Document:

Escrow and Exchange Agent Agreement

 EXHIBIT 10.2 
 ESCROW AND EXCHANGE AGENT AGREEMENT 
 THIS ESCROW AND EXCHANGE AGENT AGREEMENT (this
“Agreement”) is made as of [                    ], 2006 by and among Fortune Brands, Inc., a Delaware corporation
(“Parent”), Brightstar Acquisition LLC, an Illinois limited liability company and an indirect wholly-owned subsidiary of Parent (“Merger Sub”), SBR, Inc., a West Virginia corporation (the
“Company”), The Bank of New York, as escrow agent (the “Agent”), and Samuel B. Ross, II, in his capacity as Holders Representative (the “Holders Representative”). 
  WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of February 9, 2006 (as amended, restated, supplemented or otherwise modified
from time to time, the “Merger Agreement”), by and among Parent, Merger Sub, the Company and the Holders Representative, either (a) Merger Sub will merge with and into the Company, with the Company continuing as the surviving
entity, or (b) the Company will merge with and into Merger Sub, with Merger Sub continuing as the surviving entity (the “Merger”). Capitalized terms used herein and defined in the Merger Agreement but not otherwise defined
herein shall have the meanings defined in the Merger Agreement; and 
  WHEREAS, the Merger Agreement contemplates that the parties
hereto shall enter into this Agreement. 
 NOW, THEREFORE, in consideration of the premises and the respective agreements hereinafter set
forth, the parties hereto agree as follows: 
 1. Consent of Company Stockholders; Designation of Agent. The Fully-Diluted Stockholders
have approved the Merger Agreement and, pursuant thereto, (a) the establishment of an escrow account to secure the Fully-Diluted Stockholders’ indemnification obligations under Article VIII of the Merger Agreement in the manner set forth
therein and herein (the “Indemnity Escrow”), (b) the establishment of an escrow account as a source of reimbursement pursuant to Section 4.8 of the Merger Agreement (the “Adjustment Escrow”), (c) the
appointment of the Holders Representative as their representative for purposes of this Agreement and as attorney-in-fact and agent for and on behalf of each Fully-Diluted Stockholder, and the taking by the Holders Representative of any and all
actions and the making of any decisions required or permitted to be taken or made by the Holders Representative under this Agreement and (d) all of the other terms, conditions and limitations contained in the Merger Agreement and in this
Agreement. Parent and the Holders Representative, on behalf of the Fully-Diluted Stockholders, hereby mutually designate and appoint The Bank of New York to serve as Agent for the purposes set forth herein. The Agent hereby accepts such appointment
and agrees to act in furtherance of the terms and conditions herein. 
 2. Distribution of Materials. Subject to the provisions of
Section 4(c) and (d) hereof, Parent shall make available to the Agent the documents, if any, to be mailed to the Fully-Diluted Stockholders, including the Letters of Transmittal and instructions (which shall specify that,
with respect to Company Common Shares, the delivery shall be effected, and the risk of loss and title shall pass, only upon proper delivery of the certificates for the Company Common Shares) to accompany certificates for Company Common Shares when
surrendered for the Merger 

 
Consideration and the related Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9. Parent does hereby instruct the Agent to
mail these documents to such Fully-Diluted Stockholders as promptly as practicable but in no event later than two (2) Business Days following the date hereof. Attached hereto as Schedule A is (i) a list of such Fully-Diluted
Stockholders, (ii) each Fully-Diluted Stockholder’s respective ownership of Fully-Diluted Company Common Shares, (iii) the aggregate cash to be paid in lieu of fractional Parent Shares to each Fully-Diluted Stockholder, (iv) a
calculation of the aggregate Parent Shares and cash due each such Fully-Diluted Stockholder pursuant to the terms of the Merger Agreement, (v) each Fully-Diluted Stockholder’s taxpayer identification number and (vi) any holders of
Parent Shares who were, at the Effective Time, Affiliates of the Company. 
 3. Deposits; Payments. Concurrent herewith, Parent or
Merger Sub shall deposit, or cause to be deposited, with the Agent, (i) the aggregate cash consideration payable under the Merger Agreement, (ii) the Indemnity Escrow, (iii) the Adjustment Holdback and (iv) a sufficient amount of
cash payable with respect to fractional shares pursuant to Section 4.4 of the Merger Agreement. The aggregate cash deposited pursuant to the preceding sentence shall be invested at the direction of the Holders Representative by the Agent in
(i) obligations of, or guaranteed by, the United States of America in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investor Services, Inc. or Standard & Poor’s Corporation, respectively, in each case
with maturities not exceeding six months (or money market funds consisting of such obligations) or (ii) bank deposit accounts with a financial institution with a credit rating of not less than AA by Moody’s Investor’s Services, Inc.
Subject to the adjustments set forth in Section 11 hereof, all earnings on the Cash Consideration, the Indemnity Escrow and the Adjustment Holdback shall be allocated to the Fully-Diluted Stockholders. 
 4. Receipt of Company Common Shares and Related Materials. 
 (a) In connection with the Merger, the Agent shall receive Letters of Transmittal (or facsimiles thereof) from the Fully-Diluted
Stockholders (other than holders of Company Purchase Rights), executed in accordance with the instructions therein, and all other instruments and communications submitted to the Agent in connection with the Merger, and the Agent shall preserve the
same until delivered to Parent or otherwise disposed of in accordance with Parent’s instructions. 
 (b) All Letters of
Transmittal, facsimile transmissions, letters, and other materials properly submitted to the Agent, except certificates for Common Company Shares, shall be stamped by the Agent to show the date and time of receipt thereof. 
 (c) The Agent shall examine the Letter of Transmittal and any certificates for Company Common Shares contemplated thereby to ascertain
whether they appear to have been completed and executed in accordance with the instructions set forth in the Letter of Transmittal; provided, however, that the Agent shall accept the Letters of Transmittal and certificates (the
“Pre-Approved Deliveries”) received by it on the Closing Date and certified by Mark A. Roche on behalf of the Parent and the Holders Representative on behalf of the Fully-Diluted Stockholders without any examination. For any
irregular items, the Agent should follow its regular procedures to attempt to cause any such 

  

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irregularity to be corrected. The Agent is not authorized to waive any deficiency or irregularity in connection with the Letter of Transmittals unless Parent
provides the Agent with written authorization. As to any irregular items the Agent cannot resolve by following its regular procedures, the Agent will consult with Parent and the Holders Representative for instructions, who shall be jointly
responsible for deciding what action, if any, to be taken. Upon receipt of any certificates for the Company Common Shares, the Agent will physically cancel the certificates representing such Common Company Shares. 
 (d) Subject to the terms and conditions of this Agreement, the Agent is authorized to accept certificates for Company Common Shares and to
issue (a) one or more Parent Shares (which shall be in non-certificated book-entry form unless a physical certificate is requested) representing, in the aggregate, the whole number of Parent Shares, if any, that the applicable Fully-Diluted
Stockholder has the right to receive pursuant to Section 4.1(a) or 4.1(b) of the Merger Agreement and (b) a check or wire transfer to an account designated by the Fully-Diluted Stockholder in the amount equal to the allocable portion of
the cash consideration, if any, that the applicable Fully-Diluted Stockholder has the right to receive pursuant to Sections 4.1(a) or 4.1(b) of the Merger Agreement, Section 4.3 of the Merger Agreement (including dividends and other
distributions pursuant to Section 4.3(f) of the Merger Agreement) and cash payable in lieu of fractional shares pursuant to Section 4.4 of the Merger Agreement; provided, however, that the Agent shall accept the Pre-Approved
Deliveries and make payments therefor to the Fully-Diluted Stockholders in accordance with the allocations set forth on Schedule A and consistent with Sections 4.1(a), 4.1(b), 4.3 and 4.4 of the Merger Agreement and the applicable
Pre-Approved Deliveries on the Closing Date; provided, further, payments of the allocable portion of the cash consideration and Parent Shares shall be made by the Agent to holders of Company Purchase Rights upon written direction from
Parent and in accordance with the allocations set forth on Schedule A and consistent with Sections 4.1(a), 4.1(b), 4.3 and 4.4 of the Merger Agreement. Subject to the terms of the Letter of Transmittal, Agent shall deduct and withhold from
the amounts paid pursuant to this Section 4(d) any withholding taxes and such other amounts as are required under the Code or any applicable provision of state, local or foreign tax law, and the Agent shall provide to the applicable
Fully-Diluted Stockholder notice of the amounts so deducted or withheld. All transfer taxes owing with respect to the transfers hereunder shall be paid by Parent. 
 (e) If payment is to be made by the Agent to a person other than the person in whose name a surrendered certificate is registered, the
Agent will make no payment until the certificate so surrendered has been properly endorsed (or otherwise put in proper form for transfer) and the person requesting such payment has paid any transfer or other taxes or governmental charges required by
reason of such payment in a name other than that of the registered holder of the certificate surrendered or has established to its satisfaction that such tax or charge either has been paid or is not payable. Any tax information with respect to such
payment which the Agent is required to report pursuant to Section 4 of this Agreement shall list the registered holder of the certificate as the payee. 
  

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 (f) If any Fully-Diluted Stockholder reports to the Agent that such Fully-Diluted
Stockholder’s failure to surrender a certificate representing any Company Common Shares registered in such Fully-Diluted Stockholder’s name at the Effective Time is due to the theft, loss or destruction of his certificate, the Agent shall
require such Fully-Diluted Stockholder to furnish an affidavit of such theft, loss or destruction. Upon receipt of such affidavit, the Agent may effect payment to such Fully-Diluted Stockholder as though he had surrendered such Fully-Diluted
Stockholder’s certificate. 
 (g) If Company Common Shares registered in the name of any Person described on Schedule
A as an Affiliate of the Company are surrendered, Agent shall (i) arrange for the issuance of Parent Shares in the name of any other person only with the proper approval of Parent or its legal counsel; and (ii) issue in exchange
therefor certificates representing Parent Shares with the following legend applied to each such certificate: 
 “THE SHARES REPRESENTED
BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) APPLIES, HAVE BEEN DELIVERED IN RELIANCE UPON THE REPRESENTATION OF THE REGISTERED HOLDER HEREOF THAT THEY HAVE
BEEN ACQUIRED FOR SUCH HOLDER’S ACCOUNT, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, EXCEPT IN COMPLIANCE WITH APPLICABLE REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM SUCH REGISTRATION.” 
 5. Tax Reporting. 
 (a) On or before each January 31 of each year that any amount remains in escrow pursuant to this Agreement, the Agent will prepare
and mail to each Fully-Diluted Stockholder receiving payment or allocated income pursuant to this Agreement during the prior calendar year, other than Fully-Diluted Stockholders who demonstrate their status as nonresident aliens in accordance with
United States Treasury Regulations, an applicable Form 1099 reporting any cash payments during the prior calendar year, in accordance with Treasury regulations. The Agent will also prepare and file copies of such Forms 1099 by magnetic tape with the
Internal Revenue Service, in accordance with Treasury Regulations. 
 (b) If the Agent has not received notice from the
surrendering Fully-Diluted Stockholder of such Fully-Diluted Stockholder’s certified taxpayer identification number, the Agent shall deduct and withhold backup withholding tax from any cash payment made pursuant to the Code. 
 (c) Should any issue arise regarding Federal income tax reporting or withholding, the Agent will take such action as Parent and the
Holders Representative instruct the Agent in writing. 
  

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 (d) The Parent and the Fully-Diluted Stockholders agree to report any payments to the
Fully-Diluted Stockholders from the Escrow Accounts as payments subject to a contingency under the installment method described in section 453 of the Code. 
 6. Delivery of Payment. All checks, other than checks delivered at the Agent’s window, shall be forwarded by first class mail. In the case of any Fully-Diluted Stockholder, all checks, wire transfer
payments or certificates representing Parent Shares (if requested) shall be mailed to the address or account, as the case may be, set forth on such Fully-Diluted Stockholder’s Letter of Transmittal (or such other address as is subsequently
provided to the Agent in writing by such Fully-Diluted Stockholder) or as set forth on Schedule A hereto. 
 7. Follow-Up
Mailings. No later than one month after the date hereof, Agent will mail or caused to be mailed a follow-up letter to all Fully-Diluted Stockholders who did not theretofore surrender their certificates, or supply an affidavit pursuant to
Section 4(f) of this Agreement, for payment of the proceeds. The follow-up letter will be mailed with a Letter of Transmittal, return envelope and W-9 Guidelines. In addition, the Agent may perform a search to locate these holders and is
authorized to comply and to report to all states and jurisdictions in accordance with applicable state abandoned property law for holders who cannot be located. All reasonable out-of-pocket costs associated with the performance of this duty shall
not be incurred by Parent, but will be paid by the Fully-Diluted Stockholder who is the recipient of such mailing by set-off of amounts paid thereto pursuant to this Agreement from time to time. 
 8. Formation of the Escrow Accounts. Concurrently herewith, Parent shall deposit, or cause to be deposited, with the Agent (i) the Indemnity
Escrow, and the Agent agrees to accept and hold the Indemnity Escrow in a separate account (the “Indemnity Escrow Account”), and (ii) the Adjustment Holdback, and the Agent agrees to accept and hold the Adjustment Holdback in a
separate account (the “Adjustment Escrow Account”). The Indemnity Escrow represents a source of indemnification payments in the event that any Parent Indemnified Party is entitled to indemnification as provided in Article VIII of
the Merger Agreement. The Adjustment Holdback represents a source of payment in the event Parent is entitled to payment pursuant to Section 4.8 of the Merger Agreement. 
 9. Allocation of Distributions and Payments. The amount of any distributions or payments to be made to, or on behalf of, a Fully-Diluted
Stockholder hereunder will be determined by the Agent based on the percentage ownership (calculated on a fully-diluted basis) of Fully-Diluted Company Common Shares owned by such Fully-Diluted Stockholder immediately prior to the Effective Time as
set forth on Schedule A hereto. 
 10. Tax Distributions. Each Fully-Diluted Stockholder shall be entitled to receive a cash
distribution (a “Tax Distribution”) by wire transfer to the account set forth in such Fully-Diluted Stockholder’s Letter of Transmittal (unless the Agent shall have subsequently received written instructions from any such
Fully-Diluted Stockholder in accordance with the Letter of Transmittal) from the Agent for each taxable year in amounts sufficient to enable such 

  

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Fully- Diluted Stockholder to discharge (after taking into account any other distributions received by such party for such taxable year) any federal, state
and local tax liability arising as a result of the amount of the earnings on the Indemnity Escrow and the Adjustment Holdback allocated to such Fully-Diluted Stockholder and reported to the Internal Revenue Service by the Agent pursuant to
Section 5 hereof, determined by assuming a combined federal, state and local tax rate of 40%. All Tax Distributions pursuant to this Section 10 shall be made by the Agent to the Fully-Diluted Stockholders quarterly on the
last day of each fiscal quarter during the term of this Agreement. 
 11. Distribution of the Escrow Amounts. The Agent shall hold the
Indemnity Escrow and the Adjustment Holdback (the “Escrow Amounts”) for the benefit of Parent or the Fully-Diluted Stockholders, as the case may be, until instructed to deliver the Escrow Amounts as follows: 
 (a) Indemnification Claims. At any time and from time to time prior to the Final Distribution Date (as hereinafter defined), in the
event a Parent Indemnified Party makes a claim for indemnification in respect of Section 8.2 of the Merger Agreement (an “Indemnification Claim”), such Indemnification Claim shall be brought in accordance with the provisions of
Section 8.4 of the Merger Agreement and Parent shall deliver a written notice (an “Indemnification Notice”) to the Agent and the Holders Representative setting forth the amount of such Indemnification Claim and a reasonable
written description of and basis for such Indemnification Claim, together with copies of any documentation evidencing such claim. Parent shall also deliver to the Agent written proof of delivery to the Holders Representative of a copy of such
Indemnification Notice (which proof may consist of a photocopy of the registered or certified mail or overnight courier receipt or the signed receipt if delivered by hand). In the event each of the Agent and Parent has not received a written notice
(the “Dispute Notice”) objecting to such Indemnification Claim from the Holders Representative within thirty (30) days following the Agent’s receipt of proof of delivery of the Indemnification Notice to the Holders
Representative, the Agent shall pay to Parent the aggregate amount of the Indemnification Claim from the Indemnity Escrow Account and the then current Indemnity Escrow balance (the “Indemnity Escrow Amount Balance”) shall be reduced
by such payment. 
 (b) Disputes. If the Holders Representative delivers a Dispute Notice to any Indemnification Claim
or portion thereof to the Agent and Parent within thirty (30) days following the Agent’s receipt of proof of delivery of such Indemnification Notice to the Holders Representative, then Parent and Holders Representative each agree that
unless the Agent receives a joint instruction signed by Parent and the Holders Representative within thirty (30) days following delivery of the Dispute Notice, subject to Section 26, the dispute shall be referred for resolution to a
court of competent jurisdiction. Except as otherwise provided in Section 11(c) below, no Indemnification Claim that is the subject of a Dispute Notice shall be paid and the Indemnity Escrow Amount Balance shall not be reduced in the
event any Indemnification Claim is the subject of a Dispute Notice until the Agent receives either (i) written instructions signed by the Parent and the Holders Representative authorizing such payment and reduction and specifying all or any
portion of the Indemnification Claim that is no longer subject to the Dispute Notice, or (ii) a final decision of a court of competent jurisdiction which is not subject to further appeal setting 

  

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forth a final determination of the Indemnification Claim that is subject to the Dispute Notice. Upon receipt of such written instructions or such final
determination, as the case may be, the Agent shall pay Parent an aggregate amount equal to the amount set forth in such written instructions or such final determination from the Indemnity Escrow Account and the Indemnity Escrow Amount Balance shall
be reduced by such payment. 
 (c) Partial Distribution. If any Dispute Notice includes an objection to only a portion
of an Indemnification Claim, the Agent shall pay Parent an aggregate amount equal to the aggregate amount of the Indemnification Claim not subject to the Dispute Notice from the Indemnity Escrow Account and the Indemnity Escrow Amount Balance shall
be reduced by such payment. 
 (d) Release of Indemnity Escrow. 
 (i) On the first (1st) business day following the date that is eighteen (18) months following the Effective Time (the “Distribution Date”), the Agent shall wire transfer an aggregate amount equal to (1) the Indemnity
Escrow Amount Balance as of such date minus (2) the aggregate amount of all Unresolved Claims (as hereinafter defined) to the Fully-Diluted Stockholders in accordance with Article IV of the Merger Agreement and the applicable Letter of
Transmittal of each Fully-Diluted Stockholder delivered to the Agent or the Company at Closing or as otherwise set forth on Schedule A hereto (unless the Agent shall have subsequently received written instructions from any such Fully-Diluted
Stockholder in accordance with the Letter of Transmittal) and the Indemnity Escrow Amount Balance shall be reduced by such payment. For purposes of this Agreement, the term “Unresolved Claim” shall mean, as of the applicable
Distribution Date, an amount equal to the aggregate amount of Indemnification Claims that are the subject of a Dispute Notice, including any Indemnification Claim for which an Indemnification Notice has been delivered but for which the thirty
(30) days objection period has not expired as of the applicable Distribution Date. 
 (ii) Within two (2) business
days after (A) the Agent’s receipt of written instructions of the Holders Representative and Parent, (B) a final determination of a court of competent jurisdiction of any Unresolved Claim that is the subject of a Dispute Notice or
(C) the expiration of the thirty (30) day objection period for any Unresolved Claim for which no Dispute Notice has been delivered, the Agent shall make a cash payment to Parent in an aggregate amount equal to (1) the aggregate amount
of the Unresolved Claim, if any, as set forth in such written instructions or final determination or (2) the aggregate amount of such Unresolved Claim for which no Dispute Notice has been delivered in accordance with Section 11(a)
of this Agreement, as the case may be. 
 (iii) At such time as all Unresolved Claims existing on the Distribution Date have
been resolved in accordance with Section 12(d)(ii), the Agent shall wire transfer (A) all Undistributed Indemnity Escrow Earnings (as hereinafter defined) 

  

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on the Indemnity Escrow on such date (less the Parent’s Pro Rata Share (as defined below) thereof) to the Fully-Diluted Stockholders in accordance with
Article IV of the Merger Agreement and the applicable Letter of Transmittal of each Fully-Diluted Stockholder delivered to the Agent or the Company at Closing or as otherwise set forth on Schedule A hereto (unless the Agent shall have
subsequently received written instructions amending the applicable Letter of Transmittal from any such Fully-Diluted Stockholder) and (B) an aggregate amount equal to the Parent’s Pro Rata Share of all Undistributed Indemnity Escrow
Earnings on the Indemnity Escrow on such date to the Parent. For purposes of this Section 11(d), the term “Undistributed Indemnity Escrow Earnings” for any period shall mean an aggregate amount equal to (x) the
aggregate amount of all earnings on the Indemnity Escrow during such period minus (y) the aggregate amount of all Tax Distributions and any accruals in respect of taxes payable on the earnings on the Indemnity Escrow during such period.

 (e) Claims Procedures. All Indemnification Claims under Section 8.2 of the Merger Agreement arising as a result
of third party claims against Parent Indemnified Parties shall be made and resolved as hereinafter set forth. If a claim by a third party is made against a Parent Indemnified Party, and if such Parent Indemnified Party intends to seek indemnity with
respect thereto under Section 8.2 of the Merger Agreement, such Parent Indemnified Party shall promptly notify the Holders Representative of such Indemnification Claims. The failure to provide such notice shall not result in a waiver of any
right to indemnification under Section 8.2 of the Merger Agreement except to the extent the indemnifying party is actually materially prejudiced by such failure. With respect to an Indemnification Claim arising from a third-party claim against
a Parent Indemnified Party, the Parent Indemnified Party shall undertake, conduct and control, through counsel of its own choosing (the expense of such counsel to be included in the amount of such Indemnification Claim), the settlement or defense
thereof; provided, however, no later than 30 days following receipt of notice of such Indemnification Claim from Parent upon delivery of written notice to Parent confirming the obligation of the Fully-Diluted Stockholders to indemnify
and hold harmless the Parent Indemnified Parties, the Holders Representative may undertake, conduct and control, through counsel of his own choosing (provided that such counsel is reasonably acceptable to Parent) and at its own expense, the
settlement or defense thereof, and the Parent Indemnified Party shall cooperate with the Holders Representative in connection therewith. Such cooperation shall include the retention and (upon the Holders Representative’s reasonable request) the
provision to the Holders Representative of records and information that are reasonably relevant to the third party claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material
provided in connection therewith, including, providing testimony and attending such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested. The Parent Indemnified Party may participate, through counsel of
Parent’s own choosing and at Parent’s own expense, with the Holders Representative in the settlement or defense thereof, it being understood that the Holders Representative 

  

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shall control such defense. The Holders Representative shall not, except with the consent of the Parent Indemnified Party, such consent not to be
unreasonably withheld or delayed, enter into any settlement or consent to entry of any judgment that (i) does not include as an unconditional term thereof the giving by the Person or Persons asserting such claim to such Parent Indemnified Party
of an unconditional release from all liability with respect thereto, or (ii) imposes any restriction, condition or obligation on, or requires any undertaking or admission by such Parent Indemnified Party. 
 (f) Release of Adjustment Holdback. Upon the final determination of, or agreement as to, the Actual Adjustments pursuant to
Section 4.8 of the Merger Agreement, and following receipt of (i) a written direction executed by each of Parent and the Holders Representative or (ii) certified court order, the Agent shall promptly (1) make a cash payment to
Parent in an aggregate amount, if any, equal to the amount by which the Actual Adjustments exceeds the Estimated Adjustments (provided that, in the event such deficit is in excess of the Adjustment Holdback, such excess shall be deducted from the
Indemnity Escrow) plus the Parent’s Pro Rata Share of all undistributed earnings on the Adjustment Holdback and (2) make a cash payment to the Fully-Diluted Stockholders of any remaining amounts in the Adjustment Escrow Account,
together with any cash payment received from Parent pursuant to Section 4.8(c) of the Merger Agreement, plus all undistributed earnings on the Adjustment Holdback (less the Parent’s Pro Rata Share thereof). 
 (g) Termination. This Agreement shall terminate when the entire Escrow Amounts have been released and distributed in accordance
with this Section 11. Upon such termination, this Agreement shall have no further force and effect, except that the provisions of Sections 3, 4, 5, 6, 14, 16, and 17 shall survive such
termination. 
 (h) Parent’s Pro Rata Share. For purposes of this Agreement, the “Parent’s Pro Rata
Share” shall mean, as of any date of determination, (i) with respect to the Indemnity Escrow, the percentage obtained by dividing (A) the aggregate amount distributed to Parent pursuant to Sections 11(a), (b) and
(c) by (B) the sum of (1) the aggregate amount distributed to Parent pursuant to Sections 11(a), (b) and (c) plus (2) the aggregate amount distributed to the Fully-Diluted Stockholders pursuant to
Section 11(d)(i) and (ii) and (ii) with respect to the Adjustment Holdback, the percentage obtained by dividing (A) the amount paid to Parent pursuant to Section 11(f) by (B) the original Adjustment
Holdback; provided, however, that in neither case shall the Parent’s Pro Rata Share be greater than 100%. 
 (i) Holders’ Representative. Prior to the disbursement of any amounts due and owing the Fully-Diluted Stockholders hereunder, upon receipt of written documentation from the Holders’ Representative, any fees and expenses
reasonably incurred by the Holders’ Representative hereunder or in connection with the compromise, settlement or satisfaction of any claim asserted by or against the Holders’ Representative shall be reimbursed from such amounts otherwise
due to the Fully-Diluted Stockholders. 
  

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 12. Rights to the Escrow Amounts. None of the Company, the Fully-Diluted Stockholders, the Holders
Representative or Parent shall be deemed to have any right, title or interest in or possession of the Escrow Amounts and therefore shall not have the ability to pledge, convey, hypothecate or grant as security the Escrow Amounts unless and until
such funds have been disbursed or are required to be disbursed to one of the parties pursuant to Section 11 above. Accordingly, the Agent will not act as custodian of the Company, the Fully-Diluted Stockholders, the Holders
Representative or Parent for the purposes of perfecting a security interest therein, and no creditor of the Company, the Fully-Diluted Stockholders, the Holders Representative or Parent shall have any right to have or to hold the Escrow Amounts as
collateral for any obligation and shall not be able to obtain a security interest in any assets (tangible or intangible) contained in or relating to the Escrow Amounts. 
 13. Conditions to Escrow. The Agent agrees to hold the Escrow Amounts and to perform in accordance with the terms and provisions of this Agreement. Parent, the Company and the Holders Representative agree that
the Agent does not assume any responsibility for the failure of Parent, the Company or the Holders Representative to perform in accordance with this Agreement. The acceptance by the Agent of its responsibilities hereunder is subject to the following
terms and conditions, which the parties hereto agree shall govern and control with respect to the Agent’s rights, duties, liabilities and immunities: 
 (a) The Agent shall be protected in acting upon any written notice, request, waiver, consent, receipt or other paper or document furnished to it, not only as to its due execution and validity and effectiveness of its
provisions but also as to the truth and accuracy of any information therein contained, which the Agent in good faith believes to be genuine and what it purports to be. Should it be necessary for the Agent to act upon any instructions, directions,
documents or instruments issued or signed by or on behalf of any corporation, fiduciary, or individual acting on behalf of another party hereto, it shall not be necessary for the Agent to inquire into such corporation’s, fiduciary’s or
individual’s authority. 
 (b) The Agent shall not be liable for any error of judgment or for any act done or step taken
or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection herewith, except for its own gross negligence, recklessness, bad faith or willful misconduct. 
 (c) The Agent may consult with, and obtain advice from, legal counsel in the event of any question as to any of the provisions hereof or
the duties hereunder, and it shall incur no liability and shall be fully protected in acting in good faith in accordance with the opinion and instructions of such counsel, subject to Section 13(b) above. The reasonable and documented
costs of such counsel’s services shall be paid to the Agent in accordance with Section 16 below. 
 (d) The
Agent shall have no duties except those which are expressly set forth herein and it shall not be bound, other than as provided in Section 13(c) above, by any agreement of the other parties hereto (whether or not it has any knowledge
thereof) or by any notice of a claim, or demand with respect thereto, or any waiver of this Agreement, until received by an officer in its trust division in writing. 
  

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 (e) The Agent reserves the right to resign at any time by giving thirty (30) days
prior written notice of the effective date of resignation to the Holders Representative and Parent, specifying the effective date thereof. Within thirty (30) days after receiving the aforesaid notice, Parent may appoint a successor agent
acceptable to the Holders Representative (which acceptance shall not be unreasonably withheld or delayed) to which the Agent may distribute the Escrow Amounts then held hereunder, less the portion of Agent’s fees, costs and expenses payable by
the Fully-Diluted Stockholders from the Indemnity Escrow. If a successor agent has not been appointed by Parent by the end of such thirty (30) day period, the Holders Representative may, within five (5) business days after the end of
Parent’s thirty (30) day period, appoint a successor agent acceptable to Parent (which acceptance shall not be unreasonably withheld or delayed) to which the Agent may distribute the Escrow Amounts then held hereunder, less the
Agent’s fees, costs and expenses. If a successor agent has not been appointed and has not accepted such appointment by the end of such thirty-five (35) day period, the Agent may apply to a court of competent jurisdiction for the
appointment of a successor agent. 
 (f) Upon delivery of all of the Escrow Amounts pursuant to the terms of
Section 11 above or to a successor agent, the Agent shall thereafter be discharged from any further obligations hereunder. The Agent is hereby authorized, in any and all events, to comply with and obey any and all final judgments, orders
and decrees of any court of competent jurisdiction which may be filed, entered or issued, and, if it shall so comply or obey, it shall not be liable to any other person by reason of such compliance or obedience. 
 (g) In case the Agent becomes involved in litigation on account of the Escrow Amounts or this Agreement, it shall have the right to retain
counsel and all reasonable and documented costs, attorneys’ fees, charges, disbursements, and expenses in connection with such litigation shall be paid one-half by the Fully-Diluted Stockholders from the Indemnity Escrow and one-half by Parent
or as may be otherwise agreed among Parent and the Holders Representative. 
 14. Indemnification. The Holders Representative and
Parent, jointly and severally, hereby agree to indemnify the Agent for and to hold it harmless against any loss, liability or expense incurred without gross negligence, recklessness, bad faith or willful misconduct on the part of the Agent arising
out of or in connection with its performance under this Agreement; provided, however, that to the extent the actions of Parent or the Holders Representative give rise to any such loss, liability or expense, then the party whose actions
did not give rise to such loss, liability or expense shall have a right of contribution against the other with respect to any payment made by him or it under this Section 14 with respect to such loss, liability or expense. This
indemnification shall survive the termination of this Agreement. The costs and expenses of enforcing this right of indemnification shall also be paid equally by the Fully-Diluted Stockholders from the Indemnity Escrow and Parent. 
 15. Banking Days. If any date on which the Agent is required to make an investment or a delivery pursuant to the provisions hereof is not a
banking day, then the Agent shall make such investment or delivery on the next succeeding banking day. 
  

 - 11 - 

 16. Escrow Costs. The Agent shall be entitled to be paid the fees set forth on Schedule B
for its services pursuant to the attached schedule and to be reimbursed for its reasonable costs and expenses hereunder, which fees, costs and expenses (i) with respect to the Indemnity Escrow, shall be borne one-half by the Fully-Diluted
Stockholders from the Indemnity Escrow and one-half by Parent, and (ii) with respect to the Adjustment Holdback, shall be paid by the [Parent] from the Adjustment Holdback. 
 17. Notices. Any notice, request, instruction or other document to be given hereunder by any Party to the other Parties shall be deemed delivered
upon actual receipt and shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by reputable overnight courier, or by facsimile transmission (with a confirming copy sent by reputable overnight courier.

 If to Parent or Merger Sub, addressed to it at: 
 With a copy to: 
 If to Company or the Holders Representative: 
 With a copy to: 
 If to the Agent: 

or such other address or telecopy number or to the attention of such other person as the recipient party shall have specified by prior written notice
to the sending party. 
 18. Entire Agreement. This Agreement, together with the Agreement and related exhibits, contains the entire
understanding of the parties hereto with respect to the transactions contemplated hereby and this Agreement may be amended, modified, supplemented or altered only by a writing duly executed by the Agent, Parent and the Holders Representative and any
prior agreements or understandings, whether oral or written, are entirely superseded hereby. 
 19. Assigns and Assignment. This
Agreement shall extend to, shall inure to the benefit of and shall be binding upon all of the parties hereto and upon all of their respective successors and permitted assigns. This Agreement shall not, however, be assignable or transferable, in
whole or in part, by any of the parties hereto except upon the express prior written consent of each of the other parties hereto; provided, however, that the Fully-Diluted Stockholders shall in any event be entitled to assign all
rights to receive payments or distributions hereunder to any Affiliate, or to any investor, partner or stockholder or any of their respective Affiliates, or any other Fully-Diluted Stockholder without the prior written consent of any other party
hereto, which assignment shall be deemed effective upon the receipt by the Agent of written instructions from any such Fully-Diluted Stockholder in accordance with the Letter of Transmittal. 
 20. No Other Third Party Beneficiaries. Except as otherwise expressly provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person other than the Agent, the Holders Representative, Parent and Merger Sub any rights or remedies under or by reason of this Agreement. 
  

 - 12 - 

 21. Interpretation. The headings in this Agreement are inserted for convenience of reference only
and shall not be a part of or control or affect the meaning hereof. As used herein, a reference to “he” or “his” or like masculine form shall be deemed to also be a reference to the relevant feminine and indefinite
forms. As used herein, a “person” shall be deemed to be a reference to an individual, partnership, limited liability company, corporation, unincorporated association, trust, governmental agency (or division thereof) or any other
legal entity. 
 22. No Waiver. No failure or delay by a party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, and no single or partial exercise thereof shall preclude any right of further exercise or the exercise of any other right, power or privilege. 
 23. Severability. The parties agree that (a) the provisions of this Agreement shall be severable in the event that for any reason whatsoever
the provisions hereof are invalid, void or otherwise unenforceable, (b) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void
or otherwise unenforceable provisions but are valid and enforceable and (c) the remaining provisions shall remain enforceable to the fullest extent permitted by law. 
 24. Governing Law. This Agreement and any related disputes shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any principles of conflicts of law
thereof or other law that would cause the application of the domestic substantive laws of any other State or jurisdiction. 
 25.
Counterparts. For the convenience of the parties hereto, this Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the
same agreement. 
 26. Alternate Dispute Resolution: Trial by Jury. IT SHALL BE A CONDITION PRECEDENT TO THE RIGHT OF ANY PARTY TO
INSTITUTE LITIGATION THAT THE PARTIES HERETO SHALL FIRST ENGAGE IN MEDIATION IN A GOOD FAITH EFFORT TO RESOLVE ANY CONTROVERSY. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN
CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT. 
 *            *            *            * 
 [signature page to follow] 
  

 - 13 - 

 IN WITNESS WHEREOF, the parties hereto have executed this Escrow and Exchange Agent Agreement as of the
date first written above. 
  

			
	FORTUNE BRANDS, INC.
		
	By:	 	  

	Its:	 	  

	
	BRIGHTSTAR ACQUISITION LLC
		
	By:	 	  

	Its:	 	  

	
	  

	Samuel B. Ross, II, as Holders Representative
	
	THE BANK OF NEW YORK
		
	By:	 	  

	Its:	 	  

	
	SBR, INC.
		
	By:	 	  

	Its:	 	  

 SCHEDULE A 
 [TO COME] 

 SCHEDULE B 
 Fees of Escrow Agent 
 [TO COME]EXHIBIT 10.32

LOAN AND SECURITY AGREEMENT

This LOAN AND SECURITY AGREEMENT is made December 27, 2005, by and between DVL,
INC., a Delaware corporation having its principal place of business at 70 East
55th Street, 7th Floor, New York, New York 10022 (the "Borrower"), and PEMMIL
FUNDING LLC, a New York limited liability company (the "Lender").

WITNESSETH:

1. BACKGROUND

1.1 Defined Terms As used in this Agreement, the following terms shall have the
following meanings (all terms defined in this Article I or other provisions in
the singular shall have the same meanings when used in the plural and vice
versa):

      "Affiliate" - With respect to a specified Person, (i) a Person who,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, the specified Person, (ii) any
Person who is an officer, director, partner or trustee of, or serves in a
similar capacity with respect to, the specified Person or of which the specified
Person is an officer, partner or trustee, or with respect to which the specified
Person serves in a similar capacity, (iii) any Person who, directly or
indirectly, is the beneficial owner of 10% or more of any class of equity
securities of, or otherwise has a substantial beneficial interest in, the
specified Person or of which the specified Person has a substantial beneficial
interest and (iv) the spouse, issue, or parent of the specified Person.

      "Business Day" - Any day on which banking institutions in New York, New
York, are open for the transaction of banking business.

            "Capital Transactions" - shall mean a sale, transfer, exchange or
other disposition, refinancing, financing, condemnation or casualty affecting
all or a portion of the Borrower's assets.

            "Change of Control" - shall mean an acquisition by an individual or
legal entity or group (as defined in Section 13(d) of the Securities Exchange
Act of 1934 (the "Exchange Act")) of more than 50% of the voting rights or
capital stock of the Borrower, other than any Permitted Holder.

            "Corporation" - S2 Holdings, Inc., a Delaware corporation

            "Governmental Authority" - Any foreign, federal, state, regional,
local, municipal or other government, or any department, commission, board,
bureau, agency, public authority or instrumentality thereof, or any court or
arbitrator.

            "Interest Rate" - 12% per annum, compounded monthly.

      "Lien" - Any mortgage, deed of trust, security interest, pledge,
hypothecation, assignment, attachment, deposit arrangement, encumbrance, lien
(statutory, judgment or otherwise), or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease involving substantially the
same economic effect as any of the foregoing and the filing of any financing
statement under the UCC or comparable law of any jurisdiction).

            "Loan Amount" - $2,500,000.00

            "Loan" - as defined in Section 2.1.

<PAGE>

            "Loan Documents" - This Agreement, the Note and any other documents
entered into in connection herewith.

            "Maturity Date"- December __, 2008

            "Net Proceeds" - The excess, if any, of (i) all cash amounts
received by the Borrower in connection with a Capital Transaction over (ii) the
sum of (a) all reasonable costs and expenses (including the satisfaction of any
debt that is the subject of such Capital Transaction) incurred in connection
with such Capital Transaction and (b) any payments required to be made by
Borrower from such Capital Transaction to the Gross Settlement Fund established
in connection with the disposition of the 1992 class action litigation in which
the Borrower was a defendant.

            "Note" - as defined in Section 2.6.

            "Obligations" - all of the indebtedness, liabilities and obligations
of the Borrower to the Lender, whether now existing or hereafter arising,
whether or not currently contemplated, direct or indirect, joint or several,
certain or contingent, matured or unmatured, liquidated or unliquidated, secured
or unsecured, arising by contract, operation of law or otherwise, arising out of
or incurred under this Agreement or the Note, including, without limitation, the
Loans, and including in every case interest thereon and all other amounts
payable in respect thereof pursuant to this Agreement.

            "Organizational Documents" - With respect to any Person, to the
extent applicable, its certificate of limited partnership, certificate of
formation, certificate of incorporation, limited partnership agreement,
operating agreement, by-laws and all other equity holder agreements, voting
trusts and similar arrangements applicable to the equity interests of such
Person.

            "Permitted Holder" means any Person or group that, as of the date of
this Agreement, beneficially owns (as defined in Section 13(d) of the Exchange
Act) greater than 10% of the Company's common stock.

            "Shares" - means 100 shares of common stock of the Corporation.

            "UCC" - The Uniform Commercial Code of the State of New York as in
effect from time to time.

      1.2 Borrower. Borrower is a corporation organized under the laws of the
State of Delaware.

      1.3 Use of Loan Proceeds. Borrower has applied to Lender for a loan of up
to TWO MILLION FIVE HUNDRED THOUSAND AND XX/100 ($2,500,000) ("Loan"), the
proceeds of which are to be used for the repayment of the Borrower's existing
indebtedness.

      1.4 Loan. Subject to all of the terms, conditions and provisions of this
Agreement, and of the agreements and instruments referred to herein, the Lender
agrees to make a loan to the Borrower in a principal amount equal to the Loan
Amount, and Borrower agrees to accept and repay the Loan.

<PAGE>

      1.5 Rules of Interpretation.

      (a) A reference to any document or agreement shall include such document
or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Agreement.

      (b) The singular includes the plural and the plural includes the singular.

      (c) A reference to any law includes any amendment or modification to such
law.

      (d) A reference to any Person includes its permitted successors and
permitted assigns.

      (e) The words "include", "includes" and "including" are not limiting.

      (f) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.

      (g) Unless otherwise expressly indicated, in the computation of periods of
time from a specified date to a later specified date, the word "from" means
"from and including," the words "to" and "until" each mean "to but excluding,"
and the word "through" means "to and including."

      (h) This Agreement and the other Loan Documents are the result of
negotiation among, and have been reviewed by counsel to, among others, the
Lender and the Borrower and are the product of discussions and negotiations
among all parties. Accordingly, this Agreement and the other Loan Documents are
not intended to be construed against the Lender merely on account of the
Lender's involvement in the preparation of such documents.

      2. LOAN PROVISIONS.

            2.1 Amount of Loan. Subject to the terms and conditions set forth in
this Agreement, on the date hereof, the Lender agrees to lend to the Borrower an
aggregate amount equal to the Loan Amount.

            2.2 Maturity Date. The Loan shall mature on the Maturity Date.

            2.3 Interest Rate and Payment Terms. The Loan shall be payable as to
interest and principal in accordance with the provisions of this Agreement and
the Note. This Agreement also provides for prepayment rights.

                  2.3.1 Payment and Calculation of Interest. All interest shall
be: (a) payable in arrears commencing the first Business Day of the month
immediately following the month in which the Loan is made and on the first
Business Day of each month thereafter until the principal together with all
interest and other charges payable with respect to the Loan shall be fully paid;
and (b) calculated on the basis of a 360 day year and the actual number of days
elapsed; provided, however, that the Borrower shall not be required to make
monthly interest payments provided above except in connection with the mandatory
prepayments relating to a Capital Transaction required to be made under Section
2.3.3 hereof, and any accrued interest that is not paid when due as provided
above (subject to applicable grace periods under Section 5.1.1) shall be added
to the principal amount of the Loan.

                  2.3.2 Principal. The entire principal balance of the Loan
shall be due and payable in full on the Maturity Date.

                  2.3.3 Prepayment. The Loan or any portion thereof may be
prepaid in full or in part at any time upon fifteen (15) days prior written
notice to the Lender, without premium or penalty. The Borrower shall be required
to make a prepayment on account of the Loan upon the consummation of a Capital
Transaction which results in Net Proceeds received by the Borrower and such
prepayment shall be in an amount equal to 50% of the Net Proceeds received by
the Borrower. Any prepayment shall be applied first to interest and then to
principal.

<PAGE>

                  2.3.4 Maturity. On the Maturity Date all accrued interest,
principal and other charges due with respect to the Loan shall be due and
payable in full.

                  2.3.5 Method and Application of Payment; Date of Credit. All
payments of interest and principal shall be made in lawful money of the United
States in immediately available funds, without counterclaim or setoff and free
and clear of, and without any deduction or withholding for, any taxes or other
payments, unless required by applicable law. All payments received on account of
the Loan shall be applied first accrued and unpaid interest and then to
principal.

                  2.4 Acceleration. The Lender may, in its sole discretion,
accelerate the Loan after the occurrence and during the continuance of an Event
of Default.

      3. REPRESENTATIONS, WARRANTIES AND COVENANTS

            Section 3.1 Representations and Warranties. The Borrower hereby
represents and warrants to the Lender as follows:

                  3.1.1 Organization. The Borrower (1) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (2) has all requisite company power to own its property and conduct
its business as now conducted and as presently contemplated, and (3) is in good
standing as a foreign limited liability company and is duly authorized to do
business in each jurisdiction where such qualification is necessary except where
a failure to be so qualified would not have a material adverse effect on the
Borrower.

                  3.1.2 Due Execution. The execution, delivery and performance
of this Loan Agreement and the other documents entered into in connection
herewith to which the Borrower is or is to become a party and the transactions
contemplated hereby and thereby (a) are within the authority of the Borrower,
(b) have been duly authorized by all necessary corporate action, (c) do not
conflict with the Organizational Documents, or (d) do not conflict with, cause a
breach of default under or give any other entity or person a right of
termination, amendment or acceleration or cancellation of, or result in the
creation of a lien on any asset of the Borrower, pursuant to the terms of any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Borrower is a party or
by which the Borrower or any of its properties or assets is bound or affected,
except, in the case of this clause (e), as would not have a material adverse
effect on the Borrower.

                  3.1.3 Enforceability. The execution and delivery of this Loan
Agreement and the other documents to be entered into in connection herewith to
which the Borrower is or is to become a party will result in valid and legally
binding obligations of the Borrower enforceable against it in accordance with
the respective terms and provisions hereof and thereof, except as enforceability
is limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors' rights and
except to the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding therefore may be brought.

                  3.1.4 Consents. The execution, delivery and performance by the
Borrower of this Loan Agreement and the other documents to be entered into in
connection herewith to which it is or is to become a party and the transactions
contemplated hereby and thereby do not require the approval or consent of, or
filing with, any governmental agency or authority other than those already
obtained, other than required filings with the Securities and Exchange
Commission.

                  3.1.5 Litigation. There are no actions, suits, proceedings or
investigations of any kind pending or threatened against the Borrower before any
governmental agency that, if adversely determined, might, either in any case or
in the aggregate, (i) have a material adverse effect on the Borrower or (ii)
materially impair the right of the Borrower and its subsidiaries, considered as
a whole, to carry on business substantially as now conducted by them.

<PAGE>

                  3.1.6 No Violations. The Borrower is not in violation of any
provision of its Organizational Documents, or any agreement or instrument to
which it may be subject or by which it or any of its properties may be bound or
any decree, order, judgment, statute, license, rule or regulation, in any of the
foregoing cases in a manner that could result in the imposition of substantial
penalties or have a material adverse effect on the Borrower.

                  3.1.7 Representations with Respect to the Shares. The Borrower
is the legal and beneficial owner of the Shares, and except for the lien granted
hereunder to the Lender, are owned by the Borrower free and clear of any pledge,
mortgage, hypothecation, lien, charge, encumbrance, security interest or other
encumbrance in such shares or the proceeds thereof. The pledge of the Shares
pursuant to this Agreement creates a valid security interest in such Shares as
security for the prompt and full satisfaction of the Obligations and the Lender
shall, upon delivery of such Shares to it, have a perfected first priority
security interest in such Shares. The Shares represent all of the issued and
outstanding stock of the Corporation.

                  3.1.8 Taxes. Borrower and has made all required tax filings
and have paid all federal, state and local taxes applicable to them and/or their
respective assets.

                  3.1.9 Bankruptcy Filings. The Borrower is not contemplating
either a filing of a petition under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or
property, and the Borrower has no knowledge of any Person contemplating the
filing of any such petition against any of the Borrower.

                  3.1.10 Options. No Person holds a right of first refusal or
option to purchase with respect to the Shares.

                  3.1.11 Investment Company. Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.

                  3.1.12 Holding Company. Borrower is not a "holding company,"
or a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, as amended.

            Section 3.2 Covenants. The Borrower covenants and agrees as follows:

                  3.2.1 Books and Records. The Borrower shall keep and maintain
proper and accurate books, records and accounts reflecting all of the financial
affairs of the Borrower and all items of income and expense in connection with
its business and operations and in connection with any services, equipment or
furnishings provided in connection with the operation of the business of the
Borrower, whether such income or expense is realized thereby or by any other
person or entity.

                  3.2.2 Tax Returns. The Borrower shall cause all tax returns
required to be filed by it to be filed on a timely basis and any taxes due on
account thereof to be paid on a timely basis, unless and to the extent that such
taxes are being diligently contested in good faith and by appropriate
proceedings and appropriate reserves therefore have been established.

                  3.2.2 Organizational Documents. Except with the prior written
consent of the Lender, the Borrower shall not permit to be modified, amended,
supplemented or terminated in any material respect, its Organizational
Documents, or any of them.

<PAGE>

                  3.2.4 Legal Existence. The Borrower will do or cause to be
done all things necessary to preserve and keep in full force and effect its
legal existence, rights and franchises.

                  3.2.5 Loan Proceeds. The Borrower will use the proceeds of the
Loans solely for the purposes set forth in Section 1.3.

                  3.2.6 Insurance. The Borrower will maintain with financially
sound and reputable insurers insurance with respect to its properties and
business against such casualties and contingencies as shall be in accordance
with the general practices of businesses engaged in similar activities in
similar geographic areas and in amounts, containing such terms, in such forms
and for such periods as may be reasonable and prudent.

                  3.2.7 Compliance with Laws. The Borrower will comply in all
material respects with (a) the applicable laws and regulations wherever its
business is conducted, (b) the provisions of its Organizational Documents, (c)
all material agreements and instruments by which it or any of its properties may
be bound, and (d) all applicable decrees, orders, and judgments. If any
authorization, consent, approval, permit or license from any office, agency or
instrumentality of any government shall become necessary or required in order
that the Borrower may fulfill any of its obligations hereunder or any of the
other Loan Documents to which the Borrower is a party, the Borrower will
promptly take or cause to be taken all reasonable steps within the power of the
Borrower to obtain such authorization, consent, approval, permit or license and
furnish the Lender with evidence thereof.

                  3.2.8 Indemnification. Borrowers shall at all times, both
before and after repayment of the Loan, at its sole cost and expense defend,
indemnify, exonerate and save harmless Lender and all those claiming by, through
or under Lender ("Indemnified Party") (to the extent not paid by Borrowers in
this Section 3.2.8 or under the applicable provisions of this or any other Loan
Document) against and from all damages, losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, judgments, suits, proceedings,
costs, disbursements or expenses of any kind whatsoever, including, without
limitation, reasonable attorneys' fees and experts' fees and disbursements,
which may at any time (including, without limitation, before or after discharge
or foreclosure of the Security Documents) be imposed upon, incurred by or
asserted or awarded against the Indemnified Party and arising from or out of:

      (i) any liability for damage to person or property arising out of any
violation of any applicable legal requirement by the Borrower,

      (ii) as a result of litigation that may arise in connection with the
Borrower's activities (excluding the Loan or the Loan Documents), or

      (iii) any and all liabilities, damages, penalties, costs, and expenses,
relating in any manner to any brokerage or finder's fees in respect of the Loan.

      Notwithstanding the foregoing, an Indemnified Party shall not be entitled
to indemnification in respect of claims arising from acts of its own gross
negligence or willful misconduct to the extent that such gross negligence or
willful misconduct is determined by the final judgment of a court of competent
jurisdiction, not subject to further appeal, in proceedings to which such
Indemnified Party is a proper party.

                  3.2.9 Costs and Expenses. Borrower shall pay all legal fees
reasonably incurred by Lender in connection with the implementation of the Loan
and the administration of the Loan, and reasonably incurred by the Lender in
connection with the enforcement of the Lender's rights under the Loan Documents.
Borrowers' obligations to pay such costs and expenses shall include, without
limitation, all attorneys' fees and other costs and expenses for preparing and
conducting litigation or dispute resolution arising from any breach by Borrower
of any covenant, warranty, representation or agreement under any one or more of
the Loan Documents. Unless an Event of Default has occurred and is then
continuing, the Lender shall use its best efforts to notify the Borrower prior
to the incurrence of any such cost or expense if the aggregate amount of such
costs and expenses in any one calendar year will exceed $5,000.00; provided,
however, that the failure to provide such notice shall not affect in any manner
whatsoever on the Borrowers' obligations hereunder.

<PAGE>

                  3.2.10 Transfer of Shares; Issuance of Additional Share. The
Borrower shall not sell, assign or otherwise encumber the Shares until the
Obligations are satisfied in full. The Borrower shall not consent to the
issuance of, or permit the Corporation to issue, any additional equity interests
in the Corporation.

                  3.2.10 Further Assurances. The Borrower will cooperate with
the Lender and execute such further instruments and documents as the Lender
shall reasonably request to carry out to their reasonable satisfaction the
transactions contemplated by this Agreement and the other Loan Documents.

      4. COLLATERAL SECURITY, PLEDGE

      As security for the prompt and full satisfaction and payment of the
Obligations, the Borrower hereby pledges and assigns the Shares to the Lender
and grants the Lender a security interest therein.

            (a) The Borrower shall deliver, upon the execution of this
Agreement, certificate(s) representing the Shares, endorsed in blank or with
appropriate stock powers duly executed in blank, to be held by the Lender, in
pledge, subject to the terms hereof.

            (b) The Lender shall be entitled to receive and hold in pledge
hereunder in connection with any of the Shares, any:

                  (i) stock certificate representing a stock dividend or in
connection with any increase or reduction of capital, reclassification, merger,
consolidation, or sale of assets, combination of shares or stock splits;

                  (ii) option, warrant, or right, whether as an addition to or
in substitution or in exchange for any of the Shares, or otherwise; and

                  (iii) dividend or distribution payable in cash or property at
such time, if at all, that the entire unpaid balance of principal of and
interest on the Note outstanding has become due and payable in accordance with
Article 5.

      The Parties acknowledge and agree that, except as provided in clause
(b)(iii) above, the Lender shall not be entitled to any interest in, any Lien
on, or to receive and hold in pledge, distributions made to the Borrower from
the Corporation, including without limitation distributions of cash received by
the Corporation in respect of the Corporation's interests in Receivables II-A,
LLC and Receivables II-B, LLC, and any and all such distributions referred to
above shall be owned solely by the Borrower, free and clear of Liens in favor of
the Lender.

5. EVENTS OF DEFAULT

      5.1 Default. If any one or more of the following events ("Events of
Default") shall occur and be continuing with respect to the Borrower, the entire
unpaid balance of principal of and interest on the Note outstanding shall
immediately become due and payable upon written notice to that effect given to
the Borrower by the Lender (except that in the case of the occurrence of any
Event of Default described in subparagraph 5.1.5 hereof, no such notice shall be
required), without presentment or demand for payment, notice of non-payment,
protest or further notice or demand of any kind, all of which are expressly
waived by the Borrower:

<PAGE>

            5.1.1 Payments. Failure by the Borrower to make any payment of
principal or interest upon the Note, and such failure shall continue for a
period of more than five (5) Business Days after written notice thereof shall
have been given to the Borrower by the Lender; or

            5.1.2 Covenants. Failure by a Borrower to perform or observe in any
material respect any of the covenants or agreements contained in Section 3.2
hereof; or

            5.1.3 Representations and Warranties. Any representation or warranty
made by the Borrower to the Lender hereunder or in connection with the making of
the Loans shall have been false or misleading in any material respect when made
or delivered; or

            5.1.4 Default under a Loan Document. Any other default in any
material respect in the performance of any term or provision of the Note, or of
any of the other Loan Documents, or a breach, or other failure to satisfy, in
any material respect, any other term, provision, condition or warranty under the
Note, or any other Loan Document, regardless of whether any then undisbursed
portion of the Loan is sufficient to cover any payment of money required
thereby, and the specific grace period, if any, allowed for the default in
question shall have expired without such default having been cured.

            5.1.5 Financial Status and Insolvency. The Borrower shall: (i) admit
in writing its inability to pay its debts generally as they become due; (ii)
file a petition in bankruptcy or a petition to take advantage of any insolvency
act; (iii) make an assignment for the benefit of creditors; (iv) consent to, or
acquiesce in, the appointment of a receiver, liquidator or trustee of itself or
of the whole or any substantial part of its properties or assets; (v) file a
petition or answer seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the Federal
Bankruptcy laws or any other applicable law; (vi) have a court of competent
jurisdiction enter an order, judgment or decree appointing a receiver,
liquidator or trustee of the Borrower, or of the whole or any substantial part
of the property or assets of the Borrower, and such order, judgment or decree
shall remain unvacated or not set aside or unstayed for sixty (60) days; (vii)
have a petition filed against it seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
Federal Bankruptcy laws or any other applicable law and such petition shall
remain undismissed for sixty (60) days; (viii) have, under the provisions of any
other law for the relief or aid of debtors, any court of competent jurisdiction
assume custody or control of the Borrower or of the whole or any substantial
part of its property or assets and such custody or control shall remain
unterminated or unstayed for sixty (60) days; or (ix) have an attachment or
execution levied against any substantial portion of the property of the Borrower
or against any substantial portion of the Shares which is not discharged or
dissolved by a bond within sixty (60) days; or

            5.1.6 Loan Documents. If any Loan Document for any reason other than
the satisfaction in full of all Obligations shall cease to be in full force and
effect (other than in accordance with its terms), thereby preventing the Lender
from obtaining the practical realization of the benefits thereof, or if any Loan
Document shall be declared null and void, or if the Liens and security interests
purported to be created by any of the Loan Documents shall cease to be valid,
perfected, first priority (except as otherwise expressly provided herein)
security interests;

<PAGE>

            5.1.7 Judgments. One or more judgments or decrees shall be entered
against the Borrower involving a liability (not paid or fully covered by a
reputable and solvent insurance company) and such judgments and decrees either
shall be final and non-appealable or shall not be vacated, discharged or stayed
or bonded pending appeal for any period of sixty (60) consecutive days, and the
aggregate amount of all such judgments exceeds $250,000.

            5.1.8 Change of Control. If a Change of Control shall occur.

            5.1.9 Default of Other Obligations. Any failure by the Borrower to
pay at maturity, or within any applicable grace period, any obligation for
borrowed money, or in respect of any capitalized lease, in an aggregate amount
exceeding $500,000, or any failure to observe or perform any material term,
covenant or agreement contained in any agreement by which the Borrower is bound,
evidencing or securing borrowed money, or in respect of any capitalized lease,
such that the holder or holders thereof or of any obligations issued thereunder
have accelerated the maturity thereof.

      5.2 Remedies. In case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not the Lender shall have accelerated
the maturity of the Loans, the Lender, if owed any amount with respect to the
Loan, may proceed to protect and enforce its rights by suit in equity, action at
law or other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Loan Agreement and the other documents
entered into in connection herewith or any instrument pursuant to which the
Obligations to the Lender are evidenced, including as permitted by applicable
law the obtaining of the ex parte appointment of a receiver, and, if such amount
shall have become due, by declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of the Lender. No remedy
herein conferred upon the Lender is intended to be exclusive of any other remedy
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or any other provision of law. In addition to all of its other rights
and remedies hereunder the Lender shall have all of the rights and remedies of a
secured party under the UCC from time to time and shall comply with all
procedures thereunder for disposition and sale of the Shares. The Lender shall
have the right to sell or otherwise dispose of all or any of the Shares subject
to appropriate UCC rules. Such sales may be adjourned and continued from time to
time, with or without notice. To enable the Lender to effect any such sale,
assignment and/or transfer and to take any action and to execute any instrument
which the Lender may deem necessary or advisable to accomplish the purposes of
this Agreement, the Borrower hereby makes, constitutes and appoints the Lender
as the true and lawful attorney, in its name, place and stead, and for its
account and risk, to make, executed and deliver any and all assignments or other
instruments which the Lender may deem necessary or proper to effectuate the
authority hereby conferred by signing the Borrower's name only or by signing the
same as its attorney-in-fact, as may be deemed by the Lender to be necessary or
proper in connection with any sale, assignment, or transfer of all or any part
of the Shares. The foregoing power of attorney is coupled with an interest and
shall be a continuing one and irrevocable so long as any portion of the
Obligations remains unpaid in whole or in part. The Lender may purchase all or
any part of the Shares at public sale or, if permitted by law, private sale,
subject to appropriate UCC rules, and in lieu of actual payment of such purchase
price, may set off the amount of such price against the Obligations.

      5.3 Remedies of the Essence. The various rights and remedies of the Lender
under this Agreement are of the essence of the Agreement, and the Lender shall
be entitled to obtain a decree requiring specific performance of each such right
and remedy.

      5.4 Recourse. The Loan shall be fully recourse to the Borrower and all of
its assets.

<PAGE>

      5.5 Distribution of Proceeds. In the event that, following the occurrence
and during the continuance of any Event of Default, with respect to the
realization upon any of the Shares, such monies shall be distributed for
application as follows:

      (a) First, to the payment of, or (as the case may be) the reimbursement of
the Lender for or in respect of all reasonable costs, expenses, disbursements
and losses which shall have been incurred or sustained by the Lender in
connection with the collection of such monies by the Lender, for the exercise,
protection or enforcement by the Lender of all or any of the rights, remedies,
powers and privileges of the Lender under this Agreement or any of the other
Loan Documents or in respect of the Shares or in support of any provision of
adequate indemnity to the Lender against any taxes or Liens which by law shall
have, or may have, priority over the rights of the Lender to such monies;

      (b) Second, upon payment and satisfaction in full or other provisions for
payment in full satisfactory to the Lender of all of the Obligations, to the
payment of any obligations required to be paid pursuant to the UCC; and

      (d) Third, the excess, if any, shall be returned to the Borrower or to
such other Persons as are entitled thereto.

      6. MISCELLANEOUS

      6.1 Notices. Any notices, elections or demands permitted or required to be
made under this Agreement shall be in writing, signed by the party giving such
notice, election or demand and shall be given either by personal delivery sent
postage prepaid by registered or certified mail, return receipt requested or
sent by overnight carrier, or via facsimile followed by certified mail and shall
be deemed to have been given when evidence of receipt is received by the sender
in each case addressed as follows:

      if to Lender:

                        Pemmil Funding LLC
                        70 East 55th Street, 7th Floor
                        New York, New York 10022
                        Attention:  Mr. Jay Chazanoff
                        Facsimile No.: (212) 350-9911

      if to Borrower:

                        DVL, INC.
                        70 East 55th Street, 7th Floor
                        New York, New York 10022
                        Attention:  Mr. Jay Thailer
                        Facsimile No.: (212) 350-9911

      with a copy to:

                        Mr. Alan Casnoff
                        4900 South Broad Street
                        Philadelphia, Pennsylvania  19112
                        Fax: 215-320-3785

<PAGE>

            A party hereto may change the address to which notices shall be sent
by written notice to all other parties hereto (said change of addresses to be
effective upon receipt by all other parties hereto).

            6.2 Lender's Right to Perform on a Borrower's Behalf. If the
Borrower shall fail to observe or perform any of the terms, conditions,
covenants and agreements to be observed or performed by it hereunder or under
the Note, the Lender may (but shall not be obligated to) do the same or cause it
to be done or performed or observed, either in its name or in the name and on
behalf of the Borrower, and the Borrower hereby authorizes the Lender so to do.

            6.3 Lender's Right to Use Agents and to Act in Name of Borrower. The
Lender may exercise its rights and remedies hereunder or under the Note through
an agent or other designee and, in the exercise thereof, the Lender or any such
other Person may act in its own name or in the name and on behalf of the
Borrower.

            6.4 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, without regard to
principles of conflicts of law thereof.

            6.5 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto were upon the same instrument.

            6.6 Entire Agreement. This Agreement embodies the entire agreement
among the Borrower and the Lender relating to the subject matter hereof and
supersedes all prior agreements, representations and understandings, if any,
relating to the subject matter hereof.

            6.7 Successors and Assigns. All of the provisions of this Agreement
shall be binding and inure to the benefit of the Borrower and the Lender and
their respective successors and assigns; provided, however, that the Borrower is
not permitted to make any assignment except with the prior written consent of
Lender.

            6.8 Captions. Captions to Sections and subsections of, and Schedules
and Exhibits to, this Agreement are included for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose or in
any way affect the meaning or construction of any provision of this Agreement.

            6.9 Pronouns and Gender. All pronouns and variations thereof used
herein shall, regardless of the pronoun actually used, be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the person or
persons may, in the context in which such pronoun is used, require.

<PAGE>

      IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first set forth above.

                                   LENDER:

                                               PEMMIL FUNDING LLC

                                               By /s/ Jay Chazanoff
                                                  ------------------------------
                                                  Jay Chazanoff
                                                  Administrative Member

                                   BORROWER:

                                               DVL, INC.

                                               By /s/ Jay Thailer
                                                  ------------------------------
                                                  Name:  Jay Thailer
                                                  Title: Chief Financial Officer

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