Document:

ex10two.htm

     

     

    
      

      

    

    

    
 

    DEMAND
GRID PROMISSORY NOTE

    PRIME
RATE

    

    

    
      
        	
                $2,800,000.00

              	 
      	
                August
      26, 2009

              

      

    

    New York, New York

    

    FOR VALUE RECEIVED, the
undersigned, Freundlich
Supply Company, Inc. (the “Borrower”) HEREBY PROMISES TO PAY to the
order of ISRAEL DISCOUNT BANK
OF NEW YORK, its successors and assigns (hereinafter the “Bank”), the principal
amount of  Two
Million Eight Hundred Thousand ($2,800,000.00), in lawful money of the
United States (the “Loan”), or the
aggregate unpaid principal amount of all revolving credit advances (hereinafter
each being referred to as an “Advance” and
collectively, the “Advances”) made to
Borrower, as set forth on Bank’s computer system on the Loan Enquiry Page(s)
(the “Loan Enquiry
Page(s)”) ON
DEMAND or on the maturity date of each such Advance as shown on the Loan
Enquiry Page(s), and in no event later than the Maturity Date, and to pay
interest on the unpaid principal balance of this Demand Grid Promissory Note
(this “Note”)
in the manner and at the rate as hereinafter specified and such amounts due
hereunder.

    

    Borrower
acknowledges that this Note is an obligation which is payable on demand and that
notwithstanding anything to the contrary in any other instrument, agreement or
other document to which Borrower and/or Bank is a party, the enumeration in any
such document of specific events of default, conditions and/or covenants
relating to the Advances evidenced by this Note or to any other Obligations,
shall not be construed to qualify, define or otherwise limit in any way Bank's
right, power or ability, at any time, to make demand for payment of the
principal of and interest on this Note, and Borrower agrees that the occurrence
of any event of default or breach of any condition or covenant in any such
document is not the only basis for demand to be made on this Note.

    

    1.            
Defined
Terms.  As used in this
Note the following terms shall have the following meanings:

    

    The term
“Additional
Costs” shall have the meaning as defined in Section 17.

    

    The terms
“Advance” or
“Advances”
shall have the meanings as defined in the introductory paragraph.

    

    The term
“Bank” shall
have the meaning as defined in the introductory paragraph.

    

    The term
“Bankruptcy
Code” shall mean Title 11 of the United States Code, as
amended.

     

    The term
“Borrower”
shall have the meaning as defined in the introductory paragraph.

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
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    The term
“Business Day”
shall mean any day other than a Saturday, Sunday, or other day on which
commercial banks in New York are authorized or required to close under the laws
of the State of New York.

    

    The term “Collateral” shall
mean any and all of Borrower’s right, title and interest in and to all
properties, assets and rights of Borrower, whether now owned or hereafter
created, acquired or arising and wheresoever located together with all of the
proceeds and products thereof in which the Bank has been granted or otherwise
obtained a security interest.

    

    The term “Default Interest
Rate” shall have the meaning as defined in Section 4.

    

    The term
“Event of
Default” shall mean any of the events or conditions specified in Section
12 hereof.

    

    The term
“Guarantor”
means each endorser, guarantor and surety of this Note or the Obligations
evidenced hereby and any person who is primarily or secondarily liable, in whole
or in part, for the repayment of the Obligations or any portion thereof
(including without limitation each Guarantor), any person who has granted
security for the repayment of the Obligations, together with such person’s
heirs, personal representatives, successors and assigns.

    

    The term
“Indebtedness”
shall mean all items of indebtedness, obligation or liability, whether matured
or unmatured, liquidated or unliquidated, funded or unfunded, direct or
contingent, joint or several, which would properly be included in the liability
section of a balance sheet or in a footnote to a financial statement in
accordance with generally accepted accounting principles, and shall also include
(a) all indebtedness guaranteed, directly or indirectly in any manner, or
endorsed (other than for collection or deposit in the ordinary course of
business) or sold with recourse, (b) all indebtedness in effect guaranteed,
directly or indirectly, through agreements, contingent or otherwise, and (c) all
indebtedness secured by (or for which the holder of such indebtedness has a
right, contingent or otherwise, to be secured by) any mortgage, deed of trust,
pledge, assignment, lien, security interest or other charge or encumbrance upon
property owned or acquired subject thereto, whether or not the liabilities
secured thereby have been assumed or guaranteed.

    

    The terms
“Indemnified
Party” or “Indemnified Parties”
shall have the meanings as defined in Section 27.

    

    The term
“Interest”
means the annual rate of interest payable on the outstanding Advances in
accordance with Sections 3 and 4.

    

    The term
“Loan” shall
have the meaning as defined in the introductory paragraph.

    

    The term
“Loan
Documents” shall mean this Note and any other document, instrument or
agreement and any amendments thereto, evidencing or securing the Obligations, or
now or at any time hereafter executed, delivered or recorded in connection with
the Obligations, any other note, any loan commitment, requisition, letter
agreement, line of credit agreement, commercial financing agreement, security
agreement, guaranty of payment, mortgage, deed of trust, pledge agreement, loan
agreement, loan and security agreement, hypothecation agreement, indemnity
agreement, letter of credit application and agreement, and assignment, all as
amended, restated, extended, renewed, supplemented, modified or replaced from
time to time.

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
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    The term
“Loan Enquiry
Page(s)” shall have the meaning as defined in the introductory
paragraph.

    

    The term
“Margin” shall
mean: (i) one
hundred and fifty basis points (150 bps)

    

    The term
“Maturity Date”
shall mean April 30,
2010.

    

    The term
“Minimum
Advance” shall have the meaning as defined in Section 2(c).

    

    The term
“Note” shall
mean this Demand Grid Promissory Note.

    

    The term “Obligations” shall
mean all existing and future debts, liabilities and obligations of every kind or
nature at any time owing by Borrower to Bank, whether under this Note or under
any other existing or future instrument, document or agreement, between Borrower
and Bank, whether joint or several, related or unrelated, primary or secondary,
matured or contingent, due or to become due, including, without limitation, the
debts, liabilities and obligations in respect of this Note and any extensions,
modifications, substitutions, increases and renewals thereof.  Without
limiting the generality of the foregoing, Obligations shall include any other
loan, advance or extension of credit, under any existing or future loan
agreement, promissory note, or other instrument, document or agreement either
arising directly between Borrower and Bank or acquired out­right,
conditionally or as collateral security from another person or entity by
Bank.

    

    The term “Obligor” shall mean
individually and collectively Borrower, each endorser and surety of this Note,
any person who is primarily or secondarily liable for the repayment of this Note
or any portion thereof (including without limitation each Guarantor), any person
who has granted security for the repayment of the Note, together with such
person’s heirs, personal representatives, successors and assigns.

    

    The term “Prime Rate” shall
mean a fluctuating rate per annum equal to the rate of interest publicly
announced by Bank at its principal office from time to time as its Prime
Rate.  Any change in the Prime Rate shall be effective on the date
such change is announced by Bank.

     

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
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    The term
“Prior Note”
shall mean that certain grid promissory note referenced and described in
paragraph 26 below.

    

    2.            
Advances.

    

    (a)           Each
request by Borrower for an Advance shall be received by Bank not later than
12:00 noon, New York local time, on the date of such request.

    

    (b)           Each
request for an Advance shall specify inter alia (i) the
requested date of such Advance and (ii) the requested amount of such
Advance.

    

    (c)           A
request for an Advance shall be irrevocable upon Bank’s first receiving
notification thereof and shall be in a minimum amount (“Minimum Advance”) of:
(i) $50,000.00;
or (ii) the remaining amount of the available undrawn balance under the Loan if
such amount is less than $50,000.00.

    (d)           Subject
to the terms and conditions hereof and the terms and conditions set forth in the
Loan Documents, Advances that are repaid or prepaid may be reborrowed on a
revolving basis up to the maximum amount of this Note.

    

    (e)           Borrower
shall utilize the Advances for working
capital purposes.

    

    3.           Principal
and Interest.

    

    (a)           Interest
shall be payable on the outstanding daily unpaid principal amount of each
Advance from the date hereof until payment in full is made and shall accrue and
be payable at the rates set forth or provided for herein, before and after
default, before and after maturity, before and after judgment and before and
after the commencement of any proceeding under the Bankruptcy Code, with
interest on overdue interest to bear interest and to be compounded at the
Default Interest Rate, in each case, to the fullest extent permitted by
applicable laws.

    

    (b)           Interest
accrued on each Advance shall be due and payable in arrears on the first day of
each calendar month commencing on the first day of the first full month
following the date of such Advance and at maturity (whether as stated or by
acceleration). Except as otherwise provided in Section 4, the unpaid principal
amount of each Advance shall bear interest at a rate per annum equal to the
higher of (i) 4.25%
or (ii) the Prime Rate plus 150 bps.

    

    (c)           If
not sooner paid, the unpaid principal amount of each Advance shall be due and
payable on the date set forth on Bank’s Loan Enquiry Page(s) as the due date for
such Advance.

    

    (d)           The
unpaid principal amount of any Advance may, at any time and from time to time,
be voluntarily paid or prepaid in whole or in part except that, with respect to
any voluntary prepayment, (i) Bank shall have received written notice of any
prepayment by 12:00 noon, New York local time on a Business Day on the date of
prepayment which notice shall identify the date and amount of the prepayment
and  (ii) each prepayment of an Advance shall be accompanied by
payment of interest accrued to the date of payment on the amount of principal
paid.

     

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
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    (e)           Bank
may act without liability upon the basis of telephonic notice believed by Bank
in good faith to be from Borrower.  Borrower shall immediately confirm
to Bank, in writing, each telephonic notice.  All Advances are made at
Bank’s sole and absolute discretion and Bank may, at its option and in its sole
and absolute discretion and without notice to the undersigned, decline to make
any Advance requested by Borrower.  Borrower hereby expressly
authorizes Bank to record in its computer system the amount and date of each
Advance, the applicable rate of interest, the applicable Interest Period, the
maturity date, and each payment of principal and interest thereon.  In
the event of any discrepancy between any such notation by Bank and any records
of Borrower, the records of Bank shall be controlling and
conclusive.

    

    (f)           All
amounts due and owing hereunder shall be paid in full no later than the earlier
of: (i) demand by Bank; (ii) Maturity Date; or (iii) the occurrence and
continuation of an Event of Default.

     

    4.           Default
Rate.  At the option of
the Bank, upon the occurrence and during the continuance of any Event of
Default, and in any event if any installment of principal or interest or any fee
or cost or other amount payable under this Note, or any other Loan Document, is
not paid when due, the Obligations shall thereafter bear interest at a
fluctuating interest rate per annum at all times equal to the rate otherwise
applicable thereto plus five (5%) percent per annum (the “Default Interest
Rate”), to the fullest extent permitted by applicable
law.  Accrued and unpaid interest on past due amounts (including
interest on past due interest) shall be compounded monthly, on the last day of
each calendar month, to the fullest extent permitted by applicable
law.

    

    5.           Computation
of Interest and Fees.

    

    (a)           Computation
of interest on the Loan and all fees under this Note shall be calculated on the
basis of a year of 360 days and the actual number of days
elapsed.  Borrower acknowledges that such latter calculation method
will result in a higher yield to the Bank than a method based on a year of 365
or 366 days.

     

    (b)           Under
no circumstances or event whatsoever shall the aggregate of all amounts deemed
interest hereunder and charged or collected pursuant to the terms of this Note
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable
hereto.  In the event that such court determines Bank has charged or
received interest hereunder in excess of the highest applicable rate, Bank shall
apply, in its sole discretion, and set off such excess interest received by Bank
against other Obligations due or to become due and such rate shall automatically
be reduced to the maximum rate permitted by such law.

     

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
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    6.            
Manner
and Treatment of Payments.

    

    (a)           Each
payment due on this Note, or under any other Loan Document, shall be made to
Bank, at Bank’s office located at 511 Fifth Avenue, New York, New York
10017-4997, for the account of Bank, in immediately available funds not later
than 3:00 p.m., New York local time, on the day of payment (which must be a
Business Day).  All payments received after these deadlines shall be
deemed received on the next succeeding Business Day.  All payments
shall be made in lawful money of the United States of America.

     

    (b)           Bank
shall have the unconditional right and discretion (and Borrower hereby
authorizes Bank) to charge Borrower’s operating and/or deposit account(s) for
all of Borrower’s Obligations as they become due from time to time under this
Note, or any other Loan Document, including, without limitation, interest,
principal, fees, indemnification obligations and reimbursement of
expenses.

     

    (c)           Any
payment due under this Note which is paid by check or draft shall be subject to
the condition that any receipt issued therefore shall be ineffective unless and
until the amount due is actually received by Bank.  Each payment
received by Bank shall be applied as follows: first, to the payment
of any and all costs, fees and expenses incurred by or payable to Bank in
connection with the collection or enforcement of this Note; second, to the
payment of all unpaid late charges (if any); third, to the payment
of all accrued and unpaid interest hereunder; and fourth, to the
payment of the unpaid principal balance of this Note, or in any other manner
which Bank may, in its sole discretion, elect from time to time.

     

    7.           Security
Interest in Collateral.

    

    (a)           To
secure payment to Bank and performance of the Obligations, Borrower hereby
grants to Bank a continuing security interest in, a general lien upon and a
right of set-off against the Collateral.

    

    (b)           Borrower
hereby authorizes Bank, at any time and from time to time, to file financing
statements, continuation statements and amendments thereto under the Uniform
Commercial Code naming Borrower as debtor and Bank as secured party and
indicating therein the types or describing the items of Collateral herein
specified.  Borrower will not, without the prior written consent of
Bank, file or authorize or permit to be filed in any jurisdiction any such
financing or like statement in which Bank is not named as the sole secured party
covering the Collateral set forth herein.

    

    (c)           Bank,
at its discretion, whether any of the Obligations be due may, in its name or in
the name of Borrower or otherwise, demand, sue for, collect or receive any money
or property at any time payable or receivable on account of or in exchange for,
or make any compromise or settlement deemed desirable with respect to, any of
the Collateral, but shall be under no obligation so to do, or Bank may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, or release, any of the Collateral, without thereby incurring
responsibility to, or discharging or otherwise affecting any liability of
Borrower.  Bank shall not be required to take 
 

     

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
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any steps
necessary to preserve any rights of prior parties to any of the
Collateral.  Upon default hereunder or in connection with any of the
Obligations (whether such default be that of Borrower or of any other party
obligated thereon), Bank shall have the rights and remedies provided by law and
Bank may sell or cause to be sold in the Borough of Manhattan, New York City, or
elsewhere, in one or more sales or parcels, at such price as Bank may deem best,
and for cash or on credit or for future delivery, without assumption of any
credit risk, all or any of the Collateral, at any brokers’ board or at public or
private sale, without demand of performance or notice of intention to sell or of
time or place of sale (except such notice as is required by applicable statute
and cannot be waived), and Bank or anyone else may be the purchaser of any or
all of the Collateral so sold and thereafter hold the same, absolutely free from
any claim or right of whatsoever kind, including any equity of redemption, of
Borrower, any such demand, notice or right and equity being hereby waived and
released.  Borrower will pay to Bank all reasonable out of pocket
expenses (including reasonable expense for legal services of every kind) of, or
incidental to, the enforcement of any of the provisions hereof or of any of the
Obligations, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement of any of the Collateral or receipt of the
proceeds thereof, and for the care of the Collateral and defending or asserting
the rights and claims of Bank in respect thereof, by litigation or otherwise,
including expense of insurance, and all such expenses shall be indebtedness
within the terms of this Note.  Bank, at any time, at its option, may
apply the net cash receipts from the Collateral to the payment of principal of
and/or interest on any of the Obligations, whether or not then due, making
proper rebate of interest or discount.  Notwithstanding that Bank,
whether in its own behalf and/or in behalf of another and/or of others, may
continue to hold Collateral and regardless of the value thereof, Borrower shall
be and remain liable for the payment in full, principal and interest, of any
balance of the Obligations and expenses at any time unpaid.

       

    

    8.           Right of
Set-Off.  To secure payment
of this Note and all other Obligations of Borrower to Bank, Borrower and any
Obligor of this Note hereby grant Bank a continuing lien and/or right of set-off
upon any and all deposit and/or operating accounts now or hereafter maintained
with Bank, any and all securities and other property of Borrower and any Obligor
and the proceeds thereof now or hereafter coming into the possession or control
of Bank, hereby authorizing Bank, at any time, without prior notice, to
appropriate and apply such deposits or the proceeds of the sale of such
securities or other property to any such Obligations, although contingent and
although unmatured, it being understood that Bank shall be under no obligation
to effect any such appropriation and application.

    

    9.           Repayment
Extension.  If any payment of
principal or interest shall be due on a Saturday, Sunday or any other day on
which banking institutions in the State of New York are required or permitted to
be closed, such payment shall be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of the
payment of interest.

    

    10.           Late
Charge.  Borrower shall
unconditionally pay to Bank a late charge (the “Late Charge”) equal
to the greater of (a) five (5%) percent of the payment then due or (b) $200.00,
if any such payment in whole or in part is not received by Bank within ten (10)
days after its due date.  The Late Charge is in addition to the
Default Interest Rate, if applicable, and shall be payable together with the
next payment due hereunder or, at Bank’s option, upon demand by Bank, provided, however, that if any
such late charge is not recognized as liquidated damages for such delinquency,
and if deemed to be interest in excess of the amount permitted by applicable
law, Bank shall be entitled to collect a late charge only at the highest rate
permitted by law, and any payment actually collected by Bank in excess of such
lawful amount shall be deemed a payment in reduction of the principal sum then
outstanding, and shall be so applied.

     

     

     

    
      

        
          
            
               

              

              ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

              511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

            

             

          

          
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    11.           Representations
and Warranties.  Borrower
represents and warrants to Bank that:

    

                                   
Existence and
Qualification; Power - Borrower is a corporation or limited liability
company duly formed, validly existing and in good standing under the laws of the
state of its organization.  Borrower is duly qualified or registered
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or the ownership or leasing of its properties makes such
qualification or registration necessary.  Borrower has all requisite
corporate power and/or other authority to conduct its business, to own and lease
its properties and to execute and deliver this Note and each Loan Document to
which it is a party and to perform its Obligations;

    

    Compliance with Laws
- Borrower is in compliance with all laws, regulations and other legal
requirements applicable to its business, has obtained all authorizations,
consents, approvals, orders, licenses and permits from, and has accomplished (or
obtained exemptions from) all filings, registrations and qualifications that are
necessary for the transaction of its business;

    
                               
Authority; Compliance With Other
Agreements and Instruments - the execution, delivery and
performance by Borrower of this Note and the other Loan Documents to which it is
a party has been duly authorized by all necessary corporate, partnership or
membership action, as applicable, and does not and will not: (i) require any
consent or approval not heretofore obtained of any manager, director,
stockholder, member, partner, security holder or creditor of such party; (ii)
violate or conflict with any provision of Borrower’s partnership agreement,
articles of organization, operating agreement, articles of incorporation,
charter, by-laws or other comparable instruments; or (iii) result in a breach by
Borrower or constitute a default by Borrower under, or cause or permit the
acceleration of any obligation owed under, any indenture or loan or credit
agreement or any other contractual obligation to which Borrower is a party or by
which Borrower or any of its property is bound or affected;

     

                                    
Financial Statements -
the financial statements of Borrower previously  furnished to Bank are
complete and correct and fairly present the financial condition of Borrower
through to the date for such fiscal period, and the result of Borrower’s
operations as of the end of the most recent fiscal quarter reflect no material
adverse change in the financial condition of Borrower;

     

     

     

     

    
      

        
          
            
               

              

              ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

              511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

            

             

          

          
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No Default - no event has
occurred and no event is continuing which with the giving of notice or the lapse
of time or both would constitute an Event of Default;

     

                                    
Representations and
Warranties - prior to the making of each Advance all
representations and warranties contained herein, or the other Loan Documents,
shall be true and correct and of the same force and effect as though such
representations and warranties had been made as of the date of the making of
such Advance.

     

                                    
Regulations T, U and X; Investment
Company Act - no part of the proceeds of the Loan will be used to
purchase or carry, or to extend credit to others for the purpose of purchasing
or carrying, any margin stock within the meaning of Regulations T, U or X of the
Board of Governors of the Federal Reserve System.  Borrower is not or
is not required to be registered as an “investment company” under the Investment
Company Act of 1940; and

     

                                    
Patriot Act Compliance -
Borrower is not involved in any activity, directly or indirectly, which would
constitute a violation of applicable laws concerning money laundering, the
funding of terrorism or similar activities.  No part of the proceeds
of the Loan will be used to fund activities which would constitute a violation
of the United States Bank Secrecy Act, the United States Money Laundering
Control Act of 1986, the United States International Money Laundering Abatement
and Anti-terrorist Financing Act of 2001.

    

    12.             Events of
Default.  The
occurrence of any one or more of the following events shall constitute an “Event
of Default” under this Note:

     

                                     
Payments – if Borrower,
or any other Obligor, fails to make any payment of principal or interest under
the Obligations within ten (10) Business Days after the datesuch payment is due
and payable; or

     

                                     
Other Charges - if
Borrower, or any other Obligor, fails to pay any other charges, fees, expenses
or other monetary obligations owing to Bank arising out of or incurred in
connection with this Note within ten (10) Business Days after the date such
payment is due and payable; or

     

                                      
Particular Covenant
Defaults - if Borrower fails to perform, comply with or observe
any covenant or undertaking contained in any Loan Document and such failure
continues for ten (10) Business Days after the occurrence thereof;
or

     

                                      
Financial Information –
if (i) any statement, report, financial statement, or certificate made or
delivered by Borrower, or any other Obligor, to Bank is not true and correct in
all material respect when made or delivered, (ii) the Borrower’s financial
statements issued for the reported fiscal year materially deviate from the
projected profit and loss statement provided by the Borrower to the Bank for
such period; or (iii) otherwise fails to comply with such other requirement or
covenants set forth in the line letter agreement executed contemporaneously
herewith.

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
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                                   Warranties or Representations -
if any warranty, representation or other statement by or on behalf of Borrower
contained in or pursuant to this Note, the other Loan Documents or in any
document, agreement or instrument furnished in compliance with, relating to, or
in reference to this Note, is false, erroneous, or misleading in any material
respect when made; or

     

                                       
Agreements with Others -
(i) if Borrower shall default beyond any grace period in the payment of
principal or interest of any Indebtedness of Borrower; or (ii) if Borrower
otherwise defaults under the terms of any such Indebtedness if the effect of
such default is to enable the holder of such Indebtedness to accelerate the
payment of Borrower’s obligations, which are the subject thereof, prior to the
maturity date or prior to the regularly scheduled date of payment;
or

     

                                       
Other Agreements with
Bank - if any Obligor breaches or violates the terms of, or if a
default occurs under, any other existing or future agreement (related or
unrelated) (including, without limitation, the other Loan Documents) between any
Obligor and Bank; or

     

                                        
Judgments - if any final
judgment exceeding $250,000 for the payment of money (i) which is not fully and
unconditionally covered by insurance or (ii) for which Borrower has not
established a cash or cash equivalent reserve in the full amount of such
judgment, shall be rendered by a court of record against Borrower and such
judgment shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without being vacated, discharged, satisfied or bonded pending
appeal; or

     

                                        
Assignment for Benefit of Creditors,
etc. - if Borrower makes or proposes in writing, an assignment for
the benefit of creditors generally, offers a composition or extension to
creditors, or makes or sends notice of an intended bulk sale of any business or
assets now or hereafter owned or conducted by Borrower; or

     

                                         Bankruptcy, Dissolution, etc. -
upon the commencement of any action for the dissolution or liquidation of
Borrower, or the commencement of any proceeding to avoid any transaction entered
into by Borrower, or the commencement of any case or proceeding for
reorganization or liquidation of Borrower’s debts under the Bankruptcy Code or
any other state or federal law, now or hereafter enacted for the relief of
debtors, whether instituted by or against Borrower; provided however, that
Borrower shall have twenty (20) Business Days to obtain the dismissal or
discharge of involuntary proceedings filed against it, it being understood that
during such twenty (20) Business Day period, Bank may seek adequate protection
in any bankruptcy proceeding; or

     

                                         
Receiver - upon the
appointment of a receiver, liquidator, custodian, trustee or similar official or
fiduciary for Borrower or for Borrower’s property; or

     

                                         
Execution Process, etc. -
the issuance of any execution or distraint process against any property of
Borrower; or

     

     

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
          10

          
            

          

        

        
           

        

      

    

     

     

    

     

                                         
Termination of Business -
if Borrower ceases any material portion of its business operations as presently
conducted; or

     

                                          
Investigations - any
indication or evidence received by Bank that reasonably leads it to believe
Borrower may have directly or indirectly been engaged in any type of activity
which, would be reasonably likely to result in the forfeiture of any material
property of Borrower to any governmental entity, federal, state or local;
or

     

                                          
Liens - if any lien in
favor of Bank shall cease to be valid, enforceable and perfected and prior to
all other liens other than permitted liens; or

     

                                          
Concealment/Removal of
Property - if Borrower, or any other Obligor, conceals, removes or
permits to be concealed or removed any part of Borrower’s property with intent
to hinder, delay, or defraud any of its creditors; or

     

                                          
Fraudulent Conveyance -
the making or suffering by Borrower, or any other Obligor, of a transfer of any
property, which is fraudulent under the law of any applicable jurisdiction;
or

     

                                          
Security – if all or any
part of any security granted by Borrower for the Obligations shall, in the sole
discretion of Bank, have become unsatisfactory and Borrower fails upon demand of
Bank to furnish such further security or to make payment on account of any of
the Obligations as would be satisfactory to Bank; or

     

                                          
Material Adverse Effect –
if there is any change in Borrower’s financial condition which, in Bank’s
reasonable opinion, has or would be reasonably likely to have a material adverse
effect with respect to (a) the assets, properties, financial condition, credit
worthiness, business prospects, material agreements or results of business
operations of Borrower, or (b) Borrower’s ability to pay the Obligations in
accordance with the terms hereof, or (c) the validity or enforceability of this
Note or any of the other Loan Documents or the rights and remedies of Bank
hereunder or thereunder.

    

    13.                
Rights
and Remedies upon Demand or Default.  Upon demand or
following the occurrence of an Event of Default hereunder, Bank, in Bank’s sole
discretion and without notice or demand to Borrower or any other Obligor, may:
(a) declare the entire outstanding principal balance of this Note, together with
all accrued interest and all other sums due under this Note to be immediately
due and payable, and the same shall thereupon become immediately due and payable
without presentment, demand or notice, which are hereby expressly waived (b)
exercise its right of set-off against any money, funds, credits or other
property of any nature whatsoever of Borrower  or any other Obligor
now or at any time hereafter in the possession of, in transit to or from, under
the control or custody of, or on deposit with, Bank or any affiliate of Bank in
any capacity whatsoever, including without limitation, any balance of any
deposit account and any credits with Bank or any affiliate of Bank; (c)
terminate any outstanding commitments of Bank to Borrower or any Obligor; and
(d) exercise any or all rights, powers, and remedies provided for in the Loan
Documents or now or hereafter existing at law, in equity, by statute or
otherwise.

     

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
          11

          
            

          

        

        
           

        

      

    

     

     

    

    14.                
Remedies
Cumulative.  Each right, power
and remedy of Bank hereunder, under the other Loan Documents or now or hereafter
existing at law, in equity, by statute or otherwise shall be cumulative and
concurrent, and the exercise or the beginning of the exercise of any one or more
of them shall not preclude the simultaneous or later exercise by Bank of any or
all such other rights, powers or remedies.  No failure or delay by
Bank to insist upon the strict performance of any one or more provisions of this
Note or of the Loan Documents or to exercise any right, power or remedy
consequent upon a breach thereof or a default hereunder shall constitute a
waiver thereof, or preclude Bank from exercising any such other rights, powers
or remedy.  By accepting full or partial payment after the due date of
any amount of principal or interest on this Note, or other amounts payable on
demand, Bank shall not be deemed to have waived the right either to require
prompt payment when due and payable of all other amounts of principal or
interest on this Note or other amounts payable on demand, or to exercise any
rights and remedies available to it in order to collect all such other amounts
due and payable under this Note.

    

    15.                
Intentionally
Omitted

    

    16.               
 Intentionally
Omitted

    

    17.               
Additional
Costs.  If, as a result
of any change in applicable law, regulation, guideline or order, or in the
interpretation or application thereof by any governmental authority charged with
the administration thereof, there shall be imposed upon or made applicable to
Bank any reserve requirement against this Note or any other costs or assessments
(hereinafter “Additional Costs”),
Borrower shall pay to Bank, on demand (which demand shall be in writing and
which will set forth a calculation of such Additional Costs), an amount
sufficient to compensate Bank for such Additional Cost.  Bank’s
calculation of the amount of such Additional Costs shall be presumed correct
absent manifest error.

    

    18.                
Collection
Expenses.  If this Note is
placed in the hands of an attorney for collection following the occurrence of an
Event of Default hereunder, Borrower agrees to pay to Bank upon demand costs and
expenses, including all attorney’s fees and court costs, paid or incurred by
Bank in connection with the enforcement or collection of this Note (whether or
not any action has been commenced by Bank to enforce or collect this Note) or in
successfully defending any counterclaim or other legal proceeding brought by
Borrower contesting Bank’s right collect the outstanding principal balance of
this Note.  The obligation of Borrower to pay all such costs and
expenses shall not be merged into any judgment by confession against
Borrower.  All of such costs and expenses shall bear interest at the
highest rate of Interest permitted under this Note from the date of payment by
Bank until repaid in full by the Obligor.

    

    19.               
 Interest
Rate after Judgment.  If judgment is
entered against Borrower on this Note, the amount of the judgment entered (which
may include principal, interest, fees and costs) shall bear interest at the
higher of (i) the legal rate of interest then applicable to judgments in the
jurisdiction in which judgment was entered, or (ii) if otherwise permitted by
applicable law, the Default Interest Rate provided herein.

     

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
          12

          
            

          

        

        
           

        

      

    

     

     

    

    20.               
Certain
Waivers by Borrower.  Borrower waives
demand, presentment, protest and notice of demand, of non-payment, of dishonor,
and of protest of this Note.  Bank, without notice to or further
consent of Borrower or any other Obligor and without in any respect
compromising, impairing, releasing, lessening or affecting the obligations of
Borrower hereunder or under of the Loan Documents, may: (a) release, surrender,
waive, add, substitute, settle, exchange, compromises, modify, extend or grant
indulgences with respect to (i) this Note, (ii) any of the Loan Documents,
and/or (iii) all or any part of any collateral or security for this Note; and/or
(iv) any Obligor; (b) complete any blank space in this Note according to the
terms upon which the loan evidenced hereby is made; and (c) grant any extension
or other postponements of the time of payment hereof.

    

    21.                
Choice of
Law: Forum Selection: Consent to Jurisdiction.  This Note shall
be governed by, construed and interpreted in accordance with the laws of the
State of New York (excluding the choice of law rules
thereof).  Borrower hereby irrevocably submits to the jurisdiction of
any New York court or federal court sitting in the State of New York in any
action or proceeding arising out of or relating to this Note, and hereby
irrevocably waives any objection to the laying of venue of any such action or
proceeding in any such court and any claim that any such action or proceeding
has been brought in an inconvenient forum.  A final judgment in any
such action or proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by
law.

    

    22.                
Subsequent
Holders.  In the event that
any holder of this Note transfers this Note for value, Borrower agrees that
except with respect to a subsequent holder with actual knowledge of a claim or
defense, no subsequent holder of this Note shall be subject to any claims or
defenses which Borrower may have against a prior holder (which claims or
defenses are not waived as to prior holder), all of which are waived as to the
subsequent holder, and that all such subsequent holders shall have all of the
rights of a holder in due course with respect to Borrower even though the
subsequent holder may not qualify, under applicable law, absent this paragraph,
as a holder in due course.

    

    23.                
Invalidity
of Any Part.  If any provision
or part of any provision of this Note shall for any reason be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision (or any remaining part of
any provision) of this Note, and this Note shall be construed as if such
invalid, illegal or unenforceable provision (or part thereof) had never been
contained in this Note, but only to the extent of its invalidity, illegality, or
unenforceability.  In any event, if any such provision pertains to the
repayment of the Obligations evidenced by this Note, then and in such event, at
Bank’s option, the outstanding principal balance of this Note, together with all
accrued and unpaid interest thereon, shall become immediately due and
payable.

    

    24.               
WAIVER OF
JURY TRIAL.  BORROWER HEREBY
(i)  COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY A JURY, AND (ii) WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH BANK AND BORROWER MAY BE PARTIES ARISING OUT OF, IN
CONNECTION WITH OR IN ANY WAY PERTAINING TO THIS NOTE, ANY OF THE LOAN DOCUMENTS
AND/OR ANY TRANSACTIONS, OCCURRENCES, COMMUNICATIONS, OR UNDERSTANDINGS (OR THE
LACK OF ANY OF THE FOREGOING) RELATING IN ANY WAY TO BORROWER-BANK RELATIONSHIP
BETWEEN THE PARTIES.  IT IS UNDERSTOOD AND AGREED THAT THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH
ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
THIS NOTE.  THIS WAIVER OF JURY TRIAL IS SEPARATELY GIVEN, KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND BORROWER HEREBY AGREES THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT.  BANK IS HEREBY AUTHORIZED TO SUBMIT THIS NOTE TO ANY COURT
HAVING JURISDICTION OVER THE SUBJECT MATTER AND BORROWER SO AS TO SERVE AS
CONCLUSIVE EVIDENCE OF SUCH WAIVER OF RIGHT TO TRIAL BY
JURY.  BORROWER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED
IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND/OR THAT IT HAS HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

     

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
          13

          
            

          

        

        
           

        

      

    

     

     

    

    
 

    25.               
Waiver of
Defenses, Counterclaims, etc.  Borrower hereby
waives, in any litigation (whether or not arising out of or related to this note
or any other obligation or liabilities to Bank) in which Borrower and Bank shall
be adverse parties, the right to interpose any defense, set-off or counterclaim
of any nature or description.

    

    26.               
Prior
Note(s).  This Note amends,
replaces, restates and relates back to the Grid Promissory Note dated March 6,
2008 in the principal amount of $3,000,000.00
(“Prior Note”),
and all sums outstanding under the Prior Note shall be deemed outstanding under
this Note as of the date hereof and in the amounts set forth on the Bank’s
records.

    

    27.               
Indemnification.  The
Borrower agrees: (i) to pay and reimburse Bank for all of
its  reasonable and documented out-of-pocket costs and expenses
incurred in connection with the preparation and execution of, and any amendment,
supplement or modification to, this Note and the other Loan Documents, and the
consummation and administration of the transactions contemplated hereby and
thereby, including the reasonable fees, disbursements and other charges of
internal and external counsel, (ii) to pay and reimburse Bank for reasonable and
documented out-of-pocket costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Note, Loan Documents and
any such other documents, including the reasonable fees, disbursements and other
charges of its counsel, whether internal or external, (iii) to pay, indemnify
and hold harmless the Bank and its directors, officers and agents (each, an
“Indemnified
Party” and collectively, “Indemnified Parties”)
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including reasonable and documented fees,
disbursements and other charges internal or external counsel for all Indemnified
Parties in connection with the execution, delivery, enforcement, performance and
administration of this Note or the Loan Documents and any such other documents
or the use of the proceeds thereof, including any of the foregoing relating to
the violation of, noncompliance with or liability applicable to the operations
of the Borrower, any of its subsidiaries; provided that the Borrower shall have
no obligation hereunder to any Indemnified Party with respect to damages caused
directly by the gross negligence or willful misconduct of such Indemnified Party
as determined by a non-appealable final judgment.

     

     

     

    

      
        
          
             

            

            ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

            511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

          

           

        

        
          14

          
            

          

        

        
           

        

      

    

    
 

    

    28.               
Miscellaneous.  Time is of the
essence under this Note.  The paragraph headings of this Note are for
convenience only, and shall not limit or otherwise affect any of the terms
hereof.  This Note and the other Loan Documents, if any, constitute
the entire agreement between the parties with respect to their subject matter
and supersede all prior letters, representations, or agreements, oral or
written, with respect thereto. No modification, release, or waiver of this Note
shall be deemed to be made by Bank unless in writing signed by Bank, and each
such waiver, if any, shall apply only with respect to the specific instance
involved.  No course of dealing or conduct shall be effective to
modify, release or waive any provisions of this Note or any of the other Loan
Documents.  Borrower acknowledges that this Note is an instrument for
the payment of money only within the meaning of Section 3213 of the New York
Civil Practice Law & Rules.  This Note shall inure to the benefit
of and be enforceable by Bank and Bank’s successors and assigns and any other
person to whom Bank may grant an interest in the obligations evidenced by this
Note and shall be binding upon and enforceable against Borrower and Borrower’s
successors and assigns.  Whenever used herein, the singular number
shall include the plural, the plural the singular, and the use of the masculine,
feminine, or neuter gender shall include all genders.

    

    29.               
Joint and
Several.  Each of the
undersigned shall be jointly and severally liable hereunder and all provisions
shall apply to all of them.

    

    30.               
Renewal
Periods. Unless sooner terminated
by the Bank pursuant to the existing terms of this Note, the Maturity Date shall
be automatically extended for periods of ninety (90) days thereafter (each, a
“Renewal Period”), but in no event later than October
31, 2010, it
being understood that, notwithstanding the foregoing, the Bank shall have the
right to immediately terminate the line of credit evidenced by this Note at any
time during any Renewal Period, upon either (i) demand or (ii) the occurrence of
an Event of Default, in Bank’s sole and absolute discretion, at which such time
all amounts due and owing hereunder shall be paid in full.

    

    

    Borrower:

    

    Freundlich
Supply Company, Inc.

    

    

    By:  _____________________________

    Name:
Andrew Prince

    Title:
President & CEO

    
      
        
           

          

          ISRAEL
DISCOUNT BANK OF NEW YORK · MEMBER FDIC

          511 FIFTH
AVE. NEW YORK, NY 10017-4997 · TEL: (212)
551-8500

        

         

      

      
        15SPLIT-OFF
AGREEMENT

    

    This SPLIT-OFF AGREEMENT, dated as
of August 31, 2009 (this “Agreement”), is entered into by and among Mesa Energy
Holdings, Inc., a Delaware corporation (“Seller”), Mesquite Mining Group, Inc.,
a Delaware corporation (“Split-Off Subsidiary”) and Beverly
Frederick  (“Buyer”).

     

    RECITALS:

    

    WHEREAS, Seller is the owner of
all of the issued and outstanding capital stock of Split-Off Subsidiary;
Split-Off Subsidiary is a wholly-owned subsidiary of Seller which will acquire
the business assets and liabilities previously held by Seller; and Seller has no
other businesses or operations prior to the Merger (as defined
herein);

    

    WHEREAS, contemporaneously
with the execution of this Agreement, Seller, Mesa Energy, Inc., a Nevada
corporation (“Mesa”), and a newly-formed wholly-owned Nevada subsidiary of
Seller, Mesa Energy Acquisition Corp. (“Acquisition Subsidiary”), will enter
into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”)
pursuant to which Acquisition Subsidiary will merge with and into Mesa with Mesa
remaining as the surviving entity (the “Merger”); and the equity holders of Mesa
will receive securities of Seller in exchange for their equity interests in
Mesa;

    

    WHEREAS, the execution and
delivery of this Agreement is required by Mesa as a condition to its execution
of the Merger Agreement, and the consummation of the assignment, assumption,
purchase and sale transactions contemplated by this Agreement is also a
condition to the completion of the Merger pursuant to the Merger Agreement, and
Seller has represented to Mesa in the Merger Agreement that the transactions
contemplated by this Agreement will be consummated immediately following the
closing of the Merger, and Mesa relied on such representation in entering into
the Merger Agreement;

    

    WHEREAS, Buyer desires to
purchase the Shares (as defined in Section 2.1) from
Seller, and to assume, as between Seller and Buyer, all responsibility for any
debts, obligations and liabilities of Seller (prior to the Merger) and Split-Off
Subsidiary, on the terms and subject to the conditions specified in this
Agreement; and

    

    WHEREAS, Seller desires to
sell and transfer the Shares to Buyer, on the terms and subject to the
conditions specified in this Agreement;

    

    NOW, THEREFORE, in
consideration of the premises and the covenants, promises and agreements herein
set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, agree as follows:

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    I.            ASSIGNMENT
AND ASSUMPTION OF SELLER’S ASSETS AND LIABILITIES.

     

    Subject
to the terms and conditions provided below:

     

    1.1           Assignment
of Assets.  Seller hereby contributes, assigns, conveys and
transfers to Split-Off Subsidiary, and Split-Off Subsidiary hereby receives,
acquires and accepts, all assets and properties of Seller as of the Effective
Time, including but not limited to the following, but excluding in all cases (i) the right, title
and assets of Seller in, to and under the Transaction Documentation and (ii) the
capital stock of Mesa, Acquisition Subsidiary and Split-Off
Subsidiary:

     

    
      	
               
      

            	
              (a)

            	
              all
      cash and cash equivalents;

            

    

     

    
      	
               
      

            	
              (b)

            	
              all
      accounts receivable;

            

    

     

    
      	
               
      

            	
              (c)

            	
              all
      inventories of raw materials, work in process, parts, supplies and
      finished products;

            

    

     

    
      	
               
      

            	
              (d)

            	
              all
      of Seller’s rights, title and interests in, to and under all contracts,
      agreements, leases, licenses (including software licenses), supply
      agreements, consulting agreements, commitments, purchase orders, customer
      orders and work orders, and including all of Seller’s rights thereunder to
      use and possess equipment provided by third parties, and all
      representations, warranties, covenants and guarantees related to the
      foregoing (provided that to the extent any of the foregoing or any claim
      or right or benefit arising thereunder or resulting therefrom is not
      assignable by its terms, or the assignment thereof shall require the
      consent or approval of another party thereto, this Agreement shall not
      constitute an assignment thereof if an attempted assignment would be in
      violation of the terms thereof or if such consent is not obtained prior to
      the Effective Time, and in lieu thereof Seller shall reasonably cooperate
      with Split-Off Subsidiary in any reasonable arrangement designed to
      provide Split-Off Subsidiary the benefits thereunder or any claim or right
      arising thereunder);

            

    

     

    
      	
               
      

            	
              (e)

            	
              all
      intellectual property, including but not limited to issued patents, patent
      applications (whether or not patents are issued thereon and whether
      modified, withdrawn or resubmitted), unpatented inventions, product
      designs, copyrights (whether registered or unregistered), know-how,
      technology, trade secrets, technical information, notebooks, drawings,
      software, computer coding (both object and source) and all documentation,
      manuals and drawings related thereto, trademarks or service marks and
      applications therefor, unregistered trademarks or service marks, trade
      names, logos and icons and all rights to sue or recover for the
      infringement or misappropriation
thereof;

            

    

     

    
      	
               
      

            	
              (f)

            	
              all
      fixed assets, including but not limited to the machinery, equipment,
      furniture, vehicles, office equipment and other tangible personal property
      owned or leased by Seller;

            

    

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (g)

            	
              all
      customer lists, business records, customer records and files, customer
      financial records, and all other files and information related to
      customers, all customer proposals, all open service agreements with
      customers and all uncompleted customer contracts and agreements;
      and

            

    

     

    
      	
               
      

            	
              (h)

            	
              to
      the extent legally assignable, all licenses, permits, certificates,
      approvals and authorizations issued by Governmental Entities and necessary
      to own, lease or operate the assets and properties of Seller and to
      conduct Seller’s business as it is presently
  conducted;

            

    

     

    all of
the foregoing being referred to herein as the “Assigned Assets.”

     

    1.2           Assignment
and Assumption of Liabilities. Seller hereby assigns to
Split-Off Subsidiary, and Split-Off Subsidiary hereby assumes and agrees to pay,
honor and discharge all debts, adverse claims, liabilities, judgments and
obligations of Seller as of the Effective Time, whether accrued, contingent or
otherwise and whether known or unknown, including those arising under any law
(including the common law) or any rule or regulation of any Governmental Entity
or imposed by any court or any arbitrator in a binding arbitration resulting
from, arising out of or relating to the assets, activities, operations, actions
or omissions of Seller, or products manufactured or sold thereby or services
provided thereby, or under contracts, agreements (whether written or oral),
leases, commitments or undertakings thereof, but excluding in all cases the obligations of
Seller under the Transaction Documentation (all of the foregoing being
referred to herein as the “Assigned Liabilities”).

     

    The
assignment and assumption of Seller’s assets and liabilities provided for in
this Article I
is referred to as the “Assignment.”

    

    II.          PURCHASE
AND SALE OF STOCK.

     

    2.1           Purchased
Shares.  Subject to the terms and conditions provided below,
Seller shall sell and transfer to Buyer and Buyer shall purchase from Seller, on
the Closing Date (as defined in Section 3.1), all of the
issued and outstanding shares of capital stock of Split-Off Subsidiary (the
“Shares”).

     

    2.2           Purchase
Price.  The purchase price for the Shares shall be the transfer
and delivery by Buyer to Seller of the type and number of shares of common stock
and other securities of Seller that Buyer owns (the “Purchase Price
Securities”), as set forth in Exhibit A attached hereto, deliverable as provided
in Section
3.3.

     

    III.          CLOSING.

     

    3.1           Closing.  The
closing of the transactions contemplated in this Agreement (the “Closing”) shall
take place as soon as practicable following the execution of this Agreement;
provided, however, that
the Closing must occur immediately after the closing of the
Merger.  The date on which the Closing occurs shall be referred to
herein as the “Closing Date.”

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    3.2           Transfer
of Shares.  At the Closing, Seller shall deliver to Buyer
certificates representing the Shares purchased by Buyer, duly endorsed to Buyer
or as directed by Buyer, which delivery shall vest Buyer with good and
marketable title to such Shares, free and clear of all liens and
encumbrances.

     

    3.3           Payment
of Purchase Price.  At the Closing, Buyer shall deliver to
Seller a certificate or certificates representing Buyer’s Purchase Price
Securities duly endorsed to Seller, which delivery shall vest Seller with good
and marketable title to the Purchase Price Securities, free and clear of all
liens and encumbrances.

     

    3.4           Transfer
of Records.  On or before the Closing, Seller shall transfer to
Split-Off Subsidiary all existing corporate books and records in Seller’s
possession relating to Split-Off Subsidiary and its business, including but not
limited to all agreements, litigation files, real estate files, personnel files
and filings with governmental agencies; provided, however, when any such
documents relate to both Seller and Split-Off Subsidiary, only copies of such
documents need be furnished. On or before the Closing, Buyer and Split-Off
Subsidiary shall transfer to Seller all existing corporate books and records in
the possession of Buyer or Split-Off Subsidiary relating to Seller, including
but not limited to all corporate minute books, stock ledgers, certificates and
corporate seals of Seller and all agreements, litigation files, real property
files, personnel files and filings with governmental agencies; provided, however, when any such
documents relate to both Seller and Split-Off Subsidiary or its business, only
copies of such documents need be furnished.

     

    3.5           Instruments
of Assignment. At the Closing, Seller and Split-Off Subsidiary shall
deliver to each other such instruments providing for the Assignment as the other
may reasonably request (the “the Instruments of Assignment”).

     

    IV.          BUYER’S
REPRESENTATIONS AND WARRANTIES.  Buyer represents and warrants
that:

     

    4.1           Capacity
and Enforceability.  Buyer has the legal capacity to execute
and deliver this Agreement and the documents to be executed and delivered by
Buyer at the Closing pursuant to the transactions contemplated hereby. This
Agreement and all such documents constitute valid and binding agreements of
Buyer, enforceable in accordance with their terms.

     

    4.2           Compliance.  Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby by Buyer will result in the breach of any term
or provision of, or constitute a default under, or violate any agreement,
indenture, instrument, order, law or regulation to which Buyer is a party or by
which Buyer is bound.

    
      
         

      

      
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    4.3           Purchase
for Investment.  Buyer is financially able to bear the economic
risks of acquiring the Shares and the other transactions contemplated hereby,
and has no need for liquidity in her investment in the Shares. Buyer has such
knowledge and experience in financial and business matters in general, and with
respect to businesses of a nature similar to the business of Split-Off
Subsidiary (after giving effect to the Assignment), so as to be capable of
evaluating the merits and risks of, and making an informed business decision
with regard to, the acquisition of the Shares and the other transactions
contemplated hereby. Buyer is acquiring the Shares solely for her own account
and not with a view to or for resale in connection with any distribution or
public offering thereof, within the meaning of any applicable securities laws
and regulations, unless such distribution or offering is registered under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption from
such registration is available. Buyer has (i) received all the information
she has deemed necessary to make an informed decision with respect to the
acquisition of the Shares and the other transactions contemplated hereby;
(ii) had an opportunity to make such investigation as she has desired
pertaining to Split-Off Subsidiary (after giving effect to the Assignment) and
the acquisition of an interest therein and the other transactions contemplated
hereby, and to verify the information which is, and has been, made available to
her; and (iii) had the opportunity to ask questions of Seller concerning
Split-Off Subsidiary (after giving effect to the Assignment). Buyer acknowledges
that Buyer is a former director and officer of Seller, and a current director
and officer of Split-Off Subsidiary and, as such, has actual
knowledge of the business, operations and financial affairs of Split-Off
Subsidiary (after giving effect to the Assignment). Buyer has received no public
solicitation or advertisement with respect to the offer or sale of the Shares.
Buyer realizes that the Shares are “restricted securities” as that term is
defined in Rule 144 promulgated by the Securities and Exchange Commission under
the Securities Act, the resale of the Shares is restricted by federal and state
securities laws and, accordingly, the Shares must be held indefinitely unless
their resale is subsequently registered under the Securities Act or an exemption
from such registration is available for their resale. Buyer understands that any
resale of the Shares by her must be registered under the Securities Act (and any
applicable state securities law) or be effected in circumstances that, in the
opinion of counsel for Split-Off Subsidiary at the time, create an exemption or
otherwise do not require registration under the Securities Act (or applicable
state securities laws). Buyer acknowledges and consents that certificates now or
hereafter issued for the Shares will bear a legend substantially as
follows:

     

    THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION UNDER THE STATE ACTS OR PURSUANT TO EXEMPTIONS FROM SUCH
REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE
SECURITIES ACT, THE EXEMPTIONS AFFORDED BY SECTION 4(1) OF THE SECURITIES ACT
AND RULE 144 THEREUNDER). AS A PRECONDITION TO ANY SUCH TRANSFER, THE ISSUER OF
THESE SECURITIES SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO THE
AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AND/OR SUCH
OTHER EVIDENCE AS MAY BE SATISFACTORY THERETO THAT ANY SUCH TRANSFER WILL NOT
VIOLATE THE SECURITIES LAWS.

    
      
         

      

      
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    Buyer
understands that the Shares are being sold to her pursuant to the exemption from
registration contained in Section 4(1) of the Securities Act and that Seller is
relying upon the representations made herein as one of the bases for claiming
the Section 4(1) exemption.

     

    4.4           Liabilities.  Following
the Closing, Seller will have no liability for any debts, liabilities or
obligations of Split-Off Subsidiary or its business or activities, and there are
no outstanding guaranties, performance or payment bonds, letters of credit or
other contingent contractual obligations that have been undertaken by Seller
directly or indirectly in relation to Split-Off Subsidiary or its business and
that may survive the Closing.

     

    4.5           Title to
Purchase Price Securities.  Buyer is the sole record and
beneficial owner of her Purchase Price Securities. At Closing, Buyer will have
good and marketable title to her Purchase Price Securities, which Purchase Price
Securities are, and at the Closing will be, free and clear of all options,
warrants, pledges, claims, liens and encumbrances, and any restrictions or
limitations prohibiting or restricting transfer to Seller, except for
restrictions on transfer as contemplated by applicable securities
laws.

     

    V.          SELLER’S
AND SUBSIDIARY’S REPRESENTATIONS AND WARRANTIES.  Seller and
Split-Off Subsidiary, jointly and severally, represent and warrant to Buyer
that:

     

    5.1           Organization
and Good Standing.  Each of Seller and Split-Off Subsidiary is
a corporation duly incorporated, validly existing, and in good standing under
the laws of the State of Delaware.

     

    5.2           Authority
and Enforceability.  The execution and delivery of this
Agreement and the documents to be executed and delivered at the Closing pursuant
to the transactions contemplated hereby, and performance in accordance with the
terms hereof and thereof, have been duly authorized by Seller and all such
documents constitute valid and binding agreements of Seller enforceable in
accordance with their terms.

     

    5.3           Title to
Shares.  Seller is the sole record and beneficial owner of the
Shares.  At Closing, Seller will have good and marketable title to the
Shares, which Shares are, and at the Closing will be, free and clear of all
options, warrants, pledges, claims, liens and encumbrances, and any restrictions
or limitations prohibiting or restricting transfer to Buyer, except for
restrictions on transfer as contemplated by Section 4.3
above.  The Shares constitute all of the issued and outstanding shares
of capital stock of Split-Off Subsidiary.

     

    5.4           WARN
Act.  Split-Off Subsidiary does not have a sufficient number of
employees to make it subject to the Worker Adjustment and Retraining
Notification Act.

     

    5.5           Representations
in Merger Agreement.  Split-Off Subsidiary represents and
warrants that all of the representations and warranties by Seller, insofar as
they relate to Split-Off Subsidiary, contained in the Merger Agreement are true
and correct.

     

    
      
         

      

      
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    VI.          OBLIGATIONS
OF BUYER PENDING CLOSING.  Buyer covenants and agrees that
between the date hereof and the Closing:

     

    6.1           Not
Impair Performance.  Buyer shall not take any intentional
action that would cause the conditions upon the obligations of the parties
hereto to effect the transactions contemplated hereby not to be fulfilled,
including, without limitation, taking or causing to be taken any action that
would cause the representations and warranties made by any party herein not to
be true, correct and accurate as of the Closing, or in any way impairing the
ability of Seller to satisfy its obligations as provided in Article
VII.

     

    6.2           Assist
Performance.  Buyer shall exercise its reasonable best efforts
to cause to be fulfilled those conditions precedent to Seller’s obligations to
consummate the transactions contemplated hereby which are dependent upon actions
of Buyer and to make and/or obtain any necessary filings and consents in order
to consummate the sale transaction contemplated by this Agreement.

     

    VII.         OBLIGATIONS
OF SELLER PENDING CLOSING.  Seller covenants and agrees that
between the date hereof and the Closing:

     

    7.1           Business
as Usual.  Split-Off Subsidiary shall operate and Seller shall
cause Split-Off Subsidiary to operate in accordance with past practices and
shall use best efforts to preserve its goodwill and the goodwill of its
employees, customers and others having business dealings with Split-Off
Subsidiary. Without limiting the generality of the foregoing, from the date of
this Agreement until the Closing Date, Split-Off Subsidiary shall (a) make
all normal and customary repairs to its equipment, assets and facilities,
(b) keep in force all insurance, (c) preserve in full force and effect
all material franchises, licenses, contracts and real property interests and
comply in all material respects with all laws and regulations, (d) collect
all accounts receivable and pay all trade creditors in the ordinary course of
business at intervals historically experienced, and (e) preserve and
maintain Split-Off Subsidiary’s assets in their current operating condition and
repair, ordinary wear and tear excepted. From the date of this Agreement until
the Closing Date, Split-Off Subsidiary shall not (i) amend, terminate or
surrender any material franchise, license, contract or real property interest,
or (ii) sell or dispose of any of its assets except in the ordinary course
of business. Neither Split-Off Subsidiary nor Buyer shall take or omit to take
any action that results in Seller incurring any liability or obligation prior to
or in connection with the Closing.

     

    7.2           Not
Impair Performance.  Seller shall not take any intentional
action that would cause the conditions upon the obligations of the parties
hereto to effect the transactions contemplated hereby not to be fulfilled,
including, without limitation, taking or causing to be taken any action which
would cause the representations and warranties made by any party herein not to
be materially true, correct and accurate as of the Closing, or in any way
impairing the ability of Buyer to satisfy her obligations as provided in Article
VI.

     

    7.3           Assist
Performance.  Seller shall exercise its reasonable best efforts
to cause to be fulfilled those conditions precedent to Buyer’s obligations to
consummate the transactions contemplated hereby which are dependent upon the
actions of Seller and to work with Buyer to make and/or obtain any necessary
filings and consents. Seller shall cause Split-Off Subsidiary to comply with its
obligations under this Agreement.

    
      
         

      

      
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    VIII.       SELLER’S
AND SUBSIDIARY’S CONDITIONS PRECEDENT TO CLOSING.  The
obligations of Seller and Split-Off Subsidiary to close the transactions
contemplated by this Agreement are subject to the satisfaction at or prior to
the Closing of each of the following conditions precedent (any or all of which
may be waived by Seller and Mesa in writing):

     

    8.1           Representations
and Warranties; Performance.  All representations and
warranties of Buyer contained in this Agreement shall have been true and
correct, in all material respects, when made and shall be true and correct, in
all material respects, at and as of the Closing, with the same effect as though
such representations and warranties were made at and as of the Closing. Buyer
shall have performed and complied with all covenants and agreements and
satisfied all conditions, in all material respects, required by this Agreement
to be performed or complied with or satisfied by Buyer at or prior to the
Closing.

     

    8.2           Additional
Documents.  Buyer shall deliver or cause to be delivered such
additional documents as may be necessary in connection with the consummation of
the transactions contemplated by this Agreement and the performance of their
obligations hereunder.

     

    8.3           Release
by Split-Off Subsidiary.  At the Closing, Split-Off Subsidiary
shall execute and deliver to Seller a general release which in substance and
effect releases Seller and Mesa from any and all liabilities and obligations
that Seller and Mesa may owe to Split-Off Subsidiary in any capacity, and from
any and all claims that Split-Off Subsidiary may have against Seller, Mesa or
their respective managers, members, officers, directors, stockholders, employees
and agents (other than those arising pursuant to this Agreement or any document
delivered in connection with this Agreement).

     

    IX.         BUYER’S
CONDITIONS PRECEDENT TO CLOSING.  The obligation of Buyer to
close the transactions contemplated by this Agreement is subject to the
satisfaction at or prior to the Closing of each of the following conditions
precedent (any and all of which may be waived by Buyer in writing):

     

    9.1           Representations
and Warranties; Performance.  All representations and
warranties of Seller and Split-Off Subsidiary contained in this Agreement shall
have been true and correct, in all material respects, when made and shall be
true and correct, in all material respects, at and as of the Closing with the
same effect as though such representations and warranties were made at and as of
the Closing. Seller and Split-Off Subsidiary shall have performed and complied
with all covenants and agreements and satisfied all conditions, in all material
respects, required by this Agreement to be performed or complied with or
satisfied by them at or prior to the Closing.

     

    X.          OTHER
AGREEMENTS.

     

    10.1           Expenses.  Each
party hereto shall bear its expenses separately incurred in connection with this
Agreement and with the performance of its obligations
hereunder.

    
      
         

      

      
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    10.2         Confidentiality.  Buyer
shall not make any public announcements concerning this transaction without the
prior written agreement of Mesa, other than as may be required by applicable law
or judicial process. If for any reason the transactions contemplated hereby are
not consummated, then Buyer shall return any information received by Buyer from
Seller or Split-Off Subsidiary, and Buyer shall cause all confidential
information obtained by Buyer concerning Split-Off Subsidiary and its business
to be treated as such.

     

    10.3         Brokers’
Fees.  In connection with the transaction specifically
contemplated by this Agreement, no party to this Agreement has employed the
services of a broker and each agrees to indemnify the other against all claims
of any third parties for fees and commissions of any brokers claiming a fee or
commission related to the transactions contemplated hereby.

     

    10.4         Access
to Information Post-Closing; Cooperation.

     

    (a)           Following
the Closing, Buyer and Split-Off Subsidiary shall afford to Seller and its
authorized accountants, counsel and other designated representatives, reasonable
access (and including using reasonable efforts to give access to persons or
firms possessing information) and duplicating rights during normal business
hours to allow records, books, contracts, instruments, computer data and other
data and information (collectively, “Information”) within the possession or
control of Buyer or Split-Off Subsidiary insofar as such access is reasonably
required by Seller. Information may be requested under this Section 10.4(a) for,
without limitation, audit, accounting, claims, litigation and tax purposes, as
well as for purposes of fulfilling disclosure and reporting obligations and
performing this Agreement and the transactions contemplated hereby. No files,
books or records of Split-Off Subsidiary existing at the Closing Date shall be
destroyed by Buyer or Split-Off Subsidiary after Closing but prior to the
expiration of any period during which such files, books or records are required
to be maintained and preserved by applicable law without giving Seller at least
30 days’ prior written notice, during which time Seller shall have the right to
examine and to remove any such files, books and records prior to their
destruction.

     

    (b)           Following
the Closing, Seller shall afford to Split-Off Subsidiary and its authorized
accountants, counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) duplicating rights during normal business hours to
Information within Seller’s possession or control relating to the business of
Split-Off Subsidiary. Information may be requested under this Section 10.4(b) for,
without limitation, audit, accounting, claims, litigation and tax purposes as
well as for purposes of fulfilling disclosure and reporting obligations and for
performing this Agreement and the transactions contemplated hereby. No files,
books or records of Split-Off Subsidiary existing at the Closing Date shall be
destroyed by Seller after Closing but prior to the expiration of any period
during which such files, books or records are required to be maintained and
preserved by applicable law without giving Buyer at least 30 days prior written
notice, during which time Buyer shall have the right to examine and to remove
any such files, books and records prior to their destruction.

    
      
         

      

      
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    (c)           At
all times following the Closing, Seller, Buyer and Split-Off Subsidiary shall
use their reasonable efforts to make available to the other party on written
request, the current and former officers, directors, employees and agents of
Seller or Split-Off Subsidiary for any of the purposes set forth in Section 10.4(a) or (b) above or as
witnesses to the extent that such persons may reasonably be required in
connection with any legal, administrative or other proceedings in which Seller
or Split-Off Subsidiary may from time to be involved.

     

    (d)           The
party to whom any Information or witnesses are provided under this Section 10.4 shall
reimburse the provider thereof for all out-of-pocket expenses actually and
reasonably incurred in providing such Information or witnesses.

     

    (e)           Seller,
Buyer, Split-Off Subsidiary and their respective employees and agents shall each
hold in strict confidence all Information concerning the other party in their
possession or furnished by the other or the other’s representative pursuant to
this Agreement with the same degree of care as such party utilizes as to such
party’s own confidential information (except to the extent that such Information
is (i) in the public domain through no fault of such party or
(ii) later lawfully acquired from any other source by such party), and each
party shall not release or disclose such Information to any other person, except
such party’s auditors, attorneys, financial advisors, bankers, other consultants
and advisors or persons with whom such party has a valid obligation to disclose
such Information, unless compelled to disclose such Information by judicial or
administrative process or, as advised by its counsel, by other requirements of
law.

     

    (f)           Seller,
Buyer and Split-Off Subsidiary shall each use their best efforts to forward
promptly to the other party all notices, claims, correspondence and other
materials which are received and determined to pertain to the other
party.

     

    10.5         Guarantees,
Surety Bonds and Letter of Credit Obligations.  In the event
that Seller is obligated for any debts, obligations or liabilities of Split-Off
Subsidiary by virtue of any outstanding guarantee, performance or surety bond or
letter of credit provided or arranged by Seller on or prior to the Closing Date,
Buyer and Split-Off Subsidiary shall use their best efforts to cause to be
issued replacements of such bonds, letters of credit and guarantees and to
obtain any amendments, novations, releases and approvals necessary to release
and discharge fully Seller from any liability thereunder following the Closing.
Buyer and Split-Off Subsidiary, jointly and severally, shall be responsible for,
and shall indemnify, hold harmless and defend Seller from and against, any costs
or losses incurred by Seller arising from such bonds, letters of credits and
guarantees and any liabilities arising therefrom and shall reimburse Seller for
any payments that Seller may be required to pay pursuant to enforcement of its
obligations relating to such bonds, letters of credit and
guarantees.

     

    10.6         Filings
and Consents.  Buyer, at her risk, shall determine what, if
any, filings and consents must be made and/or obtained prior to Closing to
consummate the purchase and sale of the Shares. Buyer shall indemnify the Seller
Indemnified Parties (as defined in Section 12.1 below)
against any Losses (as defined in Section 12.1 below)
incurred by such Seller Indemnified Parties by virtue of the failure to make
and/or obtain any such filings or consents. Recognizing that the failure to make
and/or obtain any filings or consents may cause Seller to incur Losses or
otherwise adversely affect Seller, Buyer and Split-Off Subsidiary confirm that
the provisions of this Section 10.6 will not
limit Seller’s right to treat such failure as the failure of a condition
precedent to Seller’s obligation to close pursuant to Article VIII
above.

    
      
         

      

      
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    10.7         Insurance.  Buyer
acknowledges that on the Closing Date, effective as of the Closing, any
insurance coverage and bonds provided by Seller for Split-Off Subsidiary, and
all certificates of insurance evidencing that Split-Off Subsidiary maintains any
required insurance by virtue of insurance provided by Seller, will terminate
with respect to any insured damages resulting from matters occurring subsequent
to Closing.

     

    10.8         Agreements
Regarding Taxes.

     

    (a)           Tax
Sharing Agreements.  Any tax sharing agreement between Seller
and Split-Off Subsidiary is terminated as of the Closing Date and will have no
further effect for any taxable year (whether the current year, a future year or
a past year).

     

    (b)           Returns
for Periods Through the Closing Date.  Seller will include the
income and loss of Split-Off Subsidiary (including any deferred income triggered
into income by Reg. §1.1502-13 and any excess loss accounts taken into income
under Reg. §1.1502-19) on Seller’s consolidated federal income tax returns for
all periods through the Closing Date and pay any federal income taxes
attributable to such income. Seller and Split-Off Subsidiary agree to allocate
income, gain, loss, deductions and credits between the period up to Closing (the
“Pre-Closing Period”) and the period after Closing (the “Post-Closing Period”)
based on a closing of the books of Split-Off Subsidiary, and both Seller and
Split-Off Subsidiary agree not to make an election under Reg.
§1.1502-76(b)(2)(ii) to ratably allocate the year’s items of income, gain, loss,
deduction and credit. Seller, Split-Off Subsidiary and Buyer agree to report all
transactions not in the ordinary course of business occurring on the Closing
Date after Buyer’s purchase of the Shares on Split-Off Subsidiary’s tax returns
to the extent permitted by Reg. §1.1502-76(b)(1)(ii)(B). Buyer agrees to
indemnify Seller for any additional tax owed by Seller (including tax owned by
Seller due to this indemnification payment) resulting from any transaction
engaged in by Split-Off Subsidiary during the Pre-Closing Period or on the
Closing Date after Buyer’s purchase of the Shares. Split-Off Subsidiary will
furnish tax information to Seller for inclusion in Seller’s consolidated federal
income tax return for the period which includes the Closing Date in accordance
with Split-Off Subsidiary’s past custom and practice.

     

    (c)           Audits.  Seller
will allow Split-Off Subsidiary and its counsel to participate at Split-Off
Subsidiary’s expense in any audits of Seller’s consolidated federal income tax
returns to the extent that such audit raises issues that relate to and increase
the tax liability of Split-Off Subsidiary. Seller shall have the absolute right,
in its sole discretion, to engage professionals and direct the representation of
Seller in connection with any such audit and the resolution thereof, without
receiving the consent of Buyer or Split-Off Subsidiary or any other party acting
on behalf of Buyer or Split-Off Subsidiary, provided that Seller will not settle
any such audit in a manner which would materially adversely affect Split-Off
Subsidiary after the Closing Date unless such settlement would be reasonable in
the case of a person that owned Split-Off Subsidiary both before and after the
Closing Date. In the event that after Closing any tax authority informs Buyer or
Split-Off Subsidiary of any notice of proposed audit, claim, assessment or other
dispute concerning an amount of taxes which pertain to Seller, or to Split-Off
Subsidiary during the period prior to Closing, Buyer or Split-Off Subsidiary
must promptly notify Seller of the same within 15 calendar days of the date of
the notice from the tax authority. In the event Buyer or Split-Off Subsidiary
does not notify Seller within such 15 day period, Buyer and Split-Off
Subsidiary, jointly and severally, will indemnify Seller for any incremental
interest, penalty or other assessments resulting from the delay in giving
notice. To the extent of any conflict or inconsistency, the provisions of this
Section 10.8 shall control over the provisions of Section
12.2 below.

    
      
         

      

      
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    (d)           Cooperation
on Tax Matters.  Buyer, Seller and Split-Off Subsidiary shall
cooperate fully, as and to the extent reasonably requested by any party, in
connection with the filing of tax returns pursuant to this Section and any
audit, litigation or other proceeding with respect to taxes. Such cooperation
shall include the retention and (upon the other party’s request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Split-Off Subsidiary shall (i) retain all
books and records with respect to tax matters pertinent to Split-Off Subsidiary
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Seller,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and
(ii) give Seller reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if Seller so requests,
Buyer agrees to cause Split-Off Subsidiary to allow Seller to take possession of
such books and records.

     

    10.9         ERISA.  Effective
as of the Closing Date, Split-Off Subsidiary shall terminate its participation
in, and withdraw from, any employee benefit plans sponsored by Seller, and
Seller and Buyer shall cooperate fully in such termination and withdrawal.
Without limitation, Split-Off Subsidiary shall be solely responsible for
(i) all liabilities under those employee benefit plans notwithstanding any
status as an employee benefit plan sponsored by Seller, and (ii) all
liabilities for the payment of vacation pay, severance benefits, and similar
obligations, including, without limitation, amounts which are accrued but unpaid
as of the Closing Date with respect thereto. Buyer and Split-Off Subsidiary
acknowledge that Split-Off Subsidiary is solely responsible for providing
continuation health coverage, as required under the Consolidated Omnibus
Reconciliation Act of 1985, as amended (“COBRA”), to each person, if any,
participating in an employee benefit plan subject to COBRA with respect to such
employee benefit plan as of the Closing Date, including, without limitation, any
person whose employment with Split-Off Subsidiary is terminated after the
Closing Date.

    
      
         

      

      
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    XI.         TERMINATION.  This
Agreement may be terminated at, or at any time prior to, the Closing by mutual
written consent of Seller, Buyer and Mesa.

     

    If this
Agreement is terminated as provided herein, it shall become wholly void and of
no further force and effect and there shall be no further liability or
obligation on the part of any party except to pay such expenses as are required
of such party.

     

    XII.         INDEMNIFICATION.

     

    12.1         Indemnification
by Buyer.  Buyer covenants and agrees to indemnify, defend,
protect and hold harmless Seller and Mesa, and their respective officers,
directors, employees, stockholders, agents, representatives and Affiliates
(collectively, the “Seller Indemnified Parties”) at all times from and after the
date of this Agreement from and against all losses, liabilities, damages,
claims, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys’ fees and expenses of investigation), whether or not involving a third
party claim and regardless of any negligence of any Seller Indemnified Party
(collectively, “Losses”), incurred by any Seller Indemnified Party as a result
of or arising from (i) any breach of the representations and warranties of
Buyer set forth herein or in certificates delivered in connection herewith,
(ii) any breach or nonfulfillment of any covenant or agreement (including
any other agreement of Buyer to indemnify set forth in this Agreement) on the
part of Buyer under this Agreement, (iii) any Assigned Asset or Assigned
Liability or any other debt, liability or obligation of Split-Off Subsidiary,
(iv) the conduct and operations, whether before or after Closing, of (A)
the business of Seller pertaining to the Assigned Assets and Assigned
Liabilities or (B) the business of Split-Off Subsidiary, (v) claims
asserted, whether before or after Closing, (A) against Split-Off Subsidiary or
(B) pertaining to the Assigned Assets and Assigned Liabilities, or (vi) any
federal or state income tax payable by Seller or Mesa and attributable to the
transactions contemplated by this Agreement.  The obligations of Buyer
under this Section, as between Buyer and the Seller Indemnified Parties, are
joint and several.

     

    12.2         Third
Party Claims.

     

    (a)           Defense.  If
any claim or liability (a “Third-Party Claim”) should be asserted against any of
the Seller Indemnified Parties (the “Indemnitee”) by a third party after the
Closing for which Buyer has an indemnification obligation under the terms of
Section 12.1,
then the Indemnitee shall notify Buyer (the “Indemnitor”) within 20 days after
the Third-Party Claim is asserted by a third party (said notification being
referred to as a “Claim Notice”) and give the Indemnitor a reasonable
opportunity to take part in any examination of the books and records of the
Indemnitee relating to such Third-Party Claim and to assume the defense of such
Third-Party Claim and in connection therewith and to conduct any proceedings or
negotiations relating thereto and necessary or appropriate to defend the
Indemnitee and/or settle the Third-Party Claim. The expenses (including
reasonable attorneys’ fees) of all negotiations, proceedings, contests, lawsuits
or settlements with respect to any Third-Party Claim shall be borne by the
Indemnitor. If the Indemnitor agrees to assume the defense of any Third-Party
Claim in writing within 20 days after the Claim Notice of such Third-Party Claim
has been delivered, through counsel reasonably satisfactory to Indemnitee, then
the Indemnitor shall be entitled to control the conduct of such defense, and any
decision to settle such Third-Party Claim, and shall be responsible for any
expenses of the Indemnitee in connection with the defense of such Third-Party
Claim so long as the Indemnitor continues such defense until the final
resolution of such Third-Party Claim. The Indemnitor shall be responsible for
paying all settlements made or judgments entered with respect to any Third-Party
Claim the defense of which has been assumed by the
Indemnitors.  Except as provided on subsection (b) below, both the
Indemnitor and the Indemnitee must approve any settlement of a Third-Party
Claim. A failure by the Indemnitee to timely give the Claim Notice shall not
excuse Indemnitor from any indemnification liability except only to the extent
that the Indemnitor is materially and adversely prejudiced by such
failure.

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

    (b)           Failure
to Defend.  If the Indemnitor shall not agree to assume the
defense of any Third-Party Claim in writing within 20 days after the Claim
Notice of such Third-Party Claim has been delivered, or shall fail to continue
such defense until the final resolution of such Third-Party Claim, then the
Indemnitee may defend against such Third-Party Claim in such manner as it may
deem appropriate and the Indemnitee may settle such Third-Party Claim, in its
sole discretion, on such terms as it may deem appropriate. The Indemnitor shall
promptly reimburse the Indemnitee for the amount of all settlement payments and
expenses, legal and otherwise, incurred by the Indemnitee in connection with the
defense or settlement of such Third-Party Claim. If no settlement of such
Third-Party Claim is made, then the Indemnitor shall satisfy any judgment
rendered with respect to such Third-Party Claim before the Indemnitee is
required to do so, and pay all expenses, legal or otherwise, incurred by the
Indemnitee in the defense against such Third-Party Claim.

     

    12.3         Non-Third-Party
Claims.  Upon discovery of any claim for which Buyer has an
indemnification obligation under the terms of Section 12.1 which
does not involve a claim by a third party against the Indemnitee, the Indemnitee
shall give prompt notice to Buyer of such claim and, in any case, shall give
Buyer such notice within 30 days of such discovery. A failure by Indemnitee to
timely give the foregoing notice to Buyer shall not excuse Buyer from any
indemnification liability except to the extent that Buyer is materially and
adversely prejudiced by such failure.

     

    12.4         Survival.  Except
as otherwise provided in this Section 12.4, all
representations and warranties made by Buyer, Split-Off Subsidiary and Seller in
connection with this Agreement shall survive the Closing. Anything in this
Agreement to the contrary notwithstanding, the liability of all Indemnitors
under this Article XII
shall terminate on the third (3rd)
anniversary of the Closing Date, except with respect to (a) liability for
any item as to which, prior to the third (3rd)
anniversary of the Closing Date, any Indemnitee shall have asserted a Claim in
writing, which Claim shall identify its basis with reasonable specificity, in
which case the liability for such Claim shall continue until it shall have been
finally settled, decided or adjudicated, (b) liability of any party for
Losses for which such party has an indemnification obligation, incurred as a
result of such party’s breach of any covenant or agreement to be performed by
such party after the Closing, (c) liability of Buyer for Losses incurred by
a Seller Indemnified Party due to breaches of its representations and warranties
in Article IV
of this Agreement, and (d) liability of Buyer for Losses arising out of
Third-Party Claims for which Buyer have an indemnification obligation, which
liability shall survive until the statute of limitation applicable to any third
party’s right to assert a Third-Party Claim bars assertion of such
claim.

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

    XIII.        MISCELLANEOUS.

     

    13.1         Definitions.  Capitalized
terms used herein without definition have the meanings ascribed to them in the
Merger Agreement.

     

    13.2         Notices.  All
notices and communications required or permitted hereunder shall be in writing
and deemed given when received by means of the United States mail, addressed to
the party to be notified, postage prepaid and registered or certified with
return receipt requested, or personal delivery, or overnight courier, as
follows:

     

    (a)           If
to Seller, addressed to:

     

    Mesa
Energy Holdings, Inc.

    4321 7th
Avenue

    Los
Angeles, CA  90008

    Attention:  Beverly
Frederick

    Telephone:  (760)
408-5748

    

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

     

    Gottbetter
& Partners, LLP

    488
Madison Avenue, 12th
Floor

    New York,
NY  10022

    Attention:  Adam
S. Gottbetter, Esq.

    Facsimile:
(212) 400-6901

    

    (b)           If
to Buyer or Split-Off Subsidiary, addressed to:

     

    Beverly
Frederick

    4321 7th
Avenue

    Los
Angeles, CA  90008

    Telephone:  (760)
408-5748

    

    or to
such other address as any party hereto shall specify pursuant to this Section 13.2 from
time to time.

     

    13.3         Exercise
of Rights and Remedies.  Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

    13.4           Time.  Time
is of the essence with respect to this Agreement.

     

    13.5           Reformation
and Severability.  In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired
thereby.

     

    13.6           Further
Acts and Assurances.  From and after the Closing, Seller, Buyer
and Split-Off Subsidiary agree that each will act in a manner supporting
compliance, including compliance by its Affiliates, with all of its obligations
under this Agreement and, from time to time, shall, at the request of another
party hereto, and without further consideration, cause the execution and
delivery of such other instruments of conveyance, transfer, assignment or
assumption and take such other action or execute such other documents as such
party may reasonably request in order more effectively to convey, transfer to
and vest in Buyer, and to put Split-Off Subsidiary in possession of, all
Assigned Assets and Assigned Liabilities, and to convey, transfer to and vest in
Seller and Buyer, and to them in possession of, the Purchase Price Securities
and the Shares (respectively), and, in the case of any contracts and rights that
cannot be effectively transferred without the consent or approval of other
Persons that is unobtainable, to use its best reasonable efforts to ensure that
Split-Off Subsidiary receives the benefits thereof to the maximum extent
permissible in accordance with applicable law or other applicable restrictions,
and shall perform such other acts which may be reasonably necessary to
effectuate the purposes of this Agreement.

     

    13.7           Entire
Agreement; Amendments.  This Agreement contains the entire
understanding of the parties relating to the subject matter contained herein.
This Agreement cannot be amended or changed except through a written instrument
signed by all of the parties hereto and by Mesa. No provisions of this Agreement
or any rights hereunder may be waived by any party without the prior written
consent of Mesa.

     

    13.8           Assignment.  No
party may assign his, her or its rights or obligations hereunder, in whole or in
part, without the prior written consent of the other parties.

     

    13.9           Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts or choice of laws thereof.

     

    13.10         Counterparts.  This
Agreement may be executed in one or more counterparts, with the same effect as
if all parties had signed the same document. Each such counterpart shall be an
original, but all such counterparts taken together shall constitute a single
agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature page was an original
thereof.

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

    13.11      Section
Headings and Gender.  The Section headings used herein are
inserted for reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement. All personal pronouns used in this
Agreement shall include the other genders, whether used in the masculine,
feminine or neuter, and the singular shall include the plural, and vice versa, whenever and as
often as may be appropriate.

     

    13.12      Third-Party
Beneficiary.  Each of Seller, Buyer and Split-Off Subsidiary
acknowledges and agrees that this Agreement is entered into for the express
benefit of Mesa, and that Mesa is relying hereon and on the consummation of the
transactions contemplated by this Agreement in entering into and performing its
obligations under the Merger Agreement, and that Mesa shall be in all respects
entitled to the benefit hereof and to enforce this Agreement as a result of any
breach hereof.

     

    13.13      Specific
Performance; Remedies.  Each of Seller, Buyer and Split-Off
Subsidiary acknowledges and agrees that Mesa would be damaged irreparably if any
provision of this Agreement is not performed in accordance with its specific
terms or is otherwise breached. Accordingly, each of Seller, Buyer and Split-Off
Subsidiary agrees that Mesa will be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and its terms and provisions in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, subject to Section 13.9, in
addition to any other remedy to which they may be entitled, at law or in equity.
Except as expressly provided herein, the rights, obligations and remedies
created by this Agreement are cumulative and are in addition to any other
rights, obligations or remedies otherwise available at law or in equity, and
nothing herein will be considered an election of remedies.

     

    13.14      Submission
to Jurisdiction; Process Agent; No Jury Trial.

     

    (a)           Each
party to the Agreement hereby submits to the jurisdiction of any state or
federal court sitting in the State of New York in any action arising out of or
relating to this Agreement and agrees that all claims in respect of the action
may be heard and determined in any such court. Each party to the Agreement also
agrees not to bring any action arising out of or relating to this Agreement in
any other court. Each party to the Agreement agrees that a final judgment in any
action so brought will be conclusive and may be enforced by action on the
judgment or in any other manner provided at law or in equity. Each party to the
Agreement waives any defense of inconvenient forum to the maintenance of any
action so brought and waives any bond, surety or other security that might be
required of any other party with respect thereto.

     

    (b)           EACH
PARTY TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RIGHTS TO JURY TRIAL OF ANY
DISPUTE BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY DEALINGS AMONG THEM
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. The scope of this waiver is
intended to be all encompassing of any and all actions that may be filed in any
court and that relate to the subject matter of the transactions, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party to the Agreement hereby acknowledges that this
waiver is a material inducement to enter into a business relationship and that
they will continue to rely on the waiver in their related future dealings. Each
party to the Agreement further represents and warrants that it has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. NOTWITHSTANDING
ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED ORALLY OR IN WRITING, AND THE WAIVER WILL APPLY TO ANY
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO. In the event of commencement of
any action, this Agreement may be filed as a written consent to trial by a
court.

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

    13.15  
  Construction.  The
parties hereto have participated jointly in the negotiation and drafting of this
Agreement. If an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof will arise favoring or disfavoring any party
because of the authorship of any provision of this Agreement. Any reference to
any federal, state, local or foreign law will be deemed also to refer to law as
amended and all rules and regulations promulgated thereunder, unless the context
requires otherwise. The words “include,” “includes,” and “including” will be
deemed to be followed by “without limitation.”  The words “this
Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. The parties hereto intend that each representation,
warranty and covenant contained herein will have independent significance. If
any party hereto has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which that party has not breached will not
detract from or mitigate the fact that such party is in breach of the first
representation, warranty or covenant.

     

    [Signature
page follows this page.]

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
parties hereto have duly executed this Split-Off Agreement as of the day and
year first above written.

    

    
      	 
      	
              MESA
      ENERGY HOLDINGS, INC.

            
	 
      	 
      
	 
      	
              By:

            	
              /s/ Beverly Frederick

            
	 
      	
              Name:  Beverly
      Frederick

            
	 
      	
              Title:  President

            
	 
      	 
      
	 
      	
              MESQUITE
      MINING GROUP, INC.

            
	 
      	 
      
	 
      	
              By:

            	
              /s/ Beverly Frederick

            
	 
      	
              Name:  Beverly
      Frederick

            
	 
      	
              Title:  President

            
	 
      	 
      
	 
      	
              BUYER

            
	 
      	 
      
	 
      	
              /s/ Beverly Frederick

            
	 
      	
              Beverly
      Frederick

            

    

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    
      
        
          
            
              	
                      Buyers

                    	 	
                      Purchase Price Security

                    	 	
                      Number

                    
	 
      	 	 
      	 	 
      
	
                      Beverly
      Frederick

                    	 	
                      Common
      Stock

                    	 	
                      21,000,000

                    

            

          

        

      

    

    

    
      
        	
                *

              	
                As
      adjusted to reflect the 14-for-1 forward stock split of the common stock
      of Seller, in the form of a dividend, effected on August 4,
      2009.

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