units shall be made as soon as practicable after the last day of the
Performance Cycle to which such Award relates unless the Agreement evidencing
the Award provides for the deferral of payment, in which event the terms and
conditions of the deferral shall 

       

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

         

         

        be set
forth in the Agreement.  Subject to Section 10.4, such payments may be made entirely in Shares
valued at their Fair Market Value, entirely in cash, or in such combination of
Shares and cash as the Committee shall, in its discretion, determine at any time
prior to such payment; provided, however, that if the Committee in its
discretion determines to make such payment entirely or partially in Shares of
Restricted Stock, the Committee must determine the extent to which such payment
will be in Shares of Restricted Stock and the terms of such Restricted Stock at
the time the Award is granted.

      

       

      10.2. Performance
Shares.  The
Committee may, in its discretion, grant Awards of Performance Shares to Eligible
Individuals, the terms and conditions of which shall be set forth in an
Agreement.  Each Agreement may require that an appropriate legend be
placed on Share certificates.  Awards of Performance Shares shall be
subject to the following terms and provisions:

       

      (a) Rights of
Grantee.  The Committee shall provide at the time an Award of
Performance Shares is made the time or times at which the actual Shares
represented by such Award shall be issued in the name of the Grantee; provided,
however, that no Performance Shares shall be issued until the Grantee has, to
the extent required by the Committee and in the manner specified by the
Committee, executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a condition to the
issuance of such Performance Shares.  If a Grantee shall fail, to the
extent required by the Committee, to execute the Agreement evidencing an Award
of Performance Shares, the appropriate blank stock powers and, in the discretion
of the Committee, an escrow agreement and any other documents which the
Committee may require within the time period prescribed by the Committee at the
time the Award is granted, the Award shall be null and void.  At the
discretion of the Committee, Shares issued in connection with an Award of
Performance Shares shall be deposited together with the stock powers with an
escrow agent (which may be the Company) designated by the
Committee.  Except as restricted by the terms of the Agreement, upon
delivery of the Shares to the escrow agent, the Grantee shall have, in the
discretion of the Committee, all of the rights of a stockholder with respect to
such Shares, including the right to vote the Shares and to receive all dividends
or other distributions paid or made with respect to the Shares.

       

      (b) Non-Transferability.  Until
any restrictions upon the Performance Shares awarded to a Grantee shall have
lapsed in the manner set forth in Sections 10.2(c) or 10.4, such
Performance Shares shall not be sold, transferred or otherwise disposed of and
shall not be pledged or otherwise hypothecated, nor shall they be delivered to
the Grantee.  The Committee may, in its discretion, also impose such
other restrictions and conditions on the Performance Shares, if any, as it deems
appropriate.

       

      (c) Lapse of
Restrictions.  Subject to Sections 10.3(c) and 10.4,
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such terms,
conditions and satisfaction of Performance Objectives as the Committee may, in
its discretion, determine at the time an Award is granted.

       

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      (d) Treatment of
Dividends.  At the time the Award of Performance Shares is
granted, the Committee may, in its discretion, determine that the payment to the
Grantee of dividends, or a specified portion thereof, declared or paid on Shares
represented by such Award which have been issued by the Company to the Grantee
shall be (i) deferred until the lapsing of the restrictions imposed upon such
Performance Shares and (ii) held by the Company for the account of the Grantee
until such time.  In the event that dividends are to be deferred, the
Committee shall determine whether such dividends are to be reinvested in Shares
(which shall be held as additional Performance Shares) or held in cash or, if
such dividends are paid in Shares, whether the Shares shall be deposited with
the Company and subject to the same restrictions on transferability and
forfeitability as the Performance Shares with respect to which they were
paid.  If deferred dividends are to be held in cash, there may be
credited at the end of each year (or portion thereof) interest on the amount of
the account at the beginning of the year at a rate per annum as the Committee
may, in its discretion, determine.  Payment of deferred dividends in
respect of Performance Shares (whether held in cash or in additional Performance
Shares), together with interest accrued thereon, if any, shall be made upon the
lapsing of restrictions imposed on the Performance Shares in respect of which
the deferred dividends were paid, and any dividends deferred (together with any
interest accrued thereon) in respect of any Performance Shares shall be
forfeited upon the forfeiture of such Performance Shares.

       

      (e) Delivery of
Shares.  Upon the lapse of the restrictions on Performance
Shares awarded hereunder, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.

       

      10.3. Performance
Objectives

       

      (a) Establishment.  Performance
Objectives for Performance Awards may be based on and expressed in terms of one
or more of the following business criteria: (i) revenue, (ii) net income, (iii)
operating income, (iv) earnings, (v) net earnings, (vi) Share price, (vii) cash
flow, (viii) EBITDA, (ix) total shareholder return, (x) total shareholder return
relative to peers, (xi) financial returns (including, without limitation, return
on assets, return on equity and return on investment), (xii) cost reduction
targets, (xiii) customer satisfaction, (xiv) customer growth, (xv) employee
satisfaction, (xvi) pre-tax profits, (xvii) net earnings, or (xiii) any
combination of the foregoing.  Performance Objectives (and underlying
business criteria, as applicable) may be in respect of: (i) the performance of
the Company, (ii) the performance of any of its Subsidiaries, (iii) the
performance of any of its Divisions, (iv) a per Share basis, (v) a per
subscriber basis, or (vi) any combination of the
foregoing.  Performance Objectives may be absolute or relative (to
prior performance of the Company or to the performance of one or more other
entities or external indices) and may be expressed in terms of a progression
within a specified range.  The formula for determining Performance
Objectives may include or exclude items to measure specific objectives, such as
losses from discontinued operations, extraordinary, unusual or nonrecurring
gains and losses, the cumulative effect of accounting changes, acquisitions or
divestitures, core process redesigns, structural changes/outsourcing, and
foreign exchange impacts.  The Performance Objectives with respect to
a Performance Cycle shall be established in writing by the Committee by the
earlier of (x) the date on which a quarter of the Performance Cycle has elapsed
or (y) the date which is ninety (90) days after the commencement of the
Performance Cycle, and in any event while the performance relating to the
Performance Objectives remain substantially uncertain.

       

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      (b) Effect of Certain
Events.  At the time of the granting of a Performance Award, or
at any time thereafter, in either case to the extent permitted under Code
Section 162(m) and the regulations thereunder without adversely affecting the
treatment of the Performance Award as Performance-Based Compensation, the
Committee may, in its discretion, provide for the manner in which performance
will be measured against the Performance Objectives (or may adjust the
Performance Objectives) to reflect the impact of specified corporate
transactions, accounting or tax law changes and other extraordinary or
nonrecurring events.

       

      (c) Determination of
Performance.  Prior to the vesting, payment, settlement or
lapsing of any restrictions with respect to any Performance Award that is
intended to constitute Performance-Based Compensation made to a Grantee who is
subject to Code Section 162(m), the Committee shall certify in writing that the
applicable Performance Objectives have been satisfied to the extent necessary
for such Award to qualify as Performance Based Compensation.

       

      10.4. Effect of Change in
Control.  In
the event of a Change in Control, unless otherwise determined by the Committee
in its discretion and set forth in the Agreement evidencing the Award or in an
employment agreement between the Grantee and the Company, and subject to the
provisions of Section 12.2, upon (i) the
termination by the Company, Subsidiary, or Affiliate of the Optionee’s
employment other than for Cause, during the thirteen (13) month period following
the Change in Control (taking into account the deemed termination provisions of
the last paragraph of such definition) or (ii) the termination of the Optionee’s
employment for Good Reason, during the thirteen (13) month period following the
Change in Control (taking into account the deemed termination provisions of the
last paragraph of such definition).

       

      (a) With
respect to Performance Units, the Grantee shall (i) become vested in all
outstanding Performance Units as if all Performance Objectives had been
satisfied at the maximum level and (ii) be entitled to receive in respect of all
Performance Units which become vested as a result of a Change in Control a cash
payment within ten (10) days after termination of employment.

       

      (b) With
respect to Performance Shares, all restrictions shall lapse immediately on all
outstanding Performance Shares as if all Performance Objectives had been
satisfied at the maximum level.

       

      (c) The
Agreements evidencing Performance Shares and Performance Units shall provide for
the treatment of such Awards (or portions thereof), if any, which do not become
vested as the result of a Change in Control, including, but not limited to,
provisions for the adjustment of applicable Performance Objectives.

       

      (d) Notwithstanding
the above, except as otherwise provided in an Agreement or employment agreement
between the Grantee and the Company, the Committee may, in its discretion, do
one or more of the following:  (i) arrange to have the surviving or
successor entity assume the Performance Units or Performance Shares or grant
replacement Performance Units or Performance Shares, as applicable, with
appropriate adjustments so that such Awards or their 

       

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

         

         

        replacements
either (x) represent the right to receive cash or Shares as may be payable as a
result of a Change in Control with respect to the amount of cash or Shares
receivable upon the vesting of the Performance Units or Performance Shares had
such vesting occurred in full prior to such Change in Control, or (y) represent
the right to receive equity securities of the surviving or successor entity, but
only if such equity securities are actively traded on an established securities
market, or (ii) cancel the Performance Units or Performance Shares upon the
payment to the Grantees in cash with respect to each such Award to the extent
then otherwise payable in cash and/or securities of the surviving or successor
entity (but only if such securities are actively traded on an established
securities market) or in Shares (including any Awards as to which vesting or
lapse of restrictions has taken place in accordance with (a) and (b) of this
Section 10), of an amount, with respect to
Performance Units, that is equal to the amount of cash payable as if all
Performance Objectives had been satisfied at the maximum level, and, with
respect to Performance Shares, that is equal to the Fair Market Value of the
Shares payable as if all Performance Objectives had been satisfied at the
maximum level.

      

       

      10.5. Non-Transferability.  Until
the vesting of Performance Units or the lapsing of any restrictions on
Performance Shares, as the case may be, such Performance Units or Performance
Shares shall not be sold, transferred or otherwise disposed of and shall not be
pledged or otherwise hypothecated.

       

      
        	
                11.  

              	
                Other Share Based
      Awards.

              

      

       

      11.1. Share
Awards.  The
Committee may, in its discretion, grant a Share Award to any Eligible Individual
on such terms and conditions as the Committee may determine in its sole
discretion.  Share Awards may be made as additional compensation for
services rendered by the Eligible Individual or may be in lieu of cash or other
compensation to which the Eligible Individual is entitled from the
Company.

       

      11.2. Phantom Stock
Awards.

       

      (a) Grant.  The
Committee may, in its discretion, grant shares of Phantom Stock to any Eligible
Individual.  Such Phantom Stock shall be subject to the terms and
conditions established by the Committee in its discretion and set forth in the
applicable Agreement.

       

      (b) Payment of
Awards.  Upon the vesting of a Phantom Stock Award, the Grantee
shall be entitled to receive a cash payment in respect of each share of Phantom
Stock which shall be equal to the Fair Market Value of a Share as of the date
the Phantom Stock Award was granted, or such other date as determined by the
Committee in its discretion at the time the Phantom Stock Award was
granted.  The Committee may, in its discretion, at the time a Phantom
Stock Award is granted, provide a limitation on the amount payable in respect of
each share of Phantom Stock.  In lieu of a cash payment, the Committee
may, in its discretion, settle Phantom Stock Awards with Shares having a Fair
Market Value equal to the cash payment to which the Grantee has become
entitled.

       

      
        	
                12.  

              	
                Effect of a
      Termination of Employment.

              

      

       

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

       

                                    
12.1. The
Agreement evidencing the grant of each Option and each Award shall set forth the
terms and conditions applicable to such Option or Award upon a termination or
change in the status of the employment of the Optionee or Grantee by the
Company, a Subsidiary or a Division (including a termination or change by reason
of the sale of a Subsidiary or a Division), which shall be as the Committee may,
in its discretion, determine at the time the Option or Award is granted or
thereafter.  In addition, such terms and conditions may be set forth
in an employment agreement between the Eligible Individual and the
Company.

       

      12.2. Excise Tax
Limitation.

       

      (a) Notwithstanding
anything contained in this Plan to the contrary, except as otherwise provided in
an employment agreement between the Eligible Individual and the Company, to the
extent that any payment, distribution or acceleration of vesting to or for the
benefit of the Optionee or Grantee by the Company (within the meaning of Code
Section 280G and the regulations thereunder), whether paid or payable or
distributed or distributable pursuant to the terms of this Plan or otherwise
(the “Total Payments”) is or will be subject to the excise tax imposed under
Code Section 4999 (the “Excise Tax”), then the Total Payments shall be reduced
(but not below zero) if and to the extent that a reduction in the Total Payments
would result in the Optionee or Grantee retaining a larger amount, on an
after-tax basis (taking into account federal, state and local income taxes and
the Excise Tax), than if the Optionee or Grantee received the entire amount of
such Total Payments.  Unless the Optionee or Grantee shall have given
prior written notice specifying a different order to the Company to effectuate
the foregoing, the Company shall reduce or eliminate the Total Payments, by
first reducing or eliminating the portion of the Total Payments which are
payable in cash and then by reducing or eliminating non-cash payments, in each
case in reverse order beginning with payments or benefits which are to be paid
the farthest in time from the Determination (as hereinafter
defined).  Any notice given by the Optionee or Grantee pursuant to the
preceding sentence shall take precedence over the provisions of any other plan,
arrangement or agreement governing the Executive’s rights and entitlements to
any benefits or compensation.

       

      (b) The
determination of whether the Total Payments shall be reduced as provided in
Section 12.2(a) and
the amount of such reduction shall be made at the Company’s expense by an
accounting firm selected by the Optionee or Grantee from among the four largest
accounting firms in the United States or at the Optionee’s or Grantee’s expense
by an attorney selected by the Optionee or Grantee.  Such accounting
firm or attorney (the “Determining Party”) shall provide its determination (the
“Determination”), together with detailed supporting calculations and
documentation to the Company and the Optionee or Grantee within ten (10) days of
the termination of Optionee’s or Grantee’s employment.  If the
Determining Party determines that no Excise Tax is payable by the Optionee or
Grantee with respect to the Total Payments, it shall furnish the Optionee or
Grantee with an opinion reasonably acceptable to the Optionee or Grantee that no
Excise Tax will be imposed with respect to any such payments and, absent
manifest error, such Determination shall be binding, final and conclusive upon
the Company and the Optionee or Grantee.  If the Determining Party
determines that an Excise Tax would be payable, the Company shall have the right
to accept the Determination of the Determining Party as to the extent of the
reduction, if any, pursuant to Section 12.2(a), or to have such Determination reviewed by an
accounting firm selected by the Company, at the Company’s expense.  If
the Company’s accounting firm and the Determining Party do not agree, a third

       

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

         

         

        accounting
firm shall be jointly chosen by the Determining Party and the Company, at the
Company's expense, in which case the determination of such third accounting firm
shall be binding, final and conclusive upon the Company and the Optionee or
Grantee.

      

       

      
        	
                13.  

              	
                Adjustment Upon
      Changes in Capitalization.

              

      

       

      (a) In the
event of a Change in Capitalization, the Committee shall conclusively determine
the appropriate proportional adjustments to (i) the maximum number and class of
Shares or other stock or securities with respect to which Options or Awards may
be granted under the Plan, (ii) the maximum number and class of Shares or other
stock or securities with respect to which Options or Awards may be granted to
any Eligible Individual in any one calendar year period, (iii) the number and
class of Shares or other stock or securities or other property (including cash)
which are subject to outstanding Options or Awards granted under the Plan and
the exercise price therefor, if applicable, (iv) for Stock Appreciation Rights
unrelated to an Option, the Fair Market Value of a Share on the date the Stock
Appreciation Right was granted, and (v) the Performance Objectives.

       

      (b) Any such
adjustment in the Shares or other stock or securities subject to outstanding
Options or Awards that are intended to qualify as Performance-Based Compensation
shall be made in such a manner as not to adversely affect the treatment of the
Options or Awards as Performance-Based Compensation.

       

      (c) Any
adjustment pursuant to this Section 13 in respect
of Options or Stock Appreciation Rights that are Non-409A Awards shall be made
only to the extent consistent with Treasury Regulation Section 1.409A-1(b)(5)(v)
or a successor provision.

       

      (d) If, by
reason of a Change in Capitalization, a Grantee of an Award shall be entitled
to, or an Optionee shall be entitled to exercise an Option with respect to, new,
additional or different shares of stock or securities of the Company or any
other corporation, such new, additional or different shares shall thereupon be
subject to all of the conditions, restrictions and performance criteria which
were applicable to the Shares subject to the Award or Option, as the case may
be, prior to such Change in Capitalization.

       

      
        	
                14.  

              	
                Effect of Certain
      Transactions.

              

      

       

      Subject
to Sections 6.4, 7.7,
9.4(b), and 10.4 or as
otherwise provided in an Agreement or employment agreement between the Eligible
Individual and the Company, in the event of (a) the liquidation or dissolution
of the Company or (b) a merger or consolidation of the Company (a “Transaction”)
that does not constitute a Change in Control, the Plan and each Option and Award
issued hereunder shall continue in effect in accordance with their respective
terms, except that the Committee may, in its discretion, do one or more of the
following:  (i) shorten the period during which Options and Awards are
exercisable (provided they remain exercisable for at least thirty (30) days
after the date on which notice of such shortening is given to the Optionees or
Grantees); (ii) accelerate the vesting schedule or the lapse of any restrictions
with respect to Options and Awards, (iii) arrange to have the surviving or
successor entity assume the Options and Awards or grant replacement Options and
Awards with appropriate adjustments in the exercise prices, and adjustments in
the number and kind of securities issuable 

       

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

         

         

        upon
exercise or lapse of restrictions or adjustments so that the Options and Awards
or their replacements represent the right to purchase or receive the stock,
securities or other property (including cash) as may be issuable or payable as a
result of such Transaction with respect to or in exchange for the number of
Shares purchasable and receivable upon the exercise of the Options and Awards
had such exercise occurred in full prior to the Transaction, or (iv) with the
prior written consent of the Optionee or Grantee (unless otherwise stated in the
Agreement), cancel the Options and Awards upon the payment to the Grantees in
cash (A) with respect to each Option and Award to the extent exercisable for or
payable in Shares, of an amount that is equal to the Fair Market Value of the
Shares subject to the Award or portion thereof over the aggregate exercise price
for such Shares under the Award or portion thereof surrendered at the effective
time of the Transaction, or (B) with respect to each Award to the extent not
exercisable for or payable in Shares, of an amount that is equal to the cash
value of the Award or portion thereof surrendered at the effective time of the
Transaction.  The Committee may, in its discretion, also provide for
one or more of the following alternatives in any particular
Agreement.  The treatment of any Option or Award as provided in this
Section 14 shall be conclusively presumed to be
appropriate for purposes of Section 10.

      

       

      
        	
                15.  

              	
                Interpretation.

              

      

       

      Following
the required registration of any equity security of the Company pursuant to
Section 12 of the Exchange Act:

       

      (a) The Plan
is intended to comply with Rule 16b-3 promulgated under the Exchange Act and the
Committee shall interpret and administer the provisions of the Plan or any
Agreement in a manner consistent therewith.  Any provisions
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan.

       

      (b) Unless
otherwise expressly stated in the relevant Agreement, each Option, Stock
Appreciation Right and Performance Award granted under the Plan is intended to
be Performance-Based Compensation.  The Committee shall not be
entitled to exercise any discretion otherwise authorized hereunder with respect
to such Options or Awards if the ability to exercise such discretion or the
exercise of such discretion itself would cause the compensation attributable to
such Options or Awards to fail to qualify as Performance-Based
Compensation.

       

      
        	
                16.  

              	
                Successors; Binding
      Agreement.

              

      

       

      This Plan
shall be binding upon and shall inure to the benefit of the Company, its
Successors and Assigns, and the Company shall require any Successors and Assigns
to expressly assume and agree to comply with the terms of the Plan in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place.

       

      
        	
                17.  

              	
                Termination and
      Amendment of the Plan or Modification of Options and
      Awards.

              

      

       

      17.1. Plan Amendment or
Termination.  The
Plan shall terminate as of the tenth (10th) anniversary of the date of its
adoption by the Board and no Option or Award may be granted
thereafter.  The Board may sooner terminate the Plan and the Board may
at any time and from time to time amend, modify or suspend the Plan; provided,
however, that:

       

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      (a) no such
amendment, modification, suspension or termination shall impair or adversely
alter in any material respect any Options or Awards theretofore granted under
the Plan, except with the consent of the Optionee or Grantee, nor shall any
amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a result
of the Plan; and

       

      (b) to the
extent necessary under any applicable law, regulation or exchange requirement,
no amendment shall be effective unless approved by the stockholders of the
Company in accordance with applicable law, regulation or exchange
requirement.

       

      17.2. Modification of Options and
Awards.  Subject
to the provisions of the Plan, no modification of an Option or Award shall
adversely alter or impair in any material respect any of the Participant's
rights or the Company's obligations under the Option or Award without the
consent of the Optionee or Grantee, as the case may be.

       

      
        	
                18.  

              	
                Non-Exclusivity of the
      Plan.

              

      

       

      The
adoption of the Plan by the Board shall not be construed as amending, modifying
or rescinding any previously approved incentive arrangement or as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.

       

      
        	
                19.  

              	
                Regulations and Other
      Approvals; Governing Law; Jury Trial
  Waiver.

              

      

       

      19.1. Except as
to matters of federal law, the Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of the
State of Delaware without giving effect to conflicts of laws principles
thereof.

       

      19.2. Unless
otherwise specified in an applicable Agreement, any suit, action or proceeding
with respect to this Plan or any Award Agreement, or any judgment entered by any
court of competent jurisdiction in respect of any thereof, shall be brought in
any Court in St. Louis County, Missouri, and the Company and each Participant
shall submit to the exclusive jurisdiction of such courts for the purpose of any
such suit, action, proceeding or judgment.  The Company and each
Participant shall irrevocably waive any objections which he, she or it may have
to the laying of the venue of any suit, action or proceeding arising out of or
relating to this Plan or any Award Agreement brought in any Court in St. Louis
County, Missouri, and shall further irrevocably waive any claim that any such
suit, action or proceeding brought in any such court has been brought in any
inconvenient forum.  The Company and each Participant shall waive any
right he, she or it may have to trial by jury in respect of any litigation based
on, arising out of, under or in connection with this Plan or any Award Agreement
or any course of conduct, course of dealing, verbal or written statement or
action of any party to any Award Agreement or relating to this Plan in any
way.

       

      19.3. The
obligation of the Company to sell or deliver Shares with respect to Options and
Awards granted under the Plan shall be subject to all applicable laws, rules and
regulations, including all applicable federal and state securities laws, and the
obtaining of all 

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

         

         

        such
approvals by governmental agencies as may be deemed necessary or appropriate by
the Committee in its discretion.

      

       

      19.4. The Board
may make such changes as may be necessary or appropriate to comply with the
rules and regulations of any government authority.

       

      19.5. Each
Option and Award is subject to the requirement that, if at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or Award or the
issuance of Shares, no Options or Awards shall be granted or payment made or
Shares issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee in its discretion.

       

      19.6. Notwithstanding
anything contained in the Plan or any Agreement to the contrary, in the event
that the disposition of Shares acquired pursuant to the Plan is not covered by a
then current registration statement under the Securities Act of 1933, as amended
(the “Securities Act”), and is not otherwise exempt from such registration, such
Shares shall be restricted against transfer to the extent required by the
Securities Act and Rule 144 or other regulations thereunder.  The
Committee may, in its discretion, require any individual receiving Shares
pursuant to an Option or Award granted under the Plan, as a condition precedent
to receipt of such Shares, to represent and warrant to the Company in writing
that the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the Securities Act or the rules and regulations promulgated
thereunder.  The certificates evidencing any of such Shares shall be
appropriately amended or have an appropriate legend placed thereon to reflect
their status as restricted securities as aforesaid.

       

      
        	
                20.  

              	
                Miscellaneous.

              

      

       

      20.1. Multiple
Agreements.  The
terms of each Option or Award may differ from other Options or Awards granted
under the Plan at the same time, or at some other time.  The Committee
may, in its discretion, also grant more than one Option or Award to a given
Eligible Individual during the term of the Plan, either in addition to, or in
substitution for, one or more Options or Awards previously granted to that
Eligible Individual.

       

      20.2. Withholding of
Taxes.

       

      (a) At such
times as an Optionee or Grantee recognizes taxable income in connection with the
receipt of Shares or cash hereunder (a “Taxable Event”), the Optionee or Grantee
shall pay to the Company an amount equal to the federal, state and local income
taxes and other amounts as may be required by law to be withheld by the Company
in connection with the Taxable Event (the “Withholding Taxes”) prior to the
issuance, or release from escrow, of such Shares or the payment of such
cash.  The Company shall have the right to deduct from any payment of
cash to an Optionee or Grantee an amount equal to the Withholding Taxes in

       

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

         

         

        satisfaction
of the obligation to pay Withholding Taxes.  In satisfaction of the
obligation to pay Withholding Taxes to the Company, the Optionee or Grantee may
make a written election (the “Tax Election”), which may be accepted or rejected
in the discretion of the Committee, to have withheld a portion of the Shares
then issuable to him or her having an aggregate Fair Market Value equal to the
Withholding Taxes.  Notwithstanding the foregoing, the Committee may,
in its discretion, provide that an Optionee or Grantee shall not be entitled to
exercise or receive an Award, as applicable, for which cash has not been
provided by the Optionee or Grantee with respect to the Withholding Taxes
applicable to such Award.

      

       

      (b) Notwithstanding
the foregoing, if Options have been transferred pursuant to the provisions of
Section 6.1 the Optionee shall provide the Company
with funds sufficient to pay such tax withholding when such withholding is
due.  Furthermore, if such Optionee does not satisfy the applicable
tax withholding obligation, the transferee may provide the funds sufficient to
enable the Company to pay the tax withholding.  However, if Options
have been transferred, the Company shall have no right to retain or sell without
notice, or to demand surrender from the transferee of, Shares in order to pay
such tax withholding.

       

      (c) Required Consent to and
Notification of Code Section 83(b) Election.  No election under
Code Section 83(b) (to include in gross income in the year of transfer the
amounts specified in Code Section 83(b) or under a similar provision of the laws
of a jurisdiction outside the United States may be made unless expressly
permitted by the terms of the Award document or by action of the Committee in
writing prior to the making of such election. In any case in which a Participant
is permitted to make such an election in connection with an Award, the
Participant shall notify the Company of such election within ten (10) days of
filing notice of the election with the Internal Revenue Service or other
governmental authority, in addition to any filing and notification required
pursuant to regulations issued under Code Section 83(b) or other applicable
provision.

       

      (d) Requirement of Notification
Upon Disqualifying Disposition Under Code Section 421(b).  If
any Participant shall make any disposition of Shares delivered pursuant to the
exercise of an ISO under the circumstances described in Code Section 421(b)
(i.e., a disqualifying disposition), such Participant shall notify the Company
of such disposition within ten (10) days thereof.

       

      20.3. Effective
Date.  The
effective date of this Plan shall be as determined by the Board in its
discretion, subject only to the approval by the affirmative vote of the holders
of a majority of the securities of the Company (i) pursuant to a written consent
or (ii) present, or represented, and entitled to vote at a meeting of
stockholders duly held, in either case in accordance with the applicable laws of
the State of Delaware within twelve (12) months of the adoption of the Plan by
the Board.  If any Awards are granted under the Plan before the date
of such shareholder approval, such Awards automatically shall be granted subject
to such approval.

       

      20.4. Compliance with Code Section
162(m). It is
the intent of the Company that Options and SARs granted to “covered employees”
(within the meaning of Code Section 162(m)) and other Awards designated as
awards of Performance-Based Compensation are intended to constitute qualified
“performance-based compensation” within the meaning of Code Section 162(m) and
the regulations thereunder.  Accordingly, the terms of Sections 4.1, 5.2, 7 

       

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

         

         

        and 10 shall be interpreted in a manner consistent with
Code Section 162(m) and the regulations thereunder.  The foregoing
notwithstanding, because the Committee cannot determine with certainty whether a
given Participant will be in a covered employee with respect to a fiscal year
that has not yet been completed, the term covered employee as used herein shall
mean only a person designated by the Committee as likely to be a covered
employee with respect to a specified fiscal year.  If any provision of
the Plan or any Agreement relating to an Award that is designated as intended to
comply with Code Section 162(m) does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements, and no provision shall be construed or deemed amended to the
extent necessary to conform to such requirements, and no provision shall be
deemed to confer upon the Committee or any other person discretion to increase
the amount of compensation otherwise payable in connection with any such Award
upon attainment of the applicable performance objectives.

      

       

      20.5. Certain Limitations on
Awards to Ensure Compliance with Code Section 409A.  For
purposes of this Plan, references to an Option or Award term or event (including
any authority or right of the Company or a Participant) being “permitted” under
Code Section 409A mean, for a 409A Award, that the term or event will not cause
the Participant to be liable for payment of interest or a tax penalty under Code
Section 409A and, for a Non-409A Award, that the term or event will not cause
the Award to be treated as subject to Code Section 490A.  Other
provisions of the Plan notwithstanding, the terms of any 409A Award and any
Non-409A Award, including any authority of the Company and rights of the
Participant with respect to the Award, shall be limited to those terms permitted
under Code Section 409A, and any terms not permitted under Code Section 409A
shall be automatically modified and limited to the extent necessary to conform
with Code Section 409A.  For this purpose, other provisions of the
Plan notwithstanding, the Company shall have no authority to accelerate
distributions relating to 409A Awards in excess of authority permitted under
Code Section 409A, and any distribution subject to Code Section
409A(a)(2)(A)(i)(separation from service) to a “specified employee” as defined
under Code Section 409A(a)(2)(B)(i), shall not occur earlier than the earliest
time permitted under Code Section 409A(a)(2)(B)(i).  The Company shall
have no liability to a Participant, or any other party, if an Award that is
intended to be exempt from, or compliant with, Code Section 409A is not so
exempt or compliant or for any action taken by the Committee or the Company and,
in the event that any amount or benefit under the Plan becomes subject to
penalties under Section 409A, responsibility for payment of such penalties shall
rest solely with the affected Participant(s) and not with the
Company.

       

      20.6. Certain Limitations Relating
to Accounting Treatment of Awards.  Other
provisions of the Plan notwithstanding, the Committee’s authority under the Plan
is limited to the extent necessary to ensure that any Option or other Award of a
type that the Committee has intended to be subject to fixed accounting with a
measurement date at the date of grant or the date performance conditions are
satisfied under FAS 123(R) shall not become subject to “variable” accounting
solely due to the existence of such authority.

       

      20.7. Awards to Participants
Outside the United States.  The
Committee may modify the terms of any Award under the Plan made to or held by a
Participant who is then resident or primarily employed outside of the United
States in any manner deemed by the Committee to be necessary or appropriate in
order that such Award shall conform to laws, 

       

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

         

         

        regulations,
and customs of the country in which the Participant is then resident or
primarily employed, or so that the value and other benefits of the Award to the
Participant, as affected by foreign tax laws and other restrictions applicable
as a result of the Participant's residence or employment abroad shall be
comparable to the value of such an Award to a Participant who is resident or
primarily employed in the United States. An Award may be modified under this
Section 20.7 in a manner that is inconsistent with
the express terms of the Plan, so long as such modifications will not contravene
any applicable law or regulation or result in actual liability under Section
16(b) for the Participant whose Award is modified.

      

       

      20.8. Payments in the Event of
Forfeitures; Fractional Shares.  No
fractional Shares shall be issued or delivered pursuant to the Plan or any
Award.  The Committee shall determine whether cash, other Awards or
other property shall be issued or paid in lieu of such fractional Shares or
whether such fractional Shares or any rights thereto shall be forfeited or
otherwise eliminated.

       

      20.9. Right of
Setoff.  The
Company or any Subsidiary or Affiliate may, to the extent permitted by
applicable law, deduct from and set off against any amounts the Company or a
Subsidiary or Affiliate may owe to the Participant from time to time (including
amounts payable in connection with any Award that are owed as wages, fringe
benefits, or other compensation owed to the Participant), such amounts as may be
owed by the Participant to the Company, although the Participant shall remain
liable for any part of the Participant’s payment obligation not satisfied
through such deduction and setoff; provided, however, that no such setoff may be
made if such setoff would result in the imposition of penalties under Code
Section 409A.   By accepting any Award granted hereunder, the
Participant agrees to any deduction or setoff under this Section 20.9.

       

      20.10. Unfunded Status of Awards;
Creation of Trusts.  To
the extent that any Award is deferred compensation, the Plan is intended to
constitute an “unfunded” plan for deferred compensation with respect to such
Award.  With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Agreement shall give any Participant the right to any specific assets or
securities of the Company or any Subsidiary or Affiliate.

       

      20.11. Conditions and Restrictions
Upon Securities Subject to Awards.  Each
Participant to whom an Award is made under the Plan shall (i) enter into an
Agreement with the Company that shall contain such provisions consistent with
the provisions of the Plan, as may be approved by the Committee and (ii) to the
extent the Award is made at a time prior to the date Shares are not listed for
trading on an established securities exchange, enter into a “Stockholder’s
Agreement” that is substantially similar in all material respect to any
stockholder’s agreement entered into by any other employee of the Company or its
Subsidiaries in connection with the Award of any equity-based compensation. The
Committee may provide that the Shares issued upon exercise of an Option or Stock
Appreciation Right or otherwise subject to or issued under an Award shall be
subject to such further agreements, restrictions, conditions or limitations as
the Committee in its discretion may specify prior to the exercise of such Option
or Stock Appreciation Right or the grant, vesting or settlement of such Award,
including without limitation, conditions on vesting or transferability,
forfeiture or repurchase provisions and method of payment for the Shares issued
upon exercise, vesting or settlement of 

       

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

         

         

        such
Award (including the actual or constructive surrender of Shares already owned by
the Participant) or payment of taxes arising in connection with an
Award.  Without limiting the foregoing, such restrictions may address
the timing and manner of any resales by the Participant or other subsequent
transfers by the Participant of any Shares issued under an Award, including
without limitation (i) restrictions under an insider trading policy or pursuant
to applicable law, (ii) restrictions designed to delay and/or coordinate the
timing and manner of sales by Participant and holders of other Company equity
compensation arrangements, (iii) restrictions as to the use of a specified
brokerage firm for such resales or other transfers and (iv) provisions requiring
Shares to be sold on the open market or to the Company in order to satisfy tax
withholding or other obligations.

      

       

      20.12. Compliance with Laws and
Regulations.  This
Plan, the grant, issuance, vesting, exercise and settlement of Options and
Awards thereunder, and the obligation of the Company to sell, issue or deliver
Shares under such Options and Awards, shall be subject to all applicable
foreign, federal, state and local laws, rules and regulations, stock exchange
rules and regulations, and to such approvals by any governmental or regulatory
agency as may be required. The Company shall not be required to register in a
Participant’s name or deliver any Shares prior to the completion of any
registration or qualification of such Shares under any foreign, federal, state
or local law or any ruling or regulation of any government body which the
Committee shall determine to be necessary or advisable. To the extent the
Company is unable to or the Committee deems it infeasible to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, the Company and its Affiliates shall be relieved of any liability
with respect to the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained. No Option shall be exercisable
and no Shares shall be issued and/or transferable under any Option or Award
unless a registration statement with respect to the Shares underlying such
Option or Award is effective and current or the Company has determined that such
registration is unnecessary.  References in this Plan to a particular
law, rule or regulation shall be deemed to include all subsequent amendments,
modifications and interpretations as well as any successor provision
thereto.

       

      20.13. Deferral of
Gains.  The
Committee may, in an Agreement or otherwise, provide for the deferred delivery
of Shares upon settlement, vesting or other events with respect to an Award
(other than an Option or Stock Appreciation Right). Notwithstanding anything
herein to the contrary, in no event will any deferral of the delivery of Shares
or any other payment with respect to any Award be allowed if the Committee
determines, in its sole discretion, that the deferral would result in the
imposition of the additional tax under Code Section 409A(a)(1)(B).

       

      20.14. No Effect on Employment or
Service.  Nothing
in the Plan shall interfere with or limit in any way the right of the Company to
terminate any Participant’s employment or service at any time, for any reason
and with or without cause.

       

      20.15. Participation.  No
person shall have the right to be selected to receive an Award under this Plan,
or, having been so selected, to be selected to receive a future
Award.  The Committee’s determination under the Plan (including,
without limitation, determination of the Eligible Employees who shall be granted
Awards, the form, amount and timing of such Awards, 

       

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

         

         

        the terms
and provisions of Awards and the Agreements and the establishment of Performance
Objectives) need not be uniform and may be made by it selectively among Eligible
Employees who receive or are eligible to receive Awards under the Plan, ether or
not such Eligible Employees are similarly situated.

      

       

      20.16. No Rights as
Stockholder.  No
Participant (nor any beneficiary) shall have any of the rights or privileges of
a stockholder of the Company with respect to any Shares issuable pursuant to an
Award (or exercise thereof), unless and until certificates representing such
Shares shall have been issued, recorded on the records of the Company or its
transfer agents or registrars, and delivered to the Participant (or
beneficiary).

       

      20.17. Gender and
Number.  Except
where otherwise indicated by the context, any masculine term used herein also
shall include the feminine; the plural shall include the singular and the
singular shall include the plural.

       

      20.18. Severability.  In
the event any provision of the Plan or of any Award Agreement shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan or the Award Agreement, and the Plan and/or the
Award Agreement shall be construed and enforced as if the illegal or invalid
provision had not been included.

       

      20.19. Captions.  Captions
are provided herein for convenience only, and shall not serve as a basis for
interpretation or construction of the Plan.

       

      20.20. Other
Benefits.  No
Award granted or paid out under this Plan shall be deemed compensation for
purposes of computing benefits under any retirement plan of the Company or its
Affiliates nor affect any benefits under any other benefit plan now or
subsequently in effect under which the availability or amount of benefits is
related to the level of compensation.

       

      20.21. Costs.  The
Company shall bear all expenses associated with administering this Plan,
including expenses of issuing Shares pursuant to any Awards
hereunder.

       

      

       

      

       

      [End of
Document]

       

       

      
        
          
          

        

        
          37Exhibit 10.1

INVESTMENT AGREEMENT

INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of December 18, 2009 by and between San West, Inc., a California corporation (the "Company"), and Dutchess Opportunity Fund, II, LP, a Delaware Limited Partnership (the "Investor"). 

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Investor shall invest up to Ten Million dollars ($10,000,000) to purchase the Company's Common Stock, no par value per share (the "Common Stock"); 

WHEREAS, such investments will be made in reliance upon the provisions of Section 4(2) under the Securities Act of 1933, as amended (the "1933 Act"), Rule 506 of Regulation D, and the rules and regulations promulgated thereunder, and/or upon such other exemption from the registration requirements of the 1933 Act as may be available with respect to any or all of the investments in Common Stock to be made hereunder; and 

WHEREAS, the Company currently has on file a registration statement with the SEC, File Number 333-156706, which has been declared effective on January 30, 2009, and desires to use that registration statement for this Investment Agreement.

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto (the "Registration Rights Agreement") pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act, and the rules and regulations promulgated thereunder, and applicable state securities laws. 

NOW THEREFORE, in consideration of the foregoing recitals, which shall be considered an integral part of this Agreement, the covenants and agreements set forth hereafter, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Investor hereby agree as follows: 

SECTION 1. DEFINITIONS. 

As used in this Agreement, the following terms shall have the following meanings specified or indicated below, and such meanings shall be equally applicable to the singular and plural forms of such defined terms.

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“1933 Act” shall have the meaning set forth in the preamble of this agreement.

“1934 Act” shall mean the Securities Exchange Act of 1934, as it may be amended.

“Affiliate” shall have the meaning specified in Section 5(H), below.

“Agreement” shall mean this Investment Agreement.

“

Articles of Incorporation

” shall have the meaning specified in Section 4(C).

“Best Bid” shall mean the highest posted bid price of the Common Stock during a given period of time.

 

“

By-laws

” shall have the meaning specified in Section 4(C).

“Closing” shall have the meaning specified in Section 2(G).

“Closing Date” shall mean no more than seven (7) Trading Days following the Put Notice Date, for each tranche.

“Commitment Fee” shall have the meaning set forth in the Section 12(R).

“Common Stock” shall have the meaning set forth in the preamble of this Agreement.

“Control” or “Controls” shall have the meaning specified in Section 5(H).

“Effective Date” shall mean the date the SEC declares effective under the 1933 Act the Registration Statement covering the Securities.

“Environmental Laws” shall have the meaning specified in Section 4(M).

“Equity Line Transaction Documents” shall mean this Agreement and the Registration Rights Agreement.

“Execution Date” shall mean the date indicated in the preamble to this Agreement.

“Indemnities” shall have the meaning specified in Section 11.

“Indemnified Liabilities” shall have the meaning specified in Section 11.

“Investor” shall have the meaning indicated in the preamble of this Agreement.

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“Material Adverse Effect” shall have the meaning specified in Section 4(A).

“Maximum Common Stock Issuance” shall have the meaning specified in Section 2(H).

“Minimum Purchase Price” with respect to any Put Notice Date shall be the price defined by the Company in the applicable Put Notice.

 

“Open Market Adjustment Amount” shall have the meaning specified in Section 2(I).

"Open Market Purchase" shall have the meaning specified in Section 2(I)

“Open Market Share Purchase” shall have the meaning specified in Section 2(I).

“Open Period” shall mean the period beginning on and including the Trading Day immediately following the Effective Date and ending on the earlier to occur of (i) the date which is thirty-six (36) months from the Effective Date; or (ii) termination of the Agreement in accordance with Section 9, below.

“Pricing Period” shall mean the period beginning on the Put Notice Date and ending on and including the date that is five (5) Trading Days after such Put Notice Date.

“Principal Market” shall mean the Nasdaq Capital Market, the NYSE Amex, the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the OTC Bulletin Board, whichever is the principal market on which the Common Stock is listed.

“Prospectus” shall mean the prospectus, preliminary prospectus and supplemental prospectus used in connection with the Registration Statement.

“Purchase Amount” shall mean the total amount being paid by the Investor on a particular Closing Date to purchase the Securities.

“Purchase Price” shall mean ninety-two percent (92%) of the lowest closing Best Bid (as defined herein) of the Common Stock during the Pricing Period. 

“

Put

” shall have the meaning set forth in Section 2(B) hereof.  

“Put Amount” shall have the meaning set forth in Section 2(B) hereof.  

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“Put Notice” shall mean a written notice in the form attached hereto as Exhibit C, sent to the Investor by the Company stating the Put Amount in U.S. dollars the Company intends to sell to the Investor pursuant to the terms of the Agreement and stating the current number of Shares issued and outstanding on such date.

“Put Notice Date” shall mean the Trading Day, as set forth below, immediately following the day on which the Investor receives a Put Notice, however a Put Notice shall be deemed delivered on (a) the Trading Day it is received by facsimile or otherwise by the Investor if such notice is received prior to 9:00 am Eastern Time, or (b) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 9:00 am Eastern Time on a Trading Day.  No Put Notice may be deemed delivered on a day that is not a Trading Day. 

“Put Restriction” shall mean the days during the Pricing Period.  During this time, the Company shall not be entitled to deliver another Put Notice.

“Put Shares Due” shall have the meaning specified in Section 2(I).

“Registration Period” shall have the meaning specified in Section 5(C), below.

“Registration Rights Agreement” shall have the meaning set forth in the recitals, above.

“Registration Statement” means the current registration statement on file with the SEC, File Number 333-156706, which has been declared effective on January 30, 2009, or any subsequent registration statement of the Company filed under the 1933 Act covering the resale by the Investor of the Common Stock issuable hereunder.

“Related Party” shall have the meaning specified in Section 5(H).

“Resolution” shall have the meaning specified in Section 8(E).

“SEC” shall mean the U.S. Securities & Exchange Commission.

“SEC Documents” shall have the meaning specified in Section 4(F).

“Securities” shall mean the shares of Common Stock issued pursuant to the terms of the Agreement.

“Shares” shall mean the shares of the Company’s Common Stock.

“Subsidiaries” shall have the meaning specified in Section 4(A).

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“Trading Day” shall mean any day on which the Principal Market for the Common Stock is open for trading.

SECTION 2. PURCHASE AND SALE OF COMMON STOCK. 

(A) PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set forth herein, the Company may issue and sell to the Investor, and the Investor shall purchase from the Company, up to that number of Shares having an aggregate Purchase Price of Ten Million dollars ($10,000,000).

(B) DELIVERY OF PUT NOTICES.  Subject to the terms and conditions of the Equity Line Transaction Documents, and from time to time during the Open Period, the Company may, in its sole discretion, deliver a Put Notice to the Investor which states the dollar amount (designated in U.S. Dollars) (the "Put Amount") of Shares which the Company intends to sell to the Investor on a Closing Date (the "Put"). The Put Notice shall be in the form attached hereto as Exhibit C and incorporated herein by reference. The amount that the Company shall be entitled to Put to the Investor (the "Put Amount") shall be equal to either 1) two hundred percent (200%) of the average daily volume (U.S. market only) of the Common Stock for the three (3) Trading Days prior to the applicable Put Notice Date, multiplied by the average of the three (3) daily closing prices immediately preceding the Put Date or 2) one hundred thousand dollars ($100,000). During the Open Period, the Company shall not be entitled to submit a Put Notice until the Put has been completed. The Common Stock identified in the Put Notice shall be purchased for a price equal to the Purchase Price. 

(C) COMPANY’S RIGHT TO WITHDRAWAL. The Company shall reserve the right, but not the obligation, to withdraw that portion of the Put that is below the Minimum Purchase Price, by submitting to the Investor prior to the applicable Closing Date, in writing, a notice to cancel that portion of the Put.  Any shares above the Minimum Purchase price due to the Investor shall be sold to the Investor by the Company under the terms of this Agreement.

(D) INTENTIONALLY OMITTED

(E) CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding anything to the contrary in this Agreement, the Company shall not be entitled to deliver a Put Notice and the Investor shall not be obligated to purchase any Shares at a Closing (as defined in Section 2(G)) unless each of the following conditions are satisfied: 

(I) a Registration Statement shall have been declared effective and shall remain effective and available for the resale of all the Registrable Securities (as defined in the Registration Rights Agreement) at all times until the Closing with respect to the subject Put Notice; 

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(II) at all times during the period beginning on the related Put Notice Date and ending on and including the related Closing Date, the Common Stock shall have been listed on the Principal Market and shall not have been suspended from trading thereon for a period of two (2) consecutive Trading Days during the Open Period and the Company shall not have been notified of any pending or threatened proceeding or other action to suspend the trading of the Common Stock; 

(III) the Company has complied with its obligations and is otherwise not in breach of or in default under, this Agreement, the Registration Rights Agreement or any other agreement executed in connection herewith which has not been cured prior to delivery of the Investor’s Put Notice Date; 

(IV) no injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the Securities; and 

(V) the issuance of the Securities will not violate any shareholder approval requirements of the Principal Market. 

If any of the events described in clauses (I) through (V) above occurs during a Pricing Period, then the Investor shall have no obligation to purchase the Put Amount of Common Stock set forth in the applicable Put Notice. 

(F) RESERVED

(G) MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of the conditions set forth in Sections 2(E), the closing of the purchase by the Investor of Shares (a "Closing") shall occur on the date which is no later than seven (7) Trading Days following the applicable Put Notice Date (each a "Closing Date"). Prior to each Closing Date, (I) the Company shall deliver to the Investor pursuant to this Agreement, certificates representing the Shares to be issued to the Investor on such date and registered in the name of the Investor; and (II) the Investor shall deliver to the Company the Purchase Price to be paid for such Shares, determined as set forth in Section 2(B). In lieu of delivering physical certificates representing the Securities and provided that the Company's transfer agent then is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Investor, the Company shall use all commercially reasonable efforts to cause its transfer agent to electronically transmit the Securities by crediting the account of the Investor's prime broker (as specified by the Investor within a reasonable period in advance of the Investor's notice) with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. 

The Company understands that a delay in the issuance of Securities beyond the Closing Date could result in economic damage to the Investor. After the Effective 

6

 

Date, as compensation to the Investor for such loss, the Company agrees to make late payments to the Investor for late issuance of Securities (delivery of Securities after the applicable Closing Date) in accordance with the following schedule (where "No. of Days Late" is defined as the number of trading days beyond the Closing Date, with the Amounts being cumulative.): 

	
	LATE  PAYMENT  FOR  EACH

NO.  OF  DAYS  LATE               

          1                                           $100

          2                                           $200

          3                                           $300

          4                                           $400

          5                                           $500

          6                                           $600

          7                                           $700

          8                                           $800

          9                                           $900

          10                                       $1,000

          Over  10                               $1,000  +  $200  for  each

                                                      Business Day late beyond  10  days

The Company shall make any payments incurred under this Section in immediately available funds upon demand by the Investor. Nothing herein shall limit the Investor's right to pursue actual damages for the Company's failure to issue and deliver the Securities to the Investor, except that such late payments shall offset any such actual damages incurred by the Investor, and any Open Market Adjustment Amount, as set forth below. 

 (H) OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained herein to the contrary, if during the Open Period the Company becomes listed on an exchange that limits the number of shares of Common Stock that may be issued without shareholder approval, then the number of Shares issuable by the Company and purchasable by the Investor, shall not exceed that number of the shares of Common Stock that may be issuable without shareholder approval (the "Maximum Common Stock Issuance").  If such issuance of shares of Common Stock could cause a delisting on the Principal Market, then the Maximum Common Stock Issuance shall first be approved by the Company's shareholders in accordance with applicable law and the By-laws and Articles of Incorporation of the Company, as amended, if such issuance of shares of Common Stock could cause a delisting on the Principal Market. The parties understand and agree that the Company's failure to seek or obtain such shareholder approval shall in no way adversely affect the validity and due authorization of the issuance and sale of Securities or the Investor's obligation in accordance with the terms and conditions hereof to purchase a number of Shares in the aggregate up to the Maximum Common Stock Issuance limitation, and that such approval pertains only to the applicability of the Maximum Common Stock Issuance limitation provided in this Section 2(H). 

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(I)  If, by the third (3rd) business day after the Closing Date, the Company fails to deliver any portion of the shares of the Put to the Investor (the "Put Shares Due") and the Investor purchases, in an open market transaction or otherwise, shares of Common Stock necessary to make delivery of shares which would have been delivered if the full amount of the shares to be delivered to the Investor by the Company (the "Open Market Share Purchase"), then the Company shall pay to the Investor, in addition to any other amounts due to Investor pursuant to the Put, and not in lieu thereof, the Open Market Adjustment Amount (as defined below).  The "Open Market Adjustment Amount" is the amount equal to the excess, if any, of (x) the Investor's total purchase price (including brokerage commissions, if any) for the Open Market Share Purchase minus (y) the net proceeds (after brokerage commissions, if any) received by the Investor from the sale of the Put Shares Due.  The Company shall pay the Open Market Adjustment Amount to the Investor in immediately available funds within five (5) business days of written demand by the Investor.  By way of illustration and not in limitation of the foregoing, if the Investor purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover an Open Market Purchase with respect to shares of Common Stock it sold for net proceeds of $10,000, the Open Market Purchase Adjustment Amount which the Company will be required to pay to the Investor will be $1,000.

(J)  LIMITATION ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the contrary in this Agreement, in no event shall the Investor be entitled to purchase that number of Shares, which when added to the sum of the number of shares of Common Stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the 1934 Act), by the Investor, would exceed 4.99% of the number of shares of Common Stock outstanding on the Closing Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act. 

SECTION 3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS. 

The Investor represents and warrants to the Company, and covenants, that: 

(A) SOPHISTICATED INVESTOR. The Investor has, by reason of its business and financial experience, such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that it is capable of (I) evaluating the merits and risks of an investment in the Securities and making an informed investment decision; (II) protecting its own interest; and (III) bearing the economic risk of such investment for an indefinite period of time. 

(B) AUTHORIZATION; ENFORCEMENT. The Investor has the requisite power and authority to enter into and perform this Agreement and the Registration Rights Agreement. The execution and delivery of the Equity Line Transaction Documents by the Investor and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by the Investor's general partners and no further consent or authorization is required by the partners.  This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and is a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.

8

 

 

(C) SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor will comply with the provisions of Section 9 of the 1934 Act, and the rules promulgated thereunder, with respect to transactions involving the Common Stock. The Investor agrees not to sell the Company's stock short, either directly or indirectly through its affiliates, principals or advisors, the Company's common stock during the term of this Agreement. 

(D) ACCREDITED INVESTOR. Investor is an "Accredited Investor" as that term is defined in Rule 501(a) of Regulation D of the 1933 Act. 

(E) NO CONFLICTS. The execution, delivery and performance of the Transaction Documents by the Investor and the consummation by the Investor of the transactions contemplated hereby and thereby will not result in a violation of the partnership agreement or other organizational documents of the Investor. 

(F) OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to the Company's business, finance and operations which it has requested. The Investor has had an opportunity to discuss the business, management and financial affairs of the Company with the Company's management. 

(G) INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own account for investment purposes and not with a view towards distribution and agrees to resell or otherwise dispose of the Securities solely in accordance with the registration provisions of the 1933 Act (or pursuant to an exemption from such registration provisions). 

(H) NO REGISTRATION AS A DEALER. The Investor is not and will not be required to be registered as a "dealer" under the 1934 Act, either as a result of its execution and performance of its obligations under this Agreement or otherwise. 

(I)  GOOD STANDING.  The Investor is a Limited Partnership, duly organized, validly existing and in good standing in the state of Delaware.

(J)  TAX LIABILITIES.  The Investor understands that it is liable for its own tax liabilities.

9

 

(K) REGULATION M.  The Investor will comply with Regulation M under the 1934 Act, if applicable.  

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 

Except as set forth in the Schedules attached hereto, or as disclosed in the Company's SEC Documents, the Company represents and warrants to the Investor that: 

(A) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Nevada, USA and has the requisite corporate power and authorization to own its properties and to carry on its business as now being conducted. Both the Company and the companies it owns or controls (“Subsidiaries”) are duly qualified to do business and are in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any material adverse effect on (i) the properties, assets, operations, results of operations, or financial condition of the Company and its Subsidiaries, if any, taken as a whole, (ii) the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or (iii) the authority or ability of the Company to perform its obligations under the Equity Line Transaction Documents. 

(B) AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS. 

(I) The Company has the requisite corporate power and authority to enter into and perform this Investment Agreement and the Registration Rights Agreement, and to issue the Securities in accordance with the terms hereof and thereof. 

(II) The execution and delivery of the Equity Line Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the reservation for issuance and the issuance of the Securities pursuant to this Agreement, have been duly and validly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors, or its shareholders. 

(III) The Equity Line Transaction Documents have been duly and validly executed and delivered by the Company. 

(IV) The Equity Line Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies.

10

 

(C) CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of 300,000,000 shares of Common Stock with no par value per share, of which as of the date hereof, 123,423,003 shares are issued and outstanding.

Except as disclosed in the Company's publicly available filings with the SEC:

 (I) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (II) there are no outstanding debt securities; (III) there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries; (IV) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement); (V) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (VI) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement; (VII) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement; and (VIII) there is no dispute as to the classification of any shares of the Company's capital stock. 

The Company has furnished to the Investor, or the Investor has had access through the SEC’s EDGAR website to, true and correct copies of the Company's Articles of Incorporation, as amended and in effect on the date hereof (the "Articles of Incorporation"), and the Company's By-laws, as in effect on the date hereof (the "By-laws"), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto. 

11

 

(D) ISSUANCE OF SHARES. The Company has reserved 50,000,000 Shares for issuance pursuant to this Agreement, which have been duly authorized and reserved for issuance (subject to adjustment pursuant to the Company's covenant set forth in Section 5(F) below) pursuant to this Agreement. Upon issuance in accordance with this Agreement, the Securities will be validly issued, fully paid for and non-assessable and free from all taxes, liens and charges with respect to the issue thereof. In the event the Company cannot register a sufficient number of Shares for issuance pursuant to this Agreement, the Company will use its best efforts to authorize and reserve for issuance the number of Shares required for the Company to perform its obligations hereunder as soon as reasonably practicable. 

(E) NO CONFLICTS. The execution, delivery and performance of the Equity Line Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (I) result in a violation of the Articles of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws; or (II) conflict with, or constitute a material default (or an event which with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, contract, indenture mortgage, indebtedness or instrument to which the Company or any of its Subsidiaries is a party, or to the Company's knowledge result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and the rules and regulations of the Principal Market or principal securities exchange or trading market on which the Common Stock is traded or listed) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Except as disclosed in Schedule 4(e), neither the Company nor its Subsidiaries is in violation of any term of, or in default under, the Articles of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or their organizational charter or by-laws, respectively, or any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations, amendments, accelerations, cancellations and violations that would not individually or in the aggregate have or constitute a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, statute, ordinance, rule, order or regulation of any governmental authority or agency, regulatory or self-regulatory agency, or court, except for possible violations the sanctions for which either individually or in the aggregate would not have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act or any securities laws of any states, to the Company's knowledge, the Company is not required to obtain any consent, authorization, permit or order of, or make any 

12

 

filing or registration (except the filing of a registration statement as outlined in the Registration Rights Agreement between the Parties) with, any court, governmental authority or agency, regulatory or self-regulatory agency or other third party in order for it to execute, deliver or perform any of its obligations under, or contemplated by, the Equity Line Transaction Documents in accordance with the terms hereof or thereof. All consents, authorizations, permits, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof and are in full force and effect as of the date hereof. Except as disclosed in Schedule 4(e), the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any violation or default of any of the foregoing. The Company is not, and will not be, in violation of the listing requirements of the Principal Market as in effect on the date hereof and on each of the Closing Dates and is not aware of any facts which would reasonably lead to delisting of the Common Stock by the Principal Market in the foreseeable future. 

(F) SEC DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents"). The Company has delivered to the Investor or its representatives, or they have had access through the SEC’s EDGAR website to, true and complete copies of the SEC Documents. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, by a firm that is a member of the Public Companies Accounting Oversight Board ("PCAOB") consistently applied, during the periods involved (except (I) as may be otherwise indicated in such financial statements or the notes thereto, or (II) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other written information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents, including, without limitation, information referred to in Section 4(D) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided the Investor with any material, nonpublic information which was not publicly disclosed prior to the date hereof and any material, nonpublic information provided to the Investor by the Company or its Subsidiaries or any of their officers, directors, employees or agents prior to any Closing Date shall be publicly disclosed by the Company prior to such Closing Date. 

13

 

(G) ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in the SEC Documents, the Company does not intend to change the business operations of the Company in any material way. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. 

(H) ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, in which an adverse decision could have a Material Adverse Effect.

(I) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm's length purchaser with respect to the Equity Line Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Equity Line Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its respective representatives or agents in connection with the Equity Line Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor's purchase of the Securities, and is not being relied on by the Company. The Company further represents to the Investor that the Company's decision to enter into the Equity Line Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. 

14

 

(J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set forth in the SEC Documents, as of the date hereof, no event, liability, development or circumstance has occurred or exists, or to the Company's knowledge is contemplated to occur, with respect to the Company or its Subsidiaries or their respective business, properties, assets, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced. 

(K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that relations with their employees are good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the Company's employ or otherwise terminate such officer's employment with the Company. 

(L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth in the SEC Documents, none of the Company's trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights necessary to conduct its business as now or as proposed to be conducted have expired or terminated, or are expected to expire or terminate within two (2) years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth in the SEC Documents, there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and its Subsidiaries have taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties. 

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(M) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the knowledge of the Company and its Subsidiaries, in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"); (II) have, to the knowledge of the Company, received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (III) are in compliance, to the knowledge of the  Company, with all terms and conditions of any such permit, license or approval where, in each of the three (3) foregoing cases, the failure to so comply would have, individually or in the aggregate, a Material Adverse Effect. 

(N) TITLE. The Company and its Subsidiaries have good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the SEC Documents or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. 

(O) INSURANCE. Each of the Company's Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for and neither the Company nor its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. 

(P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force and effect all certificates, approvals, authorizations and permits from the appropriate federal, state, local or foreign regulatory authorities and comparable foreign regulatory agencies, necessary to own, lease or operate their respective properties and assets and conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, approval, authorization or permit, except for such certificates, approvals, authorizations or permits which if not obtained, or such revocations or modifications which, would not have a Material Adverse Effect. 

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(Q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (I) transactions are executed in accordance with management's general or specific authorizations; (II) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles by a firm with membership to the PCAOB and to maintain asset accountability; (III) access to assets is permitted only in accordance with management's general or specific authorization; and (IV) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 

(R) NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company's officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company's officers has or is expected to have a Material Adverse Effect. 

(S) TAX STATUS. The Company and each of its Subsidiaries has made or filed all United States federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. 

(T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at least ten (10) days prior to the date hereof and except for arm's length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from disinterested third parties and other than the grant of stock options disclosed in the SEC Documents, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

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(U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of shares of Common Stock issuable upon purchases pursuant to this Agreement will increase in certain circumstances including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Open Period. The Company's executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect on the shareholders of the Company. The Board of Directors of the Company has concluded, in its good faith business judgment, and with full understanding of the implications, that such issuance is in the best interests of the Company. The Company specifically acknowledges that, subject to such limitations as are expressly set forth in the Equity Line Transaction Documents, its obligation to issue shares of Common Stock upon purchases pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company. 

(V) LOCK-UP. The Company shall cause its officers, directors, and  any related parties under control of the Company, to refrain from selling Common Stock during each Pricing Period, and the Company shall use best efforts to cause other insiders or Affiliates to refrain from selling any Stock during each Pricing Period. 

(W) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor any person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Stock to be offered as set forth in this Agreement. 

(X) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS.  No brokers, finders or financial advisory fees or commissions will be payable by the Company, its agents or Subsidiaries, with respect to the transactions contemplated by this Agreement, except as otherwise disclosed in this Agreement. 

SECTION 5. COVENANTS OF THE COMPANY 

(A) BEST EFFORTS. The Company shall use all commercially reasonable efforts to timely satisfy each of the conditions set forth in Section 8 of this Agreement. 

(B) BLUE SKY. The Company shall, at its sole cost and expense, on or before each of the Closing Dates, take such action as the Company shall reasonably determine is necessary to qualify the Securities for, or obtain exemption for the Securities for, sale to the Investor at each of the Closings pursuant to this Agreement under applicable securities or "Blue Sky" laws of such states of the United States, as reasonably specified by the Investor, and shall provide evidence of any such action so taken to the Investor on or prior to the Closing Date.

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(C) REPORTING STATUS. Until one of the following occurs, the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status, or take an action or fail to take any action, which would terminate its status as a reporting company under the 1934 Act: (i) this Agreement terminates pursuant to Section 9, (ii) the date on which the Investor has sold all the Securities.

(D) USE OF PROCEEDS. The Company will use the proceeds from the sale of the Securities (excluding amounts paid by the Company for fees as set forth in the Equity Line Transaction Documents) for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company. 

(E) FINANCIAL INFORMATION. During the Open Period, the Company agrees to make available to the Investor via the SEC’s EDGAR website or other electronic means the following documents and information on the forms set forth: (I) within five (5) Trading Days after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any Registration Statements or amendments filed pursuant to the 1933 Act; (II) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders; and (III) within two (2) calendar days of filing or delivery thereof, copies of all documents filed with, and all correspondence sent to, the Principal Market, any securities exchange or market, or the Financial Industry Regulatory Authority, unless such information is material nonpublic information. 

(F) RESERVATION OF SHARES. The Company shall reserve 50,000,000 Million Shares for the issuance of the Securities to the Investor as required hereunder. In the event that the Company determines that it does not have a sufficient number of authorized shares of Common Stock to reserve and keep available for issuance as described in this Section 5(F), the Company shall use all commercially reasonable efforts to increase the number of authorized shares of Common Stock by seeking shareholder approval for the authorization of such additional shares. 

(G) LISTING. The Company shall promptly secure and maintain the listing of all of the Registrable Securities (as defined in the current Registration Statement or the Registration Statement underlying the Registration Rights Agreement) on the Principal Market and each other national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, such listing of all Registrable Securities from time to time issuable under the terms of the Equity Line Transaction Documents. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market (excluding suspensions of not more than one (1) trading day resulting from business announcements by the Company). The Company shall promptly provide to the Investor copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 5(G).

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. 

(H) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors, persons who were officers or directors at any time during the previous two (2) years, shareholders who beneficially own 5% or more of the Common Stock, or Affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a "Related Party"), except for (I) customary employment arrangements and benefit programs on reasonable terms, (II) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a disinterested third party other than such Related Party, or (III) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. "Affiliate" for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (I) has a 5% or more equity interest in that person or entity, (II) has 5% or more common ownership with that person or entity, (III) controls that person or entity, or (IV) is under common control with that person or entity. "Control" or "Controls" for purposes hereof means that a person or entity has the power, directly or indirectly, to conduct or govern the policies of another person or entity. 

(I) FILING OF FORM 8-K. On or before the date which is four (4) Trading Days after the Execution Date, the Company shall file a Current Report on Form 8-K with the SEC describing the terms of the transaction contemplated by the Equity Line Transaction Documents in the form required by the 1934 Act, if such filing is required. 

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(J) CORPORATE EXISTENCE. The Company shall use all commercially reasonable efforts to preserve and continue the corporate existence of the Company. 

(K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly notify the Investor upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of the Securities: (I) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (II) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose;  (III) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Securities for sale in any jurisdiction or the initiation or notice of any proceeding for such purpose; (IV) the happening of any event that makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (V) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, and the Company shall promptly make available to Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to Investor any Put Notice during the continuation of any of the foregoing events in this Section 5(K). 

(L)  REIMBURSEMENT.  If (I) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by any shareholder of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction Documents, or if the Investor is impleaded in any such action, proceeding or investigation by any person (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement); or (II) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction Documents (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement), or if this Investor is impleaded in any such action, proceeding or investigation by any person, then in any such case, the Company will reimburse the Investor for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as such expenses are incurred. In addition, other than with respect to any matter in which the Investor is a named party, the Company will pay to the Investor the charges, as reasonably determined by the Investor, for the time of any officers or employees of the Investor devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearings, trials or pretrial matters, or otherwise with respect to inquiries, hearing, trials, and other proceedings relating to the subject matter of this Agreement. The reimbursement obligations of the Company under this section shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Investor that are actually named in such action, proceeding or investigation, and partners, directors, agents, employees, attorneys, accountants, auditors and controlling persons (if any), as the case may be, of Investor and any such affiliate, and shall be binding upon and inure to the benefit of any successors of the Company, the Investor and any such affiliate and any such person.

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(M) TRANSFER AGENT.  Upon effectiveness of the Registration Statement or the post-effective Amendment to the Registration Statement, and for so long as the Registration Statement is effective,  the Company shall deliver instructions to its transfer agent to issue Shares to the Investor that are covered for resale by the Registration Statement free of restrictive legends.

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

SECTION 6. INTENTIONALLY OMITTED

SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL. 

The obligation hereunder of the Company to issue and sell the Securities to the Investor is further subject to the satisfaction, at or before each Closing Date, of each of the following conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion. 

(A) The Investor shall have executed this Agreement and the Registration Rights Agreement and delivered the same to the Company. 

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(B) The Investor shall have delivered to the Company the Purchase Price for the Securities being purchased by the Investor between the end of the Pricing Period and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit D). After receipt of confirmation of delivery of such Securities to the Investor, the Investor, by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company, will disburse the funds constituting the Purchase Amount. 

(C) The representations and warranties of the Investor shall be true and correct as of the date when made and as of the applicable Closing Date as though made at that time and the Investor shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Equity Line Transaction Documents to be performed, satisfied or complied with by the Investor on or before such Closing Date.

(D)  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. 

SECTION 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE. 

The obligation of the Investor hereunder to purchase Shares is subject to the satisfaction, on or before each Closing Date, of each of the following conditions set forth below. 

(A) The Company shall have executed the Equity Line Transaction Documents and delivered the same to the Investor.

(B) The Common Stock shall be authorized for quotation on the Principal Market and trading in the Common Stock shall not have been suspended by the Principal Market or the SEC, at any time beginning on the date hereof and through and including the respective Closing Date (excluding suspensions of not more than one (1) Trading Day resulting from business announcements by the Company, provided that such suspensions occur prior to the Company's delivery of the Put Notice related to such Closing). 

(C) The representations and warranties of the Company shall be true and correct as of the date when made and as of the applicable Closing Date as though made at that time and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Equity Line Transaction Documents to be performed, satisfied or complied with by the Company on or before such Closing Date. The Investor may request an update as of such Closing Date regarding the representation contained in Section 4(C) above. 

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(D) The Company shall have executed and delivered to the Investor the certificates representing, or have executed electronic book-entry transfer of, the Securities (in such denominations as the Investor shall request) being purchased by the Investor at such Closing. 

(E) The Board of Directors of the Company shall have adopted resolutions consistent with Section 4(B)(II) above (the "Resolutions") and such Resolutions shall not have been amended or rescinded prior to such Closing Date. 

(F) Reserved 

(G) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. 

(H) The Registration Statement shall be effective on each Closing Date and no stop order suspending the effectiveness of the Registration statement shall be in effect or to the Company's knowledge shall be pending or threatened. Furthermore, on each Closing Date (I) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC's concerns have been addressed and Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action), and (II) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist. 

(I) At the time of each Closing, the Registration Statement (including information or documents incorporated by reference therein) and any amendments or supplements thereto shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or which would require public disclosure or an update supplement to the prospectus. 

(J) If applicable, the shareholders of the Company shall have approved the issuance of any Shares in excess of the Maximum Common Stock Issuance in accordance with Section 2(H) or the Company shall have obtained appropriate approval pursuant to the requirements of California law and the Company’s Articles of Incorporation and By-laws.

(K) The conditions to such Closing set forth in Section 2(E) shall have been satisfied on or before such Closing Date.

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(L)  The Company shall have certified to the Investor the number of Shares of Common Stock outstanding when a Put Notice is given to the Investor.  The Company's delivery of a Put Notice to the Investor constitutes the Company's certification of the existence of the necessary number of shares of Common Stock reserved for issuance.

SECTION 9. TERMINATION. This Agreement shall terminate upon any of the following events: 

(I) when the Investor has purchased an aggregate of Ten Million dollars ($10,000,000) in the Common Stock of the Company pursuant to this Agreement; or,

(II) on the date which is thirty-six (36) months after the Effective Date; or,

(III) upon written notice of the Company to the Investor.  Any and all shares, or penalties, if any, due under this Agreement shall be immediately payable and due upon termination of this Agreement. 

SECTION 10.  SUSPENSION

The Company’s right to Put Shares, and the Investor’s obligation to purchase Shares under this Agreement shall be suspended upon any of the following events, and shall remain suspended until such event is rectified:

(I)  the trading of the Common Stock is suspended by the SEC, the Principal Market or the NASD for a period of two (2) consecutive Trading Days during the Open Period; or,

(II) The Common Stock ceases to be registered under the 1934 Act or listed or traded on the Principal Market.  Immediately upon the occurrence of one of the above-described events, the Company shall send written notice of such event to the Investor.

SECTION 11. INDEMNIFICATION. 

In consideration of the parties mutual obligations set forth in the Transaction Documents, each of the parties (in such capacity, an "Indemnitor") shall defend, protect, indemnify and hold harmless the other and all of the other party's shareholders, officers, directors, employees, counsel, and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (I) any material misrepresentation or breach of any representation or warranty made by the Indemnitor in the Equity Line Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; (II) any material breach of any covenant, agreement or obligation of the Indemnitor contained in the Equity Line Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (III) any cause of action, suit or claim brought or made against such Indemnitee by a third party and arising out of or resulting from the execution, delivery, performance or enforcement of the Equity Line Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, except insofar as any such misrepresentation, breach or any untrue statement, alleged untrue statement, omission or alleged omission is made in reliance upon and in conformity with information furnished to Indemnitor which is specifically intended for use in the preparation of any such Registration Statement, preliminary prospectus, prospectus or amendments to the prospectus. To the extent that the foregoing undertaking by the Indemnitor may be unenforceable for any reason, the Indemnitor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The indemnity provisions contained herein shall be in addition to any cause of action or similar rights Indemnitor may have, and any liabilities the Indemnitor or the Indemnitees may be subject to.

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SECTION 12. GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION.  All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to principles of conflict of laws.  The parties to this agreement will submit all disputes arising under this agreement to arbitration in Boston, Massachusetts before a single arbitrator of the American Arbitration Association (“AAA”).  The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the Commonwealth of Massachusetts.  No party to this Agreement will challenge the jurisdiction or venue provisions as provided in this section.  No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section.  Nothing contained herein shall prevent the party from obtaining an injunction.

(B) LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the Equity Line Transaction Documents, each party shall pay the fees and expenses of its advisers, counsel, the accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. Any attorneys' fees and expenses incurred by either the Company or the Investor in connection with the preparation, negotiation, execution and delivery of any amendments to this Agreement or relating to the enforcement of the rights of any party, after the occurrence of any breach of the terms of this Agreement by another party or any default by another party in respect of the transactions contemplated hereunder, shall be paid on demand by the party which breached the Agreement and/or defaulted, as the case may be. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of any Securities. 

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(C) COUNTERPARTS. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature. 

(D) HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine. 

(E) SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. 

(F) ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between the Company and the Investor with respect to the terms and conditions set forth herein, and, the terms of this Agreement may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the Parties.  No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. The execution and delivery of the Equity Line Transaction Documents shall not alter the force and effect of any other agreements between the Parties, and the obligations under those agreements.

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

If to the Company:

San West Inc.

10350 Mission Gorge Road

Santee, CA 92071 

Phone 619 258-0887

Fax 619 449 9064

Email frank@buggyworld.net

 

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If to the Investor:

Dutchess Opportunity Fund, II, LP 

50 Commonwealth Avenue, Suite 2

Boston, MA 02116 

Telephone: 617-301-4700 

Facsimile: 617-249-0947

E-mail: dleighton@dpef.com

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

(H) NO ASSIGNMENT. This Agreement may not be assigned. 

(I) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and is not for the benefit of, nor may any provision hereof be enforced by, any other person, except that the Company acknowledges that the rights of the Investor may be enforced by its general partner. 

(J) SURVIVAL. The indemnification provisions set forth in Section 11, shall survive each of the Closings and the termination of this Agreement. 

 (K) PUBLICITY. The Company and the Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. The Investor acknowledges that this Agreement and all or part of the Equity Line Transaction Documents may be deemed to be "material contracts" as that term is defined by Item 601(b)(10) of Regulation S-B, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the 1933 Act or the 1934 Act.  The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel. 

  

28

 

(L) FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 

(M) PLACEMENT AGENT. If so required by the SEC, the Company agrees to pay a registered broker dealer, to act as placement agent, a percentage of the Put Amount on each draw toward the fee as outlined in the Placement Agent Agreement.  The Investor shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other persons or entities for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Equity Line Transaction Documents. The Company shall indemnify and hold harmless the Investor, their employees, officers, directors, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses incurred in respect of any such claimed or existing fees, as such fees and expenses are incurred. 

(N) NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party, as the parties mutually agree that each has had a full and fair opportunity to review this Agreement and seek the advice of counsel on it. 

(O) REMEDIES. The Investor shall have all rights and remedies set forth in this Agreement and the Registration Rights Agreement and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which the Investor has by law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any default or breach of any provision of this Agreement, including the recovery of reasonable attorneys fees and costs, and to exercise all other rights granted by law. 

(P) PAYMENT SET ASIDE. To the extent that the Company makes a payment or payments to the Investor hereunder or under the Registration Rights Agreement or the Investor enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 

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(Q) PRICING OF COMMON STOCK. For purposes of this Agreement, the BEST BID of the Common Stock shall be as reported on Bloomberg. 

(R) COMMITMENT FEE.  The Issuer agrees to issue to the Investor four hundred thousand dollars ($400,000) worth of common stock as a Commitment Fee. The Commitment Fee shall be paid upon execution of this Agreement.  The amount of shares issued will be determined by dividing the amount of the Commitment Fee by the lowest closing Best Bid price of the Issuer's Common Stock for the ten Trading Days immediately preceding the date of this Agreement. Such Common Stock shall be subject to the same Registration Rights as the Commitment Amount, excluding the current registration statement on file, file number 333-156706. 

SECTION 13. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.

(a) The Company shall not disclose non-public information to the Investor, its advisors, or its representatives.

(b) Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 13 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading. 

30

 

ARTICLE 14  ACKNOWLEDGEMENTS OF THE PARTIES.

Notwithstanding anything in this Agreement to the contrary, the parties hereto hereby acknowledge and agree to the following: (i) the Investor makes no representations or covenants that it will not engage in trading in the securities of the Company, other than the Investor will not sell short the Company's common stock at any time during this Agreement; (ii) the Company shall, by 8:30 a.m. Boston Time on the fourth Trading Day following the date hereof, file a current report on Form 8-K disclosing the material terms of the transactions contemplated hereby and in the other Equity Line Transaction Documents; (iii) the Company has not and shall not provide material non-public information to the Investor unless prior thereto the Investor shall have executed a written agreement regarding the confidentiality and use of such information; and (iv) the Company understands and confirms that the Investor will be relying on the acknowledgements set forth in clauses (i) through (iii) above if the Investor effects any transactions in the securities of the Company.  

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SIGNATURE PAGE OF INVESTMENT AGREEMENT 

Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Investment Agreement and the Registration Rights Agreement as of the date first written above. 

The undersigned signatory hereby certifies that he has read and understands the Investment Agreement, and the representations made by the undersigned in this Investment Agreement are true and accurate, and agrees to be bound by its terms. 

DUTCHESS OPPORTUNITY FUND, II, LP

By:

________________________________   

 Douglas H. Leighton

Managing Member of:

Dutchess Capital Management, II, LLC

General Partner to:

Dutchess Opportunity Fund, II, LP

 

SAN WEST, INC.

By: _______________________________ 

Frank Drechsler , CEO

 

32

 

LIST OF EXHIBITS 

	
	EXHIBIT  A               Registration  Rights  Agreement

EXHIBIT  B               Opinion  of  Company's  Counsel

EXHIBIT  C               Put  Notice

EXHIBIT  D               Put  Settlement  Sheet

 

33

LIST OF SCHEDULES 

Schedule 4(a) Subsidiaries 

 

EXHIBIT A 

34

EXHIBIT B 

FORM OF NOTICE OF EFFECTIVENESS 

OF REGISTRATION STATEMENT

Date: __________

[TRANSFER AGENT]

Re:

SAN WEST, INC..

Ladies and Gentlemen:

We are counsel to San West, Inc.., a California corporation (the "Company"), and have represented the Company in connection with that certain Investment Agreement (the "Investment Agreement") entered into by and among the Company and Dutchess Opportunity Fund, II, LP (the "Investor") pursuant to which the Company has agreed to issue to the Investor shares of the Company's common stock, without par value per share (the "Common Stock") on the terms and conditions set forth in the Investment Agreement. Pursuant to the Investment Agreement, the Company also has entered into a Registration Rights Agreement with the Investor (the "Registration Rights Agreement") pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issued or issuable under the Investment Agreement under the Securities Act of 1933, as amended (the "1933 Act"). In connection with the Company's obligations under the Registration Rights Agreement, on _________, 200_ the Company filed a Registration Statement on Form S- ___ (File No. 333-________) (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities which names the Investor as a selling shareholder thereunder.

In connection with the foregoing, we advise you that 

[

a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective

] [the Registration Statement has become effective]

 under the 1933 Act at [enter the time of effectiveness] on [enter the date of effectiveness] and to the best of our knowledge, after telephonic inquiry of a member of the SEC’s staff, no stop order suspending its effectiveness has been issued and no proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.

Very truly yours,

[Company Counsel]

35

 

EXHIBIT C

Date: 

RE: Put Notice Number __ 

Dear Mr. Leighton, 

This is to inform you that as of today, San West, Inc., Inc., a California corporation (the "Company"), hereby elects to exercise its right pursuant to the Investment Agreement to require Dutchess Opportunity Fund, II, LP to purchase shares of its common stock. The Company hereby certifies that: 

The amount of this put is $__________. 

The Pricing Period runs from ________ until _______. 

The Minimum Purchase Price is $________

The current number of shares issued and outstanding as of the Company are: 

The number of shares currently available for issuance on the

S

-1 for the Equity Line are: 

_________________________

Regards, 

San West, Inc.

______________________

Name:

Title:

 

36

 

EXHIBIT D

PUT SETTLEMENT SHEET 

Date: 

Dear ______, 

Pursuant to the Put given by San West, Inc., to Dutchess Opportunity Fund, II, LP on _________________ 200_, we are now submitting the amount of common shares for you to issue to Dutchess. 

Please have a certificate bearing no restrictive legend totaling __________ shares issued to Dutchess Opportunity Fund, II, LP immediately and send via DWAC to the following account: 

XXXXXX 

If not DWAC eligible, please send FedEx Priority Overnight to: 

XXXXXX

Once these shares are received by us, we will have the funds wired to the Company. 

Regards, 

Douglas H. Leighton 

 

37

 

	
	DATE. . . . . . . . . . . . . . . . . . . . .  BEST BID

Day 1 – Day 5                              

 

BEST BID

                                             ------------

PUT AMOUNT

                                             ------------

AMOUNT WIRED TO COMPANY

                                             ------------

PURCHASE PRICE (92)% (NINETY-TWO PERCENT))

                                             ------------

AMOUNT OF SHARES DUE

                                             ------------

	 

The undersigned has completed this Put as of this ___th day of _________, 200_. 

San West, Inc.

______________________________

Name:

Title:

38

 

SCHEDULE 4(c) CAPITALIZATION 

SCHEDULE 4(e) CONFLICTS 

 

SCHEDULE 4(g) MATERIAL CHANGES 

SCHEDULE 4(h) LITIGATION 

39

 

SCHEDULE 4(l) INTELLECTUAL PROPERTY 

SCHEDULE 4(n) LIENS 

SCHEDULE 4(t) CERTAIN TRANSACTIONS 

40

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