Document:

Unassociated Document

    
      

    

    Exhibit
10.2

       

      MODINE
MANUFACTURING COMPANY

      2008
INCENTIVE COMPENSATION PLAN

      

      I.            
 INTRODUCTION.

      

      1.01       
 Purpose.  The
Modine Manufacturing Company 2008 Incentive Compensation Plan (the "Plan") is
intended to provide incentives that will attract and retain the best available
(a) non-employee directors of Modine Manufacturing Company (the “Company”) and
(b) employees of the Company or any Subsidiary that now exists or hereafter is
organized or acquired by the Company, provide additional incentive to such
persons and promote the success and growth of the Company.  These
purposes may be achieved through the grant of options to purchase Common Stock
of Modine Manufacturing Company, the grant of Stock Appreciation Rights, the
grant of Restricted Stock Awards, the grant of Performance Stock Awards, the
grant of Phantom Stock Awards and the grant of Cash Bonus Awards, as described
below.

      

      1.02      
  Effective
Date.  The effective date of the Plan shall be July 17, 2008,
subject to the approval of the Plan by shareholders of the Company at the 2008
Annual Meeting of Shareholders (the “Effective Date”). 

      

      II.        
   DEFINITIONS.

      

      2.02      
  "Affiliate" or "Associate" shall have
the meaning set forth in Rule 12b-2 under the Securities Exchange Act of
1934.

      

      2.02     
   “Award” means an
Incentive Stock Option, Non-Qualified Stock Option, Stock Appreciation Right,
Restricted Stock Award, Performance Stock Award, Phantom Stock Award or Cash
Bonus Award, as appropriate.

      

      2.03       
 “Award
Agreement” means the agreement between the Company and the Grantee
specifying the terms and conditions as described thereunder.

      

      2.04       
 “Board”
means the Board of Directors of Modine Manufacturing Company.

      

      2.05      
  “Cash
Bonus Award” means a cash award under Article X of the Plan.

      

      2.06     
   “Change
in Control” shall be deemed to take place on the occurrence of any of the
following events: (a) the announcement by an entity, person or group (other than
the Company or an Affiliate or Associate) of a tender offer for at least 30% of
the outstanding capital stock of the Company entitled to vote in elections of
directors ("Voting Power"); (b) the effective time of (i) a merger or
consolidation of the Company with one or more other corporations as a result of
which the holders of the outstanding Voting Power of the Company immediately
prior to such merger or consolidation (other than the surviving or resulting
corporation or any Affiliate or Associate thereof) hold less than 50% of the
Voting Power of the surviving or resulting corporation, or (ii) a transfer of
30% of the Voting Power, or a majority of the Company's consolidated assets,
other than to an entity of which the Company owns at least 50% of the Voting
Power; or (c) during any period of 24 months, the persons who at the beginning
of such 24-month period were directors of the Company cease for any reason to
constitute at least a majority of the Board.

      

      2.07      
  “Code” means the
Internal Revenue Code of 1986, as it may be amended from time to
time.

      

      2.08      
  “Committee” means the
committee described in Article IV or the person or persons to whom the committee
has delegated its power and responsibilities under Article IV.

      

      2.09    
    “Common Stock” or
“Stock” means
the common stock of the Company having a par value of $0.625 per
share.

      

      2.10     
   “Company” means Modine
Manufacturing Company, a Wisconsin corporation.

      

      2.11     
   “Fair
Market Value” means, as of any date of determination, (a) the closing
sale price of a share of Stock on the New York Stock Exchange (or on such other
recognized market or quotation system on which the trading prices of Stock are
traded or quoted at the relevant time) as reported on the composite list used by
The Wall Street Journal for reporting stock prices, or (b) if no such sale shall
have been made on that day, on the last preceding day on which there was such a
sale. If such Stock is not then listed or quoted as referenced above, Fair
Market Value shall be an amount determined in good faith by the
Committee.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      2.12    
    “Grant Date” means the
date on which an Award is deemed granted, which shall be the date on which the
Committee authorizes the Award or such later date as the Committee shall
determine in its sole discretion.

      

      2.13        
“Grantee” means
an individual who has been granted an Award.

      

      2.14       
 “Incentive Stock
Option” or “ISO” means an option
that is intended to meet the requirements of Section 422 of the Code and
regulations thereunder.

      

      2.15        
“Non-Qualified Stock
Option” or “NSO” means an option
other than an Incentive Stock Option.

      

      2.16       
 “Option”
means an Incentive Stock Option or Non-Qualified Stock Option, as
appropriate.

      

      2.17     
   “Performance Goal”
means a performance goal established by the Committee prior to the grant of an
Award that is based on the attainment of goals relating to one or more of the
following business criteria measured on an absolute basis or in terms of growth
or reduction:  return on assets employed ("ROAE"), earnings per share,
total shareholder return, net income (pre-tax or after-tax and with adjustments
as stipulated), return on equity, return on capital employed, return on assets,
return on tangible book value, operating income, earnings before depreciation,
interest, taxes and amortization (“EBITDA”), loss ratio, expense ratio, stock
price, economic value added, operating cash flow and such other subjective or
objective performance goals, including individual goals, that it deems
appropriate.

      

      2.18       
 “Performance
Stock Award” means an Award under Article VIII of the Plan, that is
conditioned upon the satisfaction pre-established performance
goals.

      

      2.19       
 “Phantom Stock
Award” means the right to receive in cash the Fair Market Value of a
share of Common Stock under Article IX of the Plan.

      

      2.20      
  “Plan” means the
Modine Manufacturing Company 2008 Incentive Compensation Plan as set forth
herein, as it may be amended from time to time.

      

      2.21        
“Restricted Stock
Award” means a restricted stock award under Article VII of the
Plan.

      

      2.22         “Stock Appreciation
Right” or “SAR” means the right
to receive cash or shares of Common Stock based upon the excess of the Fair
Market Value of one share of Common Stock on the date the SAR is exercised over
the grant price (which shall be not less than the Fair Market Value of a share
of Common Stock on the Grant Date).

      

      2.23      
  “Subsidiary” means any
corporation in which the Company or another entity qualifying as a Subsidiary
within this definition owns 50% or more of the total combined voting power of
all classes of stock, or any other entity (including, but not limited to,
partnerships and joint ventures) in which the Company or another entity
qualifying as a Subsidiary within this definition owns 50% or more of the
combined equity thereof.

      

      III.         
 SHARES SUBJECT TO AWARD.

      

      3.01        
Share
Limit.  Subject to adjustment as provided in Section 3.02
below, the number of shares of Common Stock of the Company that may be issued
under the Plan shall not exceed Two Million Five Hundred Thousand (2,500,000)
shares (the "Share Limit"); provided that no individual may be granted Awards
covering, in the aggregate, more than two hundred and fifty thousand (250,000)
shares of Common Stock in any calendar year.  Shares issued under the
Plan may come from authorized but unissued shares, from treasury shares held by
the Company, from shares purchased by the Company or an independent agent in the
open market for such purpose, or from any combination of the
foregoing.  The Share Limit shall be subject to the following rules
and adjustments:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (a)

              	
                Any
      shares of Common Stock subject to Options and SARs shall be counted
      against the Share Limit as one share for every one share subject
      thereto.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                With
      respect to SARs, when a stock settled SAR is exercised, the shares subject
      to an SAR grant agreement shall be counted against the shares available
      for issuance as one (1) share for every share subject thereto, regardless
      of the number of shares used to settle the SAR upon
    exercise.

              

      

      

      
        	
                 
      

              	
                (c)

              	
                Any
      shares of Common Stock subject to Awards other than Options and SARs shall
      be counted against the Share Limit as two and 16/100 (2.16) shares for
      every one share issued.

              

      

      

      
        	
                 
      

              	
                (d)

              	
                If
      any Award granted under this Plan is canceled, terminates, expires, or
      lapses for any reason, any shares subject to such Award again shall be
      available for the grant of an Award under the Plan.  Any Awards
      or portions thereof that are settled in cash and not in shares of Common
      Stock shall not be counted against the foregoing Share
    Limit.

              

      

      

      3.02         Changes in Common
Stock.  If any stock dividend is declared upon the Common
Stock, or if there is any stock split, stock distribution, or other
recapitalization of the Company with respect to the Common Stock, resulting in a
split or combination or exchange of shares, the Committee shall make or provide
for such adjustment in the number of and class of shares that may be delivered
under the Plan, and in the number and class of and/or price of shares subject to
outstanding Awards as it may, in its discretion, deem to be
equitable.

      

      IV.           ADMINISTRATION.

      

      4.01         Administration by the
Committee.  For purposes of the power to grant Awards to
non-employee directors, the Committee shall consist of the entire
Board.  For other Plan purposes, the Plan shall be administered by a
committee designated by the Board to administer the Plan and shall be the
Officer Nomination and Compensation Committee of the Board.  The
Committee shall be constituted to permit the Plan to comply with the provisions
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended or any
successor rule, and Section 162(m) of the Code.  A majority of the
members of the Committee shall constitute a quorum.  The approval of
such a quorum, expressed by a vote at a meeting held either in person or by
conference telephone call, or the unanimous consent of all members in writing
without a meeting, shall constitute the action of the Committee and shall be
valid and effective for all purposes of the Plan.

      

      4.02         Committee
Powers.  The Committee is empowered to adopt such rules,
regulations and procedures and take such other action as it shall deem necessary
or proper for the administration of the Plan.  The Committee shall
also have authority to interpret the Plan, and the decision of the Committee on
any questions concerning the interpretation of the Plan shall be final and
conclusive.  The Committee may consult with counsel, who may be
counsel for the Company, and shall not incur any liability for any action taken
in good faith in reliance upon the advice of counsel.  Subject to the
provisions of the Plan, the Committee shall have full and final authority
to:

      

      
        	
                 
      

              	
                (a)

              	
                designate
      the persons to whom Awards shall be
granted;

              

      

      

      
        	
                 
      

              	
                (b)

              	
                grant
      Awards in such form and amount as the Committee shall
      determine;

              

      

      

      
        	
                 
      

              	
                (c)

              	
                impose
      such limitations, restrictions and conditions upon any such Award as the
      Committee shall deem appropriate;

              

      

      

      
        	
                 
      

              	
                (d)

              	
                waive
      in whole or in part any limitations, restrictions or conditions imposed
      upon any such Award as the Committee shall deem appropriate;
      and

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (e)

              	
                modify,
      extend or renew any Award previously granted, provided that this provision
      shall not provide authority to reprice Awards to a lower exercise
      price.

              

      

      

      4.03         No
Repricing.  Repricing of Options or SARs shall not be permitted
without shareholder approval. For this purpose, a "repricing" means any of the
following (or any other action that has the same effect as any of the
following): (A) changing the terms of an Option or SAR to lower its purchase or
grant price; (B) any other action that is treated as a "repricing" under
generally accepted accounting principles; and (C) repurchasing for cash or
canceling an Option or SAR at a time when its purchase or grant price is greater
than the Fair Market Value of the underlying stock in exchange for another
Award, unless the cancellation and exchange occurs in connection with an event
set forth in Section 3.02. Such cancellation and exchange would be considered a
"repricing" regardless of whether it is treated as a "repricing" under generally
accepted accounting principles and regardless of whether it is voluntary on the
part of the Grantee.

      

      4.04         Delegation by
Committee. The Committee may delegate all or any part of its
responsibilities and powers to any executive officer or officers of the Company
selected by it.  Any such delegation may be revoked by the Board or by
the Committee at any time.

      

      V.         
  STOCK OPTIONS.

      

      5.01         Granting of Stock
Options.  Options may be granted to non-employee directors of
the Company and to officers and key employees of the Company and any of its
Subsidiaries.  In selecting the individuals to whom Options shall be
granted, as well as in determining the number of Options granted, the Committee
shall take into consideration such factors as it deems relevant pursuant to
accomplishing the purposes of the Plan.  A Grantee may, if he or she
is otherwise eligible, be granted an additional Option or Options if the
Committee shall so determine.  Option grants under the Plan shall be
evidenced by an Award Agreement in such form and containing such provisions as
are consistent with the Plan as the Committee shall from time to time
approve.

      

      5.02         Type of
Option.  At the time each Option is granted, the Committee
shall designate the Option as an Incentive Stock Option or a Non-Qualified Stock
Option. Any Option designated as an Incentive Stock Option shall comply with the
requirements of Section 422 of the Code, including the requirement that
incentive stock options may only be granted to individuals who are employed by
the Company, a parent or a Subsidiary corporation of the Company.  If
required by applicable tax rules regarding a particular grant, to the extent
that the aggregate Fair Market Value (determined as of the date an Incentive
Stock Option is granted) of the shares with respect to which an Incentive Stock
Option grant under this Plan (when aggregated, if appropriate, with shares
subject to other Incentive Stock Option grants made before said grant under this
Plan or another plan maintained by the Company or any ISO Group member (as
defined in Section 422 of the Code)) is exercisable for the first time by an
optionee during any calendar year exceeds $100,000 (or such other limit as is
prescribed by the Code), such option grant shall be treated as a grant of
Non-Qualified Stock Options pursuant to Code Section 422(d).

      

      5.03         Option
Terms.  Each option grant Award Agreement shall specify the
number of Incentive Stock Options and/or Non-Qualified Stock Options being
granted; one option shall be deemed granted for each share of
stock.  In addition, each option grant Award Agreement shall specify
the exercisability and/or vesting schedule of such options, if
any.  No Option shall be exercisable in whole or in part more than ten
years from the date it is granted.

      

      5.04         Purchase
Price.  The purchase price for a share subject to Option shall
not be less than 100% of the Fair Market Value of the share on the date the
Option is granted, provided, however, the purchase price of an Incentive Stock
Option shall not be less than 110% of the Fair Market Value of such share on the
date the Option is granted if the Grantee then owns (after the application of
the family and other attribution rules of Section 424(d) or any successor rule
of the Code) more than 10% of the total combined voting power of all classes of
stock of the Company. The purchase price of the Common Stock covered by each
Option shall be subject to adjustment as provided in Articles III and XI
hereof.

      

      5.05         Method of
Exercise.  An Option that has become exercisable may be
exercised from time to time by written notice to the Company stating the number
of shares being purchased and accompanied by the payment in full of the purchase
price for such shares.  The purchase price may be paid by any of the
following methods, (a) by cash, (b) to the extent permitted under the particular
grant Award Agreement, by transferring to the Company shares of stock of the
Company at their Fair Market Value as of the date of exercise of the Option,
provided that the Grantee held the shares of stock for at least six months
("Delivered Stock"), (c) a combination of cash and Delivered Stock, or (d) such
other forms or means which the Committee shall determine in its discretion and
in such manner as is consistent with the Plan's purpose and applicable
law.  Notwithstanding the foregoing, the Company may arrange for or
cooperate in permitting broker-assisted cashless exercise
procedures.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      5.06         Shareholder
Rights.  A Grantee shall not, by reason of any Options granted
hereunder, have any rights of a shareholder of the Company with respect to the
shares covered by Options until shares of Stock have been issued.

      

      VI.           STOCK
APPRECIATION RIGHTS.

      

      6.01         Granting of
SARs.  The Committee may, in its discretion, grant SARs to
non-employee directors of the Company and to officers and key employees of the
Company and any of its Subsidiaries.  SARs may be granted with respect
to Options granted concurrently (tandem SARs) or on a stand alone basis (stand
alone SARs).

      

      6.02         SAR
Terms.  Each SAR grant shall be evidenced by an Award Agreement
that shall specify the number of SARs granted, the grant price (which shall be
not less than the Fair Market Value of a share of Common Stock on the Grant
Date), the term of the SAR, and such other provisions as the Committee shall
determine.  No SAR shall be exercisable in whole or in part more than
ten years from the date it is granted.

      

      6.03         Method of
Exercise.  An SAR that has become exercisable may be exercised
by written notice to the Company stating the number of SARs being
exercised.

      

      6.04         Payment upon
Exercise.  Upon the exercise of SARs, the Grantee shall be
entitled to receive an amount determined by multiplying (a) the difference
obtained by subtracting the grant price from the Fair Market Value of a share of
Common Stock on the date of exercise, by (b) the number of SARs
exercised.  At the discretion of the Committee, the payment upon the
exercise of the SARs may be in cash, in shares of Common Stock of equivalent
value (valued at the Fair Market Value of the Common Stock on the date of
exercise), or in some combination thereof.  The number of available
shares under Section 3.01 shall not be affected by any cash
payments.

      

      6.05         Shareholder
Rights.  A Grantee shall not, by reason of any SARs granted
hereunder, have any rights of a shareholder of the Company with respect to the
shares covered by SARs until shares of Stock have been issued.

      

      VII.         RESTRICTED
STOCK AWARDS.

      

      7.01         Administration.  Shares
of Restricted Stock may be issued either alone or in addition to other Awards
granted under the Plan.  The Committee shall determine the eligible
persons to whom and the time or times at which grants of Restricted Stock will
be made, the number of shares of restricted Common Stock to be awarded, the time
or times within which such Awards may be subject to forfeiture and any other
terms and conditions of the Awards.  The Committee may condition the
grant of Restricted Stock upon the attainment of Performance Goals so that the
grant qualifies as “performance-based compensation” within the meaning of
Section 162(m) of the Code.  The Committee may also condition the
grant of Restricted Stock upon such other conditions, restrictions and
contingencies as the Committee may determine.  The provisions of
Restricted Stock Awards need not be the same with respect to each
recipient.  Notwithstanding the foregoing, the Committee or the Board
may grant shares of unrestricted stock to non-employee directors of the
Company.

      

      7.02         Registration.  Any
Restricted Stock Award granted hereunder may be evidenced in such manner as the
Committee may deem appropriate, including, without limitation, book-entry
registration or issuance of a stock certificate or certificates. In the event
any stock certificate is issued in respect of shares of Restricted Stock, such
certificate shall be registered in the name of the Grantee and shall bear an
appropriate legend (as determined by the Committee) referring to the terms,
conditions and restrictions applicable to such Restricted Stock. In the event
such Restricted Stock is issued in book-entry form, the depository and the
Company’s transfer agent shall be provided with notice referring to the terms,
conditions and restrictions applicable to such Restricted Stock, together with
such stop-transfer instructions as the Committee deems
appropriate.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      7.03         Terms and
Conditions.  Restricted Stock
Awards shall be subject to the following terms and conditions:

      

      
        	
                 
      

              	
                (a)

              	
                Until
      the applicable restrictions lapse or the conditions are satisfied, the
      Grantee shall not be permitted to sell, assign, transfer, pledge or
      otherwise encumber the Restricted Stock
Award.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                Except
      to the extent otherwise provided in the applicable Award Agreement and (c)
      below, the portion of the Award still subject to restriction shall be
      forfeited by the Grantee upon termination of a Grantee’s service for any
      reason.

              

      

      

      
        	
                 
      

              	
                (c)

              	
                In
      the event of hardship, early retirement or other special circumstances of
      a Grantee whose employment is terminated (other than for cause), the
      Committee may waive in whole or in part any or all remaining restrictions
      with respect to such Grantee’s shares of Restricted
  Stock.

              

      

      

      
        	
                 
      

              	
                (d)

              	
                If
      and when the applicable restrictions lapse, unlegended certificates for
      such shares shall be delivered to the
Grantee.

              

      

      

      
        	
                 
      

              	
                (e)

              	
                Each
      Award shall be confirmed by, and be subject to the terms of, an Award
      Agreement identifying the restrictions applicable to the
      Award.

              

      

      

      7.04         Rights as
Shareholder.  A Grantee
receiving a Restricted Stock Award shall have all of the rights of a shareholder
of the Company, including the right to vote the shares and the right to receive
any cash dividends.  Unless otherwise determined by the Committee,
cash dividends shall be automatically paid in cash and dividends payable in
stock shall be paid in the form of additional Restricted Stock.

      

      VIII.        PERFORMANCE
STOCK AWARDS.

      

      8.01         Administration.  Performance
Stock Awards entitle a Grantee to receive shares of Common Stock if
predetermined conditions are satisfied.  The Committee shall determine
the eligible employees to whom and the time or times at which Performance Stock
Awards will be made, the number of shares to be awarded, the time or times
within which such Awards may be subject to forfeiture and any other terms and
conditions of the Awards.  The Committee may condition the grant of a
Performance Stock Award upon the attainment of Performance Goals so that the
grant qualifies as “performance-based compensation” within the meaning of
Section 162(m) of the Code.  The Committee may also condition the
grant of a Performance Stock Award upon such other conditions, restrictions and
contingencies as the Committee may determine.  The provisions of
Performance Stock Awards need not be the same with respect to each
recipient.

      

      8.02         Terms and
Conditions.  Performance
Stock Awards shall be subject to the following terms and
conditions:

      

      
        	
                 
      

              	
                (a)

              	
                Until
      the applicable restrictions lapse or the conditions are satisfied, the
      Grantee shall not be permitted to sell, assign, transfer, pledge or
      otherwise encumber the Performance Stock
Award.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                Except
      to the extent otherwise provided in the applicable Award Agreement and (c)
      below, the portion of the Award still subject to restriction may be
      forfeited by the Grantee upon termination of a Grantee’s service for any
      reason, at the discretion of the
Committee.

              

      

      

      
        	
                 
      

              	
                (c)

              	
                In
      the event of hardship or other special circumstances of a Grantee whose
      employment is terminated (other than for cause), the Committee may waive
      in whole or in part any or all remaining restrictions with respect to such
      Grantee’s Performance Stock Award or the forfeiture of any portion of the
      Award still subject to restriction.

              

      

      

      
        	
                 
      

              	
                (d)

              	
                If
      and when the applicable restrictions lapse, if any, unlegended
      certificates for such shares shall be delivered to the
      Grantee.

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (e)

              	
                Each
      Award shall be confirmed by, and be subject to the terms of, an Award
      Agreement identifying the restrictions applicable to the Award, if
      any.

              

      

      

      8.03         Rights as
Shareholder.  A Grantee
receiving a Performance Stock Award shall not be deemed the holder of any shares
covered by the Award, or have any rights as a shareholder with respect thereto,
until such shares are issued to him/her following the lapse of the applicable
restrictions, if any.

      

      IX.           PHANTOM
STOCK AWARDS.

      

      9.01         Administration.  Phantom
Stock Awards entitle a Grantee to receive cash payments based upon the Fair
Market Value of shares of Common Stock if predetermined conditions are
satisfied.  The Committee shall determine the eligible employees to
whom and the time or times at which Phantom Stock Awards will be made, the
number of shares to be covered by the Award, the time or times within which such
Awards may be subject to forfeiture and any other terms and conditions of the
Awards.  The Committee may condition the grant of a Phantom Stock
Award upon the attainment of Performance Goals so that the grant qualifies as
“performance-based compensation” within the meaning of Section 162(m) of the
Code.  The Committee may also condition the grant of a Phantom Stock
Award upon such other conditions, restrictions and contingencies as the
Committee may determine.  The provisions of Phantom Stock Awards need
not be the same with respect to each recipient.

      

      9.02         Terms and
Conditions.  Phantom Stock
Awards shall be subject to the following terms and conditions:

      

      
        	
                 
      

              	
                (a)

              	
                Until
      the applicable restrictions lapse or the conditions are satisfied, the
      Grantee shall not be permitted to sell, assign, transfer, pledge or
      otherwise encumber the Phantom Stock
Award.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                Except
      to the extent otherwise provided in the applicable Award Agreement and (c)
      below, the portion of the Award still subject to restriction shall be
      forfeited by the Grantee upon termination of a Grantee’s service for any
      reason.

              

      

      

      
        	
                 
      

              	
                (c)

              	
                In
      the event of hardship or other special circumstances of a Grantee whose
      employment is terminated (other than for cause), the Committee may waive
      in whole or in part any or all remaining restrictions with respect to such
      Grantee’s Phantom Stock Award.

              

      

      

      
        	
                 
      

              	
                (d)

              	
                If
      and when the applicable restrictions lapse, the Company shall pay to
      Grantee an amount equal to the Fair Market Value of a share of Common
      Stock multiplied by the number of shares covered by the Award for which
      the restrictions have then lapsed.

              

      

      

      
        	
                 
      

              	
                (e)

              	
                Each
      Award shall be confirmed by, and be subject to the terms of, an Award
      Agreement identifying the restrictions applicable to the
      Award.

              

      

      

      9.03         Rights as
Shareholder.  A Grantee
receiving a Phantom Stock Award shall not be deemed the holder of any shares
covered by the Award, or have any rights as a shareholder with respect
thereto.

      

      X.           
CASH BONUS AWARDS.

      

      10.1         Administration.  The Committee may
establish Cash Bonus Awards either alone or in addition to other Awards granted
under the Plan.  The Committee shall determine the employees to whom
and the time or times at which Cash Bonus Awards shall be granted, and the
conditions upon which such Awards will be paid.  The maximum Cash
Bonus Award payable to an employee in any calendar year shall not exceed two
million dollars ($2,000,000).

      

      10.2         Terms and
Conditions.  Cash Bonus Awards shall be subject to the
following terms and conditions:

      
      

       

      
        	
                 
      

              	
                (a)

              	
                A
      Cash Bonus Award under the Plan shall be paid solely on account of the
      attainment of one or more preestablished, objective Performance
      Goals.  Performance Goals shall be based on one or more business
      criteria that apply to the individual, a business unit, or the Company as
      a whole.  It is intended that any Performance Goal will be in a
      form that relates the bonus to an increase in the value of the Company to
      its shareholders.

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (b)

              	
                Performance
      Goals shall be established in writing by the Committee not later than 90
      days after the commencement of the period of service to which the
      Performance Goal relates   The preestablished Performance
      Goal must state, in terms of an objective formula or standard, the method
      for computing the amount of compensation payable to any employee if the
      goal is attained.

              

      

       

      
      

      
        	
                 
      

              	
                (c)

              	
                Following
      the close of the performance period, the Committee shall determine whether
      the Performance Goal was achieved, in whole or in part, and determine the
      amount payable to each employee.

              

      

      

      10.3         Non-Exclusivity. This
Plan does not limit the authority of the Company, the Board or the Committee, or
any Subsidiary to award bonuses or authorize any other compensation to any
person.

      

      XI.           EFFECT
OF CORPORATE TRANSACTIONS.

      

      11.01       Merger, Consolidation or
Reorganization.  In the event of a merger, consolidation or
reorganization with another corporation in which the Company is not the
surviving corporation or a merger, consolidation or reorganization involving the
Company in which the Common Stock ceases to be publicly traded, the Committee
shall, subject to the approval of the Board, or the board of directors of any
corporation assuming the obligations of the Company hereunder, take action
regarding each outstanding and unexercised Award pursuant to either clause (a)
or (b) below:

      

      
        	
                 
      

              	
                (a)

              	
                Appropriate
      provision may be made for the protection of such Award by the substitution
      on an equitable basis of appropriate shares of the surviving or related
      corporation, provided that the excess of the aggregate Fair Market Value
      of the shares subject to such Award immediately before such substitution
      over the exercise price thereof is not more than the excess of the
      aggregate fair market value of the substituted shares made subject to
      Award immediately after such substitution over the exercise price thereof;
      or

              

      

      

      
        	
                 
      

              	
                (b)

              	
                The
      Committee may cancel such Award.  In the event any Option or SAR
      is canceled, the Company, or the corporation assuming the obligations of
      the Company hereunder, shall pay the Grantee an amount of cash (less
      normal withholding taxes) equal to the excess of (i) the value, as
      determined by the Committee, of the property (including cash) received by
      the holder of a share of Company Stock as a result of such event over (ii)
      the exercise price of such option or the grant price of the SAR,
      multiplied by the number of shares subject to such Award.  In
      the event any other Award is canceled, the Company, or the corporation
      assuming the obligations of the Company hereunder, shall pay the Grantee
      an amount of cash or stock, as determined by the Committee, based upon the
      value, as determined by the Committee, of the property (including cash)
      received by the holder of a share of Company Stock as a result of such
      event. No payment shall be made to a Grantee for any Option or SAR if the
      purchase or grant price for such Option or SAR exceeds the value, as
      determined by the Committee, of the property (including cash) received by
      the holder of a share of Company Stock as a result of such
      event.

              

      

      

      11.02       Change in
Control.  Notwithstanding any provision in the Plan to the
contrary, unless the particular Award Agreement provides otherwise, the unvested
Awards held by each Grantee shall automatically become vested upon the
occurrence, before the expiration or termination of such Award, of a Change in
Control.  Further, the Committee shall have the right to cancel such
Awards and pay the Grantee an amount determined under Section 11.01(b)
above.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      XII.         MISCELLANEOUS.

      

      12.01       Withholding.  The
Company shall have the power and the right to deduct or withhold, or require a
Grantee to remit to the Company, an amount sufficient to satisfy Federal, state,
and local taxes (including the Grantee’s FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of this
Plan. With respect
to withholding required upon the exercise of Options or SARs, upon the lapse of
restrictions on Restricted Stock or the payment of Performance Stock, Grantees
may elect to satisfy the withholding requirement, in whole or in part, by having
the Company withhold shares having a Fair Market Value on the date the tax is to
be determined equal to the minimum statutory total tax that could be imposed on
the transaction.

      

      12.02       No Employment or Retention
Agreement Intended.  Neither the establishment of, nor the
awarding of Awards under this Plan shall be construed to create a contract of
employment or service between any Grantee and the Company or its Subsidiaries;
it does not give any Grantee the right to continued service in any capacity with
the Company or its Subsidiaries or limit in any way the right of the Company or
its Subsidiaries to discharge any Grantee at any time and without notice, with
or without cause, or to any benefits not specifically provided by this Plan, or
in any manner modify the Company’s right to establish, modify, amend or
terminate any profit sharing or retirement plans.

      

      12.03       Non-transferability of
Awards.  Any Award granted hereunder shall, by its terms, be
non-transferable by a Grantee other than by will or the laws of descent and
shall be exercisable during the Grantee’s lifetime solely by the Grantee or the
Grantee’s duly appointed guardian or personal
representative.  Notwithstanding the foregoing, the Committee may
permit a Grantee to transfer a Non-Qualified Stock Option or SAR to a family
member or a trust or partnership for the benefit of a family member, in
accordance with rules established by the Committee.

      

      12.04       Securities
Laws.  No shares of Common Stock will be issued or transferred
pursuant to an Award unless and until all then applicable requirements imposed
by Federal and state securities and other laws, rules and regulations and by any
regulatory agencies having jurisdiction, and by any exchanges upon which the
shares of Common Stock may be listed, have been fully met. As a condition
precedent to the issuance of shares pursuant to the grant or exercise of an
Award, the Company may require the Grantee to take any reasonable action to meet
such requirements. The Committee may impose such conditions on any shares of
Common Stock issuable under the Plan as it may deem advisable, including,
without limitation, restrictions under the Securities Act of 1933, as amended,
under the requirements of any exchange upon which such shares of the same class
are then listed, and under any blue sky or other securities laws applicable to
such shares. The Committee may also require the Grantee to represent and warrant
at the time of issuance or transfer that the shares of Common Stock are being
acquired only for investment purposes and without any current intention to sell
or distribute such shares.

      

      12.05       Dissolution or
Liquidation.  Upon the dissolution or liquidation of the
Company, any outstanding Awards theretofore granted under this Plan shall be
deemed canceled.

      

      12.06       Controlling
Law.  The law of the State of Wisconsin, except its law with
respect to choice of law, shall be controlling in all matters relating to the
Plan.

      

      12.07       Termination and Amendment of
the Plan.  The Plan will expire ten (10) years after the
Effective Date, solely with respect to the granting of Incentive Stock Options
or such later date as may be permitted by the Code for Incentive Stock
Options.  The Board may from time to time amend, modify, suspend or
terminate the Plan; provided, however, that no such action shall (a) impair
without the Grantee’s consent any Award theretofore granted under the Plan or
(b) be made without shareholder approval where such approval would be required
as a condition of compliance with the Code or other applicable laws or
regulatory requirements.  Absent shareholder approval, neither the
Committee nor the Board shall have any authority, with or without the consent of
a Grantee, to “reprice” an Award after the date of its initial grant with a
lower exercise price in substitution for the original exercise
price.ex4_4.htm

    
      

    

    Exhibit
4.4
 

    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement dated as of July 15, 2008 (this “Agreement”) is made by and
between Espre Solutions, Inc., a Nevada corporation, with principal executive
offices located at 5700 W. Plano Parkway, Suite 2600, Plano, Texas 75093 (the
“Company”), and La Jolla
Cove Investors, Inc. (“Holder”).

     

    WHEREAS,
Holder desires to purchase from the Company, and the Company desires to issue
and sell to Holder, upon the terms and subject to the conditions of this
Agreement, a Convertible Debenture of the Company in the aggregate principal
amount of $2,000,000 (the “Debenture”); and

     

    WHEREAS,
upon the terms and subject to the conditions set forth in the Debenture the
Debenture is convertible into shares of the Company’s Common Stock (the “Common Stock”).

     

    NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:

     

    
      	
               
      

            	
              I.

            	
              PURCHASE
      AND SALE OF DEBENTURE

            

    

     

    A.           Transaction.  Holder
hereby agrees to purchase from the Company, and the Company has offered and
hereby agrees to issue and sell to Holder in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the “Securities
Act”), the Debenture.

     

    B.           Purchase Price; Form of
Payment.  The purchase price for the Debenture to be purchased
by Holder hereunder shall be $2,000,000 (the “Purchase
Price”).  Simultaneously with the execution of this Agreement,
Holder shall pay the Purchase Price by wire transfer of $250,000 in immediately
available funds to the Company and delivery to the Company of a Secured
Promissory Note in the principal amount of $1,750,000, in the form attached
hereto as Exhibit
A (the “Promissory
Note”).  Simultaneously with the execution of this Agreement,
the Company shall deliver the Debenture (which shall have been duly authorized,
issued and executed I/N/O Holder or, if the Company otherwise has been notified,
I/N/O Holder’s nominee) to the Holder.

     

    C.           Second
Debenture.  Provided that no Event of Default (as defined in
the Debenture) has occurred under the Debenture (provided that Holder may, in
its sole and absolute discretion waive the occurrence of such Event of Default
with respect to this Section), Holder shall select a date, which date shall be
in Holder’s sole and absolute discretion, during the Second Debenture Period (as
defined below) (with such date as selected by Holder referred to herein as the
“Second Debenture Date”)
at which the Company shall sell and the Holder shall purchase a debenture in the
principal amount of $2,000,000 in exchange for a purchase price of $2,000,000
(the “Second
Debenture”), with such purchase price paid via a cash payment of $250,000
and the issuance of a promissory note in the principal amount of $1,750,000 (the
“Second Promissory
Note”), with the form of and terms of the Second Debenture and the Second
Promissory Note and payment of the purchase price subject to the same terms and
conditions of this Agreement, the Debenture and the Promissory Note, as
applicable, including the entry into a Stock Pledge Agreement on the same terms
and conditions as set forth in the Stock Pledge Agreement (as defined below)
entered into in connection with this Agreement and the Debenture, and when the
Second Debenture is issued, the term “Debenture” as used in this Agreement shall
be deemed to include the Second Debenture in all respects and when the Second
Promissory Note is issued, the term “Promissory Note” as used in this Agreement
shall be deemed to include the Second Promissory Note in all respects. The
closing of the purchase and sale of the Second Debenture and the issuance of the
Second Promissory Note shall occur within thirty days of the Second Debenture
Date.  For the purposes of this Agreement, the “Second Debenture
Period” shall mean the period that commences on the date hereof and terminates
upon the date that the remaining Principal Amount of the Debenture is equal to
an amount not greater than $250,000.

    
       

      
        	 
      	 
      	 
      
	
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          1

          
            

          

        

        
           

        

      

    

    

     

    D.           Non-Funding
Penalty.  Notwithstanding the foregoing obligation of Holder to
purchase the Second Debenture, (also referred to herein as an “Additional Debenture”), in the
event that Holder does not purchase the Additional Debenture within 10 business
days of the date that the delivery of funds associated with such purchase would
otherwise be due, upon 20 days’ prior written notice from the Company of such
failure to so purchase the Additional Debenture, Holder shall pay an amount
equal to $25,000 (the “Non-Funding Penalty”) to the
Company, provided however that in the event that the Common Stock shall trade on
the Trading Market (as defined in the Debenture) at a price per share that is
$0.062 per share or lower at any time during the six month period commencing on
the date hereof and ending on the six month anniversary of the date hereof (as
adjusted for any stock splits, stock dividends, combinations, subdivisions,
recapitalizations or the like), then the Non-Funding Penalty shall be reduced to
equal $5,000.  The amount payable by the Holder to the Company in
connection with any damages, losses, claims or other amounts in connection with
the failure of the Holder to purchase the Additional Debenture shall not exceed
$25,000 (or $5,000, subject to the terms of this Section) in the
aggregate.  Upon the payment of the Non-Funding Penalty to the
Company, the Holder shall have no further obligations or duties under this
Agreement, the Debenture or any agreements or debentures entered into in
connection with the Debenture, if any, with respect to the purchase of the
Additional Debenture or other duties to deliver any additional funds to the
Company, provided however, that other than with respect to the removal of the
requirement to purchase and enter into the Additional Debenture, the Company and
the Holder shall remain obligated and bound by the remaining terms and
conditions of this Agreement, the Debenture, the Promissory Note and any
agreements or debentures previously entered into in connection with the
Debenture.  The Company’s sole and exclusive remedy in the event that
the Holder fails to purchase the Additional Debenture shall be the right of the
Company to receive the Non-Funding Penalty from the Holder.

     

    E.           Non-Funding
Election.  In the event that (i) the Common Stock shall trade
on the Trading Market (as defined in the Debenture) at a price per share that is
$0.031 per share or lower at any time during the six month period commencing on
the date hereof and ending on the six month anniversary of the date hereof (as
adjusted for any stock splits, stock dividends, combinations, subdivisions,
recapitalizations or the like), (ii) the Company shall fail to become subject to
the reporting requirements of and be current in all of its required public
disclosures and reports under the Exchange Act prior to the date that is 90 days
from the date of this Agreement, (iii) the Company shall fail to register its
Common Stock under Section 12(g) of the Exchange Act and become subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act prior to the date
that is 90 days from the date of this Agreement, or (iv) the Common Stock shall
fail to trade on the OTC Bulletin Board service of the National Association of
Securities Dealers, Inc. (“OTCBB”) at all times during
the 90 days from the date of this Agreement, the Holder shall have the right, in
the Holder’s sole and absolute discretion, during the time period commencing on
the date hereof and ending on the six month anniversary of the date hereof, to
terminate the right and obligation of the Holder to purchase the Additional
Debenture through the delivery of written notice to the Company of such
termination in the manner provided in Section XVII hereof.  In the
event that Holder so terminates Holder’s right and obligation to purchase the
Additional Debenture under the terms of this Section I.E., the Holder shall have
no obligation to pay any of the Non-Funding Penalty and shall have no further
obligations or duties under this Agreement, the Debenture or any agreements or
debentures entered into in connection with the Debenture, if any, with respect
to the purchase of the Additional Debenture or other duties to deliver any
additional funds to the Company, provided however, that other than with respect
to the removal of the requirement to purchase and enter into the Additional
Debenture and pay any of the Non-Funding Penalty, the Company and the Holder
shall remain obligated and bound by the remaining terms and conditions of this
Agreement, the Debenture, the Promissory Note and any agreements or debentures
previously entered into in connection with the Debenture.

    
       

      
        	 
      	 
      	 
      
	
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          2

          
            

          

        

        
           

        

      

    

     

    F.           Company Redemption of Debenture and
Termination of Additional Debenture Purchases.  Provided that
no Event of Default has occurred under the Debenture, the Company shall have the
right, in the Company’s sole and absolute discretion, during the time period
commencing on the date hereof and terminating on the 120th day
following the date hereof, to (i) redeem the Debenture for a redemption price
equal to 100% of the outstanding principal amount of the Debenture, plus any
accrued and unpaid interest thereon (such aggregate amount referred to herein as
the “Redemption Amount”), and (ii) terminate the right and obligation of the
Holder to purchase the Additional Debenture through (x) the delivery of written
notice to the Holder of such termination in the manner provided in Article XVII
hereof and (y) the delivery to the Holder of a payment in cash equal to the
Redemption Amount within 3 business days of the delivery of such
notice.  Notwithstanding the foregoing, the payment of the Redemption
Amount shall first be satisfied by and offset against any amounts due to the
Company under the Promissory Note and such amounts of the Promissory Note so
applied against the Redemption Amount that the Company is required or permitted
to redeem shall reduce the amount outstanding under the Promissory Note by a
like amount.  After the application of the amount owed under the
Promissory Note, if any, to the Redemption Amount, the Company shall immediately
pay in cash to the Holder any remaining amount owed by the Company to the Holder
in connection with the payment of the Redemption Amount.

     

    
      	
               
      

            	
              II.

            	
              HOLDER’S
      REPRESENTATIONS AND WARRANTIES

            

    

     

    Holder
represents and warrants to and covenants and agrees with the Company as
follows:

     

    1.           Holder
is purchasing the Debenture and the Common Stock issuable upon conversion or
redemption of the Debenture (the “Conversion Shares” and,
collectively with the Debenture, the “Securities”) for its own
account, for investment purposes only and not with a view towards or in
connection with the public sale or distribution thereof in violation of the
Securities Act.

    
       

      
        	 
      	 
      	 
      
	
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          3

          
            

          

        

        
           

        

      

    

     

    2.           Holder
is (i) an “accredited investor” within the meaning of Rule 501 of Regulation D
under the Securities Act, (ii) experienced in making investments of the kind
contemplated by this Agreement, (iii) capable, by reason of its business and
financial experience, of evaluating the relative merits and risks of an
investment in the Securities, and (iv) able to afford the loss of its investment
in the Securities.

     

    3.           Holder
understands that the Securities are being offered and sold by the Company in
reliance on an exemption from the registration requirements of the Securities
Act and equivalent state securities and “blue sky” laws, and that the Company is
relying upon the accuracy of, and Holder’s compliance with, Holder’s
representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Holder to
purchase the Securities;

     

    4.           Holder
understands that the Securities have not been approved or disapproved by the
Securities and Exchange Commission (the “Commission”) or any state or
provincial securities commission.

     

    5.           This
Agreement has been duly and validly authorized, executed and delivered by Holder
and is a valid and binding agreement of Holder enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or the public
policy underlying such laws.

     

    
      	
               
      

            	
              III.

            	
              THE
      COMPANY’S REPRESENTATIONS

            

    

     

    The
Company represents and warrants as of the date hereof to the Holder that, except
as set forth on Schedule III attached hereto, the statements contained in this
Section 3 are complete and accurate as of the date of this
Agreement.  As used in this Section 3, the term “Knowledge” shall mean
the knowledge of the members of the board of directors of the Company and/or the
officers or employees of the Company after reasonable
investigation.

     

    A.           Capitalization.

     

    1.           The
authorized capital stock of the Company consists of 500,000,000 shares of Common
Stock and 5,000,000 shares of Series A Preferred Stock of which 353,440,130
shares and no shares, respectively, are issued and outstanding as of the date
hereof and are fully paid and nonassessable.  The amount, exercise,
conversion or subscription price and expiration date for each outstanding option
and other security or agreement to purchase shares of Common Stock is accurately
set forth on Schedule
III.A.1.

     

    2.           The
Conversion Shares have been duly and validly authorized and reserved for
issuance by the Company, and, when issued by the Company upon conversion of the
Debenture, will be duly and validly issued, fully paid and nonassessable and
will not subject the holder thereof to personal liability by reason of being
such holder.

     

    3.           Except
as disclosed on Schedule III.A.3.,
there are no preemptive, subscription, “call,” right of first refusal or other
similar rights to acquire any capital stock of the Company or other voting
securities of the Company that have been issued or granted to any person and no
other obligations of the Company to issue, grant, extend or enter into any
security, option, warrant, “call,” right, commitment, agreement, arrangement or
undertaking with respect to any of their respective capital stock.

    
       

      
        	 
      	 
      	 
      
	
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          4

          
            

          

        

        
           

        

      

    

     

    B.           Organization;
Reporting Company Status.

     

    1.           The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the state or jurisdiction in which it is incorporated and is
duly qualified as a foreign corporation in all jurisdictions in which the
failure so to qualify would reasonably be expected to have a material adverse
effect on the business, properties, prospects, condition (financial or
otherwise) or results of operations of the Company or on the consummation of any
of the transactions contemplated by this Agreement (a “Material Adverse
Effect”).

     

    2.           The
Company is subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”).  The
Common Stock is traded on the OTC Bulletin Board service of the National
Association of Securities Dealers, Inc. (“OTCBB”) and the Company has
not received any notice regarding, and to its Knowledge there is no threat of,
the termination or discontinuance of the eligibility of the Common Stock for
such trading.

     

    C.           Authorization.  The
Company (i) has duly and validly authorized and reserved for issuance shares of
Common Stock, which is a number sufficient for the conversion of the Debenture
in full and (ii) at all times from and after the date hereof shall have a
sufficient number of shares of Common Stock duly and validly authorized and
reserved for issuance to satisfy the conversion of the Debenture in
full.  The Company understands and acknowledges the potentially
dilutive effect on the Common Stock of the issuance of the Conversion
Shares.  The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Debenture in accordance with this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company and notwithstanding the commencement of any case under 11 U.S.C.
§ 101 et
seq. (the “Bankruptcy
Code”).  In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. § 362 in respect of the
conversion of the Debenture.  The Company agrees, without cost or
expense to Holder, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. § 362.

     

    D.           Authority; Validity and
Enforceability.  The Company has the requisite corporate power
and authority to enter into the Documents (as such term is hereinafter defined)
and to perform all of its obligations hereunder and thereunder (including the
issuance, sale and delivery to Holder of the Securities).  The
execution, delivery and performance by the Company of the Documents and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Debenture and the issuance
and reservation for issuance of the Conversion Shares) have been duly and
validly authorized by all necessary corporate action on the part of the Company
and no further filing, consent, or authorization is required by the Company, its
board of directors, or its stockholders.  Each of the Documents has
been duly and validly executed and delivered by the Company and each Document
constitutes a valid and binding obligation of the Company enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or the public
policy underlying such laws.  The Securities have been duly and
validly authorized for issuance by the Company and, when executed and delivered
by the Company, will be valid and binding obligations of the Company enforceable
against it in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally.  For
purposes of this Agreement, the term “Documents” means (i) this
Agreement; (ii) the Debenture; (iii) the Promissory Note; and (iv) the Stock
Pledge Agreement dated as of the date hereof between the Holder and the parties
listed on the signature pages thereto (the “Stock Pledge
Agreement”).

    
       

      
        	 
      	 
      	 
      
	
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          5

          
            

          

        

        
           

        

      

    

     

    E.           Validity of Issuance of the
Securities.  The Debenture and the Conversion Shares upon their
issuance in accordance with the Debenture, will be validly issued and
outstanding, fully paid and nonassessable, and not subject to any preemptive
rights, rights of first refusal, tag-along rights, drag-along rights or other
similar rights.

     

    F.           Non-contravention.  The
execution and delivery by the Company of the Documents, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby do not, and compliance with the provisions of
this Agreement and other Documents will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a material benefit under, or result in the creation of
any Lien (as such term is hereinafter defined) upon any of the properties or
assets of the Company or any of its Subsidiaries under, or result in the
termination of, or require that any consent be obtained or any notice be given
with respect to (i) the Articles or Certificate of Incorporation or By-Laws of
the Company or the comparable charter or organizational documents of any of its
Subsidiaries, in each case as amended to the date of this Agreement, (ii) any
loan or credit agreement, debenture, bond, mortgage, indenture, lease, contract
or other agreement, instrument or permit applicable to the Company or any of its
Subsidiaries or their respective properties or assets or (iii) any statute, law,
rule or regulation applicable to, or any judgment, decree or order of any court
or government body having jurisdiction over, the Company or any of its
Subsidiaries or any of their respective properties or assets.  A
“Lien” means any
assignment, transfer, pledge, mortgage, security interest or other encumbrance
of any nature, or an agreement to do so, or the ownership or acquisition or
agreement to acquire any asset or property of any character subject to any of
the foregoing encumbrances (including any conditional sale contract or other
title retention agreement).

     

    G.           Approvals.  No
authorization, approval or consent of any court or public or governmental
authority is required to be obtained by the Company for the issuance and sale of
the Securities to Holder as contemplated by this Agreement, except such
authorizations, approvals and consents as have been obtained by the Company
prior to the date hereof.

     

    H.           Commission
Filings.  The Company is subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act.  The Company has properly
and timely filed with the Commission all reports, proxy statements, forms and
other documents required to be filed with the Commission under the Securities
Act and the Exchange Act since becoming subject to such Acts (the “Commission Filings”),
including without limitation the timely filing of all required reports under
Section 13 or 15(d) of the Exchange Act during the 12 months prior to the date
hereof (or for such shorter period that the Company was required to file such
reports).  As of their respective dates, (i) the Commission Filings
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the
Commission promulgated thereunder applicable to such Commission Filings and (ii)
none of the Commission Filings contained at the time of its filing any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.  The
financial statements of the Company included in the Commission Filings, as of
the dates of such documents, were true and complete in all material respects and
complied with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, were prepared in accordance
with generally accepted accounting principles in the United States (“GAAP”) (except in the case of
unaudited statements permitted by Form 10-Q under the Exchange Act) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented the consolidated financial position of the
Company and its Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments that
in the aggregate are not material and to any other adjustment described
therein).

    
       

      
        	 
      	 
      	 
      
	
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    I.           Full
Disclosure.  There is no fact known to the Company (other than
general economic or industry conditions known to the public generally) that has
not been fully disclosed in the Commission Filings that (i) reasonably could be
expected to have a Material Adverse Effect or (ii) reasonably could be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to the Documents.

     

    J.           Absence of Events of
Default.  No “Event of Default” (as defined
in any agreement or instrument to which the Company is a party) and no event
which, with notice, lapse of time or both, would constitute an Event of Default
(as so defined), has occurred and is continuing.

     

    K.           Securities Law
Matters.  Assuming the accuracy of the representations and
warranties of Holder set forth in Article II, the offer and sale by the Company
of the Securities is exempt from (i) the registration and prospectus delivery
requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification provisions
of all applicable state and provincial securities and “blue sky”
laws.  The Company shall not directly or indirectly take, and shall
not permit any of its directors, officers or Affiliates directly or indirectly
to take, any action (including, without limitation, any offering or sale to any
person or entity of any security similar to the Debenture) which will make
unavailable the exemption from Securities Act registration being relied upon by
the Company for the offer and sale to Holder of the Debenture and the Conversion
Shares, as contemplated by this Agreement.  No form of general
solicitation or advertising has been used or authorized by the Company or any of
its officers, directors or Affiliates in connection with the offer or sale of
the Debenture (and the Conversion Shares), as contemplated by this Agreement or
any other agreement to which the Company is a party.  As used in the
Documents, “Affiliate”
has the meaning ascribed to such term in Rule 12b-2 under the Exchange
Act.

    
       

      
        	 
      	 
      	 
      
	
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    L.           Registration
Rights.  Except as set forth on Schedule III.L.,
no Person has, and as of the Closing (as such term is hereinafter defined), no
Person shall have, any demand, “piggy-back” or other rights to cause the Company
to file any registration statement under the Securities Act relating to any of
its securities or to participate in any such registration
statement.

     

    M.           Interest.  The
timely payment of interest on the Debenture is not prohibited by the Articles or
Certificate of Incorporation or By-Laws of the Company, in each case as amended
to the date of this Agreement, or any agreement, contract, document or other
undertaking to which the Company is a party.

     

    N.           No
Misrepresentation.  No representation or warranty of the
Company contained in this Agreement or any of the other Documents, any schedule,
annex or exhibit hereto or thereto or any agreement, instrument or certificate
furnished by the Company to Holder pursuant to this Agreement contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.

     

    O.           Finder’s Fee.  There
is no finder’s fee, brokerage commission or like payment in connection with the
transactions contemplated by this Agreement for which Holder is liable or
responsible.

     

    P.           Subsidiaries.  Other than the
Subsidiaries, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity.  The Company is not a participant in any joint
venture, partnership, or similar arrangement.

     

    Q.           Litigation.  Other than as
disclosed in the Commission Filings, there is no action, suit, proceeding or
investigation pending or, to the Company’s knowledge, currently threatened
against the Company or its Subsidiaries that questions the validity of this
Agreement, the Documents, or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby, or
that might result, either individually or in the aggregate, in any material
adverse changes in the business, assets or condition of the Company and its
Subsidiaries, taken as a whole, financially or otherwise, or any change in the
current equity ownership of the Company or its Subsidiaries.  Neither
the Company nor its Subsidiaries are parties or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality.  There is no action, suit, proceeding or
investigation by the Company or its Subsidiaries currently pending or that the
Company or its Subsidiaries intends to initiate.

     

    R.           Agreements.  Except
for agreements explicitly contemplated hereby, or disclosed in the Commission
Filings, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, Affiliates, or any
affiliate thereof.

     

    S.           Tax Returns.  The
Company and each of its Subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (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) 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.

    
       

      
        	 
      	 
      	 
      
	
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    T.           Acknowledgment Regarding Holder’s
Purchase of Securities.  The Company acknowledges and agrees
that the Holder is acting solely in the capacity of an arm's length purchaser
with respect to this Agreement and the transactions contemplated
hereby.  The Company further acknowledges that Holder is not acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
statement made by Holder or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Holder’s purchase of the
Securities.  The Company further represents to Holder that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.

     

    U.           No Integrated
Offering.  Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales in any security or solicited any offers to buy any security
under circumstances that would require registration under the Securities Act of
the issuance of the Securities to the Holder.  The issuance of the
Securities to the Holder will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any shareholder
approval provisions applicable to the Company or its securities.

     

    V.           Internal Accounting
Controls.  The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, 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 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.

     

    W.           Foreign Corrupt
Practices.  Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person acting on behalf of
the Company or any Subsidiary has, in the course of his actions for, or on
behalf of, the Company, used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.

    
       

      
        	 
      	 
      	 
      
	
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    X.           Solvency.  Except as
described in its Commission Filings, the Company (after giving effect to the
transactions contemplated by this Agreement) is solvent (i.e., its assets have a
fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it intend to take
any action that would impair its ability to, pay its debts from time to time
incurred in connection therewith as such debts mature.  The Company
did not receive a qualified opinion from its auditors with respect to its most
recent fiscal year end and, after giving effect to the transactions contemplated
by this Agreement, does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal
year.

     

    Y.           No Shell
Company.  The Company is not, nor at any time during the twelve
month period immediately preceding the date hereof has the Company been a “shell
company,” as such term is defined in Rule 405 promulgated under the Securities
Act.

     

    Z.           No Investment
Company.  The Company is not, and upon the issuance and sale of
the Securities as contemplated by this Agreement will not be an "investment
company" required to be registered under the Investment Company Act of 1940 (an
"Investment Company").  The Company is not controlled by an Investment
Company.

     

    
      	
               
      

            	
              IV.

            	
              CERTAIN
      COVENANTS AND ACKNOWLEDGMENTS

            

    

     

    A.           Filings.  The
Company shall take all actions and make all necessary Commission Filings and
“blue sky” filings required to be made by the Company in connection with the
sale of the Securities to Holder as required by all applicable laws, including
without limitation such action as the Company shall reasonably determine is
necessary to qualify the Securities, or obtain an exemption for the Securities
for sale to the Holder at the Closing pursuant to this Agreement under all
applicable laws, and shall provide a copy thereof to Holder promptly after such
filing.

     

    B.           Reporting
Status.  With a view to making available to the Holder the
benefits of Rule 144 promulgated under the Securities Act or any similar rule or
regulation of the Commission that may at any time permit Holder to sell
securities of the Company to the public without registration (“Rule 144”), and
as a material inducement to the Holder’s purchase of the Securities, the Company
represents, warrants, and covenants to the following:

     

    1.           The
Company's Common Stock is registered under Section 12(g) of the Exchange
Act;

     

    2.           The
Company is not and for at least the last 12 months prior to the date hereof has
not been a "shell company," as defined in paragraph (i)(1)(i) of Rule 144 or
Rule 12b-2 of the Exchange Act;

     

    3.           The
Company is subject to the reporting requirements of section 13 or 15(d) of the
Exchange Act and has filed all required reports under section 13 or 15(d) of the
Exchange Act during the 12 months prior to the date hereof (or for such shorter
period that the issuer was required to file such reports), other than Form 8-K
reports;

    
       

      
        	 
      	 
      	 
      
	
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    4.           From
the date hereof until all the Securities either have been sold by the Holder, or
may permanently be sold by the Holder without any restrictions pursuant to Rule
144 (the "Registration
Period") (i) the Company shall file with the SEC in a timely manner all
required reports under section 13 or 15(d) of the Exchange Act and such reports
shall conform to the requirements of the Exchange Act and the SEC for filing
thereunder, and (ii) the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination;

     

    5.           During
the Registration Period the Company shall not become a "shell company," as
defined in paragraph (i)(1)(i) of Rule 144 or Rule 12b-2 of the Exchange
Act;

     

    6.           The
Company shall furnish to the Holder so long as the Holder owns Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Holders to sell such securities pursuant to
Rule 144 without registration; and

     

    7.           During
the Registration Period the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would otherwise permit such
termination.

     

    C.           8-K Filing.  On or
before the fourth Business Day following the date hereof, the Company shall file
a Current Report on Form 8-K describing the terms of the transactions
contemplated by the Documents in the form required by the Exchange Act and
attaching the material Documents (including, without limitation, this Agreement
and the Debenture) as exhibits to such filing (the “8-K Filing”).  In
the event that the Company does not file the 8-K Filing within four Business
Days following the date hereof, the Discount Multiplier (as defined in the
Debenture) under the Debenture shall decrease by one percentage point (1%) for
each period of five Business Days that the 8-K Filing is not filed by the
Company following the date hereof for all conversions of the Debenture
thereafter.

     

    D.           Listing.  Except to
the extent the Company lists its Common Stock on The New York Stock Exchange,
The American Stock Exchange or The Nasdaq Stock Market, the Company shall use
its best efforts to maintain its listing of the Common Stock on
OTCBB.  If the Common Stock is delisted from OTCBB, the Company will
use its best efforts to list the Common Stock on the most liquid national
securities exchange or quotation system that the Common Stock is qualified to be
listed on.

     

    E.           Reserved Conversion Common
Stock.  The Company at all times from and after the date hereof
shall have such number of shares of Common Stock duly and validly authorized and
reserved for issuance as shall be sufficient for the conversion in full of the
Debenture.  The Company shall take all action reasonably necessary to
at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the full
conversion of the Debenture and the Additional Debentures outstanding, if
any.  If at any time the number of authorized shares of Common Stock
of the Company is insufficient to effect the full conversion of the Debenture
and the Additional Debentures outstanding, if any, the Company shall call and
hold a special meeting of the shareholders of the Company within thirty (30)
days of such occurrence, for the sole purpose of increasing the number of
authorized shares of the Common Stock. The Company's management shall recommend
to the shareholders to vote in favor of increasing the number of shares of
authorized Common Stock.  Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common
Stock.

    
       

      
        	 
      	 
      	 
      
	
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    F.           Information.  Each
of the parties hereto acknowledges and agrees that Holder shall not be provided
with, nor be given access to, any material non-public information relating to
the Company.

     

    G.           Accounting and
Reserves.  The Company shall maintain a standard and uniform
system of accounting and shall keep proper books and records and accounts in
which full, true, and correct entries shall be made of its transactions, all in
accordance with GAAP applied on consistent basis through all periods, and shall
set aside on such books for each fiscal year all such reserves for depreciation,
obsolescence, amortization, bad debts and other purposes in connection with its
operations as are required by such principles so applied.

     

    H.           Transactions with
Affiliates.  So long as the Debenture is outstanding, neither
the Company nor any of its Subsidiaries shall, directly or indirectly, enter
into any material transaction or agreement with any officer, director or
Affiliate of the Company or family member of any officer, director or Affiliate
of the Company, unless the transaction or agreement is (i) reviewed and
approved by a majority of Disinterested Directors (as such term is hereinafter
defined) and (ii) on terms no less favorable to the Company or the
applicable Subsidiary than those obtainable from a nonaffiliated
person.  A “Subsidiary” means any entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are owned directly or indirectly by the Company.  A “Disinterested Director” shall
mean a director of the Company who is not and has not been an officer or
employee of the Company and who is not a member of the family of, controlled by
or under common control with, any such officer or employee.

     

    I.           Certain
Restrictions.  So long as the Debenture is outstanding, no
dividends shall be declared or paid or set apart for payment nor shall any other
distribution be declared or made upon any capital stock of the Company, nor
shall any capital stock of the Company be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of shares of
Common Stock made for purposes of an employee incentive or benefit plan
(including a stock option plan) of the Company or pursuant to any of the
security agreements listed on Schedule IV.I) for
any consideration by the Company, directly or indirectly, nor shall any moneys
be paid to or made available for a sinking fund for the redemption of any Common
Stock.  So long as the Debenture remains outstanding, the Company
shall not, without the prior written consent of the Holder, (i) issue or sell
shares of Common Stock or Preferred Stock without consideration or for a
consideration per share less than eighty percent (80%) of the bid price as
determined on the Trading Market (the “Bid Price”) of the Common
Stock determined immediately prior to its issuance, (ii) issue any preferred
stock, warrant, option, right, contract, call, or other security or instrument
granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration less than eighty percent (80%) of such
Common Stock's Bid Price determined immediately prior to its issuance, or (iii)
file any registration statements on Form S-8 valued at more than $500,000 in the
aggregate.

    
       

      
        	 
      	 
      	 
      
	
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    J.           Short Selling.  So long as the Debenture is
outstanding, Holder agrees and covenants on its behalf and on behalf of its
affiliates that neither Holder nor its affiliates shall at any time engage in
any short sales with respect to the Company’s Common Stock, or sell put options
or similar instruments with respect to the Company’s Common Stock. The parties
acknowledge that Holder shall be entitled to sell the Common Stock from each
Debenture conversion immediately upon submission of the applicable Debenture
Conversion Notice, and payment of the purchase price, to the Company for such
Common Stock.

     

    K.           Reporting Status/OTCBB
Trading.  The Company shall become subject to the reporting
requirements of and be current in all of its required public disclosures and
reports under the Exchange Act prior to the date that is 185 days from the date
of this Agreement (the “Reporting
Deadline”).  In addition, the Common Stock shall continue to be
eligible for and trade on the OTCBB as of the Reporting Deadline.  In
the event that (i) the Company does not become subject to and fully comply with
the reporting requirements under the Exchange Act by the Reporting Deadline, or
(ii) the Common Stock shall not be trading on the OTCBB as of and at all times
prior to the Reporting Deadline (either of the preceding events set forth in (i)
or (ii) referred to as a “Listing Default”), then at the
Holder’s election, the Holder may require (1) that the Company repay to the
Holder all cash sums advanced or paid to the Company pursuant to this Agreement,
the Debenture and the Promissory Note within five business days of Holder’s
demand therefor, (2) the Promissory Note shall be immediately cancelled and
terminated and Holder shall have no further obligations thereunder, and (3) the
Holder shall have no further obligation to purchase any Additional Debenture,
nor pay any of the Non-Funding Penalty in connection therewith.  Upon
the payment by the Company to the Holder of all cash sums due pursuant to this
Section, the Debenture shall be considered paid in full and shall be
terminated.

     

    L.           Restriction on
Resales.  Holder agrees and covenants that it shall not
transfer or resell any Conversion Shares except to the extent that Holder has
paid the Company for such Conversion Shares in cash, whether through the initial
cash portion of the Purchase Price or through full or partial repayment of the
Promissory Note.

     

    
      	
               
      

            	
              V.

            	
              ISSUANCE
      OF COMMON STOCK

            

    

     

    A.           The
Company undertakes and agrees that no instruction other than the instructions
referred to in this Article V shall be given to its transfer agent for the
Conversion Shares and that the Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and applicable law.  Nothing contained in
this Section V.A. shall affect in any way Holder’s obligations and agreement to
comply with all applicable securities laws upon resale of such Common
Stock.

     

    B.           Holder
shall have the right to convert the Debenture by telecopying an executed and
completed Conversion Notice (as such term is defined in the Debenture) to the
Company.  Each date on which a Conversion Notice is telecopied to and
received by the Company in accordance with the provisions hereof shall be deemed
a Conversion Date (as such term is defined in the Debenture).  The
Company shall cause the transfer agent to transmit the certificates evidencing
the Common Stock issuable upon conversion of the Debenture (together with a new
debenture, if any, representing the principal amount of the Debenture not being
so converted) to Holder via express courier, or if a Registration Statement
covering the Common Stock has been declared effective by the SEC by electronic
transfer, within two (2) business days after receipt by the Company of the
Conversion Notice, as applicable (the “Delivery Date”).

    
       

      
        	 
      	 
      	 
      
	
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    C.           Upon
the conversion of the Debenture or respective part thereof, the Company shall,
at its own cost and expense, take all necessary action (including the issuance
of an opinion of counsel) to assure that the Company's transfer agent shall
issue stock certificates in the name of Holder (or its nominee) or such other
persons as designated by Holder and in such denominations to be specified at
conversion or exercise representing the number of shares of common stock
issuable upon such conversion or exercise. The Company warrants that the
Conversion Shares will be unlegended, free-trading, and freely transferable, and
will not contain a legend restricting the resale or transferability of the
Company Common Stock provided the Conversion Shares, as applicable, are being
sold pursuant to an effective registration statement covering the Common Stock
to be sold or is otherwise exempt from registration when sold.

     

    D.           The
Company understands that a delay in the delivery of the Common Stock in the form
required pursuant to this section, or the Mandatory Redemption Amount described
in Section E hereof, beyond the Delivery Date or Mandatory Redemption Payment
Date (as hereinafter defined) could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Company agrees to pay late
payments to the Holder for late issuance of Common Stock in the form required
pursuant to Section E hereof upon Conversion of the Debenture or late payment of
the Mandatory Redemption Amount, in the amount of $100 per business day after
the Delivery Date or Mandatory Redemption Payment Date, as the case may be, for
each $10,000 of Debenture principal amount being converted or redeemed. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other remedies
which may be available to the Holder, in the event that the Company fails for
any reason to effect delivery of the Common Stock by the Delivery Date or make
payment by the Mandatory Redemption Payment Date, the Holder will be entitled to
revoke all or part of the relevant Notice of Conversion or rescind all or part
of the notice of Mandatory Redemption by delivery of a notice to such effect to
the Company whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to the delivery of such notice, except
that late payment charges described above shall be payable through the date
notice of revocation or rescission is given to the Company.

     

    E.           Mandatory Redemption. In the
event the Company is prohibited from issuing Common Stock, or fails to timely
deliver Common Stock on a Delivery Date, or upon the occurrence of an Event of
Default (as defined in the Debenture) or for any reason other than pursuant to
the limitations set forth herein, then at the Holder's election, the Company
must pay to the Holder ten (10) business days after request by the Holder or on
the Delivery Date (if requested by the Holder) a sum of money determined by
multiplying up to the outstanding Principal Amount (as defined in the Debenture)
of the Debenture designated by the Holder by 115%, together with accrued but
unpaid interest thereon ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by the
Holder on the same date as the Company Common Stock otherwise deliverable or
within ten (10) business days after request, whichever is sooner ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Debenture principal and interest will be deemed paid and no longer
outstanding.

    
       

      
        	 
      	 
      	 
      
	
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    F.           Buy-In. In addition to any
other rights available to the Holder, if the Company fails to deliver to the
Holder such Common Stock issuable upon conversion of a Debenture by the Delivery
Date and if ten (10) days after the Delivery Date the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Common Stock which the Holder
anticipated receiving upon such conversion (a "Buy-In"), then the Company
shall pay in cash to the Holder (in addition to any remedies available to or
elected by the Holder) the amount by which (A) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the
Debenture for which such conversion was not timely honored, together with
interest thereon at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if the Holder purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000 of Debenture
principal, the Company shall be required to pay the Holder $1,000, plus
interest. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In.

     

    G.           The
Securities shall be delivered by the Company to the Holder pursuant to Section
I.B. hereof on a “delivery-against-payment basis” at the Closing.

     

    
      	
               
      

            	
              VI.

            	
              CLOSING
      DATE

            

    

     

    The
“Closing” shall occur by
the delivery: (i) to the Holder of the documents evidencing the Debenture and
all other Documents, and (ii) to the Company the Purchase Price, including the
Promissory Note, and the date on which the Closing occurs shall be referred to
herein as the “Closing
Date”.

     

    
      	
               
      

            	
              VII.

            	
              CONDITIONS
      TO THE COMPANY’S OBLIGATIONS

            

    

     

    Holder
understands that the Company’s obligation to sell the Debenture on the Closing
Date to Holder pursuant to this Agreement is conditioned upon:

     

    A.           Delivery
by Holder to the Company of the Purchase Price, including the Promissory Note
evidencing such applicable portion of the Purchase Price;

     

    B.           The
accuracy on the Closing Date of the representations and warranties of Holder
contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as of and
relate to a specified date, in which case such accuracy shall be measured as of
such specified date) and the performance by Holder in all material respects on
or before the Closing Date of all covenants and agreements of Holder required to
be performed by it pursuant to this Agreement on or before the Closing Date;
and

    
       

      
        	 
      	 
      	 
      
	
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    C.           There
shall not be in effect any law or order, ruling, judgment or writ of any court
or public or governmental authority restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by this Agreement.

     

    
      	
            	
              VIII.

            	
              CONDITIONS
      TO HOLDER’S OBLIGATIONS

            

    

     

    The
Company understands that Holder’s obligation to purchase the Securities on the
Closing Date pursuant to this Agreement is conditioned upon:

     

    A.           Delivery
by the Company of the Debenture (I/N/O Holder or I/N/O Holder’s nominee) to
Holder;

     

    B.           The
accuracy on the Closing Date of the representations and warranties of the
Company contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as of and
relate to a specified date, in which case such accuracy shall be measured as of
such specified date) and the performance by the Company in all respects on or
before the Closing Date of all covenants and agreements of the Company required
to be performed by it pursuant to this Agreement on or before the Closing Date,
all of which shall be confirmed to Holder by delivery of the certificate of the
chief executive officer of the Company to that effect;

     

    C.           The
Company shall have delivered to the Holder a certificate of the Company executed
by an officer of the Company, dated as of the Closing, certifying
the resolutions adopted by the Company’s board of directors authorizing the
execution of the Documents, the issuance of the Securities, and the transactions
contemplated hereby, and copies of any required third party consents, approvals
and filings required in connection with the consummation of the transactions
contemplated by this Agreement;

     

    D.           There
not having occurred (i) any general suspension of trading in, or limitation on
prices listed for, the Common Stock on the OTCBB, (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States or any of its territories, protectorates or possessions or (iv) in
the case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof;

     

    E.           There
not having occurred any event or development, and there being in existence no
condition, having or which reasonably and foreseeably could have a Material
Adverse Effect;

     

    F.           There
shall not be in effect any law, order, ruling, judgment or writ of any court or
public or governmental authority restraining, enjoining or otherwise prohibiting
any of the transactions contemplated by this Agreement;

     

    G.           The
Company shall have obtained all consents, approvals or waivers from governmental
authorities and third persons necessary for the execution, delivery and
performance of the Documents and the transactions contemplated
thereby;

    
       

      
        	 
      	 
      	 
      
	
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    H.           Holder
shall have received such additional documents, certificates, payment,
assignments, transfers and other deliveries as it or its legal counsel may
reasonably request and as are customary to effect a closing of the matters
herein contemplated;

     

    I.           Delivery
by the Company of a legal opinion with respect to the enforceability of this
Agreement and the transactions contemplated hereunder from its outside counsel
in form and substance satisfactory to Holder;

     

    J.           Delivery
to the Holder of the fully executed Stock Pledge Agreement and the delivery of
the Pledged Shares (as defined in the Stock Pledge Agreement) to the Holder in
connection therewith; and

     

    K.           Delivery
by the Company of a valid waiver of any preemptive rights held by the
individuals and/or parties listed on Schedule III.A.3 hereto in form and
substance satisfactory to Holder.

     

    
      	
               
      

            	
              IX.

            	
              SURVIVAL;
      INDEMNIFICATION

            

    

     

    A.           The
representations, warranties and covenants made by each of the Company and Holder
in this Agreement, the annexes, schedules and exhibits hereto and in each
instrument, agreement and certificate entered into and delivered by them
pursuant to this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby.  In the event of a breach or
violation of any of such representations, warranties or covenants, the party to
whom such representations, warranties or covenants have been made shall have all
rights and remedies for such breach or violation available to it under the
provisions of this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such party on or prior
to the Closing Date.

     

    B.           The
Company hereby agrees to indemnify and hold harmless Holder, its affiliates and
their respective officers, directors, employees, consultants, partners, members
and attorneys (collectively, the “Holder Indemnitees”) from and
against any and all losses, claims, damages, judgments, penalties, liabilities
and deficiencies (collectively, “Losses”) and agrees to
reimburse Holder Indemnitees for all reasonable out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel), in each case
promptly as incurred by Holder Indemnitees and to the extent arising out of or
in connection with:

     

    1.           any
misrepresentation, omission of fact or breach of any of the Company’s
representations or warranties contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or delivered by the Company
pursuant to this Agreement or the other Documents;

     

    2.           any
failure by the Company to perform any of its covenants, agreements, undertakings
or obligations set forth in this Agreement or the other Documents or any
instrument, certificate or agreement entered into or delivered by the Company
pursuant to this Agreement or the other Documents;

    
       

      
        	 
      	 
      	 
      
	
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          17

          
            

          

        

        
           

        

      

    

     

    3.           the
purchase of the Debenture, the conversion of the Debenture, the payment of
interest on the Debenture, the consummation of the transactions contemplated by
this Agreement and the other Documents, the use of any of the proceeds of the
Purchase Price by the Company, the purchase or ownership of any or all of the
Securities, the performance by the parties hereto of their respective
obligations hereunder and under the Documents or any claim, litigation,
investigation, proceedings or governmental action relating to any of the
foregoing, whether or not Holder is a party thereto; and/or

     

    4.           resales
of the Common Stock by Holder in the manner and as contemplated by this
Agreement and the Documents.

     

    C.           Promptly
after receipt by a party seeking indemnification pursuant to this
Article IX (an “Indemnified Party”) of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a “Claim”), the Indemnified Party
promptly shall notify the Company against whom indemnification pursuant to this
Article IX is being sought (the “Indemnifying Party”) of the
commencement thereof, but the omission so to notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights or defenses by reason of such
failure.  In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof.  Notwithstanding the
assumption of the defense of any Claim by the Indemnifying Party, the
Indemnified Party shall have the right to employ separate legal counsel and to
participate in the defense of such Claim, and the Indemnifying Party shall bear
the reasonable fees, out-of-pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the Indemnifying
Party shall have agreed to pay such fees, out-of-pocket costs and expenses,
(y) the Indemnified Party and the Indemnifying Party reasonably shall have
concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim.  If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified
Party.  Except as provided above, the Indemnifying Party shall not, in
connection with any Claim in the same jurisdiction, be liable for the fees and
expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel).  The Indemnifying Party
shall not, without the prior written consent of the Indemnified Party (which
consent shall not unreasonably be withheld), settle or compromise any Claim or
consent to the entry of any judgment that does not include an unconditional
release of the Indemnified Party from all liabilities with respect to such Claim
or judgment.

     

    D.           In
the event one party hereunder should have a claim for indemnification that does
not involve a claim or demand being asserted by a third party, the Indemnified
Party promptly shall deliver notice of such claim to the Indemnifying
Party.  If the Indemnifying Party disputes the claim, such dispute
shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration
Association.  Judgment upon any award rendered by any arbitrators may
be entered in any court having competent jurisdiction thereof.

    
       

      
        	 
      	 
      	 
      
	
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              X.

            	
              GOVERNING
      LAW

            

    

     

    This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of California, without regard to the conflicts of law principles of
such state.

     

    
      	
               
      

            	
              XI.

            	
              SUBMISSION
      TO JURISDICTION

            

    

     

    Each of
the parties hereto consents to the exclusive jurisdiction of the federal courts
whose districts encompass any part of the City of San Diego or the state courts
of the State of California sitting in the City of San Diego in connection with
any dispute arising under this Agreement and the other
Documents.  Each party hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may effectively do so, any defense of an
inconvenient forum or improper venue to the maintenance of such action or
proceeding in any such court and any right of jurisdiction on account of its
place of residence or domicile.  Each party hereto irrevocably and
unconditionally consents to the service of any and all process in any such
action or proceeding in such courts by the mailing of copies of such process by
registered or certified mail (return receipt requested), postage prepaid, at its
address specified in Article XVII.  Each party hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.

     

    
      	
               
      

            	
              XII.

            	
              WAIVER
      OF JURY TRIAL

            

    

     

    TO
THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS.  EACH PARTY
HERETO (i) CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR
ATTORNEYS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

     

    
      	
            	
              XIII.

            	
              COUNTERPARTS;
      EXECUTION

            

    

     

    This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which counterparts shall together
constitute one and the same instrument.  A facsimile transmission of
this signed Agreement shall be legal and binding on both parties
hereto.

    
       

      
        	 
      	 
      	 
      
	
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              XIV.

            	
              HEADINGS

            

    

     

    The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

     

    
      	
               
      

            	
              XV.

            	
              SEVERABILITY

            

    

     

    In the
event any one or more of the provisions contained in this Agreement or in the
other Documents should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired
thereby.  The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

     

    
      	
            	
              XVI.

            	
              ENTIRE
      AGREEMENT; REMEDIES, AMENDMENTS AND
WAIVERS

            

    

     

    This
Agreement and the Documents constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of such parties.  No supplement, modification or waiver of
this Agreement shall be binding unless executed in writing by both
parties.  No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.

     

    
      	
            	
              XVII.

            	
              NOTICES

            

    

     

    Any
notices, consents, waivers, or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) 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:

     

    
      	
               
      

            	
              A.

            	
              If
      to the Company, to:

            

    

    

    Espre
Solutions, Inc.

    5700 W.
Plano Parkway, Suite 2600

    Plano,
Texas 75093

    
      	
               
      

            	
              Telephone:

            	
              214-254-3708

            

    

    
      	
               
      

            	
              Facsimile:

            	
              214-254-3709

            

    

    
       

      
        	 
      	 
      	 
      
	
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          20

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              B.

            	
              If
      to Holder, to:

            

    

    La Jolla
Cove Investors, Inc.

    1150
Silverado Street, Suite 220

    La Jolla,
California 92037

    
      	
               
      

            	
              Telephone:

            	
              858-551-8789

            

    

    
      	
               
      

            	
              Facsimile:

            	
              858-551-8779

            

    

     

    The
Company or Holder may change the foregoing address by notice given pursuant to
this Article XVII.

     

    
      	
            	
              XVIII.

            	
              CONFIDENTIALITY

            

    

     

    Each of
the Company and Holder agrees to keep confidential and not to disclose to or use
for the benefit of any third party the terms of this Agreement or any other
information which at any time is communicated by the other party as being
confidential without the prior written approval of the other party; provided,
however, that this provision shall not apply to information which, at the time
of disclosure, is already part of the public domain (except by breach of this
Agreement) and information which is required to be disclosed by law (including,
without limitation, pursuant to Item 601(b)(10) of Regulation S-K under the
Securities Act and the Exchange Act).

     

    
      	
            	
              XIX.

            	
              MAXIMUM
      INTEREST RATE

            

    

     

    Notwithstanding
anything herein to the contrary, if at any time the applicable interest rate as
provided for herein shall exceed the maximum lawful rate which may be contracted
for, charged, taken or received by the Holder in accordance with any applicable
law (the “Maximum
Rate”), the rate of interest applicable to this Agreement shall be
limited to the Maximum Rate.  To the greatest extent permitted under
applicable law, the Company hereby waives and agrees not to allege or claim that
any provisions of this Agreement could give rise to or result in any actual or
potential violation of any applicable usury laws.

     

    
      	
               
      

            	
              XX.

            	
              ASSIGNMENT

            

    

     

    This
Agreement shall not be assignable by the Company without the prior written
consent of the Holder.  The Holder may assign this Agreement upon 10
days prior written notice to the Company.

    
       

      
        	 
      	 
      	 
      
	
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          21

          
            

          

        

        
           

        

      

    

    

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

    

    

    
      	
              Espre
      Solutions, Inc.

            	 
      	
              La
      Jolla Cove Investors, Inc.

            
	 
      	 
      	 
      	 
      	 
      
	
              By:

            	
               
      /s/ Peter Leighton

            	 
      	
              By:

            	
               
      /s/ Travis W. Huff

            
	 	 	 	 	 
	
              Name:

            	
               
      Peter Leighton

            	 
      	
              Name:

            	
               
      Travis W. Huff

            
	 	 	 	 	 
	
              Title:

            	
                President

            	 
      	
              Title:

            	
               
      Portfolio Mgr/VP

            

    

    
       

      
        	 
      	 
      	 
      
	
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          22

          
            

          

        

        
           

        

      

    

     

    SCHEDULE
III.A.1

    

    
       

      
        	 
      	 
      	 
      
	
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          23

          
            

          

        

        
           

        

      

    

     

    SCHEDULE
III.A.3

     

    PREEMPTIVE
RIGHTS

     

    None.

    
       

      
        	 
      	 
      	 
      
	
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          24

          
            

          

        

        
           

        

      

    

     

    SCHEDULE
III.L.

     

    REGISTRATION
RIGHTS

     

    

    
      	
              Name

            	 
      	 
      	 
      	 
      
	 	 	 	 	 
	
              Ackerell
      Capital, LLC

            	 
      	
              Piggy
      Back Registration

            	 
      	
              1,843,124
      Shares

            
	 	 	 	 	 
	
              Nonsuch
      Holdings Ltd.

            	 
      	
              Demand
      Registration

            	 
      	
              4,938,272
      Shares

            

    

    
       

      
        	 
      	 
      	 
      
	
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          25

          
            

          

        

        
           

        

      

    

     

    SCHEDULE
IV.I.

     

    SECURITY
AGREEMENTS

     

    None.

    
       

      
        	 
      	 
      	 
      
	
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          26

          
            

          

        

        
           

        

      

    

     

    EXHIBIT
A

     

    SECURED
PROMISSORY NOTE

    
       

      
        	 
      	 
      	 
      
	
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      27

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