Document:

Exhibit 10.1 

SHAREHOLDER PROTECTION RIGHTS AGREEMENT 

BETWEEN 

MONTEREY GOURMET FOODS 

AND

CORPORATE STOCK TRANSFER 

as Rights Agent

Dated as of July 1, 2008

TABLE OF CONTENTS

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Page

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 1.

	
 

	
DEFINITIONS

	
 

	
1

	
 

	
SECTION 2.

	
 

	
APPOINTMENT OF
 RIGHTS AGENT

	
 

	
4

	
 

	
SECTION 3.

	
 

	
ISSUE OF RIGHTS
 CERTIFICATES

	
 

	
4

	
 

	
SECTION 4.

	
 

	
FORM OF RIGHTS
 CERTIFICATES

	
 

	
6

	
 

	
SECTION 5.

	
 

	
COUNTERSIGNATURE AND
 REGISTRATION

	
 

	
6

	
 

	
SECTION 6.

	
 

	
TRANSFER, SPLIT UP,
 COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR
 STOLEN RIGHTS CERTIFICATES

	
 

	
7

	
 

	
SECTION 7.

	
 

	
EXERCISE OF RIGHTS;
 PURCHASE PRICE; EXPIRATION DATE OF RIGHTS

	
 

	
8

	
 

	
SECTION 8.

	
 

	
CANCELLATION AND
 DESTRUCTION OF RIGHTS CERTIFICATES

	
 

	
9

	
 

	
SECTION 9.

	
 

	
AVAILABILITY OF
 PREFERRED SHARES

	
 

	
10

	
 

	
SECTION 10.

	
 

	
PREFERRED SHARES
 RECORD DATE

	
 

	
10

	
 

	
SECTION 11.

	
 

	
ADJUSTMENT OF
 PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS

	
 

	
10

	
 

	
SECTION 12.

	
 

	
CERTIFICATE OF
 ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES

	
 

	
18

	
 

	
SECTION 13.

	
 

	
CONSOLIDATION,
 MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER

	
 

	
19

	
 

	
SECTION 14.

	
 

	
FRACTIONAL RIGHTS
 AND FRACTIONAL SHARES

	
 

	
23

	
 

	
SECTION 15.

	
 

	
RIGHTS OF ACTION

	
 

	
24

	
 

	
SECTION 16.

	
 

	
AGREEMENT OF RIGHTS
 HOLDERS

	
 

	
24

	
 

	
SECTION 17.

	
 

	
RIGHTS CERTIFICATE
 HOLDER NOT DEEMED A SHAREHOLDER

	
 

	
25

	
 

	
SECTION 18.

	
 

	
FEES, EXPENSES AND
 LIABILITIES OF THE RIGHTS AGENT

	
 

	
25

	
 

	
SECTION 19.

	
 

	
MERGER OR
 CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT

	
 

	
26

	
 

	
SECTION 20.

	
 

	
DUTIES OF RIGHTS
 AGENT

	
 

	
26

	
 

	
SECTION 21.

	
 

	
CHANGE OF RIGHTS
 AGENT

	
 

	
29

	
 

	
SECTION 22.

	
 

	
ISSUANCE OF NEW
 RIGHTS CERTIFICATES

	
 

	
29

	
 

	
SECTION 23.

	
 

	
REDEMPTION

	
 

	
30

	
 

	
SECTION 24.

	
 

	
EXCHANGE

	
 

	
31

	
 

	
SECTION 25.

	
 

	
NOTICE OF CERTAIN
 EVENTS

	
 

	
32

	
 

	
SECTION 26.

	
 

	
NOTICES

	
 

	
33

	
 

	
SECTION 27.

	
 

	
SUPPLEMENTS AND
 AMENDMENTS

	
 

	
34

	
 

	
SECTION 28.

	
 

	
REGISTRATION OF
 SECURITIES

	
 

	
34

	
 

	
SECTION 29.

	
 

	
DETERMINATIONS AND
 ACTIONS BY THE BOARD OF DIRECTORS; TIDE COMMITTEE

	
 

	
34

	
 

	
SECTION 30.

	
 

	
SUCCESSORS

	
 

	
35

	
 

	
SECTION 31.

	
 

	
BENEFITS OF THIS
 AGREEMENT

	
 

	
35

	
 

	
SECTION 32.

	
 

	
SEVERABILITY

	
 

	
36

	
 

	
SECTION 33.

	
 

	
GOVERNING LAW

	
 

	
36

	
 

-i-

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 34.

	
 

	
COUNTERPARTS

	
 

	
36

	
 

	
SECTION 35.

	
 

	
DESCRIPTIVE HEADINGS

	
 

	
36

	
 

	
 

	
EXHIBIT A -
Certificate of Determination (§1(m)) 

	
 

	
EXHIBIT B -
Form of Rights Certificate (§3(a)(2);
§4) 

	
 

	
EXHIBIT C -
Summary of Rights (Letter to Shareholders) (§3(b)) 

-ii-

SHAREHOLDER PROTECTION RIGHTS AGREEMENT

          This
Shareholder Protection Rights Agreement (the “Agreement”), dated as of July 1,
2008, is made between Monterey Gourmet Foods, Inc., a Delaware corporation (the
“Company”), and Corporate Stock Transfer, Inc., a Colorado corporation (the
“Rights Agent”). 

          Pursuant
to this Agreement, the Board of Directors of the Company has authorized and
declared a dividend of one preferred share purchase right (a “Right”) for each
Common Share (as hereinafter defined) of the Company outstanding on July 11,
2008 (the “Record Date”), each Right representing the right to purchase one
one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined). 

          Accordingly,
in consideration of the premises and the mutual agreements herein set forth,
the parties hereby agree as follows: 

SECTION
1. 

DEFINITIONS

          For
purposes of this Agreement, the following terms have the meanings indicated: 

          (a)
          “Acquiring Person” shall mean
any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 20% or more of the Common Shares
of the Company then outstanding, but shall not include the Company, any
Subsidiary (as such term is hereinafter defined) of the Company, any employee
benefit plan of the Company (including without limitation the Employee Plans)
or of any Subsidiary of the Company, or of any entity holding Common Shares for
or pursuant to the terms of any such plan, provided, however, that any Person
who first obtains the written approval of a majority of the Board of Directors
of the Company for the acquisition of 20% or more of the Common Shares of the
Company and therefore accumulates at least 20% of the Common Shares, within six
months of the date of such written approval shall not be an “Acquiring Person.”

          Notwithstanding
the preceding paragraph, no Person shall become an “Acquiring Person” as the
result of an acquisition of Common Shares by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 20% or more of the Common Shares of the
Company then outstanding by reason of share purchases by the Company and shall,
after such share purchases by the Company, become the Beneficial Owner of any
additional Common Shares of the Company, then such Person shall be deemed to be
an “Acquiring Person”. 

          (b)
          “Adjustment Shares” shall
have the meaning set forth in
Section 11(a)(ii) hereof. 

1

          (c)
          “Affiliate”
and “Associate” shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in
effect on the date of this Agreement. 

          (d)
          A Person shall be
deemed the “Beneficial Owner” of and shall be deemed to “beneficially own” any
securities: 

	
 

	
 

	
 

	
 

	
                (i)
            Which such Person
  or any of such Person’s Affiliates or Associates beneficially owns, directly
  or indirectly;

	
 

	
 

	
 

	
                (ii)           Which such
  Person or any of such Person’s Affiliates or Associates has

	
 

	
 

	
 

	
 

	
 

	
               
  (A)           The right to
  acquire (whether such right is exercisable immediately or only after the
  passage of time) pursuant to any agreement, arrangement or understanding
  (other than customary agreements with and between underwriters and selling
  group members with respect to a bona fide public offering of securities), or
  upon the exercise of conversion rights, exchange rights, rights (other than
  these Rights), warrants or options, or otherwise; provided, however, that a
  Person shall not be deemed the Beneficial Owner of, or to beneficially own,
  securities tendered pursuant to a tender or exchange offer made by or on
  behalf of such Person or any of such Person’s Affiliates or Associates until
  such tendered securities are accepted for purchase or exchange; or 

	
 

	
 

	
 

	
 

	
 

	
               
  (B)           The right to
  vote pursuant to any agreement, arrangement or understanding; provided,
  however, that a Person shall not be deemed the Beneficial Owner of, or to
  beneficially own, any security if the agreement, arrangement or understanding
  to vote such security (1) arises solely from a revocable proxy or consent
  given to such Person in response to a public proxy or consent solicitation
  made pursuant to, and in accordance with, the applicable rules and
  regulations promulgated under the Exchange Act and (2) is not also then
  reportable on Schedule 13D under the Exchange Act (or any comparable or
  successor report); or

	
 

	
 

	
 

	
 

	
                (iii)           Which are
  beneficially owned, directly or indirectly, by any other Person with which
  such Person or any of such Person’s Affiliates or Associates has any
  agreement, arrangement or understanding (other than customary agreements with
  and between underwriters and selling group members with respect to a bona
  fide public offering of securities) for the purpose of acquiring, holding,
  voting (except to the extent contemplated by the proviso in Section
  l(d)(ii)(B)) or disposing of any securities of the Company; provided,
  however, that in no case shall an officer or director of the Company be
  deemed the Beneficial Owner of securities held of record by the trustee of
  any employee benefit plan of the Company (including without limitation the
  Employee Plans) or any Subsidiary of the Company for the benefit of any
  employee (other than the officer or director) of the Company or any
  Subsidiary of the Company, by reason of any influence that such officer or
  director may have over the voting of the securities held in the plan.

2

          Notwithstanding
anything in this definition of Beneficial Ownership to the contrary, the phrase
“then outstanding,” when used with reference to a Person’s Beneficial Ownership
of securities of the Company, shall mean the number of such securities then
issued and outstanding together with the number of such securities not then
actually issued and outstanding which such Person would be deemed to own
beneficially hereunder. 

          (e)
          “Business Day” shall mean any
day other than a Saturday, a Sunday, or a
day on which business corporations in the States of California and Colorado are
authorized or obligated by law or executive order to close. 

          (f)
          “Close of Business” on any given date
shall mean 5:00 P.M Salinas, California time, on such date; provided, however,
that if such date is not a Business Day it shall mean 5:00 P.M., Salinas,
California time, on the next succeeding Business Day. 

          (g)
          “Common Shares” when used
with reference to the Company shall mean the shares
of common stock, $.001 par value, of the Company. “Common Shares” when used
with reference to any Person other than the Company shall mean the capital
stock (or equity interest) with the greatest voting power of such other Person
or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person. 

          (h)
          “Current Value” shall have
the meaning set forth in Section 11(a)(iv)
hereof. 

          (i)
          “Distribution Date” shall
have the meaning set forth in
Section 3 hereof. 

          (j)
          “Employee Plans” shall mean
the Monterey Gourmet Foods Employee Stock
Purchase Plan and any other tax-qualified employee benefit plan of the Company
or any Subsidiary, or any of them, and any successor plan to any of them. 

          (k)
          “Final Expiration Date” shall
have the meaning set forth in
Section 7(a) hereof. 

          (l)
          “Person”
shall mean any individual, firm, association, partnership, joint venture,
corporation, limited liability company or other entity, and shall include any
successor (by merger or otherwise) of such entity. 

          (m)
          “Preferred Shares” shall mean
shares of Series A Junior
Participating Preferred Stock, par value $.001 per share, of the Company having
the rights and preferences set forth in the Certificate of Determination for
Series A Junior Participating Preferred Stock attached hereto as Exhibit A. 

          (n)
          “Principal Party” shall have
the meaning set forth in Section 13(b) hereof. 

          (o)
          “Purchase Price” shall have
the meaning set forth in Section 4 hereof. 

          (p)
          “Redemption Date”
shall have the meaning set forth in Section 7(a) hereof. 

3

          (q)
          “Registered Common
Shares” shall have the meaning set forth in Section 13(b)(ii) hereof. 

          (r)
          “Shares Acquisition
Date” shall mean the date of first public announcement (which, for purposes of
this definition, shall include, without limitation, the date of filing of a
report filed pursuant to Section 13(d) of the Exchange Act) by the Company or
an Acquiring Person that an Acquiring Person has become an Acquiring Person, or
such earlier date as a majority of the directors of the Company shall become
aware of the existence of an Acquiring Person. 

          (s)
          “Spread” shall have
the meaning set forth in Section 11(a)(iv) hereof. 

          (t)
          “Subsidiary” of any
Person shall mean any corporation or other entity, the majority of the voting
power of the voting equity securities or equity interest of which is owned,
directly or indirectly, by such Person. 

          (u)
          “Substitution
Period” shall have the meaning set forth in Section 11(a)(iv) hereof. 

          (v)
          “Trading Day” shall
have the meaning set forth in Section 11(d)(ii) hereof. 

          (w)
          A “Trigger Event”
shall be deemed to have occurred when any Person, together with all Affiliates
and Associates of such Person, becomes an Acquiring Person. 

SECTION
2.

APPOINTMENT OF RIGHTS AGENT

          The
Company hereby appoints the Rights Agent to act as rights agent for the Company
in accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable. The Rights Agent shall
have no duty to supervise, and in no event shall be liable for, the acts or
omissions of any such co-Rights Agent. 

SECTION
3.

ISSUANCE OF RIGHTS CERTIFICATES

          (a)
          Except as provided
in subsections (i) and (ii) below, the Rights shall at all times be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates, and the right to receive Rights Certificates will
be transferable only in connection with the transfer of Common Shares. 

4

	
 

	
 

	
 

	
             (i)          After the
  Close of Business on the earlier of (A) the tenth day after the Shares
  Acquisition Date, or (B) the tenth Business Day (or such later date as may be
  determined by action of the Board of Directors prior to such time as any
  Person becomes an Acquiring Person) after the date when any Person (other
  than the Company, any Subsidiary of the Company, any employee benefit plan of
  the Company, including without
  limitation the Employee Plans, or of any Subsidiary of the Company or of any
  entity holding Common Shares for or pursuant to the terms of any such plan)
  commences, or first publicly announces an intention to commence, a tender or
  exchange offer which would result in such Person becoming the Beneficial
  Owner of Common Shares aggregating 20% or more of the then outstanding Common
  Shares (the earliest of such dates being herein referred to as the
  “Distribution Date”), the Company shall distribute Rights Certificates in
  accordance with subsection (ii). The provisions of this Section 3(a) shall
  control regardless of whether any Common Shares are actually purchased
  pursuant to such offer, and the Distribution Date may include any date which
  is after the date of this Agreement and prior to the issuance of the Rights.

	
 

	
 

	
 

	
             (ii)
            As soon as
  practicable after the Distribution Date, the Company will prepare and
  execute, the Rights Agent will countersign, and the Company will send or
  cause to be sent (and the Rights Agent will, if requested and provided with
  all necessary information, send) by first-class, insured, postage-prepaid
  mail, to each record holder of Common Shares as of the Close of Business on
  the Distribution Date, at the address of such holder shown on the records of
  the Company, a Rights Certificate, in substantially the form of Exhibit B
  hereto (a “Rights Certificate”), evidencing one Right for each Common Share
  so held. As of the Distribution Date, the Rights will be evidenced solely by
  such Rights Certificates. The Company shall promptly notify the Rights Agent
  in writing upon the occurrence of the Distribution Date and, if such
  notification is given orally, the Company shall confirm same in writing on or
  prior to the Business Day next following. Until such notice is received by
  the Rights Agent, the Rights Agent may presume conclusively for all purposes
  that the Distribution Date has not occurred. 

	
 

	
 

	
          (b)
         On the Record Date, or as soon as
  practicable thereafter, the Company will send a copy of a Summary of Rights
  to Purchase Preferred Shares, in substantially the form of Exhibit C hereto
  (the “Summary of Rights”), by first- class, postage-prepaid mail, to each
  record holder of Common Shares as of the Close of Business on the Record
  Date, at the address of such holder shown on the records of the Company. With
  respect to certificates for Common Shares outstanding as of the Record Date,
  until the Distribution Date, the Rights will be evidenced by such
  certificates registered in the names of the holders thereof regardless of
  whether a copy of the Summary of Rights is attached thereto. Until the
  Distribution Date (or the earlier of the Redemption Date or the Final
  Expiration Date), the surrender for transfer of any certificate for Common
  Shares outstanding on the Record Date, with or without a copy of the Summary
  of Rights attached thereto, shall also constitute the transfer of the Rights
  associated with the Common Shares represented thereby. 

	
 

5

	
 

	
 

	
          (c)
         Certificates for Common Shares
  (including, without limitation, reacquired Common Shares referred to in the
  last sentence of this paragraph (c)) which become outstanding after the
  Record Date but prior to the earliest of the Distribution Date, the
  Redemption Date or the Final Expiration Date shall have impressed on, printed
  on, written on or otherwise affixed to them the following legend: 

	
 

	
 

	
This
  certificate also evidences and entitles the holder hereof to certain rights
  as set forth in an agreement between Monterey Gourmet Foods, Inc. and
  Corporate Stock Transfer, Inc., as Rights Agent, dated as of July 1, 2008
  (the “Rights Agreement”), the terms of which are hereby incorporated herein
  by reference and a copy of which is on file at the principal executive
  offices of Monterey Gourmet Foods, Inc. Under certain circumstances, as set
  forth in the Rights Agreement, such Rights will be evidenced by separate
  certificates and will no longer be evidenced by this certificate. Monterey
  Gourmet Foods, Inc. will mail to the holder of this certificate a copy of the
  Rights Agreement without charge after receipt of a written request therefor.
  Under certain circumstances, as set forth in the Rights Agreement, Rights
  issued to any Person who becomes an Acquiring Person (as defined in the
  Rights Agreement) may become null and void. 

          With
respect to such certificates containing the foregoing legend, until the
Distribution Date, such certificates alone shall evidence the Rights associated
with the Common Shares represented by such certificates, and the surrender for
transfer of any such certificate shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed cancelled and retired so that the Company shall not be entitled
to exercise any Rights associated with such Common Shares while they are not
outstanding. 

SECTION
4.

FORM OF RIGHTS CERTIFICATES

          The
Rights Certificates (and the forms of election to purchase Preferred Shares and
of assignment to be printed on the reverse thereof) shall be substantially the
same as Exhibit B hereto and may have such marks of identification or designation
and such legends, summaries or endorsements printed thereon as the Company may
deem appropriate (but do not affect the rights, duties or responsibilities of
the Rights Agent) and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange or other organization on which the Rights may from time to time
be listed or quoted, or to conform to usage. Subject to the provisions of
Section 22 hereof, the Rights Certificates shall entitle the holders thereof to
purchase such number of one one-hundredths of a Preferred Share as shall be set
forth therein at the price per one one-hundredth of a Preferred Share set forth
therein (the “Purchase Price”), but the number of such one one-hundredths of a
Preferred Share and the Purchase Price shall be subject to adjustment as
provided herein. 

SECTION
5.

COUNTERSIGNATURE AND REGISTRATION

          The
Rights Certificates shall be executed on behalf of the Company by its Chairman
of the Board, its Chief Executive Officer, its President, or any of its
Executive Vice Presidents, either manually or by facsimile signature and shall
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent and issued and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Agreement any
such person was not such an officer.

6

          Following
the Distribution Date, receipt by the Rights Agent of notice to that effect and
all other relevant information referred to in Section 3(a), the Rights Agent
will keep or cause to be kept, at its office designated for such purpose, books
for registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the
Rights Certificates, the number of Rights evidenced on its face by each of the
Rights Certificates and the date of each of the Rights Certificates. 

SECTION 6.

TRANSFER, SPLIT UP, COMBINATION AND 

EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED, 

DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES 

          Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Rights
Certificate or Rights Certificates, other than Rights Certificates representing
Rights that have become null and void pursuant to Section 11(a)(ii) hereof or
that have been exchanged pursuant to Section 24 hereof, may be transferred,
split up, combined or exchanged for another Rights Certificate or Rights
Certificates, entitling the registered holder to purchase a like number of one
one-hundredths of a Preferred Share as the Rights Certificate or Rights
Certificates surrendered then entitled such holder to purchase. Any registered
holders desiring to transfer, split up, combine or exchange any Rights
Certificate or Rights Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, split up, combined or exchanged at the office
of the Rights Agent designated for such purpose. Thereupon the Rights Agent
shall countersign and deliver to the person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment by the holder of such Rights of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates. Neither the
Rights Agent nor the Company shall have any duty or be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate or Certificates until the registered holder thereof shall have (i)
completed and signed the certificate contained in the form set forth on the reverse
side of each such Rights Certificate and (ii) provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) thereof
and of the Rights evidenced thereby and the Affiliates and Associates of such
Beneficial Owner (or former Beneficial Owner) as the Company or the Rights
Agent shall reasonably request. The Rights Agent shall have no duty or obligation to take any action under any Section of this Agreement
which requires, or under which the Company may request and does request (with prompt written notice thereof to the Rights Agent), the
payment by a Rights holder of applicable taxes or governmental charges unless and until it is satisfied that all such taxes and/or
governmental charges have been paid.

7

          Upon
receipt by the Company and the Rights Agent of evidence reasonably satisfactory
to them of the loss, theft, destruction or mutilation of a Rights Certificate,
and, in case of loss, theft or destruction, of indemnity or security
satisfactory to them and, at the request of the Company, reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights Certificate
if mutilated, the Company will make and deliver a new Rights Certificate of
like tenor to the Rights Agent for countersignature and delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated. 

SECTION 7.
EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION
DATE OF RIGHTS

          (a)          The
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided in this Rights Agreement) in whole or in
part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office of the Rights Agent designated
for such purpose, together with payment of the Purchase Price for each one
one-hundredth of a Preferred Share as to which the Rights are exercised, at or
prior to the earliest of (i) the Close of Business on July 1, 2018 (the “Final
Expiration Date”), (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the “Redemption Date”), or (iii) the time at which such
Rights are exchanged as provided in Section 24 hereof. 

          (b)          The
Purchase Price for each one one-hundredth of a Preferred Share purchasable
pursuant to the exercise of a Right shall initially be $11.70, shall be subject
to adjustment from time to time as provided in Sections 11 and 13 hereof and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below. 

	
 

	
 

	
 

	
          (c)           Upon
  receipt of a Rights Certificate representing exercisable Rights, with the
  form of election to purchase duly and properly executed, accompanied by
  payment of the Purchase Price for the shares to be purchased and an amount
  equal to any applicable tax or charge required to be paid by the holder of
  such Rights Certificate in accordance with Section 9 hereof by cash,
  certified check, cashier’s check or money order payable to the order of the
  Company, subject to Section 20(i) hereof, the Rights Agent shall thereupon
  promptly: 

	
 

	
 

	
 

	
 

	
               (i)          Requisition
  (A) from any transfer agent of the Preferred Shares, certificates for the
  number of Preferred Shares to be purchased and the Company hereby irrevocably
  authorizes each such transfer agent of the Preferred Shares to comply with
  all such requests, or (B) from the depository agent, depository receipts
  representing such number of one one-hundredths of a Preferred Share as are to
  be purchased (in which case certificates for the Preferred Shares represented
  by such receipts shall be deposited by the transfer agent with the depository
  agent) and the Company hereby directs the depository agent to comply with
  such request; 

	
 

	
 

	
 

	
 

	
              (ii)          When
  necessary to comply with this Agreement, requisition from the Company the
  amount of cash to be paid in lieu of issuance of fractional shares in
  accordance with Section 14 hereof;

8

	
 

	
 

	
 

	
              (iii)          After
  receipt of such certificates or depository receipts, cause the same to be delivered
  to or upon the order of the registered holder of such Rights Certificate,
  registered in such name or names as may be designated by such holder; and 

	
 

	
 

	
 

	
              (iv)          When
  necessary to comply with this Agreement, after receipt, deliver such cash to
  or upon the order of the registered holder of such Rights Certificate. 

	
 

	
 

	
          (d)          In
  case the registered holder of any Rights Certificate shall exercise less than
  all the Rights evidenced thereby, the Rights Agent shall issue a new Rights
  Certificate evidencing Rights equivalent to the Rights remaining unexercised
  to the registered holder of such Rights Certificate or to his duly authorized
  assigns, subject to the provisions of Section 14 hereof. 

	
 

	
 

	
          (e)          The
  Company covenants and agrees that it will cause to be reserved and kept
  available out of its authorized and unissued Preferred Shares or any
  Preferred Shares held in its treasury the number of Preferred Shares that
  will be sufficient to permit the exercise in full of all outstanding Rights
  in accordance with this Section 7. 

	
 

	
 

	
          (f)          Notwithstanding
  anything in this Agreement to the contrary, neither the Rights Agent nor the
  Company shall be obligated to undertake any action with respect to a
  registered holder of Rights or other securities upon the occurrence of any
  purported exercise as set forth in this Section 7 unless such registered
  holder shall have (i) properly completed and signed the certificate contained
  in the form of election to purchase set forth on the reverse side of the
  Right Certificate surrendered for such exercise and (ii) provided such
  additional evidence of the identity of the Beneficial Owner (or former
  Beneficial Owner) thereof and of the Rights evidenced thereby and of the
  Affiliates and Associates of such Beneficial Owner (or former Beneficial
  Owner) as the Company or the Rights Agent shall reasonably request.

SECTION 8.
CANCELLATION AND DESTRUCTION OF RIGHTS
CERTIFICATES

          All
Rights Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, if surrendered to the Company or to
any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company. 

9

SECTION
9.

AVAILABILITY OF PREFERRED SHARES

          The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Preferred Shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued, fully paid and nonassessable.

          The
Company further covenants and agrees that it will pay when due and payable any
and all taxes and governmental charges which may be payable in respect of the
issuance or delivery of the Rights Certificates or of any Preferred Shares upon
the exercise of Rights. The Company shall not, however, be required to pay any
tax or charge which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of
certificates or depository receipts for the Preferred Shares in a name other
than that of, the registered holder of the Rights Certificate evidencing Rights
surrendered for exercise or to issue or to deliver any certificates or
depository receipts for Preferred Shares upon the exercise of any Rights until
any such tax or charge shall have been paid (any such tax or charge being
payable by the holder of such Rights Certificate at the time of surrender) or
until it has been established to the Company’s reasonable satisfaction that no
such tax or charge is due.

SECTION
10.

PREFERRED SHARES RECORD DATE

          Each person in
whose name any certificate for Preferred Shares is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
the Preferred Shares represented thereby on, and such certificate shall be
dated, the date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and any applicable taxes or
governmental charges) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Shares transfer books
of the Company are closed, such person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a holder
of Preferred Shares for which the Rights shall be exercisable, including,
without limitation, the rights to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.

SECTION
11.

ADJUSTMENT OF PURCHASE PRICE,

NUMBER OF SHARES OR NUMBER OF RIGHTS

          (a)          The
Purchase Price, the number of Preferred Shares covered by each Right and the
number of Rights outstanding shall be subject to adjustment from time to time
as provided in this Section 11.

10

	
 

	
 

	
 

	
 

	
 

	
 

	
(i)       In the
 event the Company shall at any time after the date of this Agreement: 

	
 

	
 

	
 

	
 

	
 

	
 

	
           (A)          Declare
 a dividend on the Preferred Shares payable in Preferred Shares; 

	
 

	
 

	
 

	
 

	
 

	
 

	
           (B)          Subdivide
 the outstanding Preferred Shares; 

	
 

	
 

	
 

	
 

	
 

	
 

	
           (C)          Combine
 the outstanding Preferred Shares into a smaller number of Preferred Shares;
 or 

	
 

	
 

	
 

	
 

	
 

	
 

	
           (D)          Issue
 any shares of its capital stock in a reclassification of the Preferred Shares
 (including any such reclassification in connection with a consolidation or
 merger in which the Company is the continuing or surviving corporation), 

	
 

	
 

	
 

	
 

	
 

	
except as
 otherwise provided in this Section 11(a), the Purchase Price in effect at the
 time of the record date for such dividend or of the effective date of such
 subdivision, combination or reclassification, and the number and kind of
 shares of capital stock issuable on such date, shall be proportionately
 adjusted so that the holder of any Rights exercised after such time shall be
 entitled to receive the aggregate number and kind of shares of capital stock
 which, if such Rights had been exercised immediately prior to such date and
 at a time when the Preferred Shares transfer books of the Company were open,
 such holder would have owned upon such exercise and been entitled to receive
 by virtue of such dividend, subdivision, combination or reclassification;
 provided, however, that in no event shall the consideration to be paid upon
 the exercise of one Right be less than the aggregate par value of the shares
 of capital stock of the Company issuable upon exercise of one Right.

	
 

	
 

	
 

	
 

	
 

	
 

	
(ii)

	
Subject to
 Section 24 of this Agreement, in the event:

	
 

	
 

	
 

	
 

	
 

	
 

	
           (A)          A
 Trigger Event shall have occurred (other than through an acquisition described
 in subparagraph (iii) of this paragraph (a)); or

	
 

	
 

	
 

	
 

	
 

	
 

	
           (B)          During
 such time as there is an Acquiring Person, there shall be any
 reclassification of securities (including any reverse stock split), or
 recapitalization or reorganization of the Company or other transaction or
 series of transactions involving the Company which has the effect, directly
 or indirectly, of increasing by more than 1% the proportionate share of the
 outstanding shares of any class of equity securities of the Company or any of
 its Subsidiaries beneficially owned by any Acquiring Person or any Affiliate
 or Associate thereof,

each holder of
a Right shall thereafter have a right to receive, upon exercise thereof at a
price equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of the Company (such number of shares being
referred to herein as the “Adjustment Shares”) as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the number of
one one-hundredths of a Preferred Share for which a Right is then exercisable,
and dividing that product by (y) 50% of the then current per share market price
of the Company’s Common Shares (determined pursuant to Section 11(d) hereof) on
the date of the occurrence of the earliest of the events described in clauses
(A) and (B) above.

11

          From
and after the occurrence of the earliest of the events described in clauses (A)
and (B) above, any Rights that are or were acquired or are or were beneficially
owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring
Person) shall be null and void and any holder of such Rights (including any
subsequent transferee) shall thereafter have no right whatsoever with respect
to such Rights under any provision of this Agreement. No Rights Certificate
shall be issued pursuant to Section 3 that represents Rights beneficially owned
by an Acquiring Person whose Rights would be null and void pursuant to the
preceding sentence or any representative, nominee, Associate or Affiliate
thereof; no Rights Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be null and void pursuant
to the preceding sentence or any Associate or Affiliate thereof or to any
nominee of such Acquiring Person, Associate or Affiliate; and any Rights
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be null and void pursuant to the preceding sentence or any representative, nominee, Associate or
Affiliate thereof, shall be cancelled. The Company shall give the Rights Agent
written notice of the identity of any such Acquiring Person, Associate or
Affiliate, or the representative or nominee of any of the foregoing, and the
Rights Agent may rely on such notice in carrying out its duties under this
Agreement and shall be deemed not to have any knowledge of the identity of any
such Acquiring Person, Associate or Affiliate, or the representative or nominee
of any of the foregoing unless and until it shall have received such notice.

	
 

	
 

	
 

	
 

	
          (iii)          The
 right to buy Common Shares of the Company pursuant to subparagraph (ii) of
 this paragraph (a) shall not arise as a result of any Person becoming an
 Acquiring Person through a purchase of Common Shares pursuant to a tender
 offer made in the manner prescribed by Section 14(d) of the Exchange Act and
 the rules and regulations promulgated thereunder; provided, however, that
 such tender offer shall provide for the acquisition of all of the outstanding
 Common Shares held by any Person other than such Acquiring Person and its Affiliates
 or Associates at a price and on terms determined by at least a majority of
 the members of the Board of Directors who are not officers of the Company and
 who are not representatives, nominees, Affiliates or Associates of an
 Acquiring Person, after receiving advice from one or more investment or
 financial advisers, to be (A) fair to shareholders, taking into account all
 factors which such members of the Board deem relevant including, without
 limitation, prices which could reasonably be achieved if the Company or its
 assets were sold on an orderly basis designed to realize maximum value, and
 (B) otherwise in the best interests of the Company and its shareholders,
 employees, customers and communities in which the Company does business. 

12

	
 

	
 

	
 

	
 

	
          (iv)          In
 the event that there shall not be sufficient Common Shares authorized but
 unissued to permit the exercise in full of the Rights in accordance with the
 foregoing subparagraph (ii), the Company shall:

	
 

	
 

	
 

	
 

	
                (A)          Determine
 the excess of (1) the value of the Adjustment Shares issuable upon the
 exercise of a Right (the “Current Value”), over (2) the Purchase Price (such
 excess being hereinafter referred to as the “Spread”); and

	
 

	
 

	
 

	
 

	
 

	
                (B)          With
 respect to each Right, make adequate provision to substitute for such
 unavailable Adjustment Shares either (1) cash, (2) a reduction in the
 Purchase Price, (3) other equity securities of the Company, including without
 limitation, Preferred Shares, (4) debt securities of the Company, (5) other
 assets, or (6) any combination of the foregoing having, together with the
 Adjustment Shares issued upon exercise of such Right, an aggregate value
 equal to the Current Value, where such aggregate value has been determined by
 the Board of Directors of the Company based upon the advice of a reputable
 investment banking firm selected by the Board of Directors of the Company.

          Notwithstanding
the provisions of the preceding paragraph, if, within 30 days following the
date of the occurrence of the earliest of the events described in clauses (A)
and (B) of Section 11(a)(ii) above, the Company shall have not made adequate
provision to deliver value pursuant to clause (B) above, then the Company shall
be obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent such
shares are available) and then, if necessary, cash or Preferred Shares, which
shares and/or cash have an aggregate value equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights, the 30-day period set forth above may be
extended to the extent necessary, but not more than 120 days following the date
of the occurrence of the earliest of the events described in clauses (A) and
(B) of Section 11(a)(ii) above, in order that the Company may seek shareholder
approval for the authorization of such additional shares (such period, as it
may be extended, hereinafter referred to as the “Substitution Period”).

          To
the extent that the Company determines that action needs be taken pursuant to
the first and/or second sentences of this Section 11(a)(iv), the Company (x)
shall provide, subject to Section 11(a)(ii) hereof, that such action shall
apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement (with prompt written notice thereof
to the Rights Agent) stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement (with prompt written
notice thereof to the Rights Agent) at such time as the suspension is no longer
in effect. For purposes of this Section 11(a)(iv), the value of the Common
Shares shall be the current per share market price (as determined pursuant to
Section 11(d) hereof) per Common Share on the date of the occurrence of the
earliest of the events described in clauses (A) and (B) of Section 11(a)(ii)
above.

13

          (b)          In
case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Shares entitling them (for a period
expiring within 45 calendar days after such record date) to subscribe for or
purchase Preferred Shares (or shares having the same rights, privileges and
preferences as the Preferred Shares (“equivalent preferred shares”)) or securities
convertible into Preferred Shares or equivalent preferred shares at a price per
Preferred Share or equivalent preferred share (or having a conversion price per
share, if a security is convertible into Preferred Shares or equivalent
preferred shares) less than the then current per share market price of the
Preferred Shares (as defined in Section 11(d) hereof) on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number
of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares to be offered
for subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). 

          In
case such subscription price may be paid in a consideration part or all of
which shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such record date is fixed; and in the event
that such rights, options or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.

          (c)          In
case the Company shall fix a record date for the making of a distribution to
all holders of the Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness or assets
(other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or rights, options or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on
such record date, less the fair market value (as determined in good faith by
the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription rights
or warrants applicable to one Preferred Share and the denominator of which
shall be such current per share market price of the Preferred Shares. Such
adjustments shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.

14

	
 

	
 

	
 

	
 

	
(d)

	
For the
 purpose of any computation hereunder:

	
 

	
 

	
 

	
 

	
           (i)          The
 “current per share market price” of any security (a “Security” for the
 purpose of this Section 11(d)(i)) on any date shall be deemed to be the
 average of the daily closing prices per share of such Security for the 20 consecutive
 Trading Days (as such term is hereinafter defined) immediately prior to, but
 not including, such date. In the event that the current per share market
 price of the Security is determined:

	
 

	
 

	
 

	
 

	
 

	
 

	
               (A)          During
 a period following the announcement by the issuer of such Security of:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
                              (1)          A
 dividend or distribution on such Security payable in shares of such Security
 or 
               securities convertible into such Security; or

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
                              (2)          Any
 subdivision, combination or reclassification of such Security, and

	
 

	
 

	
 

	
 

	
 

	
 

	
               (B)          Prior
 to, but not including, the expiration of 20 Trading Days after the
 ex-dividend date for such dividend or distribution, or the record date for
 such subdivision, combination or reclassification,

	
 

	
 

	
 

	
 

	
 

	
then, and in
 each such case, the current per share market price shall be appropriately
 adjusted to reflect the current market price per share equivalent of such
 Security. The closing price for each day shall be the last sale price or, in
 case no such sale takes place on such day, the average of the closing bid and
 asked prices in either case as reported in the principal consolidated
 transaction reporting system with respect to securities listed or admitted to
 trading on the New York Stock Exchange or, if the Security is not listed or
 admitted to trading on the New York Stock Exchange, as reported in the
 principal consolidated transaction reporting system with respect to
 securities listed on the principal national securities exchange on which the
 Security is listed or admitted to trading or, if the Security is not listed
 or admitted to trading on any national securities exchange, the last reported
 trade in the over-the-counter market, as reported by the Nasdaq Global Market
 (“Nasdaq”) or such other system then in use, or, if on any such date the
 Security is not quoted by any such organization, the average of the closing
 bid and asked prices as furnished by a professional market maker making a
 market in the Security selected by the Board of Directors of the Company. If
 on any such date no such market maker is making a market in the Security, the
 fair value of the Security on such date as determined in good faith by the
 Board of Directors of the Company shall be used.

	
 

	
 

	
 

	
          The
 term “Trading Day” shall mean a day on which the principal national
 securities exchange on which the Security is listed or admitted to trading is
 open for the transaction of business or, if the Security is not listed or
 admitted to trading on any national securities exchange, a Business Day.

	
 

	
 

	
 

	
          (ii)          For
 the purpose of any computation hereunder, if the Preferred Shares are publicly traded, the “current per
 share market price” of the Preferred Shares shall be determined in accordance
 with the method set forth in Section 11(d)(i). If the Preferred Shares are
 not publicly traded but the Common Shares are publicly traded, the “current
 per share market price” of the Preferred Shares shall be conclusively deemed
 to be the current per share market price of the Common Shares as determined
 pursuant to Section 11(d)(i) (appropriately adjusted to reflect any stock
 split, stock dividend or similar transaction occurring after the date
 hereof), multiplied by one hundred. If neither the Common Shares nor the
 Preferred Shares are publicly held or so listed or traded, “current per share
 market price” shall mean the fair value per share as determined in good faith
 by the Board of Directors of the Company, whose determination shall be described
 in a statement filed with the Rights Agent.

15

          (e)          No
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 11(e) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest one ten-thousandth of a Preferred Share or
one one-hundredth of any other share or security, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three years from the date of the transaction which requires such adjustment or
(ii) the date of the expiration of the right to exercise any Rights.

          (f)          If
as a result of an adjustment made pursuant to Section 11(a) hereof, the holder
of any Rights thereafter exercised shall become entitled to receive any shares
of capital stock of the Company other than Preferred Shares, thereafter the
number of such other shares so receivable upon exercise of any Rights shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred
Shares contained in
Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10
and 13 with respect to the Preferred Shares shall apply on like terms to any
such other shares.

          (g)          All
Rights originally issued by the Company subsequent to any adjustment made to
the Purchase Price hereunder shall evidence the right to purchase, at the
adjusted Purchase Price, the number of one one-hundredths of a Preferred Share
purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.

          (h)          Unless
the Company shall have exercised its election as provided in Section 11(i)
below, upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of one
one-hundredths of a Preferred Share (calculated to the nearest one
one-hundredth of a Preferred Share) obtained by (i) multiplying (x) the number
of one one-hundredths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.

          (i)          The
Company may elect on or after the date of any adjustment of the Purchase Price
to adjust the number of Rights, in substitution for any adjustment in the
number of one one-hundredths of a Preferred Share purchasable upon the exercise
of a Right. Each of the Rights outstanding after such adjustment of the number
of Rights shall be exercisable for the number of one one-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one
one-hundredth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement (with prompt
written notice thereof to the Rights Agent) of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. 

16

          If
Rights Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new Rights
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Rights Certificates so to be distributed shall be
issued, executed and delivered by the Company and countersigned and delivered
by the Rights Agent in the manner provided for herein and shall be registered
in the names of the holders of record of Rights Certificates on the record date
specified in the public announcement.

          (j)          Irrespective
of any adjustment or change in the Purchase Price or the number of one
one-hundredths of a Preferred Share issuable upon the exercise of the Rights,
the Rights Certificates previously and thereafter issued may continue to
express the Purchase Price and the number of one one-hundredths of a Preferred
Share that were expressed in the initial Rights Certificates issued hereunder.

          (k)          Before
taking any action that would cause an adjustment reducing the Purchase Price
below one one-hundredth of the then par value, if any, of the Preferred Shares
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Preferred
Shares at such adjusted Purchase Price.

          (l)          In
any case in which this Section 11 shall require that an adjustment in the
Purchase Price be made effective as of a record date for a specified event, the
Company may elect to defer (with prompt
written notice of such deferral to the Rights Agent) until the
occurrence of such event the issuing to the holder of any Rights exercised
after such record date of the Preferred Shares and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder’s
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.

17

          (m)          Anything
in this Section 11 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the extent that it
in its sole discretion shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Shares, issuance wholly for cash
of any Preferred Shares at less than the current market price, issuance wholly
for cash of Preferred Shares or securities which by their terms are convertible
into or exchangeable for Preferred Shares, dividends on Preferred Shares
payable in Preferred Shares or issuance of rights, options or warrants referred
to hereinabove in Section 11(b), hereafter made by the Company to holders of
its Preferred Shares shall not be taxable to such shareholders.

          (n)          The
Company covenants and agrees that it shall not, at any time after the
Distribution Date, (i) consolidate with, or merge with and into, any other
Person (other than a Subsidiary of the Company in a transaction that complies
with Section 11(o)), (ii) permit or cause any Person to consolidate with the
Company, or merge with and into the Company (other than a Subsidiary of the
Company in a transaction that complies with Section 11(o)), or (iii) sell or
otherwise transfer (or permit any Subsidiary to sell or transfer), in one or
more transactions, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o)), if at the time of or immediately after such consolidation, merger or
sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect that would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.

          (o)          The
Company covenants and agrees that, after the Distribution Date, it will not,
except as permitted by Section 23, Section 24 or Section 27 hereof, take (or
permit any Subsidiary of the Company to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights.

          (p)          In
the event that at any time after the date of this Agreement and prior to the
Distribution Date, the Company shall (i) declare or pay any dividend on the
Common Shares payable in Common Shares or (ii) effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into a greater or
lesser number of Common Shares, then in any such case (A) the number of one
one-hundredths of a Preferred Share purchasable after such event upon proper
exercise of each Right shall be determined by multiplying the number of one
one-hundredths of a Preferred Share so purchasable immediately prior to such
event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (B) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(p) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or
consolidation is effected.

SECTION
12. 

CERTIFICATE OF ADJUSTED 

PURCHASE PRICE OR NUMBER OF SHARES

          Whenever
an adjustment is made or any event
affecting the Rights or their exercisability (including without limitation an
event which causes Rights to become null and void) occurs as provided in
Section 11 or 13 hereof, the Company shall promptly (a) prepare a
certificate setting forth such adjustment or describing such event, and a
brief, reasonably detailed statement of the facts, computation and methodology
accounting for any adjustment, (b) file with the Rights Agent and with each
transfer agent for the Common Shares or the Preferred Shares a copy of such
certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Sections 25 and 26 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment or statement therein contained
and shall have no duty or liability with respect to, and shall not be deemed to
have knowledge of, any adjustment or any such event unless and until it shall
have received such a certificate.

18

SECTION
13.

CONSOLIDATION, MERGER OR SALE OR

TRANSFER OF ASSETS OR EARNING POWER

	
 

	
 

	
 

	
 

	
(a)

	
If,
 following the Distribution Date, directly or indirectly: 

	
 

	
 

	
 

	
 

	
          (i)          The
 Company shall consolidate with, or merge with and into, any other Person and
 the Company shall not be the continuing or surviving corporation of such
 consolidation or merger; 

	
 

	
 

	
 

	
 

	
         (ii)          Any
 Person shall consolidate with the Company, or merge with and into the Company
 and the Company shall be the continuing or surviving corporation of such
 merger and, in connection with such merger, all or part of the Common Shares
 shall be changed into or exchanged for stock or other securities of any other
 Person (or the Company) or cash or any other property; 

	
 

	
 

	
 

	
 

	
         (iii)          Any
 Person shall acquire all or a majority of the Common Shares pursuant to a
 statutory plan of exchange; or 

	
 

	
 

	
 

	
 

	
         (iv)          The
 Company shall sell or otherwise transfer (or one or more of its Subsidiaries
 shall sell or otherwise transfer), in one or more transactions, assets or
 earning power aggregating 50% or more of the assets or earning power of the
 Company and its Subsidiaries (taken as a whole) to any other Person other
 than the Company or one or more of its wholly-owned Subsidiaries, 

	
 

	
 

	
 

	
 

	
then, and in
 each such case, proper provision shall be made so that:

	
 

	
 

	
 

	
 

	
         (A)          Each
 holder of a Right (except as otherwise provided herein) shall thereafter have
 the right to receive, upon the exercise thereof at a price equal to the then
 current Purchase Price multiplied by the number of one one-hundredths of a
 Preferred Share for which a Right is then exercisable, in accordance with the
 terms of this Agreement and in lieu of Preferred Shares, such number of
 Common Shares of the Principal Party (as hereinafter defined), not subject to
 any liens, encumbrances, rights of first refusal or other adverse claims, as
 shall equal the result obtained by (1) multiplying the then current Purchase
 Price by the number of one one-hundredths of a Preferred Share for which a Right
 is then exercisable and dividing that product by (2) 50% of the then current
 per share market price of the Common Shares (determined pursuant to Section
 11(d) hereof) of such Principal Party on the date of consummation of such
 consolidation, merger, sale or transfer; 

19

	
 

	
 

	
 

	
 

	
          (B)          Such
 Principal Party shall thereafter be liable for, and shall assume, by virtue
 of such consolidation, merger, sale or transfer, all the obligations and
 duties of the Company pursuant to this Agreement;

	
 

	
 

	
 

	
 

	
          (C)          The
 term “Company” shall thereafter be deemed to refer to such Principal Party,
 it being specifically intended that the provisions of Section 11 shall apply
 only to such Principal Party after the first occurrence of an event described
 in this Section 13(a);

	
 

	
 

	
 

	
 

	
          (D)          Such
 Principal Party shall take such steps (including, but not limited to, the
 reservation of a sufficient number of its Common Shares in accordance with
 Section 9 hereof) in connection with such consummation as may be necessary to
 assure that the provisions hereof shall thereafter be applicable, as nearly
 as reasonably may be, in relation to the Common Shares thereafter deliverable
 upon the exercise of the Rights; and

	
 

	
 

	
 

	
 

	
          (E)          The
 provisions of Section 11(a)(ii) shall be of no further effect following the
 first occurrence of any event described in this Section 13(a).

	
 

	
 

	
 

	
 

	
(b)

	
“Principal
 Party” shall mean:

	
 

	
 

	
 

	
 

	
          (i)          In
 the case of any transaction described in clause (i), (ii) or (iii) of Section
 13(a):

	
 

	
 

	
 

	
 

	
 

	
              (A)          The
 Person that is the issuer of any securities into which Common Shares of the
 Company are converted in such merger, consolidation or for which they are
 exchanged in such statutory plan of exchange, or, if there is more than one
 such issuer, the issuer of Common Shares that has the highest aggregate
 current market price (determined in accordance with Section 11(d)); and 

	
 

	
 

	
 

	
 

	
 

	
              (B)          If
 no securities are so issued, the Person that is the other party to such
 merger, consolidation or statutory plan of exchange, or, if there is more
 than one such Person, the Person whose Common Shares have the highest
 aggregate current market price (determined in accordance with Section 11(d));
 and

	
 

	
 

	
 

	
 

	
          (ii)          In
 the case of any transaction described in clause (iv) of Section 13(a), the
 Person that is the party receiving the largest portion of the assets or
 earning power transferred pursuant to such transaction or transactions, or,
 if each Person that is a party to such transaction or transactions receives
 the same portion of the assets or earning power transferred pursuant to such
 transaction or transactions or if the Person receiving the largest portion of
 the assets or earning power cannot be determined, whichever Person whose
 Common Shares have the highest aggregate current market price (determined in
 accordance with Section 11(d)); provided, however, that in any such case:

	
 

	
 

	
 

	
 

	
 

	
               (A)          If
 the Common Shares of such Person are not at such time and have not been
 continuously over the preceding twelve-month period registered under Section
 12 of the Exchange Act (“Registered Common Shares”), or such Person is not a
 corporation, and such Person is a direct or indirect Subsidiary of another
 Person that has Registered Common Shares outstanding, “Principal Party” shall
 refer to such other Person; 

20

	
 

	
 

	
 

	
 

	
 

	
               (B)          If
 the Common Shares of such Person are not Registered Common Shares or such
 Person is not a corporation, and such Person is a direct or indirect
 Subsidiary of another Person but is not a direct or indirect Subsidiary of
 another Person which has Registered Common Shares outstanding, “Principal
 Party” shall refer to the ultimate parent entity of such first-mentioned
 Person; 

	
 

	
 

	
 

	
 

	
 

	
               (C)          If
 the Common Shares of such Person are not Registered Common Shares or such
 Person is not a corporation, and such Person is directly or indirectly
 controlled by more than one Person, and one or more of such other Persons has
 Registered Common Shares outstanding, “Principal Party” shall refer to
 whichever of such other Persons is the issuer of the Registered Common Shares
 having the highest aggregate current market price (determined in accordance
 with Section 11(d)); and 

	
 

	
 

	
 

	
 

	
 

	
               (D)          If
 the Common Shares of such Person are not Registered Common Shares or such
 Person is not a corporation, and such Person is directly or indirectly
 controlled by more than one Person, and none of such other Persons have
 Registered Common Shares outstanding, “Principal Party” shall refer to
 whichever ultimate parent entity is the corporation having the greatest
 shareholders’ equity or, if no such ultimate parent entity is a corporation,
 shall refer to whichever ultimate parent entity is the entity having the
 greatest net assets.

	
 

	
 

	
 

	
           (c)         The
 Company shall not consummate any such consolidation, merger, statutory plan
 of exchange, sale or transfer unless prior thereto the Company and the
 Principal Party shall have executed and delivered to the Rights Agent a
 supplemental agreement confirming that:

	
 

	
 

	
 

	
 

	
              (i)          Such
 Principal Party shall, upon consummation of such consolidation, merger,
 statutory plan of exchange or sale or transfer of assets or earning power,
 assume this Agreement in accordance with Section 13;

	
 

	
 

	
 

	
 

	
              (ii)         All
 rights of first refusal or preemptive rights in respect of the issuance of
 Common Shares of such Principal Party upon exercise of outstanding Rights
 have been waived;

	
 

	
 

	
 

	
 

	
              (iii)        Any
 provision of the authorized securities of such Principal Party or of its
 charter, bylaws or other instruments governing its corporate affairs which
 would obligate such Principal Party to issue in connection with, or as a
 consequence of, the consummation of a transaction referred to in Section
 13(a), Common Shares of such Principal Party at less than the then-current
 per share market price (determined in accordance with Section 11(d)(i)) or
 securities exercisable for, or convertible into, such Common Shares at less
 than such then- current per share market price (other than to the holders of
 Rights pursuant to this Section 13) have been waived or canceled; and 

21

	
 

	
 

	
 

	
          (iv)          Such
 transaction shall not result in a default by such Principal Party under this
 Agreement, and further providing that, as soon as practicable after the date
 of any consolidation, merger, statutory plan of exchange or sale or transfer
 of assets or earning power referred to in Section 13(a), such Principal Party
 will: 

	
 

	
 

	
 

	
                (A)          Prepare
 and file a registration statement under the Securities Act of 1933, as
 amended, with respect to the Rights and the securities purchasable upon
 exercise of the Rights on an appropriate form, use its best efforts to cause
 such registration statement to become effective as soon as practicable after
 such filing and use its best efforts to cause such registration statement to
 remain effective (with a prospectus at all times meeting the requirements of
 the Securities Act until the Final Expiration Date of the Rights), and
 similarly comply with applicable state securities laws; 

	
 

	
 

	
 

	
                (B)          Use
 its best efforts to list (or continue the listing of) the Rights and the
 securities purchasable upon exercise of the Rights or to meet the eligibility
 requirements for quotation of the Rights and such securities on Nasdaq or
 other system then in use; and 

	
 

	
 

	
 

	
                (C)          Deliver
 to holders of the Rights historical financial statements for such Principal
 Party which comply in all respects with the requirements for registration on
 Form 10 (or any successor form) under the Exchange Act. 

          In
the event that at any time after the occurrence of an event described in
Section 11(a)(ii) hereof some or all of the Rights shall not have then been
exercised at the time of the occurrence of an event described in Section 13(a)
hereof, the Rights which have not theretofore been exercised shall thereafter
be exercisable in the manner described in Section 13(a) (without taking into
account any prior adjustment required by Section 11(a)(ii)). 

          (d)          The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. 

          (e)          Notwithstanding
anything in this Agreement to the contrary, this Section 13 shall not be
applicable to a transaction described in Section 13(a)(i), (ii) or (iii) if:
(i) such transaction is consummated with a Person or Persons who acquired
Common Shares pursuant to a tender offer described in Section 11(a)(iii) (or
with a wholly-owned Subsidiary of any such Person or Persons), (ii) the price
per Common Share offered in such transaction is not less than the price per
Common Share paid to all holders of Common Shares whose shares were purchased
pursuant to such tender or exchange offer, and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer. Upon consummation of any such transaction contemplated by this
Section 13(e), all Rights shall expire. 

22

SECTION
14.
FRACTIONAL RIGHTS AND FRACTIONAL SHARES

          (a)          The
Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Right would
have been otherwise issuable. The closing price for any day shall be the last
sale price, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last reported
trade in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Rights selected by the
Board of Directors of the Company. 

          (b)          The
Company shall not be required to issue fractions of Preferred Shares (other
than fractions which are integral multiples of one one-hundredth of a Preferred
Share) upon exercise of the Rights or to distribute certificates which evidence
fractional Preferred Shares (other than fractions which are integral multiples
of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-hundredth of a Preferred Share may, at the
election of the Company, be evidenced by depository receipts, pursuant to an
appropriate agreement between the Company and a depository selected by it;
provided, that such agreement shall provide that the holders of such depository
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depository receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Company shall
pay to the registered holders of Rights Certificates at the time such Rights
are exercised as herein provided an amount in cash equal to the same fraction
of the current market value of one Preferred Share. For the purposes of this
Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to Section 11(d)
hereof) for the Trading Day immediately prior to the date of such exercise. 

          (c)          The
holder of a Right by the acceptance of the Right expressly waives his right to
receive any fractional Rights or any fractional shares upon exercise of a Right
(except as expressly provided above). 

          (d)          Whenever
a payment for fractional Rights or fractional shares is to be made by the Rights
Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a
certificate setting forth in reasonable detail the facts related to such
payments and the prices and/or formulas utilized in calculating such payments,
and (ii) provide sufficient monies to the Rights Agent in the form of fully
collected funds to make such payments. The Rights Agent shall be fully
protected in relying upon such a certificate and shall have no duty with respect to, and
shall not be deemed to have knowledge of any payment for fractional Rights or
fractional shares under any Section of this Agreement relating to the payment
of fractional Rights or fractional shares unless and until the Rights Agent
shall have received such a certificate and sufficient monies.

23

SECTION
15. 

RIGHTS OF ACTION

          All
rights of action in respect of this Agreement, excepting the rights of action
given to the Rights Agent under Section 18 and Section 20 hereof, are vested in
the respective registered holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Shares), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Shares), may, in his own behalf and for his own benefit, enforce,
and may institute and maintain any suit, action or proceeding against the
Company to enforce, or otherwise act in respect of, his right to exercise the
Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach by the Company of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations by the Company of the obligations of any Person subject
to, this Agreement. 

          Notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent shall have any liability to any holder of a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, judgment,
decree or ruling (whether interlocutory or final) issued by a court or by a
governmental, regulatory, self-regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, that the Company must use
all reasonable efforts to have any such injunction, order, judgment, decree or
ruling lifted or otherwise overturned as soon as possible. 

SECTION
16. 

AGREEMENT OF RIGHTS HOLDERS

          Every
holder of a Right, by accepting the same, consents and agrees with the Company
and the Rights Agent and with every other holder of a Right that: 

          (a)          Prior
to the Distribution Date, the Rights will be transferable only in connection
with the transfer of the Common Shares;

          (b)          After
the Distribution Date, the Rights Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the office of the Rights
Agent designated for such purpose, duly endorsed or accompanied by a proper
instrument of transfer; and 

24

          (c)          Each
of the Company and the Rights Agent may deem and treat the person in whose name
the Rights Certificate (or, prior to the Distribution Date, the associated Common
Shares certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Rights Certificates or the associated Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any notice to
the contrary. 

SECTION
17. 

RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER

          No
holder of any Rights Certificate, by reason only of being a holder of such
Rights Certificate, shall be entitled to vote, receive dividends or be deemed
for any purpose the holder of the Preferred Shares or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate,
by reason only of being a holder of such Rights Certificate, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in Section
25 hereof), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof. 

SECTION
18. 

FEES, EXPENSES AND LIABILITIES OF THE RIGHTS AGENT

          The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the preparation, delivery, amendment, administration and execution
of this Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, damage, judgment, fine, penalty, claim, demand,
settlement, cost or expense (including, without limitation, the reasonable fees
and expenses of legal counsel), incurred
without gross negligence, bad faith or willful misconduct on the part of the
Rights Agent (which gross negligence, bad faith or willful misconduct must be
determined by a final, non-appealable order, judgment, decree or ruling of a
court of competent jurisdiction), for any action taken, suffered or omitted by
the Rights Agent in connection with the acceptance, administration, exercise
and performance of its duties under this
Agreement. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Company. The provisions of this Section 18
and Section 20 below shall survive the termination of this Agreement, the
exercise or expiration of the Rights and the resignation, replacement or
removal of the Rights Agent. 

          The Rights
Agent shall be authorized and protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with its
acceptance and administration of this Agreement and the exercise and
performance of its duties hereunder, in reliance upon any Rights Certificate or
certificate for the Preferred Shares or Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof. 

25

SECTION
19.

MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT

          Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger
or consolidation to which the Rights Agent or any successor Rights Agent shall
be a party, or any Person succeeding to the shareholder services business of
the Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that such
Person would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement any of the Rights
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement. 

          In
case at any time the name of the Rights Agent shall be changed and at such time
any of the Rights Certificates shall have been countersigned but not delivered,
the Rights Agent may adopt the countersignature under its prior name and
deliver Rights Certificates so countersigned; and in case at that time any of
the Rights Certificates shall not have been countersigned, the Rights Agent may
countersign such Rights Certificates either in its prior name or in its changed
name; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement. 

SECTION
20. 

DUTIES OF RIGHTS AGENT

          The
Rights Agent undertakes to perform only the duties and obligations expressly
imposed by this Agreement (and no implied duties) upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound: 

          (a)          The
Rights Agent may consult with legal counsel (who may be legal counsel for the
Company or an employee of the Rights Agent), and the advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by
it and in accordance with such advice or opinion. 

26

          (b)          Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter (including without
limitation the identity of an Acquiring Person and the determination of the
current per share market price of any Security)be proved or established by the Company prior to taking or
suffering or omitting to take any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Executive Vice President, or the Secretary of the Company and delivered to
the Rights Agent; and such certificate shall be full and complete authorization
and protection to the Rights Agent for any action taken, suffered or omitted by
it under the provisions of this Agreement in reliance upon such certificate. 

          (c)          The
Rights Agent shall be liable hereunder to the Company and any other Person only
for its own gross negligence, bad faith or willful misconduct (which gross
negligence, bad faith or willful misconduct must be determined by a final,
non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction). Anything in this
Agreement to the contrary notwithstanding, in no event shall the Rights Agent
be liable for special, punitive, incidental, indirect or consequential loss or
damage of any kind whatsoever (including, but not limited to, lost profits),
even if the Rights Agent has been advised of the likelihood of such loss or
damage and regardless of the form of action. Any liability of the Rights Agent
under this Rights Agreement will be limited to the annual fees paid by the
Company to the Rights Agent.

          (d)          The
Rights Agent shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the Rights Certificates
(except its countersignature thereof) or be required to verify the same, but
all such statements and recitals are and shall be deemed to have been made by
the Company only. 

          (e)          The
Rights Agent shall not have any liability for or be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming null and void pursuant to Section 11(a)(ii)
hereof) or any change or adjustment in the terms of the Rights (including the
manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24,
or the ascertaining of the existence of facts that would require any such
change or adjustment (except with respect to the exercise of Rights evidenced
by Rights Certificates after receipt of the certificate described in Section 12
hereof, upon which the Rights Agent may rely); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred Shares
will, when issued, be duly and validly authorized and issued, fully paid and
nonassessable. 

          (f)          The
Company agrees that it will perform, execute, acknowledge and deliver or cause
to be performed, executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement. 

27

          (g)          The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any one of the Chairman
of the Board, the Chief Executive Officer, the President, the Chief Financial
Officer, or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and such instructions
shall be full authorization and protection to the Rights Agent and the Rights
Agent shall not be liable for any action taken or suffered or omitted to be
taken by it in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. The Rights Agent shall be
fully authorized and protected in relying upon the most recent instructions
received by any such officer. 

          (h)          The
Rights Agent and any stockholder, Affiliate, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent or any
such any stockholder, Affiliate, director, officer or employee under this
Agreement. Nothing herein shall preclude the Rights Agent or any such any
stockholder, Affiliate, director, officer or employee from acting in any other
capacity for the Company or for any other Person. 

          (i)          If,
with respect to any Right Certificate surrendered to the Rights Agent for
exercise or transfer, the certificate contained in the form of assignment or
the form of election to purchase set forth on the reverse thereof has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.

          (j)          The
Rights Agent may execute and exercise any of the rights or powers hereby vested
in it or perform any duty hereunder either itself (through its directors,
officers and employees) or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company or any other Person resulting from any such act, default, neglect or
misconduct, absent gross negligence, bad faith or willful misconduct in the selection and continued employment
thereof (which gross negligence, bad faith or willful misconduct must be
determined by a final, non-appealable order, judgment, decree or ruling of a
court of competent jurisdiction).

          (k)          No
provision of this Agreement shall require the Rights Agent to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder or in the exercise of its rights if it believes
that repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it. 

28

SECTION
21.

CHANGE OF RIGHTS AGENT

          The
Rights Agent or any successor Rights Agent may resign and be discharged from
its duties under this Agreement upon 30 days’ prior notice in writing mailed to
the Company and to each transfer agent of the Common Shares or Preferred Shares
known to the Rights Agent by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. The Company may remove the
Rights Agent or any successor Rights Agent upon 30 days’ prior notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then the registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. 

Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a Person organized and doing business under the laws of the United States or
any state of the United States so long as such Person is authorized to do
business as a banking institution, is authorized under such laws to exercise
corporate trust or stock transfer powers, is in good standing, and is subject
to supervision or examination by federal or state authority and which has at
the time of its appointment as Rights Agent a combined capital and surplus of
at least $50 million, or (b) an Affiliate of any such Person described in part
(a) of this sentence. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. 

          Not
later than the effective date of any such appointment the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares or Preferred Shares, and mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be. 

SECTION
22. 

ISSUANCE OF NEW RIGHTS CERTIFICATES

          Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. 

29

SECTION
23.

REDEMPTION

          (a)          The
Board of Directors of the Company may, at its option, at any time prior to such
time as any Person becomes an Acquiring Person, redeem all but not less than
all the then outstanding Rights at a redemption price of $0.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the “Redemption Price”); provided, however, that if,
following the occurrence of a Shares Acquisition Date and following the
expiration of the right of redemption hereunder but prior to any event
described in clause (B) of Section 11(a)(ii) or clauses (i), (ii), (iii) or
(iv) of Section 13(a) hereof: 

	
 

	
 

	
 

	
          (i)          A Person
  who is an Acquiring Person shall have transferred or otherwise disposed of a
  number of shares of Common Shares in one transaction or series of
  transactions, not directly or indirectly involving the Company or any of its
  Subsidiaries, which did not result in the occurrence of an event described in
  clause (B) of Section 11(a)(ii) or clauses (i), (ii), (iii) or (iv) of
  Section 13(a) hereof such that such Person is thereafter a Beneficial Owner
  of less than 15% of the outstanding Common Shares; and 

	
 

	
 

	
 

	
          (ii)         There
  are no other Persons, immediately following the occurrence of the event
  described in clause (i), who are Acquiring Persons, 

then the right
of redemption shall be reinstated and thereafter be subject to the provisions
of this Section 23. The redemption of the Rights by the Board of Directors may
be made effective at such time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish. The Company may, in
its discretion, round up the redemption price to be paid to any holder of
Rights to the nearest whole cent. 

          (b)          Immediately
upon the action of the Board of Directors of the Company ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23, and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption (with prompt written notice thereof to the Rights
Agent); provided, however, that the failure to give, or any defect in, any such
notice shall not affect the legality or validity of such redemption. Within 10
days after such action of the Board of Directors ordering the redemption of the
Rights, the Company shall mail a notice of redemption to all the holders of the
then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice that is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made. 

30

SECTION 24.

EXCHANGE

          (a)          The
Board of Directors of the Company may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become null and void pursuant to the provisions of Section 11(a)(ii) hereof)
for Common Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the “Exchange Ratio”). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company, including without limitation the Employee Plans,
or of any such Subsidiary, or of any entity holding Common Shares for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares then outstanding. 

          (b)          Immediately
upon the action of the Board of Directors of the Company ordering the exchange
of any Rights pursuant to subsection (a) of this Section 24 and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange (with prompt written notice thereof to the
Rights Agent); provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice that is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares
for Rights will be effected and, in the event of any partial exchange, the
number of Rights that will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have become
null and void pursuant to the provisions of Section 11(a)(ii) hereof) held by
each holder of Rights. 

          (c)          In
any exchange pursuant to this Section 24, the Company, at its option, may
substitute Preferred Shares (or equivalent preferred shares, as such term is
defined in Section 11(b) hereof) for Common Shares exchangeable for Rights, at
the initial rate of one one-hundredth of a Preferred Share (or equivalent
preferred share) for each Common Share, as appropriately adjusted to reflect
adjustments in the voting rights of the Preferred Shares pursuant to the terms
thereof, so that the fraction of a Preferred Share delivered in lieu of each
Common Share shall have the same voting rights as one Common Share. 

          (d)          In
the event that there shall not be sufficient Common Shares or Preferred Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
use its best efforts to cause all such action to be taken as may be necessary
to authorize additional Common Shares or Preferred Shares for issuance upon
exchange of the Rights. 

          (e)          The
Company shall not be required to issue fractions of Common Shares or to
distribute certificates which evidence fractional Common Shares. In lieu of
such fractional Common Shares, the Company shall pay to the registered holders
of the Rights Certificates with regard to which such fractional Common Shares
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. For the purposes of this paragraph (e), the current market value
of a whole Common Share shall be the closing price of a Common Share (as
determined pursuant to Section 11(d) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.

31

SECTION
25.

NOTICE OF CERTAIN EVENTS

	
 

	
 

	
 

	
(a)          In
  case the Company shall propose to:

	
 

	
 

	
 

	
              (i)         Pay
  any dividend payable in stock of any class to the holders of its Preferred
  Shares or to make any other distribution to the holders of its Preferred
  Shares (other than a regular quarterly cash dividend);

	
 

	
 

	
 

	
              (ii)        Offer
  to the holders of its Preferred Shares rights, options or warrants to
  subscribe for or to purchase any additional Preferred Shares or shares of
  stock of any class or any other securities, rights, options or warrants;

	
 

	
 

	
 

	
              (iii)       Effect
  any reclassification of its Preferred Shares (other than a reclassification
  involving only the subdivision of outstanding Preferred Shares);

	
 

	
 

	
 

	
              (iv)       Effect
  any consolidation or merger into or with, or to effect any sale, disposition
  or other transfer (or to permit one or more of its Subsidiaries to effect any
  sale, disposition or other transfer), in one or more transactions, of 50% or
  more of the assets or earning power of the Company and its Subsidiaries
  (taken as a whole) to, any other Person;

	
 

	
 

	
 

	
              (v)        Effect
  the liquidation, dissolution or winding up of the Company; or 

	
 

	
 

	
 

	
              (vi)       Declare
  or pay any dividend on the Common Shares payable in Common Shares or effect a
  subdivision, combination or consolidation of the Common Shares (by
  reclassification or otherwise than by payment of dividends in Common Shares);

then, in each
such case, the Company shall give to the Rights Agent and to each holder of a
Rights Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights, options or warrants, or the date on
which such reclassification, consolidation, merger, sale, disposition,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed. Such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least 10 days prior
to the record date for determining holders of the Preferred Shares for purposes
of such action, and in the case of any such other action, at least 10 days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever shall be the earlier. 

          (b)          In
case any of the events set forth in Section 11(a)(ii) hereof shall occur, then
the Company shall as soon as practicable thereafter give to the Rights Agent
and to each holder of a Rights Certificate, in accordance with Section 26
hereof, a notice of the occurrence of such event, which notice shall describe
such event and the consequences of such event to holders of Rights under
Section 11(a)(ii) hereof. 

32

SECTION
26.

NOTICES

          Notices
or demands authorized by this Agreement to be given or made by the Rights Agent
or by the holder of any Rights Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as
follows: 

	
 

	
 

	
 

	
Monterey
  Gourmet Foods

	
 

	
1528 Moffett
  Street

	
 

	
Salinas, CA
  93905

	
 

	
Attn: Chief
  Financial Officer 

Subject to the
provisions of Section 21 hereof, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows: 

	
 

	
 

	
 

	
Corporate
  Stock Transfer

	
 

	
3200 Cherry
  Creek South Drive

	
 

	
# 430

	
 

	
Denver, CO
  80209

	
 

	
Attention: Carylyn
  Bell

	
 

	
 

	
 

	
With a copy
  to: 

	
 

	
 

	
 

	
Corporate
  Stock Transfer

	
 

	
3200 Cherry
  Creek South Drive

	
 

	
# 430

	
 

	
Denver, CO
  80209

	
 

	
Attention:
  General Counsel 

          Notices
or demands authorized by this Agreement to be given or made by the Company or
the Rights Agent to the holder of any Rights Certificate shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed to such
holder at the address of such holder as shown on the registry books of the
Company. 

33

SECTION
27.

SUPPLEMENTS AND AMENDMENTS

          The
Company may from time to time supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order to cure any ambiguity,
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, or to make any other
provisions with respect to the Rights which the Company may deem necessary or
desirable, any such supplement or amendment to be evidenced by a writing signed
by the Company and the Rights Agent; provided, however, that from and after
such time as any Person becomes an Acquiring Person, this Agreement shall not
be amended in any manner which would adversely affect the interests of the
holders of Rights. Without limiting the foregoing, the Company at any time
prior to such time as any Person becomes an Acquiring Person may amend this
Agreement to raise or lower the thresholds set forth in Sections l(a) and 3(a),
provided the threshold may not be lowered to less than the greater of (i) any
percentage greater than the largest percentage of the outstanding Common Shares
then known by the Company to be beneficially owned by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any Person holding Common Shares
for or pursuant to the terms of any such plan or a person excluded from the
definition of “Acquiring Person” by such definition), and (ii) 10%.
Notwithstanding anything contained in this Agreement to the contrary, the
Rights Agent may, but shall not be obligated to, enter into any supplement or
amendment that affects the Rights Agent’s own rights, duties, obligations or
immunities under this Agreement. Prior to the executing any amendments or
supplements, the Rights Agent shall be entitled to request and rely on a
certificate from an appropriate officer of the Company and, if requested by the
Rights Agent, an opinion of counsel, that states that the proposed supplement
or amendment complies with this Section 27.

SECTION
28.

REGISTRATION OF SECURITIES

          The
Company may temporarily suspend, for a period of time not to exceed ninety (90)
days, the exercisability of the Rights in order to prepare and file, if deemed
necessary by the Company, such registration statements and other filings under
the Securities Act and the securities or “blue sky” laws of any state, with
respect to any securities purchasable upon the exercise of the Rights, and to
permit the same to become effective. Upon any such suspension, the Company
shall issue a public announcement (with prompt written notice thereof to the
Rights Agent) stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement (with prompt written
notice thereof to the Rights Agent) at such time as the suspension is no longer
in effect. Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction unless the requisite
qualification in such jurisdiction has been obtained. 

SECTION
29.

DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS;

TIDE COMMITTEE

          (a)
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or to
not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board of Directors in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights and all
other Persons, and (y) not subject the Board to any liability to the holders of
the Rights. The Rights Agent is entitled always to assume the Company’s Board
of Directors acted in good faith and shall fully be protected and incur no
liability in reliance thereon. 

34

          (b)
It is understood that the TIDE Committee (as described below) of the Board of
Directors shall review and evaluate this Agreement in order to consider whether
the maintenance of this Agreement continues to be in the best interests of the
Company, its stockholders and other relevant constituencies of the Company at
least once every three years, or sooner than that if any Person shall have made
a proposal to the Company or its stockholders, or taken any other action that,
if effective, could cause such Person to become an Acquiring Person hereunder,
if a majority of the members of the TIDE Committee shall deem such review and
evaluation appropriate after giving due regard to all relevant circumstances.
Following each such review, the TIDE Committee shall communicate its
conclusions to the full Board of Directors, including any recommendation in
light thereof as to whether this Agreement should be modified or the Rights
should be redeemed. If the Company has a non-executive chairman, the TIDE
Committee shall be chaired by the non-executive chairman and comprised of all
members of the Board of Directors who are not officers, employees or Affiliates
of the Company. If the Company does not have a non-executive chairman, the TIDE
Committee shall be comprised of the members of the Corporate Governance and
Nominating Committee of the Board of Directors (or any successor committee) who
are not officers, employees or Affiliates of the Company 

          (c)
The TIDE Committee and the Board of Directors, when considering whether this
Agreement should be modified or the Rights should be redeemed, shall have the
power to set their own agenda and to retain at the expense of the Company their
choice of legal counsel, investment bankers and other advisors. The TIDE
Committee and the Board of Directors, when considering whether this Agreement
should be modified or the Rights should be redeemed, shall have the authority
to review all information of the Company and to consider any and all factors they
deem relevant to an evaluation of whether this Agreement should be modified or
the Rights should be redeemed. 

SECTION
30.

SUCCESSORS

          All
the covenants and provisions of this Agreement by or for the benefit of the
Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder. 

SECTION
31.

BENEFITS OF THIS AGREEMENT

          Nothing
in this Agreement shall be construed to give to any Person or corporation other
than the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights Agent
and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares). 

35

SECTION
32.

SEVERABILITY

          If
any term, provision, covenant or restriction of this Agreement is held by a court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. 

SECTION
33.

GOVERNING LAW

          This
Agreement and each Rights Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of California and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State,
provided, however, that all provisions regarding the rights, duties and
obligations of the Rights Agent shall be governed by and construed in accordance
with the laws of the State of Colorado applicable to contracts made and to be
performed entirely within such State. 

SECTION
34.

COUNTERPARTS

          This
Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument. 

SECTION
35.

DESCRIPTIVE HEADINGS

          Descriptive
headings of the several Sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof. 

          IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and attested, all as of the day and year first above written. 

	
 

	
 

	
 

	
 

	
 

	
MONTEREY
  GOURMET FOODS, INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
/s/ VAN TUNSTALL

	
 

	
 

	

	
 

	
 

	
Van Tunstall

	
 

	
 

	
Chairman of
  the Board

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
CORPORATE
  STOCK TRANSFER, INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ CARYLYN BELL

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 Title: President

	
 

36EXHIBIT 10.1

                                                                  EXECUTION COPY

================================================================================

                                CREDIT AGREEMENT

                            Dated as of June 26, 2008

                                 by and between

                         COACTIVE MARKETING GROUP, INC.

                                       and

                                 SOVEREIGN BANK

================================================================================

<PAGE>

                                TABLE OF CONTENTS

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS...............................................6
        SECTION 1.01. Definitions..............................................6
        SECTION 1.02. Terms Generally.........................................18

ARTICLE II
REVOLVING CREDIT LOANS........................................................18
        SECTION 2.01. Revolving Credit Loans..................................18
        SECTION 2.02. Revolving Credit Note...................................19
        SECTION 2.03. Term Loan...............................................19
        SECTION 2.04. Term Note...............................................20
        SECTION 2.05. Standby Letters of Credit...............................20

ARTICLE III
PROVISIONS RELATING TO ALL EXTENSIONS OF CREDIT;..............................23
        SECTION 3.01. Interest Rate; Continuation and Conversion of Loans.....23
        SECTION 3.02. Use of Proceeds.........................................24
        SECTION 3.03. Prepayments.............................................24
        SECTION 3.04. Fees....................................................25
        SECTION 3.05. Inability to Determine Interest Rate....................26
        SECTION 3.06. Illegality..............................................26
        SECTION 3.07. Increased Costs.........................................27
        SECTION 3.08. Indemnity...............................................28
        SECTION 3.09. Taxes...................................................28
        SECTION 3.10. Payments................................................29
        SECTION 3.11. Disbursement of Loans...................................29

ARTICLE IV
REPRESENTATIONS AND WARRANTIES................................................29
        SECTION 4.01. Organization, Powers....................................29
        SECTION 4.02. Authorization of Borrowing, Enforceable Obligations.....30
        SECTION 4.03. Financial Condition.....................................30
        SECTION 4.04. Taxes...................................................31
        SECTION 4.05. Title to Properties.....................................31
        SECTION 4.06. Litigation..............................................31
        SECTION 4.07. Agreements..............................................31
        SECTION 4.08. Compliance with ERISA...................................31
        SECTION 4.09. Federal Reserve Regulations; Use of Proceeds............32
        SECTION 4.10. Approvals...............................................32
        SECTION 4.11. Subsidiaries............................................32
        SECTION 4.12. Hazardous Materials.....................................32

                                       ii
<PAGE>

        SECTION 4.13. Investment Company Act..................................32
        SECTION 4.14. Security Documents......................................33
        SECTION 4.15. No Default..............................................33
        SECTION 4.16. Material Contracts......................................33
        SECTION 4.17. Permits and Licenses....................................33
        SECTION 4.18. Compliance with Law.....................................33
        SECTION 4.19. Accounts Receivable.....................................33
        SECTION 4.20. Disclosure..............................................33

ARTICLE V
CONDITIONS TO LENDING ........................................................34
        SECTION 5.01. Conditions to Initial Extension of Credit...............34
        SECTION 5.02. Conditions to Extension of the Term Loan................36
        SECTION 5.03. Conditions to All Extensions of Credit..................36

ARTICLE VI
AFFIRMATIVE COVENANTS ........................................................37
        SECTION 6.01. Existence, Properties, Insurance........................37
        SECTION 6.02. Payment of Indebtedness and Taxes.......................38
        SECTION 6.03. Reports, etc. Financial Statements......................38
        SECTION 6.04. Books and Records; Access to Premises...................40
        SECTION 6.05. Notice of Adverse Change................................40
        SECTION 6.06. Notice of Default.......................................41
        SECTION 6.07. Notice of Litigation....................................41
        SECTION 6.08. Notice of Default in Other Agreements...................41
        SECTION 6.09. Notice of ERISA Event...................................41
        SECTION 6.10. Notice of Environmental Law Violations..................42
        SECTION 6.11. Notice Regarding Material Contracts.....................42
        SECTION 6.12. Compliance with Applicable Laws.........................42
        SECTION 6.13. Subsidiaries............................................42
        SECTION 6.14. Depository Relationship.................................42
        SECTION 6.15. Environmental Laws......................................42

ARTICLE VII
NEGATIVE COVENANTS ...........................................................43
        SECTION 7.01. Liens...................................................43
        SECTION 7.02. Indebtedness............................................44
        SECTION 7.03. Guaranties..............................................44
        SECTION 7.04. Sale of Assets..........................................45
        SECTION 7.05. Sales of Receivables....................................45
        SECTION 7.06. Loans and Investments...................................45
        SECTION 7.07. Nature of Business......................................45
        SECTION 7.08. Sale and Leaseback......................................45
        SECTION 7.09. Federal Reserve Regulations.............................45
        SECTION 7.10. Accounting Policies and Procedures......................46
        SECTION 7.11. Hazardous Materials.....................................46

                                      iii
<PAGE>

        SECTION 7.12. Limitations on Fundamental Changes......................46
        SECTION 7.13. Financial Condition Covenants...........................46
        SECTION 7.14. Dividends...............................................46
        SECTION 7.15. Transactions with Affiliates............................47
        SECTION 7.16. Impairment of Security Interest.........................47
        SECTION 7.17. Subordinated Debt.......................................47

ARTICLE VIII
EVENTS OF DEFAULT ............................................................47
        SECTION 8.01. Events of Default.......................................47

ARTICLE IX
MISCELLANEOUS
        SECTION 9.01. Notices.................................................50
        SECTION 9.02. Effectiveness; Survival.................................50
        SECTION 9.03. Expenses................................................51
        SECTION 9.04. Modification of Agreement...............................51
        SECTION 9.05. Successors and Assigns; Participations..................51
        SECTION 9.06. No Waiver; Cumulative Remedies..........................52
        SECTION 9.07. APPLICABLE LAW..........................................52
        SECTION 9.08. SUBMISSION TO JURISDICTION; JURY WAIVER.................52
        SECTION 9.09. Severability............................................53
        SECTION 9.10. Right of Setoff.........................................53
        SECTION 9.11. Headings................................................53
        SECTION 9.12. CONSTRUCTION............................................53
        SECTION 9.13. Counterparts............................................53

                                       iv
<PAGE>

SCHEDULES

Schedule I            -      Subsidiaries
Schedule II           -      Existing Liens
Schedule III          -      Existing Indebtedness
Schedule IV           -      Existing Guarantees
Schedule V            -      Material Contracts
Schedule VI           -      Litigation
Schedule 4.04         -      Tax Filings

EXHIBITS
Exhibit A             -      Form of Revolving Credit Note
Exhibit B             -      Form of Term Note
Exhibit C             -      Form of Security Agreement
Exhibit D             -      Form of Opinion of Counsel
Exhibit E             -      Form of Guaranty
Exhibit F             -      Form of Borrowing Base Certificate

                                       v
<PAGE>

         CREDIT AGREEMENT dated as of June 26, 2008, by and between COACTIVE
MARKETING GROUP, INC., a Delaware corporation (the "Company"), and SOVEREIGN
BANK, a federal savings bank (the "Lender").

                                    RECITALS

         The Company has requested the Lender to extend credit from time to time
and the Lender is willing to extend such credit to the Company, subject to the
terms and conditions hereinafter set forth.

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

         SECTION 1.01. Definitions. As used herein, the following words and
terms shall have the following meanings:

         "Acquired Assets" shall have the meaning given such term in the Asset
Purchase Agreement.

         "Acquisition" shall mean the acquisition by U.S. Concepts of certain
assets of 3 For All Partners identified in the Asset Purchase Agreement as the
Acquired Assets.

         "Affiliate" shall mean (a) a director, officer, partner, shareholder,
member, manager, employee, executor or trustee of a specified Person, or (b)
with respect to a specified Person, another Person which, directly or
indirectly, controls or is controlled by or is under common control with such
specified Person. For the purpose of this definition, "control" of a Person
shall mean the power, direct or indirect, to direct or cause the direction of
the management or policies of such Person whether through the ownership of
voting securities, by contract or otherwise; provided that, in any event, any
Person who owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interest of any
Person (other than as a limited partner of such other Person) will be deemed to
control such corporation or other Person.

         "Aggregate Outstandings" shall mean, on the date of determination, the
sum of (a) the aggregate outstanding principal amount of all Revolving Credit
Loans at such time, and (b) the aggregate Standby LC Exposure at such time.

         "Agreement" shall mean this Credit Agreement dated as of June 26, 2008,
as it may hereafter be amended, restated, supplemented or otherwise modified
from time to time.

         "Asset Purchase Agreement" means that certain ASSET PURCHASE AGREEMENT,
dated as of June __, 2008, by and among COACTIVE MARKETING GROUP, INC., a

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Delaware corporation ("Parent"), U.S. Concepts LLC, a Delaware limited liability
company ("Buyer"), 3 FOR ALL PARTNERS, LLC, a New York limited liability company
d/b/a mktgpartners ("Seller"), CHARLIE HORSEY ("Horsey"), EVAN GREENBERG ("EG"),
GLENN GREENBERG ("GG"), PATTY HUBBARD ("PH") and JOHN MOUSSEAU ("JM" and,
together with Horsey, EG, GG, and PH, the "Members").

         "Borrowing Base" shall mean an amount equal to seventy-five percent
(75%) of the face amount of all Eligible Receivables; provided the Bank may
increase or decrease such percentage from time to time in its reasonable
discretion. Any such revision to advance rates would become effective five (5)
Business Days after notice of such change is delivered to the Company, unless a
Default or Event of Default is then existing, in which case such revision shall
be effective immediately upon delivery of such notice.

         "Borrowing Base Certificate" shall mean the Borrowing Base Certificate
in the form attached hereto as Exhibit F.

         "Borrowing Date" shall mean, with respect to any Loan, the date on
which such Loan is disbursed to the Company.

         "Business Day" shall mean (a) any day not a Saturday, Sunday or legal
holiday, on which banks in New York City are open for business and (b) as it
relates to any payment, determination, funding or notice to be made or given in
connection with any LIBOR Rate Loan, any day specified in clause (a) on which
trading is carried on by and between banks in Dollar deposits in the London
interbank eurodollar market.

         "Capital Expenditures" shall mean additions to property and equipment
of the Company and its Subsidiaries which, in conformity with Generally Accepted
Accounting Principles, are included as "additions to property, plant or
equipment" or similar items which would be reflected in the consolidated
statement of cash flow of the Company and its Subsidiaries, including without
limitation, property and equipment which are the subject of Capital Leases.

         "Capital Lease" shall mean any lease the obligations of which are
required to be capitalized on the balance sheet of a Person in accordance with
Generally Accepted Accounting Principles.

         "Cash Collateral" shall mean the pledge and deposit by the Company with
the Lender, as collateral for the Obligations, of cash or deposit account
balances pursuant to documentation in form and substance satisfactory to the
Lender and the taking of all action required to provide the Lender with a first
priority perfected security interest in such deposit.

         "Change of Control" shall mean any event which results in (i) any
Person, or two or more Persons acting in concert, acquiring beneficial ownership
(within the meaning of Rules 13d-3 and 13d-5 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of securities of the Company (or other securities convertible into
such securities) representing 35% or more of the combined voting power of all

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securities of the Company entitled to vote in the election of directors; or (ii)
the individuals who, as of the date hereof, constitute the Board of Directors of
the Company, together with those who first become directors subsequent to such
date, provided the recommendation, election or nomination for election to the
Board of Directors of such subsequent directors was approved by a vote of at
least a majority of the directors then still in office who were either directors
as of the date hereof or whose recommendation, election or nomination for
election was previously so approved, ceasing for any reason to constitute a
majority of the members of the Board of Directors of the Company.

         "Chief Financial Officer" shall mean the Chief Financial Officer of the
Company.

         "Closing Date" shall mean June 26, 2008.

         "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

         "Commitment" shall mean, collectively, the Revolving Credit Commitment
and the Term Loan Commitment.

        "Company" shall have the meaning set forth in the preamble hereto.

         "Consolidated Debt Service Coverage Ratio" shall mean, for any period,
the ratio of (a) Consolidated Net Income, plus (i) to the extent deducted in
determining Consolidated Net Income, the sum of (A) Consolidated Interest
Expense, and (B) all depreciation and amortization expenses or charges, minus
(ii) the sum of (A) dividends and/or distributions for the applicable period and
(B) Unfunded Capital Expenditures to (b) the sum of (i) Consolidated Interest
Expense plus (ii) all scheduled installments of principal on all Indebtedness
(including Capital Leases) having a final maturity of one year or more from the
date of incurrence thereof, including, without limitation, the Term Loan. All
the foregoing categories shall be determined on a consolidated basis for the
Company and its Subsidiaries in accordance with Generally Accepted Accounting
Principles applied on a consistent basis and shall be calculated (without
duplication) over the four fiscal quarters then most recently ended.

         "Consolidated EBITDA" shall mean for the Company and its Subsidiaries
for any period, Consolidated Net Income (Net Loss) for such period, plus, to the
extent deducted in computing such Consolidated Net Income (Net Loss) and without
duplication, the sum of (a) Consolidated Interest Expense for such period, (b)
depreciation and amortization expenses or charges for such period, and (c) all
income taxes to any government or governmental instrumentality whether paid or
accrued for such period, in each case, determined on a consolidated basis for
the Company and its Subsidiaries in accordance with Generally Accepted
Accounting Principles applied on a consistent basis. For purposes of calculating
Consolidated EBITDA for any period of four consecutive fiscal quarters, if
during such period the Company or any Subsidiary shall have acquired or disposed
of any Person or acquired or disposed of all or substantially all of the
operating assets of any Person, Consolidated EBITDA for such period shall be
calculated after giving pro forma effect thereto as if such acquisition or
disposition and related transactions had been consummated on the first day of
such period. The pro forma calculations pursuant to the immediately preceding

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sentence (including adjustments in respect of cost savings) shall be made in
accordance with Regulation S-X under the Securities Act of 1933, as amended,
unless otherwise approved by the Lender.

         "Consolidated Funded Debt" means, as of the date of determination, the
sum of all Indebtedness of the Company and its Subsidiaries, on a consolidated
basis, having an original maturity of one year or more, including the current
portion thereof.

         "Consolidated Interest Expense" shall mean the consolidated gross
interest expense on all Indebtedness of the Company and its Subsidiaries
determined in accordance with Generally Accepted Accounting Principles applied
on a consistent basis and calculated (without duplication) over the four fiscal
quarters immediately preceding the date of calculation thereof.

         "Consolidated Leverage Ratio" shall mean the ratio of (a) Consolidated
Funded Debt on such day to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters ended on the last day of such period.

         "Consolidated Net Income (Net Loss)" shall mean, for any period, the
net income (or net loss) of the Company and its Subsidiaries on a consolidated
basis for such period determined in accordance with Generally Accepted
Accounting Principles applied on a consistent basis.

         "Consolidated Pre-tax Net Loss" shall mean, for any period, the net
loss of the Company and its Subsidiaries on a consolidated basis (calculated
exclusive of extraordinary gains or non-cash losses) for such period determined
in accordance with Generally Accepted Accounting Principles applied on a
consistent basis, plus, to the extent deducted in computing such consolidated
net loss, all income taxes to any government or governmental instrumentality
whether paid or accrued for such period.

         "Customer" shall mean and include the account debtor or obligor with
respect to any Receivable.

         "Default" shall mean any condition or event which upon notice, lapse of
time or both would constitute an Event of Default.

         "Diaego" means, collectively, Diageo Plc, its Subsidiaries and
Affiliates.

         "Dollar" and the symbol "$" shall mean lawful currency of the United
States of America.

         "Eligible Investments" shall mean (a) direct obligations of the United
States of America or any governmental agency thereof which are fully guaranteed
by the United States of America, provided that such obligations mature within
one year from the date of acquisition thereof; or (b) dollar denominated
certificates of time deposit maturing within one year issued by any bank
organized and existing under the laws of the United States or any state thereof
and having aggregate capital and surplus in excess of $1,000,000,000; or (c)
money market mutual funds having assets in excess of $2,500,000,000; or (d)
commercial paper rated not less than P-1 or A-1 or their equivalent by Moody's

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Investor Service, Inc. or Standard & Poor's Ratings Group, respectively; or (e)
tax exempt securities of a U.S. issuer rated A or better by Standard and Poor's
Ratings Group or rated A-2 or better by Moody's Investor Service, Inc.

         "Eligible Receivables" shall mean Receivables created by the Company or
its Subsidiaries in the ordinary course of business arising out of the sale of
goods or rendition of services by the Company, which are and at all times shall
continue to be acceptable to the Lender, in its sole discretion, in all
respects. Standards of eligibility may be fixed and revised from time to time
solely by the Lender in the Lender's exclusive judgment. In general, without
limiting the foregoing, a Receivable shall in no event be deemed to be an
Eligible Receivable unless: (a) all payments due on the Receivable have been
invoiced and the underlying goods shipped or otherwise delivered to the customer
per the invoice for such goods or services performed in full, as the case may
be; provided that the foregoing shall not exclude Receivables arising from
invoices issued no more than thirty (30) days in advance of the services to be
performed under such invoice, provided further that no more than twenty-five
percent (25%) of all Eligible Receivables as of any date of determination shall
be Receivables billed in advance of services in accordance with the foregoing
proviso; (b) no more than ninety (90) days have elapsed from the invoice date;
(c) the payments due on more than 50% of all Receivables from the same Customer
are not more than ninety (90) days past the invoice date; (d) subject to the
proviso set forth in (a) above, the Receivable arose or arises from a bona fide
transaction; (e) the Receivable is in full conformity with the representations
and warranties made by the Company to the Lender with respect thereto and is
free and clear of all security interests and Liens of any nature whatsoever
other than any security interest deemed to be held by the Company or any
security interest created pursuant to the Security Documents or permitted by
Section 7.01 hereof; (f) the Receivable constitutes an "account" or "chattel
paper" within the meaning of the Uniform Commercial Code of the state in which
the Receivable is located; (g) the Customer has not asserted that the
Receivable, and the Company is not aware that the Receivable, arises out of a
bill and hold, consignment or progress billing arrangement or is subject to any
setoff, net-out contract, offset, deduction, dispute, credit, counterclaim or
other defense arising out of the transactions represented by the Receivables or
independently thereof, the Receivable does not constitute a chargeback or debit
memo, and the Customer has not objected to its liability thereon or returned,
rejected or repossessed any of such goods, (h) the Receivable arose in the
ordinary course of business of the Company; (i) the Customer is not (i) the
United States government or the government of any state or political subdivision
thereof or therein, or any agency or department of any thereof or any foreign
government unless there has been compliance to the satisfaction of the Lender
the Federal Assignment of Claims Act or similar state or foreign statutes or
(ii) an Affiliate of the Company or any subsidiary of any thereof; (j) the
Customer is a United States person or an obligor in the United States, (k) the
Receivable complies with all material requirements of all applicable laws and
regulations, whether Federal, state or local (including, without limitation,
usury laws and laws, rules and regulations relating to truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy); (l) the Receivable is in full force and
effect and constitutes a legal, valid and binding obligation of the Customer
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and by general equity
principles; (m) the Receivable is denominated in and provides for payment by the

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Customer in U.S. dollars; (n) the Receivable has not been and is not required to
be charged off or written off as uncollectible in accordance with Generally
Accepted Accounting Principles or the customary business practices of the
Company; (o) the Lender possesses a valid, first priority perfected security
interest in such Receivable as security for payment of the Obligations; and (p)
the Lender is reasonably satisfied with the credit standing of the Customer in
relation to the amount of credit extended.

         "Environmental Law" shall mean any law, ordinance, rule, regulation, or
policy having the force of law of any Governmental Authority relating to
pollution or protection of the environment or to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections
9601, et seq.), the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sections 1801, et seq.) the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 6901, et seq.) and the rules and regulations
promulgated pursuant thereto.

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

         "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with the Company or any Affiliate of the Company would be
deemed to be a member of the same "controlled group" within the meaning of
Section 414(b), (c), (m) or (o) of the Code.

         "Eurocurrency Reserve Requirement" shall mean a fraction (expressed as
a decimal), the numerator of which is the number one and the denominator of
which is the number one minus the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves, under any regulations of the Board of Governors of the Federal Reserve
System or any other governmental authority having jurisdiction with respect
thereto) as from time to time in effect, dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "eurocurrency
liabilities" in Regulation D) maintained by the Lender. For purposes hereof each
LIBOR Rate Loan shall be deemed to constitute a "eurocurrency liability" as
defined in Regulation D, and subject to the reserve requirements of "Regulation
D," without benefit of credit or proration, exemptions or offsets which might
otherwise be available to the Lender from time to time under Regulation D.

         "Event of Default" shall have the meaning set forth in Article VIII.

         "Executive Officer" shall mean any of the President, the Chief
Executive Officer, Chief Financial Officer or the Secretary of the Company or
any of its Subsidiaries, as applicable, and their respective successors, if any,
designated by the board of directors thereof.

         "Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal fund brokers, as published on the

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next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the Lender from
three Federal fund brokers of recognized standing selected by the Lender.

         "Generally Accepted Accounting Principles" shall mean those generally
accepted accounting principles in the United States of America, as in effect
from time to time.

         "Governmental Authority" shall mean any nation or government, any
state, province, city or municipal entity or other political subdivision
thereof, and any governmental, executive, legislative, judicial, administrative
or regulatory agency, department, authority, instrumentality, commission, board
or similar body, whether federal, state, provincial, territorial, local or
foreign.

         "Guarantors" shall mean, collectively, Inmark Services LLC, a Delaware
limited liability company, Optimum Group LLC, a Delaware limited liability
company, U.S. Concepts LLC, a Delaware limited liability company, Digital
Intelligence Group LLC, a Delaware limited liability company, Bars.com LLC, a
Delaware limited liability company, and each other Person who from time to time
is required to execute a Guaranty in accordance with Section 6.13.

         "Guaranty" shall mean the Guaranty in the form attached hereto as
Exhibit E to be executed and delivered by each Guarantor on the Closing Date and
thereafter by each Person required to deliver a Guaranty pursuant to Section
6.13 hereof, as the same may hereafter be amended, restated, supplemented or
otherwise modified from time to time.

         "Hazardous Materials" shall mean any explosives, radioactive materials,
or other materials, wastes, substances, or chemicals regulated as toxic
hazardous or as a pollutant, contaminant or waste under any applicable
Environmental Law.

         "Hedging Agreement" shall mean any interest rate swap, collar, cap,
floor or forward rate agreement or other agreement regarding the hedging of
interest rate risk exposure executed in connection with hedging the interest
rate exposure of the Company or any of its Subsidiaries and any confirming
letter executed pursuant to such agreement, all as amended, supplemented,
restated or otherwise modified from time to time.

         "Indebtedness" shall mean, without duplication, as to any Person or
Persons (a) indebtedness for borrowed money; (b) indebtedness for the deferred
purchase price of property or services; (c) indebtedness evidenced by bonds,
debentures, notes or other similar instruments; (d) obligations and liabilities
secured by a Lien upon property owned by such Person, whether or not owing by
such Person and even though such Person has not assumed or become liable for the
payment thereof; (e) obligations and liabilities directly or indirectly
guaranteed by such Person; (f) obligations or liabilities created or arising
under any conditional sales contract or other title retention agreement with
respect to property used and/or acquired by such Person; (g) obligations of such
Person as lessee under Capital Leases; (h) net liabilities of such Person under
Hedging Agreements and foreign currency exchange agreements, as calculated on a
basis satisfactory to the Lender and in accordance with accepted practice; (i)
all obligations of such Person in respect of bankers' acceptance; and (j) all
obligations, contingent or otherwise of such Person as an account party or
applicant in respect of letters of credit.

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         "Interest Payment Date" shall mean (a) as to any Prime Rate Loan, the
first day of each calendar month during the term hereof; (b) as to any LIBOR
Rate Loan, the last day of the Interest Period for such LIBOR Rate Loan; and (c)
as to any Loan, the date such Loan is paid in full or in part; provided,
however, that if any Interest Period for a LIBOR Rate Loan exceeds three months,
the date that falls three months after the beginning of such Interest Period
shall also be an Interest Payment Date.

         "Interest Period" shall mean with respect to any LIBOR Rate Loan:

         (a)      initially, the period commencing on the date such LIBOR Rate
Loan is made and ending one, two, three or six months thereafter, as selected by
the Company in its Notice of Borrowing or in its notice of conversion from a
Prime Rate Loan to a LIBOR Rate Loan provided, in each case, in accordance with
the terms of Articles II and III hereof; and

         (b)      thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Rate Loan and ending one,
two, three or six months thereafter, as selected by the Company by irrevocable
written notice to the Lender not later than 11:00 a.m. New York, New York time
three (3) Business Days prior to the last day of then current Interest Period
with respect to such LIBOR Rate Loan; provided, however, that all of the
foregoing provisions relating to Interest Periods are subject to the following:

                  (i)      if any Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month in which event such Interest
Period shall end on the immediately preceding Business Day;

                  (ii)     if the Company shall fail to give notice as provided
in clause (b) above, the Company shall be deemed to have requested conversion of
the affected LIBOR Rate Loan to a Prime Rate Loan on the last day of then
current Interest Period with respect thereto;

                  (iii)    any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month;

                  (iv)     no Interest Period may be selected with respect to
(a) a Revolving Credit Loan which ends later than the Revolving Credit
Commitment Termination Date, or (b) the Term Loan which ends later than the Term
Loan Maturity Date;

                  (v)      no more than four (4) Interest Periods may exist at
any one time; and

                  (vi)     the Company shall select Interest Periods so as not
to require a payment or prepayment of any LIBOR Rate Loan during an Interest
Period for such LIBOR Rate Loan.

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         "Lender" shall have the meaning set forth in the preamble hereto.

         "LIBOR Rate Loans" shall mean Loans at such time as they are made
and/or being maintained at a rate of interest based upon Reserve Adjusted Libor.

         "Lien" shall mean any lien (statutory or otherwise), security interest,
mortgage, deed of trust, pledge, charge, conditional sale, title retention
agreement, Capital Lease or other encumbrance or similar right of others, or any
agreement to give any of the foregoing.

         "Loans" shall mean, collectively, the Revolving Credit Loans and Term
Loan.

         "Loan Documents" shall mean, collectively, this Agreement, the Notes,
the Security Documents, the Guaranties, any Hedging Agreement entered into with
the Lender and each other agreement executed in connection with the transactions
contemplated hereby or thereby, as each of the same may hereafter be amended,
restated, supplemented or otherwise modified from time to time.

         "Master Services Contract" means the Marketing and Promotion Agreement,
dated as of July 1, 2006, between the Spirits division of Diageo North America,
Inc., the DC&E division of Diageo North America, Inc., Diageo-Guinness USA, Inc.
and U.S. Concepts.

         "Material Adverse Effect" shall mean a material adverse effect upon (a)
the business, operations, property, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or (b) the
validity or enforceability of (i) this Agreement or any of the other Loan
Documents or (ii) the rights or remedies of the Lender hereunder or thereunder.

         "Material Contract" shall mean each contract, instrument or agreement
(a) to which the Company or any of its Subsidiaries is a party which is material
to the business, operations or condition (financial or otherwise), prospects, or
properties of the Company and its Subsidiaries taken as a whole, or (b) which
requires the payment to, or by, the Company or any of its Subsidiaries during
the term thereof in excess of $500,000.

         "Notes" shall mean, collectively, the Revolving Credit Note and the
Term Note.

         "Notice of Borrowing" shall mean the Lender's form of notice of
borrowing or other form of notice of borrowing acceptable to the Lender.

         "Obligations" shall mean all obligations, liabilities and indebtedness
of the Company to the Lender, whether now existing or hereafter created,
absolute or contingent, direct or indirect, due or not, whether created directly
or acquired by assignment or otherwise, arising under or relating to this
Agreement, the Notes or any other Loan Document including, without limitation,
all obligations, liabilities and indebtedness of the Company with respect to the
principal of and interest on the Loans, and obligations arising under Hedging
Agreements with the Lender (including the payment of amounts that would become

                                       14
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due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, and interest that but for the filing of a
petition in bankruptcy with respect to the Company, would accrue on such
obligations, whether or not a claim is allowed against such Company for such
interest in the related bankruptcy proceeding), and all fees, costs, expenses
and indemnity obligations of the Company hereunder, under any other Loan
Document or under any Hedging Agreement. The Obligations shall be joint and
several obligations of the Company.

         "Payment Office" shall mean the Lender's office located at 330 South
Service Road, Melville, NY 11747, or such other office as the Lender may
designate from time to time.

         "PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.

         "Permitted Liens" shall mean the Liens specified in clauses (a) through
(h) of Section 7.01.

         "Person" shall mean any natural person, corporation, limited liability
company, limited liability partnership, business trust, joint venture,
association, company, partnership or Governmental Authority.

         "Plan" shall mean any multi-employer or single-employer plan defined in
Section 4001 of ERISA, which covers, or at any time during the five calendar
years preceding the date of this Agreement covered, employees of the Company, or
any Subsidiary of the Company or an ERISA Affiliate on account of such
employees' employment by the Company, or any Subsidiary of the Company or an
ERISA Affiliate.

         "Prime Rate" shall mean, for any day, the higher of (a) the rate per
annum publicly announced by the Lender from time to time as its prime rate in
effect at its principal office, each change in the Prime Rate shall be effective
on the date such change is announced to become effective, or (b) the Federal
Funds Effective Rate plus one-half of one percent (0.5%).

         "Prime Rate Loans" shall mean Loans at such as they are being made
and/or maintained at a rate of interest based on the Prime Rate.

         "Receivable" shall mean any and all rights to payments for goods sold
or leased or for services rendered, including accounts, contract rights, general
tangibles and any such right evidenced by chattel paper, instruments or
documents.

         "Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.

         "Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan as to which the 30 day notice requirement has not
been waived by the PBGC.

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         "Reserve Adjusted Libor" shall mean with respect to an Interest Period
pertaining to a LIBOR Rate Loan, the rate per annum equal to the product
(rounded upwards to the next higher 1/16 of one percent) of (a) the annual rate
of the interest at which Dollar deposits of an amount comparable to the amount
of such Loan and for a period equal to the Interest Period applicable thereto
are offered to the London office of the Lender in immediately available funds in
the London interbank market for Eurodollars by leading banks in the eurodollar
market at approximately 11:00 A.M. (London time) on the second Business Day
prior to the commencement of such Interest Period, multiplied by (b) the
Eurocurrency Reserve Requirement

         "Revolving Credit Commitment" shall mean the Lender's obligation to
make Revolving Credit Loans to the Company in an aggregate amount not to exceed
$2,500,000, as such amount may be adjusted in accordance with the terms of this
Agreement.

         "Revolving Credit Commitment Period" shall mean the period from and
including the Closing Date to, but not including, the Revolving Credit
Commitment Termination Date or such earlier date as the Revolving Credit
Commitment shall terminate as provided herein.

         "Revolving Credit Commitment Termination Date" shall mean June 30,
2011.

         "Revolving Credit Loans" shall have the meaning set forth in Section
2.01(a).

         "Revolving Credit Note" shall have the meaning set forth in Section
2.02.

         "Security Agreement" shall mean the Security Agreement in the form
attached hereto as Exhibit C to be executed and delivered on the Closing Date by
the Company and the Guarantors and by any Person who may be required to execute
the same pursuant to Section 6.13, as amended, restated, supplemented or
otherwise modified from time to time.

         "Security Documents" shall mean the Security Agreement and each other
collateral security document delivered to the Lender hereunder.

         "Solvent" shall mean with respect to any Person as of the date of
determination thereof that (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise," as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required on its debts as such debts become absolute
and matured, (c) such Person will not have as of such date, an unreasonably
small amount of capital with which to conduct its business, and (d) such Person
will be able to pay its debts as they mature.

         "Standby LC Disbursement" shall mean a payment made by the Lender
pursuant to a Standby Letter of Credit.

         "Standby LC Exposure" shall mean, on the date of determination, the sum
of (a) the aggregate undrawn amount of all outstanding Standby Letters of Credit

                                       16
<PAGE>

at such time, and (b) the aggregate amount of all Standby LC Disbursements that
have not yet been reimbursed by or on behalf of the Company at such time.

         "Standby LC Fee" shall mean one and one-quarter (1.25%) percent per
annum.

         "Standby Letter of Credit" shall mean any letter of credit issued to
support an obligation of a Person and which may be drawn on only upon the
failure of such Person to perform such obligation or other contingency.

         "Subordinated Debt" or "Subordinated Indebtedness" shall mean all
Indebtedness which is subordinated in right of payment to the prior payment in
full of the Obligations on terms of subordination satisfactory to and approved
in writing by the Lender.

         "Subsidiaries" shall mean with respect to any Person any corporation,
association or other business entity more than 50% of the voting stock or other
ownership interests (including, without limitation, membership interests in a
limited liability company) of which is at the time owned or controlled, directly
or indirectly, by such Person or one or more of its Subsidiaries or a
combination thereof.

         "Taxes" shall have the meaning set forth in Section 3.09.

         "Term Loan" shall have the meaning set forth in Section 2.03

         "Term Loan Commitment" shall mean the Lender's obligation to make a
Term Loan to the Company in the principal amount of $2,500,000 on the Term Loan
Funding Date.

         "Term Loan Funding Date" the date on which the conditions to funding of
the Term Loan set forth in Section 5.02 hereof have been satisfied.

         "Term Loan Maturity Date" shall mean June 30, 2011.

         "Term Note" shall have the meaning set forth in Section 2.04.

         "3 For All Partners" means 3 For All Partners, LLC, a New York limited
liability company.

         "Type" shall mean as to any Loan its status as a Prime Rate Loan or a
LIBOR Rate Loan.

         "UCP" shall mean the International Chamber of Commerce Uniform Customs
and Practice for Documentary Credits, 1993 Revision, ICC Publication No. 500 or
any successor publication thereof.

         "Unfunded Capital Expenditures" shall mean, with respect to any period,
Capital Expenditures incurred during such period which are not financed with the
proceeds from any Indebtedness or a Capital Lease.

                                       17
<PAGE>

         "Unfunded Current Liability" of any Plan shall mean the amount, if any,
by which the present value of the accrued benefits under the Plan as of the
close of its most recent plan year exceeds the fair market value of the assets
allocable thereto, determined in accordance with Section 412 of the Code.

         "U.S. Concepts" means U.S. Concepts LLC, a Delaware limited liability
company.

         SECTION 1.02. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, pronouns stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and the neuter. Except as otherwise
herein specifically provided, each accounting term used herein shall have the
meaning given to it under Generally Accepted Accounting Principles. The term
"including" shall not be limited or exclusive, unless specifically indicated to
the contrary. The word "will" shall be construed to have the same meaning in
effect as the word "shall". The words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole, including the
exhibits and schedules hereto, all of which are by this reference incorporated
into this Agreement.

                                   ARTICLE II

                             REVOLVING CREDIT LOANS

         SECTION 2.01. Revolving Credit Loans.
                       ----------------------

         (a)      Subject to the terms and conditions, and relying upon the
representations and warranties, set forth herein, the Lender agrees to make
loans (individually a "Revolving Credit Loan" and, collectively, the "Revolving
Credit Loans") to the Company from time to time during the Revolving Credit
Commitment Period up to but not exceeding at any one time outstanding the amount
of its Revolving Credit Commitment; provided, however, that no Revolving Credit
Loan shall be made if, after giving effect to such Revolving Credit Loan, the
Aggregate Outstandings would exceed the then current Borrowing Base. During the
Revolving Credit Commitment Period, the Company may from time to time borrow,
repay and reborrow hereunder on or after the date hereof and prior to the
Revolving Credit Commitment Termination Date, subject to the terms, provisions
and limitations set forth herein. The Revolving Credit Loans may be (i) LIBOR
Rate Loans, (ii) Prime Rate Loans, or (iii) a combination thereof.

         (b)      The Company shall give the Lender irrevocable written notice
(or telephonic notice promptly confirmed in writing) not later than 11:00 a.m.
(New York, New York time), three (3) Business Days prior to the date of each
proposed LIBOR Rate Loan under this Section 2.01 or prior to 11:00 a.m. (New
York, New York time) on the date of each proposed Prime Rate Loan under this
Section 2.01. Such notice shall be irrevocable and shall specify (i) the amount
and Type of the proposed borrowing, (ii) the proposed use of the loan proceeds,
(iii) the initial Interest Period if a LIBOR Rate Loan, and (iv) the proposed
Borrowing Date. Except for borrowings which utilize the full remaining amount of

                                       18
<PAGE>

the Revolving Credit Commitment, each borrowing of a Prime Rate Loan shall be in
an amount not less than $500,000 or, if greater, whole multiples of $100,000 in
excess thereof. Each borrowing of LIBOR Rate Loan shall be an amount not less
than $500,000 or whole multiples of $100,000 in excess thereof. Funding of all
Loans shall be made in accordance with Section 3.11 of this Agreement.

         (c)      The Company shall have the right, upon not less than three
Business Days' prior written notice to the Lender to terminate the Revolving
Credit Commitment or from time to time to permanently reduce the amount of the
Revolving Credit Commitment; provided, however, that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments of the Revolving Credit Loans made on the effective date thereof,
the Aggregate Outstandings would exceed the lesser of (x) Revolving Credit
Commitment as then reduced or (y) the then current Borrowing Base; provided,
further, that any such termination or reduction requiring prepayment of any
LIBOR Rate Loan shall be made only on the last day of the Interest Period with
respect thereto or on the date of payment in full of all amounts owing pursuant
to Section 3.08 as a result of such termination or reduction. Any such reduction
shall be in the amount of $500,000 or whole multiples of $100,000 in excess
thereof, and shall reduce permanently the amount of the Revolving Credit
Commitment then in effect.

         (d)      The agreement of the Lender to make Revolving Credit Loans
pursuant to this Section 2.01 shall automatically terminate on the Revolving
Credit Commitment Termination Date. Upon such termination, the Company shall
immediately repay in full the principal amount of the Revolving Credit Loans
then outstanding and the aggregate amount of all Standby LC Disbursements that
have not yet been reimbursed by or on behalf of the Company, together with all
accrued interest thereon and all other amounts due and payable hereunder.

         SECTION 2.02. Revolving Credit Note. The Revolving Credit Loans made by
the Lender shall be evidenced by a promissory note of the Company (the
"Revolving Credit Note"), substantially in the form attached hereto as Exhibit
A, appropriately completed, duly executed and delivered on behalf of the Company
and payable to the order of the Lender in a principal amount equal to the
Revolving Credit Commitment. The Revolving Credit Note shall (a) be dated the
Closing Date, (b) be stated to mature on the Revolving Credit Commitment
Termination Date, and (c) bear interest from the date thereof until paid in full
on the unpaid principal amount thereof from time to time outstanding as provided
in Section 3.01. The Lender is authorized to record the date, Type and amount of
each Revolving Credit Loan and the date and amount of each payment or prepayment
of principal of each Revolving Credit Loan in the Lender's records or on the
grid schedule annexed to the Revolving Credit Note; provided, however, that the
failure of the Lender to set forth each such Revolving Credit Loan, payment and
other information shall not in any manner affect the obligation of the Company
to repay each Revolving Credit Loan made by the Lender in accordance with the
terms of its Revolving Credit Note and this Agreement. The Revolving Credit
Note, the grid schedule and the books and records of the Lender shall constitute
presumptive evidence of the information so recorded absent manifest error.

         SECTION 2.03. Term Loan. Subject to the terms and conditions hereof,
the Lender agrees to make a term loan (the "Term Loan") to the Company on the
Term Loan Funding Date in an amount equal to the Term Loan Commitment. The

                                       19
<PAGE>

Company shall give the Lender irrevocable written notice on or before the Term
Loan Funding Date specifying (a) the Type of such Term Loan, and (b) if the Term
Loan is a LIBOR Rate Loan, the initial Interest Period selected for the Term
Loan. The Term Loan may, at the election of the Company, be either (x) a LIBOR
Rate Loan or (y) a Prime Rate Loan, but not a combination thereof. The Term Loan
Commitment shall terminate upon funding of the Term Loan on the Term Loan
Funding Date.

         SECTION 2.04. Term Note. The Term Loan made by the Lender shall be
evidenced by a promissory note of the Company, substantially in the form of
Exhibit B (the "Term Note") payable to the order of the Lender and representing
the obligation of the Company to pay the unpaid principal amount of the Term
Loan with interest thereon as provided in Section 3.01. The Lender is authorized
to record the Type of the Term Loan and the date and amount of each payment or
prepayment of principal thereof in the Lender's records or on the grid schedule
annexed to the Term Note; provided, however, that the failure of the Lender to
set forth each payment and other information shall not in any manner affect the
obligation of the Company to repay the Term Loan in accordance with the terms of
the Term Note and this Agreement. The Term Note, the grid schedule and the books
and records of the Lender shall constitute conclusive evidence of the
information so recorded absent manifest error. The Term Note shall (a) be dated
the Term Loan Funding Date, (b) be stated to mature on the Term Loan Maturity
Date and (c) be payable as to principal in twelve (12) consecutive quarterly
installments commencing on September 30, 2008 and continuing on the last day of
each December, March, June and September thereafter with the first eleven (11)
quarterly installments to be in an amount equal to $168,750 and the last
installment on the Term Loan Maturity Date to be in an amount equal to the
remaining unpaid principal amount of the Term Loan then outstanding. The Term
Note shall bear interest from the date thereof until paid in full on the unpaid
principal amount thereof from time to time outstanding at the applicable
interest rate per annum determined as provided in, and payable as specified in,
Section 3.01.

         SECTION 2.05. Standby Letters of Credit.
                       -------------------------

         (a)      Generally. Subject to the terms and conditions set forth in
this Agreement, upon the written request of the Company in accordance herewith,
the Lender shall issue Standby Letters of Credit at any time during the
Revolving Credit Commitment Period. Notwithstanding the foregoing, at no time
shall the Standby LC Exposure exceed $1,000,000, and no Letter of Credit shall
be issued if, after giving effect to the same, the Aggregate Outstandings would
exceed the lesser of (x) the Revolving Credit Commitment in effect at such time
or (y) the then current Borrowing Base. Each request for issuance of a Letter of
Credit shall be in writing and shall be received by the Lender by no later than
12:00 noon, New York, New York time, on the day which is at least two (2)
Business Days prior to the proposed date of issuance or creation. Such issuance
shall occur by no later than 5:00 p.m. on the proposed date of issuance
(assuming proper prior notice as aforesaid). Subject to the terms and conditions
contained herein, the expiry date and the amount and beneficiary of the Standby
Letters of Credit will be as designated by the Company; provided that the Lender
reserves the right to limit the expiry date if in its reasonable judgment the
requested expiry date is not reasonable and customary for the transaction of the
type for which the Letter of Credit is being requested. Each Letter of Credit

                                       20
<PAGE>

issued by the Lender hereunder shall identify: (i) the dates of issuance and
expiry of such Letter of Credit, (ii) the amount of such Letter of Credit (which
shall be a sum certain), (iii) the beneficiary of such Letter of Credit, and
(iv) the drafts and other documents necessary to be presented to the Lender upon
drawing thereunder. The Company agrees to execute and deliver to the Lender such
further documents and instruments in connection with any Letter of Credit issued
hereunder (including without limitation, applications therefor) as the Lender in
accordance with its customary practices may reasonably request. The Lender will
not be required to issue a Standby Letter of Credit hereunder with an expiration
date more than three hundred sixty-five (365) days from the date of issuance of
such Letter of Credit and in no event shall any Letter of Credit expire (or by
its terms be required to be paid or extended, renewed, financed or refinanced to
a date) more than 180 days after the Revolving Credit Commitment Termination
Date. With respect to all Standby Letters of Credit that shall not have expired
or presentment for honor shall not have occurred on or prior to the Revolving
Credit Commitment Termination Date, the Company shall provide the Lender on the
Revolving Credit Commitment Termination Date with Cash Collateral in an amount
equal to the aggregate undrawn amount of such Standby Letters of Credit. Such
Cash Collateral shall be used to reimburse the Lender for drawings under Standby
Letters of Credit for which the Lender has not been reimbursed and, to the
extent not so used, shall be held for the satisfaction of the reimbursement
obligations of the Company at such time or, if the maturity of the Loans has
been accelerated, be applied to satisfy other Obligations, with any amount
remaining after such satisfactions to be returned to the Company or paid to such
other party as may legally be entitled to the same.

         (b)      Drawings Under Standby Letters of Credit. The Company hereby
absolutely and unconditionally promises to pay the Lender not later than 12:00
noon (New York, New York time) the amount of each drawing under a Letter of
Credit if the Company receives notice of such drawing prior to 10:00 a.m., New
York, New York time, on the date of such drawing, or if such notice has not been
received by the Company prior to such time on such date, then not later than
12:00 noon (New York, New York time), on the Business Day immediately following
the day that the Company receives such notice; provided, however, if any drawing
was in an amount not less than $500,000, the Company may, subject to the
conditions to borrowing set forth herein, request in accordance with Section
2.01 hereof that such payment be financed with a Revolving Credit Loan which is
a Prime Rate Loan in an equivalent amount, and, to the extent so financed, the
Company's obligation to make such payment shall be discharged and replaced by
such a Prime Rate Loan. Such request shall be made by the Company on the date of
receipt of notice from the Lender of a drawing under a Standby Letter of Credit.
Each drawing under a Standby Letter of Credit which is not paid on the date such
drawing is made, shall accrue interest for each day from and including the date
of such drawing, to but excluding the date that the Company reimburses the
Lender in full for such drawing, at the rate per annum then applicable to
Revolving Credit Loans which are Prime Rate Loans; provided, however, that if
the Company fails to reimburse such drawing when due pursuant to this paragraph
(b), then the Company shall pay to the Lender interest on the amount of such
drawing at the rate per annum set forth in Section 3.01(c) hereof.

                                       21
<PAGE>

         (c)      Standby Letter of Credit Obligations Absolute.

                  (i)      The obligation of the Company to reimburse the Lender
as provided hereunder in respect of drawings under Standby Letters of Credit
shall rank pari passu with the obligation of the Company to repay the Revolving
Credit Loans hereunder, and shall be absolute and unconditional under any and
all circumstances subject to subsection (ii) below. Without limiting the
generality of the foregoing, the obligation of the Company to reimburse the
Lender in respect of drawings under Standby Letters of Credit shall not be
subject to any defense based on the non-application or misapplication by the
beneficiary of the proceeds of any such drawing or the legality, validity,
regularity or enforceability of the Standby Letters of Credit or any related
document, even though such document shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Company, the
beneficiary of any Standby Letter of Credit, or any financial institution or
other party to which any Standby Letter of Credit may be transferred. The Lender
may accept or pay any draft presented to it under any Standby Letter of Credit
regardless of when drawn or made and whether or not negotiated, if such draft,
accompanying certificate or documents and any transmittal advice are presented
or negotiated on or before the expiry date of such Standby Letter of Credit or
any renewal or extension thereof then in effect, and is in substantial
compliance with the terms and conditions of such Standby Letter of Credit.
Furthermore, neither the Lender nor any of its correspondents shall be
responsible, as to any document presented under a Standby Letter of Credit which
appears to be regular on its face, and appears on its face to be in substantial
compliance with the terms of the Standby Letter of Credit, for the validity or
sufficiency of any signature or endorsement, for delay in giving any notice or
failure of any instrument to bear adequate reference to the Standby Letter of
Credit, or for failure of any Person to note the amount of any draft on the
reverse of the Standby Letter of Credit. The Lender shall have the right, in its
sole discretion, to decline to accept any documents and to decline making
payment under any Standby Letter of Credit if the documents presented are not in
strict compliance with the terms of such Standby Letter of Credit.

                  (ii)     Any action, inaction or omission on the part of the
Lender or any of its correspondents under or in connection with any Standby
Letter of Credit or the related instruments, documents or property, if in good
faith and in conformity with such laws, regulations or customs as are
applicable, shall be binding upon the Company and shall not place the Lender or
any of its correspondents under any liability to the Company in the absence of
(x) gross negligence or willful misconduct by the Lender or its correspondents
or (y) the failure by the Lender to pay under a Standby Letter of Credit after
presentation of a draft and documents strictly complying with such Standby
Letter of Credit unless the Lender is prohibited from making such payment
pursuant to a court order. The Lender's rights, powers, privileges and
immunities specified in or arising under this Agreement are in addition to any
heretofore or at any time hereafter otherwise created or arising, whether by
statute or rule of law or contract. All Standby Letters of Credit issued
hereunder will, except to the extent otherwise expressly provided hereunder, be
governed by the UCP to the extent applicable and not inconsistent with the laws
of the State of New York.

                                       22
<PAGE>

                                  ARTICLE III

                PROVISIONS RELATING TO ALL EXTENSIONS OF CREDIT;

                                FEES AND PAYMENTS

         SECTION 3.01. Interest Rate; Continuation and Conversion of Loans.
                       ---------------------------------------------------

         (a)      Each Prime Rate Loan shall bear interest for the period from
the date thereof on the unpaid principal amount thereof at a fluctuating rate
per annum equal to the Prime Rate.

         (b)      Each LIBOR Rate Loan shall bear interest for the Interest
Period applicable thereto on the unpaid principal amount thereof at a rate per
annum equal to the Reserve Adjusted Libor determined for each Interest Period
thereof in accordance with the terms hereof plus two and one-quarter percent
(2.25%).

         (c)      Upon the occurrence and during the continuance of an Event of
Default the outstanding principal amount of the Loans (excluding any defaulted
payment of principal accruing interest in accordance with clause (e) below),
shall, at the option of the Lender, bear interest payable on demand at a rate of
interest 2% per annum in excess of the interest rate otherwise then in effect
or, if no rate is in effect, 2% per annum in excess of the Prime Rate.

         (d)      If a Default or Event of Default shall occur pursuant to
Section 8.01(a) hereof and such Default or Event of Default shall continue
unremedied for ten (10) consecutive days, the Company shall pay to the Lender a
late fee in an amount equal to five percent (5%) of the amount of the payment
due the Lender, whether consisting of principal, interest or otherwise.

         (e)      The Company may elect from time to time to convert outstanding
Loans from LIBOR Rate Loans to Prime Rate Loans by giving the Lender at least
three Business Day's prior irrevocable written notice of such election, provided
that any such conversion of LIBOR Rate Loans shall only be made on the last day
of an Interest Period with respect thereto or upon the date of payment in full
of any amounts owing pursuant to Section 3.08 as a result of such conversion.
The Company may elect from time to time to convert outstanding Loans from Prime
Rate Loans to a LIBOR Rate Loan by giving the Lender irrevocable written notice
of such election not later than 11:00 a.m. (New York, New York time), three (3)
Business Days prior to the date of the proposed conversion., with respect to a
LIBOR Rate Loan. All or any part of outstanding Prime Rate Loans may be
converted as provided herein, provided that each conversion shall be in the
principal amount of $500,000 or whole multiples of $100,000 in excess thereof,
and further provided that no Default or Event of Default shall have occurred and
be continuing. Any conversion to or from any type of LIBOR Rate Loans hereunder
shall be in such amounts and be made pursuant to such elections so that, after
giving effect thereto, the aggregate principal amount of all LIBOR Rate Loans
having the same Interest Period shall not be less than $500,000.

         (f)      Any LIBOR Rate Loan in a minimum principal amount of $500,000
may be continued as such upon the expiration of an Interest Period with respect

                                       23
<PAGE>

thereto by compliance by the Company with the notice provisions contained in the
definition of Interest Period; provided, that no LIBOR Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Prime Rate Loan on the
last day of the Interest Period in effect when the Lender is notified, or
otherwise has actual knowledge, of such Default or Event of Default.

         (g)      If the Company shall fail to select the duration of any
Interest Period for any LIBOR Rate Loan in accordance with the definition of
"Interest Period" set forth in Section 1.01, the Company shall be deemed to have
selected an Interest Period of one month.

         (h)      No Loan may be funded as a LIBOR Rate Loan, or converted to or
continued as a LIBOR Rate Loan, with an Interest Period that extends beyond the
Revolving Credit Commitment Termination Date or Term Loan Maturity Date, as
applicable.

                  (i)      Anything in this Agreement or in any Note to the
contrary notwithstanding, the obligation of the Company to make payments of
interest shall be subject to the limitation that payments of interest shall not
be required to be paid to the Lender to the extent that the charging or receipt
thereof would not be permissible under the law or laws applicable to the Lender
limiting the rates of interest that may be charged or collected by the Lender.
In each such event payments of interest required to be paid to the Lender shall
be calculated at the highest rate permitted by applicable law until such time as
the rates of interest required hereunder may lawfully be charged and collected
by the Lender. If the provisions of this Agreement or any Note would at any time
otherwise require payment by the Company to the Lender of any amount of interest
in excess of the maximum amount then permitted by applicable law, the interest
payments to the Lender shall be reduced to the extent necessary so that the
Lender shall not receive interest in excess of such maximum amount.

                  (ii)     Interest on each Loan shall be payable in arrears on
each Interest Payment Date and shall be calculated on the basis of a year of 360
days and shall be payable for the actual days elapsed. Any rate of interest on
the Loans or other Obligations which is computed on the basis of the Prime Rate
shall change when and as the Prime Rate changes in accordance with the
definition thereof. Each determination by the Lender of an interest rate or fee
hereunder shall, absent manifest error, be conclusive and binding for all
purposes.

         SECTION 3.02. Use of Proceeds. The proceeds of the Revolving Credit
Loans shall be used solely for the working capital needs of the Company in the
ordinary course of its business. The proceeds of the Term Loan shall be used
solely to fund a portion of the purchase price for the Acquisition and other
costs incurred by the Company in connection with the Acquisition.

         SECTION 3.03. Prepayments.
                       -----------

         (a)      The Company may at any time and from time to time prepay then
outstanding Loans, in whole or in part, without premium or penalty, except as
provided in Section 3.08 with respect to any prepayment or payment of a LIBOR
Rate Loan on a date other than the last day of the Interest Period with respect

                                       24
<PAGE>

thereto, upon written notice to the Lender (or telephonic notice promptly
confirmed in writing) not later than 1100 a.m. (New York, New York time), three
(3) Business Days before the date of prepayment with respect to prepayments of
LIBOR Rate Loans, or 11:00 a.m. (New York, New York time) one (1) Business Day
before the date of prepayment with respect to Prime Rate Loans. Each notice
shall be irrevocable and shall specify the date and amount of prepayment and
whether such prepayment is of the Term Loan or the Revolving Credit Loan and
LIBOR Rate Loans or Prime Rate Loans, or a combination thereof, and if a
combination thereof, the amount of prepayment allocable to each. If such notice
is given, the Company shall make such prepayment, and the amount specified in
such notice shall be due and payable, on the date specified therein. Each
partial prepayment of a LIBOR Rate Loan pursuant to this Section 3.03 shall be
in a principal amount of $500,000 or whole multiples of $100,000 in excess
thereof. Each partial prepayment of a Prime Rate Loan pursuant to this Section
3.03 shall be in a principal amount of $500,000 or whole multiples of $100,000
in excess thereof.

         (b)      To the extent that the Aggregate Outstandings exceed the
lesser of (i) the Revolving Credit Commitment in effect at such time and (ii)
the Borrowing Base as in effect at any time, the Company shall immediately
prepay the Revolving Credit Loans to the extent necessary to cause compliance
with the foregoing. All prepayments under this clause (b) shall be applied,
first, to Prime Rate Loans outstanding and second, to LIBOR Rate Loans
outstanding. To the extent that such prepayments are insufficient to cause such
compliance, the Company shall pledge to the Lender, Cash Collateral in an amount
equal to the amount of such shortfall, which Cash Collateral shall secure the
reimbursement obligations of the Company to the Lender with respect to drawings
under Standby Letters of Credit.

         (c)      Each prepayment of principal of a Loan pursuant to this
Section 3.03 shall be accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment. Unless otherwise directed by the
Company pursuant to Section 3.03(a), partial prepayments of any Loan shall be
applied first to outstanding Prime Rate Loans and then to LIBOR Rate Loans in
such order as the Lender shall determine in its sole and absolute discretion.
Prepayments of the Term Loan shall be applied to the remaining installments of
principal thereof in inverse order of maturity. Amounts paid with respect to the
Term Loan may not be re-borrowed.

         SECTION 3.04. Fees.
                       ----

         (a)      The Company agrees to pay to the Lender an annual facility fee
of $7,500 per year, payable in arrears in quarterly installments of $1,875 each
on the last Business Day of March, June, September, and December of each year
commencing September 30, 2008 and on the Revolving Credit Commitment Termination
Date or the date the Revolving Credit Commitment is permanently reduced in
whole.

         (b)      The Company shall pay to the Lender a commission with respect
to the Lender's participation in Standby Letters of Credit equal to the Standby
LC Fee multiplied by the average daily amount of the Standby LC Exposure during
the period from and including the Closing Date to but excluding the later of (a)
the Revolving Credit Commitment Termination Date and (b) the date on which the

                                       25
<PAGE>

Lender ceases to have any Standby LC Exposure. Such commissions with respect to
Standby Letters of Credit shall be payable in arrears on the last Business Day
of March, June, September and December of each year, commencing September 30,
2008; provided that all such fees shall be payable on the Revolving Credit
Commitment Termination Date or the date the Revolving Credit Commitment is
permanently reduced in whole and any such fees accruing after the Revolving
Credit Commitment Termination Date or the date the Revolving Credit Commitment
is permanently reduced in whole shall be payable on demand. All commissions with
respect to Standby Letters of Credit shall be computed on the basis of a year of
three hundred sixty (360) days and shall be payable for the actual number of
days elapsed.

         (c)      The Company shall pay to the Lender upon issuance of any
Standby Letter of Credit hereunder, a letter of credit fronting fee equal to
0.25% of the face amount of each Standby Letter of Credit issued hereunder,
together with the customary fees and expenses charged by the Lender in its sole
discretion with respect to the issuance, payment, acceptance, processing and
administration of Letters of Credit (including, without limitation, amendments
to Letters of Credit).

         (d)      The Company agrees to pay to the Lender an upfront fee of
$12,500, $6,250 of which the Lender acknowledges receipt prior to the date
hereof and the remaining balance of which shall be paid in full on the Closing
Date.

         SECTION 3.05. Inability to Determine Interest Rate. In the event that
the Lender shall have determined (which determination shall be conclusive and
binding upon the Company) that, by reason of circumstances affecting the London
interbank market, adequate and reasonable means do not exist for ascertaining
the Reserve Adjusted Libor applicable pursuant to Section 3.01(b) for any
requested Interest Period with respect to (a) the making of a LIBOR Rate Loan,
(b) a LIBOR Rate Loan that will result from the requested conversion of a Prime
Rate Loan into a LIBOR Rate Loan, or (c) the continuation of an LIBOR Rate Loan
beyond the expiration of then current Interest Period with respect thereto, the
Lender shall forthwith give notice by telephone of such determination, promptly
confirmed in writing, to the Company of such determination. Until the Lender
notifies the Company that the circumstances giving rise to the suspension
described herein no longer exist, the Company shall not have the right to
request or continue a LIBOR Rate Loan or to convert a Prime Rate Loan or to a
LIBOR Rate Loan.

         SECTION 3.06. Illegality. Notwithstanding any other provisions herein,
if any introduction of or change in any law, regulation, treaty or directive or
in the interpretation or application thereof shall make it unlawful for the
Lender to make or maintain LIBOR Rate Loans as contemplated by this Agreement,
the Lender shall forthwith give notice by telephone of such circumstances,
promptly confirmed in writing, and (a) the commitment of the Lender to make and
to allow conversion to or continuations of LIBOR Rate Loans shall forthwith be
cancelled for the duration of such illegality and (b) the Loans then outstanding
as LIBOR Rate Loans, if any, shall be converted automatically to Prime Rate
Loans on the next succeeding last day of each Interest Period applicable to such
LIBOR Rate Loans or within such earlier period as may be required by law. The
Company shall pay to the Lender, upon demand, any additional amounts required to
be paid pursuant to Section 3.08 hereof.

                                       26
<PAGE>

         SECTION 3.07. Increased Costs.
                       ---------------

         (a)      In the event that any introduction of or change in, on or
after the date hereof, any applicable law, regulation, treaty, order, directive
or in the interpretation or application thereof (including, without limitation,
any request, guideline or policy, whether or not having the force of law, of or
from any central bank or other governmental authority, agency or instrumentality
and including, without limitation, Regulation D), by any authority charged with
the administration or interpretation thereof shall occur, which:

                  (i)      shall subject the Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Loan, or change the
basis of taxation of payments to the Lender of principal, interest, fees or any
other amount payable hereunder (other than any tax that is measured with respect
to the overall net income of the Lender or lending office of the Lender and that
is imposed by the United States of America, or any political subdivision or
taxing authority thereof or therein, or by any jurisdiction in which the
Lender's lending office is located, or by any jurisdiction in which the Lender
is organized, has its principal office or is managed and controlled); or

                  (ii)     shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement (whether or not having
the force of law) against assets held by, or deposits or other liabilities in or
for the account of, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of the Lender; or

                  (iii)    shall impose on the Lender any other condition, or
change therein; and the result of any of the foregoing is to increase the cost
to the Lender of making, renewing or maintaining or participating in advances or
extensions of credit hereunder or to reduce any amount receivable hereunder, in
each case by an amount which the Lender deems material, then, in any such case,
the Company shall pay the Lender, upon demand, such additional amount or amounts
as the Lender shall have determined will compensate the Lender for such
increased costs or reduction.

         (b)      If the Lender shall have determined that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender (or any
lending office of the Lender) or the Lender's holding company, with any request
or directive regarding capital adequacy (whether or not having the force of the
law) of any such authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on the Lender's capital or on the
capital of the Lender's holding company as a consequence of its obligations
hereunder to a level below that which the Lender could have achieved but for
such adoption, change or compliance (taking into consideration the Lender's
policies and the policies of the Lender's holding company with respect to
capital adequacy) by an amount deemed by the Lender to be material, then from
time to time, the Company shall pay to the Lender, the additional amount or
amounts as the Lender shall have determined will compensate the Lender or the
Lender's holding company for such reduction. The Lender's determination of such
amounts shall be conclusive and binding on the Company absent manifest error.

                                       27
<PAGE>

         (c)      A certificate of the Lender setting forth the amount or
amounts payable pursuant to Sections 3.07(a) and 3.07(b) above shall be
conclusive absent manifest error. The Company shall pay the Lender the amount
shown as due on any such certificate within ten (10) days after receipt thereof.

         (d)      In the event the Lender shall be entitled to compensation
pursuant to Section 3.07(a) or Section 3.07(b), it shall promptly notify the
Company of the event by reason of which it has become so entitled; provided,
however, no failure on the part of the Lender to demand compensation under
clause (a) or clause (b) above on one occasion shall constitute a waiver of its
right to demand compensation on any other occasion. The Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 3.07(a) or
Section 3.07(b), it will use reasonable efforts to designate another lending
office for any Loans affected by such event with the object of avoiding or
reducing the consequences of such event; provided, that such designation is made
on terms that, in the sole judgment of the Lender, cause the Lender to suffer no
additional cost or economic, legal or regulatory disadvantage.

         SECTION 3.08. Indemnity. The Company agrees to indemnify the Lender and
to hold the Lender harmless from any loss, cost or expense which the Lender may
sustain or incur, including, without limitation, interest or fees payable by the
Lender to lenders of funds obtained by it in order to maintain LIBOR Rate Loans
hereunder, as a consequence of (a) default by the Company in payment of the
principal amount of or interest on any LIBOR Rate Loan, (b) default by the
Company to accept or make a borrowing of a LIBOR Rate Loan or a conversion into
or continuation of a LIBOR Rate Loan after the Company has requested such
borrowing, conversion or continuation, (c) default by the Company in making any
prepayment of any LIBOR Rate Loan after the Company gives a notice in accordance
with Section 3.03 of this Agreement and/or (d) the making of any payment or
prepayment (whether mandatory or optional) of a LIBOR Rate Loan or the making of
any conversion of a LIBOR Rate Loan to a Prime Rate Loan and, with respect to
LIBOR Rate Loan only, such payment, prepayment or conversion is on a day which
is not the last day of the applicable Interest Period with respect thereto. A
certificate of the Lender setting forth such amounts shall be conclusive absent
manifest error. The Company shall pay the Lender the amount shown as due on any
certificate within ten (10) days after receipt thereof.

         SECTION 3.09. Taxes. All payments made by the Company under this
Agreement shall be made free and clear of, and without reduction for or on
account of, any present or future taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding income and
franchise taxes imposed on the Lender by (a) the United States of America or any
political subdivision or taxing authority thereof or therein, (b) the
jurisdiction under the laws of which the Lender is organized or in which it has
its principal office or is managed and controlled or any political subdivision
or taxing authority thereof or therein, or (c) any jurisdiction in which the
Lender's lending office is located or any political subdivision or taxing
authority thereof or therein (such non-excluded taxes being called "Taxes"). If
any Taxes are required to be withheld from any amounts payable to the Lender

                                       28
<PAGE>

hereunder, or under the Note, the amount so payable to the Lender shall be
increased to the extent necessary to yield to the Lender (after payment of all
Taxes and free and clear of all liability in respect of such Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Note. Whenever any Taxes are payable by the
Company, as promptly as possible thereafter, the Company shall send to the
Lender, as the case may be, a certified copy of an original official receipt
showing payment thereof. If the Company fails to pay Taxes when due to the
appropriate taxing authority or fails to remit to the Lender the required
receipts or other required documentary evidence, the Company shall indemnify the
Lender for any incremental taxes, interest or penalties that may become payable
by the Lender as a result of any such failure together with any expenses payable
by the Lender in connection therewith.

         SECTION 3.10. Payments. All payments (including prepayments) to be made
by the Company on account of principal, interest, fees and reimbursement
obligations shall be made without set-off or counterclaim and shall be made to
the Lender, at the Payment Office of the Lender in Dollars in immediately
available funds. The Lender may, in its sole discretion, directly charge
principal and interest payments due in respect of the Loans and reimbursement
obligations with respect to Standby Letters of Credit to the Company's accounts
at the Payment Office or other office of the Lender. Except as otherwise
provided in the definition of "Interest Period", if any payment hereunder
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at then applicable rate during
such extension.

         SECTION 3.11. Disbursement of Loans. The Lender shall make each Loan to
be made by it hereunder available to the Company at the Payment Office by
crediting the account of the Company with such amount and in like funds;
provided, however, that if the proceeds of any Loan or any portion thereof are
to be used to prepay outstanding Loans, then the Lender shall apply such
proceeds for such purpose to extent necessary and credit the balance, if any, to
the Company's account.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         In order to induce the Lender to enter into this Agreement and to
extend the credit herein provided for, the Company represents and warrants to
the Lender that both prior to and after giving effect to the Acquisition:

         SECTION 4.01. Organization, Powers. The Company and each Guarantor (a)
is a corporation or limited liability company, duly organized, validly existing
and in good standing under the laws of the state of its incorporation or
formation, as the case may be, (b) has the power and authority to own its
properties and to carry on its business as now being conducted, (c) is duly
qualified to do business in every jurisdiction wherein the conduct of its
business or the ownership of its properties are such as to require such
qualification except those jurisdictions in which the failure to be so qualified

                                       29
<PAGE>

could not reasonably be expected to have a Material Adverse Effect, and (d) has
the power to execute, deliver and perform each of the Loan Documents to which it
is a party, including, without limitation, with respect to the Company, the
power to obtain extensions of credit hereunder and to execute and deliver the
Notes.

         SECTION 4.02. Authorization of Borrowing, Enforceable Obligations. The
execution, delivery and performance by the Company of this Agreement, and the
other Loan Documents to which it is a party, the borrowings and the other
extensions of credit to the Company hereunder, and the execution, delivery and
performance by each Guarantor of the Loan Documents to which such Guarantor is a
party, (a) have been duly authorized by all requisite corporate, limited
partnership or limited liability action, (b) will not violate or require any
consent (other than consents as have been made or obtained and which are in full
force and effect) under (i) any provision of law applicable to the Company or
any Guarantor or any rule or regulation of any Governmental Authority, (ii) the
Certificate of Incorporation or By-laws of the Company, (iii) the Certificate of
Formation, limited liability company agreement, or other organizational
documents, as applicable, of any Subsidiary of the Company, (iv) any order of
any court or other Governmental Authority binding on the Company or any
Subsidiary of the Company, or (v) any indenture, agreement or other instrument
to which the Company or any Subsidiary of the Company is a party, or by which
the Company or any Subsidiary of the Company or any of its property is bound,
and (c) will not be in conflict with, result in a breach of or constitute (with
due notice and/or lapse of time) a default under, any such indenture, agreement
or other instrument, or result in the creation or imposition of any Lien, of any
nature whatsoever upon any of the property or assets of the Company or any
Guarantor other than as contemplated by this Agreement or the other Loan
Documents. This Agreement and each other Loan Document to which the Company or
any Guarantor is a party constitutes a legal, valid and binding obligation of
such Company and each Guarantor, as the case may be, enforceable against such
Company and each Guarantor, as the case may be, in accordance with its terms.

         SECTION 4.03. Financial Condition.
                       -------------------

         (a)      The Company has heretofore furnished to the Lender the audited
consolidated balance sheet of the Company and its Subsidiaries and the related
consolidated statement of income, retained earnings and cash flow of the Company
and its Subsidiaries, audited by Lazar, Levine & Felix LLP, independent
certified public accountants, for the fiscal year ended March 31, 2008. Such
financial statements were prepared in conformity with Generally Accepted
Accounting Principles, applied on a consistent basis, and fairly present the
consolidated financial condition and consolidated results of operations of the
Company and its Subsidiaries as of the date of such financial statements and for
the periods to which they relate and since March 31, 2008, no Material Adverse
Effect has occurred. The Company shall deliver to the Lender a certificate of
the Chief Financial Officer to that effect on the Closing Date. Other than
obligations and liabilities arising in the ordinary course of business since
March 31, 2008, there are no material obligations or liabilities contingent or
otherwise, of the Company or any of its Subsidiaries which are not reflected or
disclosed on such audited statements other than obligations of the Company and
any of its Subsidiaries incurred in the ordinary course of business.

                                       30
<PAGE>

         (b)      The Company and each of the Guarantors is Solvent and
immediately after giving effect to each Loan and each other extension of credit
contemplated by this Agreement and the execution of each Loan Document, will be
Solvent.

         SECTION 4.04. Taxes. Except as set forth on Schedule 4.04, the Company
and each of its Subsidiaries has filed or caused to be filed all federal, state
and local tax returns which are required to be filed, and has paid or has caused
to be paid all taxes as shown on said returns or on any assessment received by
them, to the extent that such taxes have become due, except taxes which are
being contested in good faith and which are reserved against in accordance with
Generally Accepted Accounting Principles.

         SECTION 4.05. Title to Properties. The Company and each of its
Subsidiaries has good title to their respective properties and assets reflected
on the financial statements referred to in Section 4.03(a) hereof, except for
such properties and assets as have been disposed of since the date of such
financial statements as no longer used or useful in the conduct of their
respective businesses or as have been disposed of in the ordinary course of
business, and all such properties and assets are free and clear of all Liens
other than Permitted Liens.

         SECTION 4.06. Litigation. (a) Except as set forth on Schedule VI,
there are no actions, suits or proceedings (whether or not purportedly on behalf
of the Company or any of its Subsidiaries) pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
at law or in equity or before or by any Governmental Authority, which involve
any of the transactions contemplated herein or which, if adversely determined
against the Company or such Subsidiary, could reasonably be expected to result
in a Material Adverse Effect; and (b) neither the Company nor any of its
Subsidiaries is in default with respect to any judgment, writ, injunction,
decree, rule or regulation of any Governmental Authority which could reasonably
be expected to result in a Material Adverse Effect.

         SECTION 4.07. Agreements. Neither the Company nor any of its
Subsidiaries is a party to any agreement or instrument or subject to any charter
or other corporate or company restriction or any judgment, order, writ,
injunction, decree or regulation which could reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party, which default could reasonably be expected to have a Material Adverse
Effect

         SECTION 4.08. Compliance with ERISA. Each Plan is in compliance in all
material respects with ERISA; no Plan is insolvent or in reorganization, no Plan
or Plans have an Unfunded Current Liability, and no Plan has an accumulated or
waived funding deficiency; neither the Company, its Subsidiaries nor any ERISA
Affiliate has incurred any liability to or on account of a Plan pursuant to
Section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA or expects to incur any
liability under any of the foregoing sections on account of the prior
termination of participation in or contributions to any such Plan; no
proceedings have been instituted to terminate any Plan; no condition exists
which could reasonably be expected to present a risk to the Company, or any
ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to
the foregoing provisions of ERISA and the Code; no lien imposed under the Code
or ERISA on the assets of the Company, or any ERISA Affiliates exists or is

                                       31
<PAGE>

likely to arise on account of any Plan and the Company, as applicable, may
terminate contributions to any other employee benefit plans maintained by it
without incurring any material liability to any Person interested therein.

         SECTION 4.09. Federal Reserve Regulations; Use of Proceeds. Neither
the Company nor any of its Subsidiaries is engaged principally in, nor has as
one of its important activities, the business of extending credit for the
purpose of purchasing or carrying any "margin stock" (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System of the
United States, as amended from time to time).

         (a)      No part of the proceeds of any Loan and no other extension of
credit hereunder will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, (i) to purchase or to carry margin
stock or to extend credit to others for the purpose of purchasing or carrying
margin stock, or to refund indebtedness originally incurred for such purposes,
or (ii) for any purpose which violates or is inconsistent with the provisions of
Regulation T,U, or X of the Board of Governors of the Federal Reserve System.

         (b)      The proceeds of each Loan, and each other extension of credit
hereunder shall be used solely for the purposes permitted under Section 3.02.

         SECTION 4.10. Approvals. No registration with or consent or approval
of, or other action by, any Governmental Authority or any other Person is
required in connection with the execution, delivery and performance of this
Agreement by the Company or any of its Subsidiaries, or with the execution and
delivery of other Loan Documents to which it is a party or, with respect to the
Company, the borrowings and each other extension of credit hereunder.

         SECTION 4.11. Subsidiaries. Attached hereto as Schedule I is a correct
and complete list of each of the Company's Subsidiaries as of the Closing Date
showing as to each Subsidiary, its name, the jurisdiction of its incorporation
or formation, its shareholders or other owners of an interest in each Subsidiary
and the number of outstanding shares or other ownership interests owned by each
shareholder or other owner of an interest.

         SECTION 4.12. Hazardous Materials. The Company and each of its
Subsidiaries is in compliance in all material respects with all applicable
Environmental Laws and neither the Company nor any of its Subsidiaries has used
Hazardous Materials on, from, or affecting any property now owned or occupied or
previously owned or occupied by any of the Company or any of its Affiliates in
any manner which violates any applicable Environmental Law. To the knowledge of
the Company, no prior owner of any such property, or any tenant, subtenant,
prior tenant or prior subtenant has used Hazardous Materials on, from, or
affecting such property in any manner which violates in any material respect any
applicable Environmental Law or has not remediated any such property in
accordance with applicable law or regulation.

         SECTION 4.13. Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.

                                       32
<PAGE>

         SECTION 4.14. Security Documents. Each Security Document executed by
the Company and the Guarantors shall, pursuant to its terms, constitute a valid
and continuing lien on and security interest in the collateral referred to in
such Security Documents in favor of the Lender, which shall be prior to all
other Liens, claims and rights of all other Persons, other than Permitted Liens,
in such collateral and shall be enforceable as such against all other Persons.

         SECTION 4.15. No Default. No Default or Event of Default has occurred
and is continuing.

         SECTION 4.16. Material Contracts. All Material Contracts in effect on
the date hereof are disclosed on Schedule V hereto. Each Material Contract is in
full force and effect and is binding upon and enforceable against the Company
and each of its Subsidiaries, in each case, to the extent they are a party
thereto, and, to the Company's knowledge, all other parties thereto in
accordance with its terms, and there exists no default, in any material respect,
under any Material Contract by the Company or any Subsidiary of the Company or
by any other party thereto which (a) has not been fully cured or waived, or (b)
with respect to the Company or any Subsidiary of the Company, could result in
the incurrence or acceleration of any obligations or liabilities under, or
termination of, such Material Contract.

         SECTION 4.17. Permits and Licenses. The Company and each of its
Subsidiaries has all permits, licenses, certifications, authorizations and
approvals required for it lawfully to own and operate their respective
businesses except those the failure of which to have could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.

         SECTION 4.18. Compliance with Law. The Company and each of its
Subsidiaries are in compliance with all laws, rules, regulations, orders and
decrees which are applicable to the Company or any of its Subsidiaries, or to
any of their respective properties, which the failure to comply with could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

         SECTION 4.19. Accounts Receivable. Each Receivable shown on each
Borrowing Base Certificate is based upon an actual bona fide sale and shipment
of delivery of goods or rendition of services to Customers made by the Company
and each Guarantor in the ordinary course of their business; the goods and
inventory sold and the Receivables thereby created and created by services being
rendered are the exclusive property of the Company and the Guarantors, as
applicable, and are not and shall not be subject to any Lien (other than
Permitted Liens); and except as the Company may otherwise advise the Lender, the
Customers of the Company and the Guarantors have accepted such goods or services
and owe and are obligated to pay the full amount stated in the invoices
according to their terms, without dispute, offset, defense or counterclaim.
Notwithstanding the foregoing to the contrary, each Borrowing Base Certificate
may include Receivables arising from invoices issued no more than thirty (30)
days in advance of the services to be performed under such invoice.

         SECTION 4.20. Disclosure. Neither this Agreement, any other Loan
Document, nor any other document, certificate or written statement furnished to
the Lender by or on behalf of the Company or any of its Subsidiaries for use in
connection with the transactions contemplated by this Agreement contains any

                                       33
<PAGE>

untrue statement of material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances in which they were made.

                                   ARTICLE V

                              CONDITIONS TO LENDING

         SECTION 5.01. Conditions to Initial Extension of Credit. The obligation
of the Lender to make its initial Revolving Credit Loan hereunder, and the
obligation of the Lender to issue the initial Standby Letter of Credit, are
subject to the following conditions precedent:

         (a)      Revolving Credit Note. On or prior to the Closing Date, the
Lender shall have received the Revolving Credit Note as duly executed by the
Company.

         (b)      Guaranties. On or prior to the Closing Date, the Lender shall
have received a Guaranty duly executed by each Guarantor.

         (c)      Security Agreements. On or prior to the Closing Date, the
Lender shall have received the Security Agreement duly executed by the Company
and each Guarantor.

         (d)      Opinion of Counsel. On or prior to the Closing Date, the
Lender shall have received a written opinion of counsel for the Company and the
Guarantors dated the Closing Date and addressed to the Lender, substantially in
the form of Exhibit D attached hereto.

         (e)      Supporting Documents. On or prior to the Closing Date, the
Lender shall have received (i) a certificate of good standing for the Company
and each Guarantor from the secretary of state of the states of their
organizational jurisdiction dated as of a recent date; (ii) certified copies of
the charter documents of the Company and each Guarantor, (iii) a certificate of
an authorized officer, member or manager of the Company and each Guarantor, as
the case may be, dated the Closing Date and certifying: (x) that the charter
documents, by-laws and operating agreements of such Person, as applicable, have
not been amended since the date of their certification (or if there has been any
such amendment, attaching a certified copy thereof); (y) that attached thereto
is a true and complete copy of resolutions adopted by the Board of Directors of
the Company and by the board of directors or other governing body or Persons of
each Guarantor authorizing the execution, delivery and performance of each Loan
Document to which it is a party and, with respect to the Company, the borrowings
and other extensions of credit hereunder; and (z) the incumbency and specimen
signature of each officer of the Company and of each officer or other authorized
Person of each Guarantor executing each Loan Document to which the Company or
any Guarantor of the Company is a party and any certificates or instruments
furnished pursuant hereto or thereto, and a certification by another officer,
member or manager of the Company and each Guarantor, as the case may be, as to
the incumbency and signature of the authorized officer, member or manager of the
Company and each Guarantor; and (iv) such other documents as the Lender may
reasonably request.

                                       34
<PAGE>

         (f)      Insurance. On or prior to the Closing Date, the Lender shall
have received a certificate or certificates of insurance from an independent
insurance broker or brokers confirming the insurance required to be maintained
pursuant to Section 6.01 hereof, and evidence that the Lender has been named
loss payee and additional insured, as applicable, with respect to each policy of
such insurance.

         (g)      Assets Free from Liens. Prior to the Closing Date, the Lender
shall have received UCC-1 financing statement, tax and judgment lien searches
evidencing that the Company's and each Guarantor's assets are free and clear of
all Liens except Permitted Liens.

         (h)      Borrowing Base Certificate. On or prior to the Closing Date,
the Lender shall have received a Borrowing Base Certificate satisfactory to the
Lender dated as of the Closing Date and signed by the Chief Financial Officer.

         (i)      Depository Account. On or prior to the Closing Date, the
Lender shall have received evidence that the Company has opened a depository
account with the Lender.

         (j)      Fees and Expenses. On or prior to the Closing Date, the Lender
shall have received the fees payable on the Closing Date pursuant to Section
3.04(d) and reimbursement of expenses in accordance with Section 9.03(b).

         (k)      No Litigation. There shall exist no action, suit,
investigation, litigation or proceeding affecting the Company or any Guarantor
pending or threatened before any court, governmental agency or arbiter that
could reasonably be expected to be adversely determined against such Company or
any Guarantor and, if so adversely determined, could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect

         (l)      Consents and Approvals. All governmental and third party
consents and approvals necessary in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall have been
obtained (without the imposition of any conditions that are not acceptable to
the Lender) and shall remain in effect, and no law or regulation shall be
applicable in the reasonable judgment of the Lender that imposes materially
adverse conditions upon the transactions contemplated hereby.

         (m)      No Material Adverse Changes. There shall not have occurred any
material adverse change in the business, operations, properties, prospects or
condition (financial or otherwise) of the Company and its Subsidiaries as a
whole, since March 31, 2008.

         (n)      Due Diligence. The Lender shall have received results
satisfactory to it with respect to judgment, tax, bankruptcy and lien searches
against the Company, each Guarantor and 3 For All Partners.

         (o)      Officer's Certificate. On the Closing Date, the Lender shall
have received a certificate dated the Closing Date, executed by an Executive
Officer of the Company, confirming compliance with the conditions set forth in
clauses (a), (b) and (c) of Section 5.03.

         (p)      Other Information, Documentation. The Lender shall have
received such other and further information and documentation as it may
reasonably require, including, but not limited to, any information or

                                       35
<PAGE>

documentation relating to compliance by the Company and each of its Subsidiaries
with the requirements of all Environmental Laws.

         (q)      Completion of Proceedings. All corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by the Loan Documents, shall be
reasonably satisfactory in form and substance to the Lender, and its counsel.

         SECTION 5.02. Conditions to Extension of the Term Loan. The obligation
of the Lender to make the Term Loan hereunder is subject to satisfaction of the
conditions precedent set forth in Section 5.01, Section 5.03 and satisfaction of
the following conditions precedent:

         (a)      Consummation of the Acquisition. The Lender shall have
received a certificate from an Executive Officer of the Company certifying that
all conditions to the consummation of the Acquisition have been satisfied prior
to, or shall be satisfied concurrently with, the funding of the Term Loan.

         (b)      Term Note. The Lender shall have received the Term Note duly
executed by the Company.

         (c)      No Liens. The Lender shall have received evidence satisfactory
to it that the Acquired Assets are free and clear of all Liens, except Permitted
Liens.

         (d)      Acquisition Documents. The Lender shall have received a true,
correct and complete copy of the agreements governing the terms of the
Acquisition, all of which shall be satisfactory to the Lender in all material
respects.

         (e)      Consideration. The aggregate purchase price for the purchase
by U.S. Concepts of the Acquired Assets shall not exceed the amount set forth in
the agreements referred to in clause (d) above.

         (f)      Receipt of Consents. The Lender shall be satisfied that all
third-party and governmental consents and approvals necessary in connection with
the consummation of the Acquisition have been obtained.

         SECTION 5.03. Conditions to All Extensions of Credit. The obligation of
the Lender to make each Loan hereunder including, without limitation, the
initial Loan are subject to satisfaction of the conditions precedent set forth
in Section 5.01, the conditions precedent set forth in Section 5.02, to the
extent applicable, and satisfaction of the following conditions precedent:

         (a)      Representations And Warranties The representations and
warranties by the Company and each Guarantor pursuant to this Agreement and the
other Loan Documents to which each is a party shall be true and correct in all
material respects on and as of the Borrowing Date or the date of issuance,
amendment, renewal or extension of such Standby Letter of Credit, as applicable,
with the same effect as though such representations and warranties had been made
on and as of such date unless such representation is as of a specific date, in
which case, as of such date.

                                       36
<PAGE>

         (b)      No Default. No Default or Event of Default shall have occurred
and be continuing on the Borrowing Date or will result after giving effect to
the Loan requested or the requested issuance, amendment, renewal or extension of
a Standby Letter of Credit.

         (c)      Availability. After giving effect to any requested Revolving
Credit Loan, the Aggregate Outstandings shall not exceed the lesser of (x) the
Revolving Credit Commitment in effect at such time or (y) the then current
Borrowing Base.

         (d)      Letter of Credit Documentation. With respect to the issuance,
amendment, renewal or extension of any Standby Letter of Credit, the Lender
shall have received the documents and instruments requested by the Lender in
accordance with Section 2.05(a) hereof.

         (e)      Notice of Borrowing. The Lender shall have received a Notice
of Borrowing duly executed by an Executive Officer of the Company with respect
to the requested Loan.

         Each borrowing hereunder shall constitute a representation and warranty
of the Company that the statements contained in clauses (a), (b), and (c) of
Section 5.03 are true and correct on and as of the Borrowing Date, as though
such representation and warranty had been made on and as of such date.

                                   ARTICLE VI

                              AFFIRMATIVE COVENANTS

         The Company covenants and agrees with the Lender that so long as the
Commitment remains in effect, or any of the principal of or interest on any Note
or any other Obligations hereunder shall be unpaid it will, and will cause each
Guarantor to:

         SECTION 6.01. Existence, Properties, Insurance. Do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate, partnership or limited liability company existence, as applicable,
rights and franchises and comply in all material respects with all laws
applicable to it; at all times maintain, preserve and protect all franchises and
trade names and preserve all of its property, in each case, used or useful in
and material to the conduct of its business and keep the same in good repair,
working order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals, replacements, betterments and improvements
thereto so that the business carried on in connection therewith may be properly
and advantageously conducted in the ordinary course at all times; at all times,
preserve and maintain in full force and effect all governmental rights,
privileges, qualifications, permits, licenses and franchises necessary for the
normal conduct of its business; and at all times maintain insurance covering its
assets and its businesses with financially sound and reputable insurance
companies or associations in such amounts and against such risks (including,

                                       37
<PAGE>

without limitation, hazard, business interruption, public liability and product
liability) as are usually carried by companies engaged in the same or similar
business. Each such policy of insurance of the Company and each Guarantor shall
name the Lender as loss payee and additional insured thereof, as applicable, and
shall provide for at least thirty (30) days' prior written notice to the Lender
of any modification or cancellation of such policies. The Company shall provide
to the Lender promptly upon receipt thereof evidence of the annual renewal of
each such policy.

         SECTION 6.02. Payment of Indebtedness and Taxes.
                       ---------------------------------

         (a)      Pay all indebtedness and obligations, now existing or
hereafter arising, as and when due and payable unless such indebtedness or
obligations, other than indebtedness or obligations owing to the Lender, are
being contested in good faith by appropriate proceedings diligently conducted,
and (b) pay and discharge or cause to be paid and discharged promptly all taxes,
assessments and government charges or levies imposed upon it or upon its income
and profits, or upon any of its property, real, personal or mixed, or upon any
part thereof, before the same shall become in default, as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
become a lien or charge upon such properties or any part thereof; provided,
however, that neither the Company nor any Guarantor shall be required to pay and
discharge or cause to be paid and discharged any such tax, assessment, charge,
levy or claim so long as the validity thereof shall be contested in good faith
by appropriate proceedings, and the Company or such Guarantor, as the case may
be, shall have set aside on its books adequate reserves determined in accordance
with Generally Accepted Accounting Principles with respect to any such tax,
assessment, charge, levy or claim so contested; further, provided that, subject
to the foregoing proviso, the Company and each Guarantor will pay or cause to be
paid all such taxes, assessments, charges, levies or claims upon the
commencement of proceedings to foreclose any lien which has attached as security
therefor.

         SECTION 6.03. Reports, etc. Financial Statements.
                       ----------------------------------

         Furnish to the Lender:

         (a)      as soon as available, but in any event within 90 days after
the end of each fiscal year of the Company, (i) a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such year and the related audited consolidated statements of income,
shareholders equity and cash flow for such year, setting forth in comparative
form the respective figures as of the end of and for the previous fiscal year,
and accompanied by a report thereon of independent certified public accountants
of recognized standing selected by the Company and satisfactory to the Lender
(the "Auditor"), it being acknowledged and agreed that Lazar Levine & Felix LLP
is satisfactory to the Lender, which report shall be unqualified and shall be to
the effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Company and its consolidated Subsidiaries on a consolidated basis in accordance
with Generally Accepted Accounting Principles consistently applied, and (ii) a
copy of the comparative consolidating financial statements of the Company and
its consolidated Subsidiaries, prepared in accordance with Generally Accepted
Accounting Principles, consistently applied, which support the financial
statements delivered pursuant to clause (i);

                                       38
<PAGE>

         (b)      as soon as available, but in any event not later than 45 days
after the end of each quarterly period of each fiscal year of the Company, a
copy of the unaudited interim consolidated and consolidating balance sheet of
the Company and its Subsidiaries as of the end of each such quarter and the
related unaudited interim consolidated and consolidating statements of income,
shareholders equity and cash flow for such quarter and the portion of the fiscal
year through such date and setting forth in each case in comparative form the
respective figures for the corresponding date and period in the previous fiscal
year, in each case prepared by the Chief Financial Officer in accordance with
Generally Accepted Accounting Principles, applied on a consistent basis, and
accompanied by a certificate to that effect executed by the Chief Financial
Officer;

         (c)      a certificate prepared and signed by the Chief Financial
Officer with each delivery required by clauses (a) and (b) above, as to whether
or not, as of the close of such preceding period and at all times during such
preceding period, the Company was in compliance with all the provisions in this
Agreement and the other Loan Documents, showing computation of financial
covenants and quantitative negative covenants, and if the Chief Financial
Officer shall have obtained knowledge of any default in such compliance or
notice of such default, it shall disclose in such certificate such default or
defaults or notice thereof and the nature thereof, whether or not the same shall
constitute a Default or an Event of Default hereunder;

         (d)      as soon as available, in any event within 30 days of the end
of each month, a schedule of the Company's and each of its Subsidiaries'
Receivables which shall include a Receivables aging report in form and substance
satisfactory to Lender and certified by the Chief Financial Officer and current
as of the first day of such month;

         (e)      within 30 days after the end of each month a duly executed
Borrowing Base Certificate;

         (f)      within 30 days after the end of each month, an accounts
payable report of the Company and its Subsidiaries in form and substance
satisfactory to the Lender certified by the Chief Financial Officer and current
as of the first day of such month;

         (g)      at all times indicated in clause (a) above a copy of the
management letter, if any, prepared by the Auditor;

         (h)      together with each delivery required by clause (b) above, a
quarterly project status report consisting of both current projects and projects
under contract for which performance has not yet commenced, in each case, with
respect to the Company and its Subsidiaries in form and substance satisfactory
to Lender and certified by the Chief Financial Officer;

         (i)      promptly after filing thereof, copies of all regular and
periodic financial information, proxy materials and other information and
reports which the Company or any of its Subsidiaries shall file with the
Securities and Exchange Commission;

                                       39
<PAGE>

         (j)      promptly after submission to any government or regulatory
agency, all documents and information furnished to such government or regulatory
agency other than such documents and information prepared in the normal course
of business and which could not reasonably be expected to result in any
materially adverse action to be taken by such agency;

         (k)      promptly, but in any event, within ninety (90) days after the
end of each fiscal year of the Company, consolidated annual financial
projections of the Company and its Subsidiaries for the next succeeding fiscal
year in form and substance reasonably satisfactory to the Lender; and

         (l)      promptly, from time to time, such other information regarding
the operations, business affairs and condition (financial or otherwise) of the
Company or any of its Subsidiaries as the Lender may reasonably request.

Any documents required to be delivered to Lender pursuant to this Section 6.03
shall be deemed to have been delivered to the Lender to the extent the Company
notifies the Lender that any such documents are included in materials otherwise
filed with the Securities and Exchange Commission and available on the
Securities and Exchange Commission's EDGAR database and if so filed, shall be
deemed to have been delivered on the date the Company notifies the Lender of
such filing.

         SECTION 6.04. Books and Records; Access to Premises.
                       -------------------------------------

         (a)      Keep adequate records and proper books of record and account
in which complete entries will be made in a manner to enable the preparation of
financial statements in accordance with Generally Accepted Accounting
Principles, and which shall reflect all financial transactions of the Company
and each of its Subsidiaries.

         (b)      At any time during normal business hours, and from time to
time, permit the Lender or any agents or representatives thereof, to examine and
make copies of and abstracts from the books and records of such information
which the Lender deems is necessary or desirable (including, without limitation,
the financial records of the Company and each of its Subsidiaries) and to visit
the properties of the Company or any of its Subsidiaries and to discuss the
affairs, finances and accounts of the Company or any of its Subsidiaries with
any of their respective Executive Officers or the Company's independent
accountants and to conduct such audits (including, without limitation, field
audits) of the Company's and each Guarantor's assets and liabilities (including,
without limitation, reviews of Receivables, inventory, accounts payable,
payroll, taxes and insurance) and the Company's and each Guarantor's books and
records, in each case at the Company's expense as such representatives deem
necessary, provided, the Company shall bear the cost of not more than one (1)
such audit in any calendar year unless an Event of Default has occurred, in
which case, the Company shall also bear the cost of an audit, if any, performed
by the Lender in connection with such Event of Default.

         SECTION 6.05. Notice of Adverse Change. Promptly notify the Lender in
writing of (a) any change in the business or the operations of the Company or
any of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect, and (b) any information which indicates that any financial

                                       40
<PAGE>

statements which are the subject of any representation contained in this
Agreement, or which are furnished to the Lender pursuant to this Agreement, fail
to present fairly, as of the date thereof and for the period covered thereby,
the financial condition and results of operations purported to be presented
therein, disclosing the nature thereof.

         SECTION 6.06. Notice of Default. Promptly notify the Lender of any
Default or Event of Default which shall have occurred or the occurrence or
existence of any event or circumstance that in the reasonable judgment of the
Company is likely to be come a Default or Event of Default, which notice shall
include a written statement as to such occurrence, specifying the nature thereof
and the action (if any) which is proposed to be taken with respect thereto.

         SECTION 6.07. Notice of Litigation. Promptly notify the Lender of any
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency which, if adversely determined against the
Company or any Subsidiary of the Company on the basis of the allegations and
information set forth in the complaint or other notice of such action, suit or
proceeding, or in the amendments thereof, if any, could reasonably be expected
to have a Material Adverse Effect.

         SECTION 6.08. Notice of Default in Other Agreements. Promptly notify
the Lender of any default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement or
instrument to which the Company or any Subsidiary of the Company is a party
which default could reasonably be expected to have a Material Adverse Effect.

         SECTION 6.09. Notice of ERISA Event. Promptly deliver to the Lender a
certificate of the Chief Financial Officer of the Company setting forth details
as to such occurrence and such action, if any, which the Company, any Guarantor,
or such ERISA Affiliate is required or proposes to take, together with any
notices required or proposed to be given to or filed with or by the Company,
such Guarantor, ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator, with respect thereto: that a Reportable Event has occurred with
respect to a Plan, that an accumulated funding deficiency has been incurred or
an application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code with respect to a Plan, that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA, that one or more Plans have an Unfunded Current Liability giving rise to
a Lien under ERISA, that proceedings may be or have been instituted to terminate
a Plan, that a proceeding has been instituted pursuant to Section 515 of ERISA
to collect a delinquent contribution to a Plan, or that the Company, any
Guarantor or any ERISA Affiliate will or may incur any liability (including any
contingent or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA.
The Company will deliver to the Lender a complete copy of the annual report
(Form 5500) of each Plan that is a single employer Plan (within the meaning of
Section 4001(a)(15) of ERISA), filed with the Internal Revenue Service. In
addition to any certificates or notices delivered to the Lender pursuant to the
first sentence hereof, copies of annual reports and any other notices received
by the Company or any Guarantor required to be delivered to the Lender hereunder

                                       41
<PAGE>

shall be delivered to the Lender no later than ten (10) days after the later of
the date such report or notice has been filed with the Internal Revenue Service
or the PBGC, given to Plan participants or received by the Company or any
Guarantor.

         SECTION 6.10. Notice of Environmental Law Violations. Promptly notify
the Lender of the receipt of any notice of an action, suit, and proceeding
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, pending against the Company or any
Subsidiary of the Company relating to any alleged violation of any Environmental
Law which could reasonably be expected to have a Material Adverse Effect.

         SECTION 6.11. Notice Regarding Material Contracts. Promptly notify the
Lender of (a) any termination (prior to the end of its stated term), material
amendment, material supplement or other material modification of any Material
Contract and (b) the occurrence of a default by the Company or any of its
Subsidiaries under, or by any party to, any Material Contract of which the
Company is aware.

         SECTION 6.12. Compliance with Applicable Laws. Comply with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority, the breach of which could reasonably be expected to have
a Material Adverse Effect.

         SECTION 6.13. Subsidiaries. Give the Lender written notice of the
creation, establishment, reactivation or acquisition, in any manner, of any
Subsidiary of the Company not existing or active on the Closing Date prior to
such creation, establishment, reactivation or acquisition and cause each such
Subsidiary to execute a Guaranty and Security Agreement concurrently with the
creation, establishment, reactivation or acquisition of such Subsidiary and in
connection therewith shall deliver or cause to be delivered such proof of
corporate action, incumbency of officers and other documents (including opinions
of counsel) as are consistent with those delivered as to the Company pursuant to
Section 5.01 hereof on the Closing Date, or as the Lender may request, each in
form and substance satisfactory to the Lender.

         SECTION 6.14. Depository Relationship. Maintain their primary
depository relationship with the Lender and, in connection therewith, provide
evidence to the Lender that it has closed all of its payroll accounts and
depository accounts at other financial institutions within (a) 60 days of the
Closing Date, with respect to payroll accounts, and (b) 30 days of the Closing
Date, with respect to all depository accounts.

         SECTION 6.15. Environmental Laws. Comply in all material respects with
the requirements of all Environmental Laws, provide to the Lender all
documentation in connection with such compliance that the Lender may reasonably
request, and defend, indemnify, and hold harmless the Lender and its respective
employees, agents, officers, and directors, from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs, or expenses
of whatever kind or nature, known or unknown, contingent or otherwise, arising
out of, or in any way related to, (a) the presence, disposal, or release of any
Hazardous Materials on any property at any time owned or occupied by the Company
or any Subsidiary of the Company; (b) any personal injury (including wrongful

                                       42
<PAGE>

death) or property damage (real or personal) arising out of or related to such
Hazardous Materials; (c) any lawsuit brought or threatened, settlement reached,
or government order relating to such Hazardous Materials, and/or (d) any
violation of applicable Environmental Laws, including, without limitation,
reasonable attorney and consultant fees, investigation and laboratory fees,
court costs, and litigation expenses.

                                  ARTICLE VII

                               NEGATIVE COVENANTS

         The Company covenants and agrees with the Lender that so long as the
Commitment remains in effect or any of the principal of or interest on any Note
or any other Obligations hereunder shall be unpaid, it will not, and will not
cause or permit any Guarantor, directly or indirectly, to:

         SECTION 7.01. Liens. Incur, create, assume or suffer to exist any Lien
on any of their respective assets now or hereafter owned, other than:

         (a)      Liens existing on the date hereof as set forth on Schedule II
attached hereto including any renewals or extensions thereof; provided that no
such Lien is extended to cover any additional property and that the amount of
Indebtedness secured thereby is not increased and, provided, further, that, with
respect to the federal tax lien in the amount of $56,287.60 disclosed on such
Schedule II, the Company shall comply with Section 6.02 hereof within thirty
(30) days of the Closing Date;

         (b)      Liens for taxes, assessments or other governmental charges or
levies not yet delinquent or which are being contested in good faith by
appropriate proceedings, provided, however, that adequate reserves with respect
thereto are maintained on the books of the Company or its Subsidiaries in
accordance with Generally Accepted Accounting Principles;

         (c)      Statutory Liens of landlords and carriers', warehousemens',
mechanics', suppliers' or other like Liens arising in the ordinary course of
business, provided such Liens are not overdue for a period of more than 30 days
or which, if so overdue, are being contested in good faith by appropriate
proceedings in a manner which will not jeopardize or diminish the interest of
the Lender in any of the collateral subject to the Security Documents;

         (d)      Liens incurred or deposits to secure the performance of
tenders, bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety, performance and appeal bonds, and other
obligations of similar nature incurred in the ordinary course of business;

         (e)      Easements, rights of way, restrictions and other similar
charges or encumbrances which in the aggregate do not interfere in any material
respect with the occupation, use and enjoyment by the Company or any Guarantor
of the property or assets encumbered thereby in the normal course of their
respective business or materially impair the value of the property subject
thereto;

                                       43
<PAGE>

         (f)      Deposits under workmen's compensation, unemployment insurance
and social security laws;

         (g)      Liens granted to the Lender under this Agreement or any other
Loan Document; and

         (h)      Purchase money liens for fixed or capital assets including
obligations with respect to Capital Leases; provided in each case (i) no Default
or Event of Default shall have occurred and be continuing or shall occur after
giving effect to such lien, (ii) such purchase money lien does not exceed 100%
of the purchase price of, and encumbers only, the property acquired, and (iii)
such purchase money Lien does not secure any Indebtedness other than in respect
of the purchase price of the asset acquired.

         SECTION 7.02. Indebtedness. Incur, create, assume or suffer to exist or
otherwise become liable in respect of any Indebtedness, other than:

         (a)      Indebtedness incurred prior to the date hereof as described in
Schedule III attached hereto, including any renewals or extensions thereof;
provided such renewal or extension is on terms no less favorable to the Company
or the Guarantor, as applicable, and does not result in an increase in the
aggregate principal amount of such Indebtedness;

         (b)      Indebtedness to the Lender under this Agreement, the Notes or
any other Loan Document;

         (c)      Indebtedness for trade payables incurred in the ordinary
course of business; provided such payables shall be paid or discharged when due;

         (d)      Indebtedness consisting of guarantees permitted pursuant to
Section 7.03;

         (e)      Intercompany Indebtedness owed by the Company to any Guarantor
or by any Guarantor to the Company or any other Guarantor;

         (f)      Subordinated Indebtedness in an amount not exceed $1,000,000
at any time outstanding; provided, however, that no Default or Event of Default
shall have occurred and be continuing at the time of incurrence thereof or would
occur after giving effect to the incurrence of such Subordinated Indebtedness;
and

         (g)      Indebtedness secured by purchase money liens as permitted
under Section 7.01(h) hereof; provided such Indebtedness incurred in any fiscal
year of the Company shall not exceed $500,000, and, further, provided no Default
or Event of Default shall have occurred and be continuing or would occur after
giving effect to the incurrence of such Indebtedness.

         SECTION 7.03. Guaranties. Guarantee, endorse, become surety for, or
otherwise in any way become or be responsible for the Indebtedness or
obligations of any other Person, whether by agreement to maintain working
capital or equity capital or otherwise maintain the net worth or solvency of any
Person or by agreement to purchase the Indebtedness of any other Person, or
agreement for the furnishing of funds, directly or indirectly, through the
purchase of goods, supplies or services for the purpose of discharging the

                                       44
<PAGE>

Indebtedness of any other Person or otherwise, or enter into or be a party to
any contract for the purchase of merchandise, materials, supplies or other
property if such contract provides that payment for such merchandise, materials,
supplies or other property shall be made regardless of whether delivery of such
merchandise, supplies or other property is ever made or tendered except:

         (a)      guaranties executed prior to the date hereof as described on
Schedule IV attached hereto but not including any renewals or extension thereof;

         (b)      endorsements of negotiable instruments for collection or
deposit in the ordinary course of business;

         (c)      guaranties of any Indebtedness owing to the Lender; and

         (d)      guaranties by the Company of any obligations of any Guarantor,
or by any Guarantor of any obligations of the Company or any other Guarantor, in
each case, to the extent such obligations are otherwise permitted by the terms
and conditions of this Agreement.

         SECTION 7.04. Sale of Assets. Sell, assign, lease, transfer or
otherwise dispose of any of their now owned or hereafter acquired respective
properties and assets, whether or not pursuant to an order of a federal agency
or commission, except for the sale or other disposition of properties or assets
no longer used or useful in the conduct of their respective businesses.

         SECTION 7.05. Sales of Receivables. Sell, transfer, discount or
otherwise dispose of notes, accounts receivable or other obligations owing to
the Company or any of its Subsidiaries, with or without recourse, except for
collection in the ordinary course of business.

         SECTION 7.06. Loans and Investments. Make or commit to make any
advance, loan, extension of credit, or capital contribution to, or purchase or
hold beneficially any stock or other securities, or evidence of Indebtedness of,
purchase or acquire all or a substantial part of the assets of, make or permit
to exist any interest whatsoever in, any other Person except for (a) the
ownership of stock of any Subsidiaries existing as of the Closing Date, (b)
loans and capital contributions by the Company to any Guarantor and loans and
advances by any Guarantor to the Company or any other Guarantor, (c) the
Acquisition, and (d) investments consisting of Eligible Investments.

         SECTION 7.07. Nature of Business. Change or alter, in any material
respect, the nature of its business from the nature of the business engaged in
by it on the date hereof.

         SECTION 7.08. Sale and Leaseback. Enter into any arrangement, directly
or indirectly, with any Person whereby it shall sell or transfer any property,
whether real or personal, used or useful in its business, whether now owned or
hereafter acquired, of it or any of its Subsidiaries, if at the time of such
sale or disposition it intends to lease or otherwise acquire the right to use or
possess (except by purchase) such property or like property for a substantially
similar purpose.

                                       45
<PAGE>

         SECTION 7.09. Federal Reserve Regulations. Permit any Loan or the
proceeds of any Loan to be used for any purpose which violates or is
inconsistent with the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System.

         SECTION 7.10. Accounting Policies and Procedures. Except as required by
applicable law, rule or regulation, permit any change in the accounting policies
and procedures of the Company or any of its Subsidiaries, including a change in
fiscal year, provided, however, that any policy or procedure required to be
changed by the Financial Accounting Standards Board (or other board or committee
thereof) in order to comply with Generally Accepted Accounting Principles may be
so changed.

         SECTION 7.11. Hazardous Materials. Cause or permit any of its
properties or assets to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose of, transfer, produce or process Hazardous
Materials, except in compliance with all applicable federal, state and local
laws or regulations, or cause or permit, a release of Hazardous Materials onto
such property or asset or onto any other property in violation of any such local
laws or regulations.

         SECTION 7.12. Limitations on Fundamental Changes. Merge or consolidate
with, or sell, assign, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now or hereafter acquired) to, any Person, acquire all of the stock or all or
substantially all of the assets or the business of any Person (except pursuant
to the Acquisition) or liquidate, wind up or dissolve or suffer any liquidation
or dissolution.

         SECTION 7.13. Financial Condition Covenants.
                       -----------------------------

         (a)      Consolidated Debt Service Coverage Ratio. Permit the
Consolidated Debt Service Coverage Ratio to be less than 1.50:1.00, at the end
of any fiscal quarter of the Company.

         (b)      Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio to be greater than 2.25:1.00, at the end of any fiscal quarter of the
Company.

         (c)      Consolidated Pre-tax Loss. Incur a Consolidated Pre-tax Net
Loss in excess of $500,000, in the aggregate, in any period of two consecutive
fiscal quarters, as determined as of the end of each fiscal quarter of the
Company.

         SECTION 7.14. Dividends. Declare any dividend on, or make any payment
on account of, or set apart assets for a sinking or other analogous fund for the
purchase, redemption, defeasance, retirement or other acquisition of, any shares
of any class of stock of the Company or any of its Subsidiaries or any warrant
to purchase any class of stock of the Company or any of its Subsidiaries,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash, securities or property
or in obligations of the Company or any of its Subsidiaries or in any
combination thereof, except dividends paid by a Guarantor to the Company, or
permit any Subsidiary to make any payment on account of, or purchase or
otherwise acquire, any shares of any class of the stock of the Company or any of
its Subsidiaries or any warrant to purchase any class of stock of the Company or
any of its Subsidiaries from any Person.

                                       46
<PAGE>

         SECTION 7.15. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, except (i) in the ordinary
course of and pursuant to the reasonable requirements of the Company's or any
Guarantor's business (including reasonable and customary fees paid to officers
and directors of the Company or any Subsidiary of the Company for services
rendered thereto and reimbursement of expenses of officers, directors and
employees consistent with past practice) and upon fair and reasonable terms no
less favorable to the Company or such Guarantor than they would obtain in a
comparable arms-length transaction with a Person not an Affiliate, or (ii) with
respect to services provided by the Company to a Guarantor or by a Guarantor to
the Company or another Guarantor which are not otherwise prohibited by this
Agreement.

         SECTION 7.16. Impairment of Security Interest. Take or omit to take any
action which could reasonably be expected to have the result of impairing the
security interest in any property subject to a security interest in favor of the
Lender or grant to any person any interest whatsoever in any property which is
subject to a security interest in favor of the Lender.

         SECTION 7.17. Subordinated Debt. (a) Directly or indirectly prepay,
defease, purchase, redeem, or otherwise acquire any Subordinated Debt or (b)
amend, supplement or otherwise modify any of the terms thereof without (other
than any such amendment, supplement or modification that (i) would extend the
maturity or reduce the amount of any payment of principal thereof or reduce the
rate or extend any date for payment of interest thereon and (ii) does not
involve the payment of a consent fee) the prior written consent of the Lender.

                                  ARTICLE VIII

                                EVENTS OF DEFAULT

         SECTION 8.01. Events of Default. In the case of the happening of any of
the following events (each an "Event of Default"):

         (a)      failure to pay the principal of, or interest on, any Loan, or
any fee or other amount due under this Agreement, as and when due and payable;

         (b)      default shall be made in the due observance or performance of
any covenant, condition or agreement of the Company or any of its Subsidiaries
to be performed (i) pursuant to Article VI of this Agreement (other than Section
6.03 and Section 6.04(b) thereof) and, in the case of this sub-clause (i) only,
such default shall continue unremedied for a period of thirty (30) consecutive
days, or (ii) pursuant to any other provision of this Agreement or any other
Loan Document;

         (c)      any representation or warranty made or deemed made in this
Agreement or any other Loan Document shall prove to be false or misleading in
any material respect when made or given or when deemed made or given;

                                       47
<PAGE>

         (d)      any report, certificate, financial statement or other
instrument furnished in connection with this Agreement or any other Loan
Document or the borrowings hereunder, shall prove to be false or misleading in
any material respect when made or given or when deemed made or given;

         (e)      default in the performance or compliance in respect of any
agreement or condition relating to any Indebtedness of the Company or any of its
Subsidiaries in excess of $500,000 individually or in the aggregate (other than
the Notes) if the effect of such default is to accelerate the maturity of such
Indebtedness or to permit the holder or obligee thereof (or a trustee on behalf
of such holder or obligee) to cause such Indebtedness to become due prior to the
stated maturity thereof, or, any such Indebtedness shall not be paid when due;

         (f)      the Company or any of its Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11 of
the United States Code or any other federal or state bankruptcy, insolvency or
similar law, (ii) consent to the institution of, or fail to controvert in a
timely and appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the employment of a receiver, trustee,
custodian, sequestrator or similar official for the Company or any of its
Subsidiaries or for a substantial part of its property; (iv) file an answer
admitting the material allegations of a petition filed against it in such
proceeding, (v) make a general assignment for the benefit of creditors, (vi)
take corporate action for the purpose of effecting any of the foregoing; or(vii)
become unable or admit in writing its inability or fail generally to pay its
debts as they become due;

         (g)      an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Company or any of its Subsidiaries or of a substantial part of
their respective property, under Title 11 of the United States Code or any other
federal or state bankruptcy insolvency or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator or similar official for the Company
or any of its Subsidiaries or for a substantial part of their property, or (iii)
the winding-up or liquidation of the Company or any of its Subsidiaries and such
proceeding or petition shall continue undismissed for 30 days or an order or
decree approving or ordering any of the foregoing shall continue unstayed and in
effect for 30 days;

         (h)      one or more orders, judgments or decrees for the payment of
money in excess of $500,000 in the aggregate by shall be rendered against the
Company or any of its Subsidiaries and the same shall not have been paid in
accordance with such judgment, order or decree or settlement and either (i) an
enforcement proceeding shall have been commenced by any creditor upon such
judgment, order or decree, or (ii) there shall have been a period of thirty (30)
days with respect to the Company or any Domestic Subsidiary during which a stay
of enforcement of such judgment, order or decree, by reason of pending appeal or
otherwise, was not in effect;

                  (i)      any Plan shall fail to maintain the minimum funding
standard required for any Plan year or part thereof or a waiver of such standard
or extension of any amortization period is applied for or granted under Section

                                       48
<PAGE>

412 of the Code, any Plan is terminated by the Company, any Guarantor or any
ERISA Affiliate or the subject of termination proceedings under ERISA, any Plan
shall have an Unfunded Current Liability, a Reportable Event shall have occurred
with respect to a Plan or the Company, any of its Subsidiaries or any ERISA
Affiliate shall have incurred a liability to or on account of a Plan under
Section 515, 4062, 4063, 4201 or 4204 of ERISA, and there shall result from any
such event or events the imposition of a lien upon the assets of the Company or
any of its Subsidiaries or the granting of a security interest on such assets,
or a liability to the PBGC or a Plan or a trustee appointed under ERISA or a
penalty under Section 4971 of the Code;

                  (ii)     any Loan Document shall for any reason cease to be in
full force and effect in accordance with its terms or the Company or any of its
Subsidiaries shall so assert in writing;

                  (iii)    a Change of Control shall have occurred;

                  (iv)     the termination or expiration of the Master Services
Contract which is not replaced by a new master services contract with Diageo;

                  (v)      any material adverse change in the financial
condition of the Company and its Subsidiaries, taken as a whole, shall have
occurred; or

                  (vi)     any of the Liens purported to be granted pursuant to
any Security Document shall fail or cease for any reason to be legal, valid and
enforceable liens on the collateral purported to be covered thereby or shall
fail or cease to have the priority purported to be created thereby;

then, at any time thereafter during the continuance of any such event, the
Lender may, in its sole discretion, by written or telephonic notice to the
Company, take either or both of the following actions, at the same or different
times, (a) terminate the Commitments and (b) declare (i) the Notes, both as to
principal and interest, (ii) an amount equal to the Standby LC Exposure, and
(iii) all other Obligations, to be forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Notes to the
contrary notwithstanding; provided, however, that if an event specified in
Section 8.01(f) or (g) shall have occurred, the Commitment shall automatically
terminate and interest, principal and amounts referred to in the preceding
clauses (i), (ii) and (iii) shall be immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived, anything contained herein or in the Note to the contrary
notwithstanding. With respect to all Standby Letters of Credit that shall not
have expired or presentment for honor shall not have occurred, the Company shall
provide the Lender with Cash Collateral in an amount equal to the aggregate
undrawn amount of such Standby Letters of Credit. Such Cash Collateral shall be
used to reimburse the Lender for drawings under Standby Letters of Credit for
which the Lender has not been reimbursed and, to the extent not so used, shall
be held for the satisfaction of the reimbursement obligations of the Company at
such time or, if the maturity of the Loans has been accelerated, be applied to
satisfy other Obligations, with any amount remaining after such satisfactions to
be returned to the Company or paid to such other party as may legally be
entitled to the same.

                                       49
<PAGE>

                                   ARTICLE IX

                                  MISCELLANEOUS

         SECTION 9.01. Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including
telecopy, and with respect to information required to be provided to Lender
pursuant to Section 6.03, by email), and unless otherwise expressly provided
herein, shall be conclusively deemed to have been received by a party hereto and
to be effective on the day on which delivered by hand or email to such party or
one Business Day after being sent by overnight mail to the address set forth
below, or, in the case of telecopy notice, when acknowledged as received, or if
sent by registered or certified mail, three (3) Business Days after the day on
which mailed in the United States, addressed to such party at such address:

         (a)      if to the Lender, at

                  Sovereign Bank
                  330 South Service Road
                  Melville NY 11747
                  Attn:  Mr. William Conlan
                         Vice President
                  Telecopy: (631) 694-8388
                  Email address: WConlan@sovereignbank.com

         (b)      if to the Company, at

                  CoActive Marketing Group, Inc.
                  75 Ninth Avenue
                  New York, New York 10011
                  Attn: Mr. Fred Kaseff, Chief Financial Officer
                  Telecopy: (212) 660-3881

         (c)      as to each such party at such other address as such party
shall have designated to the other in a written notice complying as to delivery
with the provisions of this Section 9.01

         SECTION 9.02. Effectiveness; Survival. This Agreement shall become
effective on the date on which all parties hereto shall have signed a
counterpart copy hereof and shall have delivered the same to the Lender. All
representations and warranties made herein and in the other Loan Documents and
in the certificates delivered pursuant hereto or thereto shall survive the
making by the Lender of the Loans and the issuance of the Standby Letters of
Credit, in each case, as herein contemplated and the execution and delivery to
the Lender of the Notes evidencing the Loans and shall continue in full force

                                       50
<PAGE>

and effect so long as the Obligations hereunder are outstanding and unpaid and
the Commitments are in effect. The obligations of the Company pursuant to
Section 3.07, Section 3.08, Section 3.09, Section 6.15 and Section 9.03 hereof
shall, notwithstanding anything herein to the contrary, survive termination of
this Agreement and payment of the Obligations.

         SECTION 9.03. Expenses. The Company agrees (a) to indemnify, defend and
hold harmless the Lender and its officers, directors, employees, and affiliates
(each, an "indemnified person") from and against any and all losses, claims,
damages, liabilities or judgments to which any such indemnified person may be
subject and arising out of or in connection with the Loan Documents, the
financings contemplated hereby, the use of any proceeds of such financings or
any related transaction or any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any of such indemnified persons
is a party thereto, and to reimburse each of such indemnified persons upon
demand for any reasonable, legal or other expenses incurred in connection with
the investigation or defending any of the foregoing; provided that the foregoing
indemnity will not, as to any indemnified person, apply to losses, claims,
damages, liabilities, judgments or related expenses to the extent arising from
the willful misconduct or gross negligence of such indemnified person, (b) to
pay or reimburse the Lender for all its out-of-pocket costs and expenses
incurred in connection with the preparation and execution of this Agreement, the
Note any other Loan Documents and any amendment, supplement or modification to
any of the foregoing, and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including without limitation, the reasonable fees and disbursements of
Farrell Fritz, P.C., counsel to the Lender, and (c) to pay or reimburse the
Lender for all their costs and expenses incurred in connection with the
enforcement and preservation of any rights under this Agreement, the Note, the
other Loan Documents, and any other documents prepared in connection herewith or
therewith, including, without limitation, the reasonable fees and disbursements
of counsel (including, without limitation, in-house counsel) to the Lender,
including all such out-of-pocket expenses incurred during any work-out,
restructuring or negotiations in respect of the Obligations.

         SECTION 9.04. Modification of Agreement. No modification, amendment or
waiver of any provision of this Agreement, any Note or any other Loan Document,
nor consent to any departure by the Company therefrom shall in any event be
effective unless the same shall be in writing and signed by the Lender and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in the same, similar or other circumstance.

         SECTION 9.05. Successors and Assigns; Participations.
                       --------------------------------------

         (a)      This Agreement shall be binding upon and inure to the benefit
of the Company, the Lender, all future holders of the Note and their respective
successors and assigns, except that no Company may assign or transfer any of its
rights or obligations under this Agreement without the prior written consent of
the Lender.

         (b)      The Lender reserves the right to sell participations in or to
sell and assign its rights, duties or obligations with respect to the Loans or
the Commitments to such banks or lending institutions as it may choose and (i)

                                       51
<PAGE>

with respect to participations, without the consent of the Company and (ii) with
respect to assignments, with the consent of the Company, such consent not to be
unreasonably withheld. The Lender may furnish any information concerning the
Company or any of its Subsidiaries in its possession from time to time to any
assignee or participant (or proposed assignee or participant). The Lender may at
any time pledge or assign or grant a security interest in all or any part of its
rights under this Agreement and its Note to a Federal Reserve Bank, provided
that no such assignment shall release the transferor Lender from its Commitment
or its obligations hereunder or substitute any such pledgee or assignee for the
Lender as a party to this Agreement

         SECTION 9.06. No Waiver; Cumulative Remedies. Neither any failure nor
any delay on the part of the Lender in exercising any right, power or privilege
hereunder or under any Note or any other Loan Document shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise of any other right, power or privilege. The rights, remedies,
powers and privileges herein provided or provided in the other Loan Documents
are cumulative and not exclusive of any rights, remedies powers and privileges
provided by law.

         SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAW.

         SECTION 9.08. SUBMISSION TO JURISDICTION; JURY WAIVER. THE COMPANY
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT IN
THE STATE OF NEW YORK, COUNTY OF NEW YORK, COUNTY OF NASSAU OR COUNTY OF SUFFOLK
IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, AND TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE COMPANY HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH FEDERAL OR
STATE COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT OR INSTRUMENT
REFERRED TO HEREIN OR THEREIN OR THE SUBJECT MATTER HEREOF THEREOF MAY NOT BE
LITIGATED IN OR BY SUCH FEDERAL OR STATE COURTS. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE COMPANY AGREES NOT TO ASSERT ANY COUNTERCLAIM IN ANY SUCH
SUIT, ACTION OR PROCEEDING UNLESS SUCH COUNTERCLAIM CONSTITUTES A COMPULSORY OR
MANDATORY COUNTERCLAIM UNDER APPLICABLE RULES OF CIVIL PROCEDURE. THE COMPANY
AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED
MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS AGREEMENT OR ANY METHOD

                                       52
<PAGE>

AUTHORIZED BY THE LAWS OF NEW YORK. EACH PARTY HERETO WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY
OTHER LOAN DOCUMENT.

         SECTION 9.09. Severability. In case any one or more of the provisions
contained in this Agreement, any Note or any other Loan Document should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.

         SECTION 9.10. Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Lender and each of its Affiliates are hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by the Lender or any Affiliate of the Lender to or for the credit or
the account of the Company against any and all of the Obligations of,
irrespective of whether or not the Lender shall have made any demand under this
Agreement or any Note and although such obligations may be unmatured. The rights
of the Lender and each Affiliate of the Lender under this Section 9.10 are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which they may have.

         SECTION 9.11. Headings. Section headings used herein are for
convenience of reference only and are not to affect the construction of or be
taken into consideration in interpreting this Agreement.

         SECTION 9.12. CONSTRUCTION. This Agreement is the result of
negotiations between, and has been reviewed by, each of the Company, the Lender
and their respective counsel. Accordingly, this Agreement shall be deemed to be
the product of each party hereto, and no ambiguity shall be construed in favor
of or against the Company or the Lender.

         SECTION 9.13. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
taken together, shall constitute one and the same instrument.

                      [the next page is the signature page]

                                       53
<PAGE>

         IN WITNESS WHEREOF, the Company and the Lender have caused this
Agreement to be duly executed by their duly authorized officers, as of the day
and year first above written.

                                       COACTIVE MARKETING GROUP, INC.

                                       By: /s/ FRED KASEFF
                                           -------------------------------------
                                           Name:  Fred Kaseff
                                           Title: Chief Financial Officer

                                       SOVEREIGN BANK

                                       By: /s/ WILLIAM CONLAN
                                           -------------------------------------
                                           Name:  William Conlan
                                           Title: Vice-President

                                       54

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