Document:

PACIFIC MAGTRON INTERNATIONAL CORP. 
  

 AMENDED AND RESTATED

  CERTIFICATE OF DESIGNATION OF PREFERENCES, 

  RIGHTS AND LIMITATIONS  

  OF  

  SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK  

 PURSUANT TO SECTION 78.1955 OF THE GENERAL
  

  CORPORATION LAW OF THE STATE OF NEVADA  

     The undersigned, Theodore
  S. Li, and Hui Cynthia Lee, do hereby certify that:  

          1.
  They are the President and Secretary, respectively, of PACIFIC MAGTRON INTERNATIONAL
  CORP., a Nevada corporation (the  "Corporation").  

          2.
  A Certificate of Designation of Preferences, Rights and Limitations of Series
  A Redeemable Convertible Preferred Stock was filed with the Secretary of State
  of the State of Nevada on May 31, 2002.  

            3.
  The holder of the Series A Redeemable Convertible Preferred Stock has duly adopted
  a resolution authorizing the adoption of this Amended and Restated Certificate
  of Designation of Preferences, Rights and Limitations of Series A Redeemable
  Convertible Preferred Stock and the filing hereof with the Secretary of State
  of the State of Nevada.  

            4.
  There is no class or series of stock of the Corporation that has rights senior
  to the Series A Redeemable Convertible Preferred Stock.  

          5.
  The following resolutions were duly adopted by the Board of Directors of the
  Corporation:  

     WHEREAS, the Certificate of
  Incorporation of the Corporation provides for a class of its authorized stock
  known as preferred stock, comprised of 5,000,000 shares, $0.001 par value, issuable
  from time to time in one or more series;  

     WHEREAS, the Board of Directors
  of the Corporation is authorized to fix the dividend rights, dividend rate,
  voting rights, conversion rights, rights and terms of redemption and liquidation
  preferences of any wholly unissued series of preferred stock and the number
  of shares constituting any series and the designation thereof, of any of them;
  and  

 
     WHEREAS, a
  Certificate of Designation of Preferences, Rights and Limitations of Series
  A Redeemable Convertible Preferred Stock was filed with the Secretary of State
  of the State of Nevada on May 31, 2002 (the "Original Certificate of Designation").
   

     WHEREAS, it is the desire
  of the Board of Directors of the Corporation, pursuant to its authority as aforesaid,
  to amend and restate the preferences, rights and limitations of the Series A
  Redeemable Convertible Preferred Stock contained in the Original Certificate
  of Designation as follows:  

     NOW, THEREFORE, BE IT RESOLVED,
  that the Board of Directors does hereby amend and the restate the rights, preferences,
  restrictions and other matters relating to the Series A of Preferred Stock as
  follows:  

 TERMS OF PREFERRED STOCK  

          Section
  1. Designation, Amount and Par Value. The series of preferred stock shall
  be designated as its 4% Series A Convertible Preferred Stock (the "Preferred
  Stock") and the number of shares so designated shall be 600 (which shall
  not be subject to increase without the consent of the holders of the Preferred
  Stock (each, a "Holder" and collectively, the "Holders")). Each
  share of Preferred Stock shall have a par value of $0.001 per share and a stated
  value equal to the sum of $666.67 plus all accrued and unpaid dividends to the
  date of determination to the extent not previously paid in cash in accordance
  with the terms hereof (the "Stated Value").  

           Section
  2. Dividends.  

          (a) Holders shall be entitled
  to receive, out of funds legally available therefor, and the Corporation shall
  pay, cumulative dividends at the rate per share (as a percentage of the Stated
  Value per share) of 4% per annum, payable in arrears on each Conversion Date
  (as defined in Section 5(a)(i)) and/or such other date as the Corporation may
  determine from time to time for each such share, in cash or by accretion of
  the Stated Value. Subject to the terms and conditions herein, the decision whether
  to accrete dividends hereunder to the Stated Value or to pay for dividends in
  cash shall be at the discretion of the Corporation. The Corporation shall provide
  the Holders written notice of its intention to accrete dividends hereunder to
  the Stated Value or pay dividends in cash not more than ninety days after the
  end of each fiscal year of the Corporation or within five Trading Days after
  a Conversion Date, as the case may be, for so long as shares of Preferred Stock
  are outstanding (the Corporation may indicate in such notice that the election
  contained in such notice shall continue for later periods until revised). Failure
  to timely provide such written notice shall be deemed (if permitted hereunder)
  an election by the Corporation to accrete dividends hereunder to the Stated
  Value. Dividends on the Preferred Stock shall be calculated on the basis of
  a 360-day year, shall accrue annually commencing on the date this Certificate
  of  

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 Designation is filed with the Secretary of State of the
  State of Nevada (the  "Filing Date"), and shall be deemed to accrue from
  such date whether or not earned or declared and whether or not there are profits,
  surplus or other funds of the Corporation legally available for the payment
  of dividends. Except as otherwise provided herein, if at any time the Corporation
  pays less than the total amount of dividends then accrued on account of the
  Preferred Stock, such payment shall be distributed ratably among the Holders
  based upon the number of shares of Preferred Stock held by each Holder. Any
  dividends to be paid in cash hereunder that are not paid within three Trading
  Days (as defined in Section 7) following a Conversion Date shall continue to
  accrue and shall entail a late fee, which must be paid in cash, at the rate
  of 12% per annum or the lesser rate permitted by applicable law (such fees to
  accrue daily, from the date such dividend is due hereunder through and including
  the date of payment).  

          (b) Notwithstanding anything
  to the contrary contained herein, the Corporation must pay dividends in cash
  if:  

                (i) the number of shares
  of Common Stock (as defined in Section 7) at the time authorized, unissued and
  unreserved for all purposes is insufficient to accrete such dividends to the
  Stated Value and permit conversion in full of all outstanding Stated Value;
  or 

                (ii) the Common Stock is
  not then listed or quoted on the Nasdaq Small-Cap Market or on the New York
  Stock Exchange, American Stock Exchange or Nasdaq National Market (each, a  "Principal
  Market") or the over-the-counter market (the "OTC Market").  

          (c) So long as any Preferred
  Stock shall remain outstanding, neither the Corporation nor any subsidiary thereof
  shall redeem, purchase or otherwise acquire directly or indirectly any Junior
  Securities (as defined in Section 7), nor shall the Corporation directly or
  indirectly pay or declare any dividend or make any distribution (other than
  a dividend or distribution described in Section 5 or dividends due and paid
  in the ordinary course on preferred stock of the Corporation at such times when
  the Corporation is in compliance with its payment and other obligations hereunder)
  upon, nor shall any distribution be made in respect of, any Junior Securities,
  nor shall any monies be set aside for or applied to the purchase or redemption
  (through a sinking fund or otherwise) of any Junior Securities or shares pari
  passu with the Preferred Stock.  

          Section 3. Voting Rights.
  Except as otherwise provided herein and as otherwise required by law, the Preferred
  Stock shall have no voting rights. However, so long as any shares of Preferred
  Stock are outstanding, the Corporation shall not, without the affirmative vote
  of the Holders of a majority of the shares of the Preferred Stock then outstanding,
  (a) alter or change adversely the powers, preferences or rights given to the
  Preferred Stock or alter or amend this Certificate of Designation, (b) authorize
  or create any class of stock ranking as to dividends or distribution of assets
  upon a Liquidation (as  

 3  

 
 defined in Section 4) senior to or otherwise pari passu
  with the Preferred Stock, (c) amend its certificate or articles of incorporation
  or other charter documents so as to affect adversely any rights of the Holders,
  or (d) enter into any agreement with respect to the foregoing.  

          Section 4.
  Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation,
  whether voluntary or involuntary (a "Liquidation"), the Holders shall
  be entitled to receive out of the assets of the Corporation, whether such assets
  are capital or surplus, for each share of Preferred Stock an amount equal to
  the Stated Value per share before any distribution or payment shall be made
  to the holders of any Junior Securities, and if the assets of the Corporation
  shall be insufficient to pay in full such amounts, then the entire assets to
  be distributed to the Holders shall be distributed among the Holders ratably
  in accordance with the respective amounts that would be payable on such shares
  if all amounts payable thereon were paid in full. A sale, conveyance or disposition
  of 50% or more of the assets of the Corporation or the effectuation by the Corporation
  of a transaction or series of related transactions in which more than 33% of
  the voting power of the Corporation is disposed of, or a consolidation or merger
  of the Corporation with or into any other company or companies into one or more
  companies not wholly-owned by the Corporation shall not be treated as a Liquidation,
  but instead shall be subject to the provisions of Section 5. The Corporation
  shall mail written notice of any such Liquidation, not less than 45 days prior
  to the payment date stated therein, to each record Holder.  

           Section 5. Conversion.  

   (a) (i) Conversions at Option of Holder.
    Each share of Preferred Stock shall be convertible into shares of Common Stock
    (subject to the limitations set forth in Section 5(a)(ii)) at the Conversion
    Ratio (as defined in Section 7), at the option of the Holder, at any time
    and from time to time on or after the 181st day following the Filing
    Date; provided, however, that in the event the Corporation exercises its redemption
    right under Section 6 prior to such date, the Holder shall be permitted to
    convert up to that number of shares of Series A Preferred Stock for which
    a redemption has been exercised at any time prior to the date the Redemption
    Price for such shares is paid in full. Holders shall effect conversions by
    providing the Corporation with the form of conversion notice attached hereto
    as Annex A (a "Conversion Notice"). Each Conversion Notice shall
    specify the number of shares of Preferred Stock to be converted, the number
    of shares of Preferred Stock owned prior to the conversion at issue, the number
    of shares of Preferred Stock owned subsequent to the conversion at issue and
    the date on which such conversion is to be effected, which date may not be
    prior to the date the Holder delivers such Conversion Notice by facsimile
    (the "Conversion Date"). If no Conversion Date is specified in a Conversion
    Notice, the Conversion Date shall be the date that such Conversion Notice
    is deemed delivered hereunder. To effect conversions of shares of Preferred
    Stock, a  

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 Holder shall not be required to surrender the certificate(s)
  representing such shares of Preferred Stock to the Corporation unless all of
  the shares of Preferred Stock represented thereby are so converted, in which
  case the Holder shall deliver the certificate representing such share of Preferred
  Stock promptly following the Conversion Date at issue. The calculations and
  entries set forth in the Conversion Notice shall control in the absence of manifest
  or mathematical error.  

          (ii) Beneficial Ownership
  Conversion Restriction. A Holder may not convert shares of Preferred Stock
  or receive shares of Common Stock as payment of dividends hereunder to the extent
  such conversion or receipt of such dividend payment would result in the Holder,
  together with any affiliate thereof, beneficially owning (as determined in accordance
  with Section 13(d) of the Exchange Act (as defined in Section 8) and the rules
  promulgated thereunder) in excess of 4.999% of the then issued and outstanding
  shares of Common Stock, including shares issuable upon conversion of, and payment
  of dividends on, the shares of Preferred Stock held by such Holder after application
  of this Section. Since the Holder will not be obligated to report to the Corporation
  the number of shares of Common Stock it may hold at the time of a conversion
  hereunder, unless the conversion at issue would result in the issuance of shares
  of Common Stock in excess of 4.999% of the then outstanding shares of Common
  Stock without regard to any other shares which may be beneficially owned by
  the Holder or an affiliate thereof, the Holder shall have the authority and
  obligation to determine whether the restriction contained in this Section will
  limit any particular conversion hereunder and to the extent that the Holder
  determines that the limitation contained in this Section applies, the determination
  of which portion of the shares of Preferred Stock are convertible shall be the
  responsibility and obligation of the Holder. If the Holder has delivered a Conversion
  Notice for shares of Preferred Stock that, without regard to any other shares
  that the Holder or its affiliates may beneficially own, would result in the
  issuance in excess of the permitted amount hereunder, the Corporation shall
  notify the Holder of this fact and shall honor the conversion for the maximum
  number of shares of Preferred Stock permitted to be converted on such Conversion
  Date in accordance with the periods described in Section 5(b) and, at the option
  of the Holder, either retain shares of Preferred Stock tendered for conversion
  in excess of the permitted amount hereunder for future conversions or return
  such excess shares of Preferred Stock permitted to the Holder. The provisions
  of this Section may be waived by a Holder (but only as to itself and not to
  any other Holder) upon not less than 61 days prior notice to the Corporation.
  Other Holders shall be unaffected by any such waiver.  

 (b)        (i) Not later than five Trading Days after each Conversion
  Date, the Corporation will deliver to the Holder (A) a certificate or certificates
   

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 which, after the Conversion Date, shall be free of restrictive
  legends and trading restrictions representing the number of shares of Common
  Stock being acquired upon the conversion of shares of Preferred Stock, and (B)
  a bank check in the amount of accrued and unpaid dividends (if the Corporation
  has elected or is required to pay accrued dividends in cash). The Corporation
  shall, upon request of the Holder, if available, use commercially reasonable
  efforts to deliver any certificate or certificates required to be delivered
  by the Corporation under this Section electronically through the Depository
  Trust Corporation or another established clearing corporation performing similar
  functions. If in the case of any Conversion Notice such certificate or certificates
  are not delivered to or as directed by the applicable Holder by the fifth Trading
  Day after the Conversion Date, the Holder shall be entitled to elect by written
  notice to the Corporation at any time on or before its receipt of such certificate
  or certificates thereafter, to rescind such conversion, in which event the Corporation
  shall immediately return the certificates representing the shares of Preferred
  Stock tendered for conversion.  

          (ii) If the Corporation fails
  to deliver to the Holder such certificate or certificates pursuant to Section
  5(b)(i) by the fifth Trading Day after the Conversion Date, the Corporation
  shall pay to such Holder, in cash, as liquidated damages and not as a penalty,
  for each $5,000 of Stated Value of Preferred Stock being converted, $50 per
  Trading Day (increasing to $100 per Trading Day after 5 Trading Days and increasing
  to $200 per Trading Day 6 Trading Days after such damages begin to accrue) for
  each Trading Day after such fifth Trading Day until such certificates are delivered.
  Nothing herein shall limit a Holder's right to pursue actual damages for the
  Company's failure to deliver certificates representing shares of Common Stock
  upon conversion within the period specified herein and such Holder shall have
  the right to pursue all remedies available to it hereunder, at law or in equity
  including, without limitation, a decree of specific performance and/or injunctive
  relief.  

            (iii)
    In addition to any other rights available to the Holder, if the Corporation
    fails to deliver to the Holder such certificate or certificates pursuant to
    Section 5(b)(i), by the fifth Trading Day after the Conversion Date, and if
    after such fifth Trading Day the Holder purchases (in an open market transaction
    or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder
    of the Underlying Shares which the Holder was entitled to receive upon such
    conversion (a "Buy-In"), then the Corporation shall (A) pay in cash
    to the Holder the amount by which (x) the Holder's total purchase price (including
    brokerage commissions, if any) for the Common Stock so purchased exceeds (y)
    the product of (1) the aggregate number of shares of Common Stock that such
    Holder was entitled to receive from the conversion at issue multiplied by
    (2) the market price of the Common Stock at the time of the sale giving rise
    to  

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 such purchase obligation on the Conversion Date and (B)
  at the option of the Holder, either return the shares of Preferred Stock for
  which such conversion was not honored or deliver to such Holder the number of
  shares of Common Stock that would have been issued had the Corporation timely
  complied with its conversion and delivery obligations under Section 5(b)(i).
  For example, if the Holder purchases Common Stock having a total purchase price
  of $11,000 to cover a Buy-In with respect to an attempted conversion of shares
  of Preferred Stock with respect to which the market price of the Underlying
  Shares on the Conversion Date totaled $10,000, under clause (A) of the immediately
  preceding sentence the Corporation shall be required to pay the Holder $1,000.
  The Holder shall provide the Corporation written notice indicating the amounts
  payable to the Holder in respect of the Buy-In. Nothing herein shall limit a
  Holder's right to pursue any other remedies available to it hereunder, at law
  or in equity including, without limitation, a decree of specific performance
  and/or injunctive relief with respect to the Corporation's failure to timely
  deliver certificates representing shares of Common Stock upon conversion of
  the shares of Preferred Stock as required pursuant to the terms hereof. 

          (iv) Acknowledgement of
  Holder Damages The Corporation acknowledges and agrees that, due to the
  fact that the Preferred Stock is convertible, a breach of the Corporation’s
  obligations hereunder could result in damages greater than the aggregate Stated
  Value. Without limitation, the Company agrees and acknowledges that a material
  benefit of the bargain to the Holders is the underlying conversion benefit which
  is the number of shares of Common Stock issuable to the Holder multiplied by
  the then market price of the Common Stock.  

 (c)     (i) The conversion
  price for each share of Preferred Stock (the "Conversion Price") shall
  equal $0.50, subject to adjustment as provided herein. 

          (ii) If the Corporation, at
  any time while any shares of Preferred Stock are outstanding, shall (a) pay
  a stock dividend or otherwise make a distribution or distributions on shares
  of its Junior Securities or securities pari passu with the Preferred Stock in
  shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
  a larger number of shares, (c) combine (including by way of reverse stock split)
  outstanding shares of Common Stock into a smaller number of shares, or (d) issue
  by reclassification and exchange of the Common Stock any shares of capital stock
  of the Corporation, then the Conversion Price shall be multiplied by a fraction
  of which the numerator shall be the number of shares of Common Stock (excluding
  treasury shares, if any) outstanding before such event and of which the denominator
  shall be the number of shares of Common Stock outstanding after such event.
  Any adjustment made  

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 pursuant to this Section 5(c)(ii) shall become effective
  immediately after the record date for the determination of stockholders entitled
  to receive such dividend or distribution and shall become effective immediately
  after the effective date in the case of a subdivision, combination or reclassification.
   

          (iii) If at any time while
  shares of Preferred Stock are outstanding the Company or any Subsidiary (with
  respect to Common Stock Equivalents) shall offer, sell, grant any option to
  purchase, or otherwise dispose of (or announce any offer, sale, grant or any
  option to purchase or other disposition) any of shares of Common Stock or Common
  Stock Equivalents at a price that is, at the issuance thereof, or at any later
  time due to adjustment, reset, additional issuances or otherwise, less than
  the Conversion Price, then, at the option of the Holder for such conversions
  as such Holder shall indicate in its Conversion Notices (including on conversion
  pursuant to section 5(a)(ii) and (iii)), the Conversion Price shall be adjusted
  to mirror the conversion, exchange or purchase price for such Common Stock or
  Common Stock Equivalents (including any reset provisions thereof) at issue.
  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents
  are issued. If the holder of the Common Stock or Common Stock Equivalent so
  issued shall at any time, whether by operation of purchase price adjustments,
  reset provisions, floating conversion, exercise or exchange prices or otherwise,
  or due to warrants, options or rights issued in connection with such issuance,
  be entitled to receive shares of Common Stock at a price less than the Conversion
  Price, such issuance shall be deemed to have occurred for less than the Conversion
  Price. A  "Common Stock Equivalent" means any equity or equity equivalent
  securities (including debt or any other instrument that is at any time over
  the life thereof convertible into or exchangeable for Common Stock) issued by
  the Company or a subsidiary thereof that provide the holder thereof to receive
  shares of Common Stock. The Company shall notify the Holder in writing, no later
  than the Trading Day following the issuance of any Common Stock or Common Stock
  Equivalent subject to this section, indicating therein the applicable issuance
  price, or of applicable reset price, exchange price, conversion price and other
  pricing terms.  

          (iv) If the Company, at any
  time while shares of Preferred Stock are outstanding, shall distribute to all
  holders of Common Stock (and not to Holders) evidences of its indebtedness or
  assets or rights or warrants to subscribe for or purchase any security (excluding
  those referred to in Sections 5(c)(ii)-(iii) above), then in each such case
  the Conversion Price at which each share of Preferred Stock shall thereafter
  be convertible shall be determined by multiplying the Conversion Price in effect
  immediately prior to the record date fixed for determination of stockholders
  entitled to receive such distribution by a fraction of which the denominator
  shall be  

 8  

 

 the Per Share Market Value determined as of the record
  date mentioned above, and of which the numerator shall be such Per Share Market
  Value on such record date less the then fair market value at such record date
  of the portion of such assets or evidence of indebtedness so distributed applicable
  to one outstanding share of Common Stock as determined by the Board of Directors
  in good faith. In either case the adjustments shall be described in a statement
  provided to the Holders of the portion of assets or evidences of indebtedness
  so distributed or such subscription rights applicable to one share of Common
  Stock. Such adjustment shall be made whenever any such distribution is made
  and shall become effective immediately after the record date mentioned above.
   

          (v) All calculations under
  this Section 5 shall be made to the nearest cent or the nearest 1/100th of a
  share, as the case may be. The number of shares of Common Stock outstanding
  at any given time shall not include shares owned or held by or for the account
  of the Corporation, and the disposition of any such shares shall be considered
  an issue or sale of Common Stock.  

          (iv) Whenever the Conversion
  Price is adjusted pursuant to Section 5(c)(ii), (iii) or (iv), the Corporation
  shall promptly mail to each Holder, a notice setting forth the Conversion Price
  after such adjustment and setting forth a brief statement of the facts requiring
  such adjustment.  

          (v) In case of any reclassification
  of the Common Stock, or any compulsory share exchange pursuant to which the
  Common Stock is converted into other securities, cash or property, the Holders
  of the Preferred Stock then outstanding shall have the right thereafter to convert
  such shares only into the shares of stock and other securities, cash and property
  receivable upon or deemed to be held by holders of Common Stock following such
  reclassification or share exchange, and the Holders of the Preferred Stock shall
  be entitled upon such event to receive such amount of securities, cash or property
  as a holder of the number of shares of Common Stock of the Corporation into
  which such shares of Preferred Stock could have been converted immediately prior
  to such reclassification or share exchange would have been entitled. This provision
  shall similarly apply to successive reclassifications or share exchanges. 

          (vi) In case of any merger
  or consolidation of the Corporation with or into another Person, or sale by
  the Corporation of more than one-half of the assets of the Corporation (on an
  as valued basis) in one or a series of related transactions to any Person other
  than an affiliate (as defined in Rule 13e-3 of the Exchange Act) of the Corporation,
  a Holder shall have the right thereafter to (A) convert its shares of Preferred
  Stock into the shares of stock and other securities, cash and property receivable
  upon or  

 9  

 

 deemed to be held by holders of Common Stock following
  such merger, consolidation or sale, and such Holder shall be entitled upon such
  event or series of related events to receive such amount of securities, cash
  and property as the shares of Common Stock into which such shares of Preferred
  Stock could have been converted immediately prior to such merger, consolidation
  or sales would have been entitled or (B) in the case of a merger or consolidation,
  (x) require the surviving entity to issue shares of convertible preferred stock
  or convertible debentures with such aggregate stated value or in such face amount,
  as the case may be, equal to the Stated Value of the shares of Preferred Stock
  then held by such Holder, plus all accrued and unpaid dividends and other amounts
  owing thereon, which newly issued shares of preferred stock or debentures shall
  have terms identical (including with respect to conversion) to the terms of
  the Preferred Stock (except, in the case of debentures, as may be required to
  reflect the differences between debt and equity) and shall be entitled to all
  of the rights and privileges of a Holder of Preferred Stock set forth herein
  and the agreements pursuant to which the Preferred Stock was issued (including,
  without limitation, as such rights relate to the acquisition, transferability,
  registration and listing of such shares of stock other securities issuable upon
  conversion thereof), and (y) simultaneously with the issuance of such convertible
  preferred stock or convertible debentures, shall have the right to convert such
  instrument only into shares of stock and other securities, cash and property
  receivable upon or deemed to be held by holders of Common Stock following such
  merger, consolidation or sale. In the case of clause (B), the conversion price
  applicable for the newly issued shares of convertible preferred stock or convertible
  debentures shall be based upon the amount of securities, cash and property that
  each share of Common Stock would receive in such transaction, the Conversion
  Ratio immediately prior to the effectiveness or closing date for such transaction
  and the Conversion Price stated herein. The terms of any such merger, sale or
  consolidation shall include such terms so as continue to give the Holders the
  right to receive the securities, cash and property set forth in this Section
  upon any conversion or redemption following such event. This provision shall
  similarly apply to successive such events. 

          (vii) If (a) the Corporation
  shall declare a dividend (or any other distribution) on the Common Stock, (b)
  the Corporation shall declare a special nonrecurring cash dividend on or a redemption
  of the Common Stock, (c) the Corporation shall authorize the granting to all
  holders of Common Stock rights or warrants to subscribe for or purchase any
  shares of capital stock of any class or of any rights, (d) the approval of any
  stockholders of the Corporation shall be required in connection with any reclassification
  of the Common Stock, any consolidation or merger to which the Corporation is
  a party, any sale or transfer of all or substantially all of the assets of the
  Corporation, or any compulsory share of exchange  

 10   

 

 whereby the Common Stock is converted into other securities,
  cash or property, or (e) the Corporation shall authorize the voluntary or involuntary
  dissolution, liquidation or winding up of the affairs of the Corporation; then
  the Corporation shall notify the Holders at their last addresses as they shall
  appear upon the stock books of the Corporation, at least 20 calendar days prior
  to the applicable record or effective date hereinafter specified, a notice stating
  (x) the date on which a record is to be taken for the purpose of such dividend,
  distribution, redemption, rights or warrants, or if a record is not to be taken,
  the date as of which the holders of Common Stock of record to be entitled to
  such dividend, distributions, redemption, rights or warrants are to be determined
  or (y) the date on which such reclassification, consolidation, merger, sale,
  transfer or share exchange is expected to become effective or close, and the
  date as of which it is expected that holders of Common Stock of record shall
  be entitled to exchange their Common Stock for securities, cash or other property
  deliverable upon such reclassification, consolidation, merger, sale, transfer
  or share exchange. Holders are entitled to convert shares of Preferred Stock
  during the 20-day period commencing the date of such notice to the effective
  date of the event triggering such notice.  

          (viii) Exceptions to Adjustment
  of Conversion Price. No adjustment to the Conversion Price will be made
  (i) upon the conversion of any other Preferred Stock of this series or of any
  other securities issued by the Company in connection with the offer and sale
  of this Company's securities pursuant to the Purchase Agreement; (ii) upon the
  exercise of or conversion of any convertible securities, options or warrants
  issued and outstanding on the Filing Date; (iii) upon the grant or exercise
  of any options which may hereafter be granted or exercised under any employee
  benefit plan of the Company now existing or to be implemented in the future,
  so long as the issuance of such options is approved by a majority of the non-employee
  members of the Board of Directors of the Company or a majority of the members
  of a committee of non-employee directors established for such purpose; (iv)
  upon the issuance of Common Stock or convertible securities in any transaction
  of the nature contemplated by Rule 145, promulgated under the Securities Act;
  or (v) in connection with any strategic partnership or joint venture or acquisition
  (including the issuance of Common Stock or convertible securities in connection
  with any financing transaction, the primary purpose of which is to finance the
  strategic partnership or joint venture or acquisition) or key consulting agreements
  (the primary purpose of which is not to raise equity capital for the Company).
   

          (d) The Corporation covenants
  that it will at all times reserve and keep available out of its authorized and
  unissued shares of Common Stock solely for the purpose of issuance upon conversion
  of Preferred Stock, each as herein provided, free from preemptive rights or
  any other actual contingent purchase  

 11   

 

 rights of persons other than the Holders, not less than
  such number of shares of Common Stock as shall be issuable (taking into account
  the provisions of Section 5(a) and Section 5(c)) upon the conversion of all
  outstanding shares of Preferred Stock. The Corporation covenants that all shares
  of Common Stock that shall be so issuable shall, upon issue, be duly and validly
  authorized, issued and fully paid and nonassessable.  

            (e)
    Upon a conversion hereunder the Corporation shall not be required to issue
    stock certificates representing fractions of shares of Common Stock, but may
    if otherwise permitted, make a cash payment in respect of any final fraction
    of a share based on the Per Share Market Value at such time. If any fraction
    of an Underlying Share would, except for the provisions of this Section, be
    issuable upon a conversion hereunder, the Corporation shall pay an amount
    in cash equal to the Conversion Ratio multiplied by such fraction. 
  

            (f)
    The issuance of certificates for Common Stock on conversion of Preferred Stock
    shall be made without charge to the Holders thereof for any documentary stamp
    or similar taxes that may be payable in respect of the issue or delivery of
    such certificate, provided that the Corporation shall not be required to pay
    any tax that may be payable in respect of any transfer involved in the issuance
    and delivery of any such certificate upon conversion in a name other than
    that of the Holder of such shares of Preferred Stock so converted. 
  

            (g)
    Shares of Preferred Stock converted into Common Stock or redeemed in accordance
    with the terms hereof shall be canceled and may not be reissued.  

            (h)
    Any and all notices or other communications or deliveries to be provided by
    the Holders of the Preferred Stock hereunder, including, without limitation,
    any Conversion Notice, shall be in writing and delivered personally, by facsimile
    or sent by a nationally recognized overnight courier service, addressed to
    the attention of the Chief Executive Officer of the Corporation addressed
    to 1600 California Circle, Milpitas, California
    950356, fax: (408) 956-5168, or to such other address or facsimile number
    as shall be specified in writing by the Corporation for such purpose. Any
    and all notices or other communications or deliveries to be provided by the
    Corporation hereunder shall be in writing and delivered personally, by facsimile
    or sent by a nationally recognized overnight courier service, addressed to
    each Holder at the facsimile telephone number or address of such Holder appearing
    on the books of the Corporation, or if no such facsimile telephone number
    or address appears, at the principal place of business of the Holder. Any
    notice or other communication or deliveries hereunder shall be deemed given
    and effective on the earliest of (i) the date of transmission, if such notice
    or communication is delivered via facsimile at the facsimile telephone number
    specified in this Section prior to 5:00 p.m. (New York City time) (with confirmation
    of transmission), (ii) the date after the date of transmission, if such notice
    or communication is delivered via facsimile at the facsimile telephone number
    specified in this Section later than 5:00 p.m. (New York City time) on any
     

 12   

 

 date and earlier than 11:59 p.m. (New York City time) on
  such date (with confirmation of transmission), (iii) upon receipt, if sent by
  a nationally recognized overnight courier service, or (iv) upon actual receipt
  by the party to whom such notice is required to be given.  

      Section 6.
  Redemption. 

            (a)
    Optional Redemption by Corporation. At anytime and from time to time
    after the Filing Date, the Corporation shall have the right, upon at least
    10 Trading Days’ notice to the Holders (a "Redemption Notice"
    and the date such notice is received by the Holder, the "Redemption Notice
    Date"), to redeem for cash all or a portion of the outstanding Preferred
    Stock (a "Redemption") at a price per share of Preferred Stock equal to 100%
    of the Stated Value (the "Redemption Price"). Nothing in this Section
    6 shall be deemed to restrict or otherwise limit the Holder’s right to
    convert any of the shares of Preferred Stock pursuant to Section 5(a)(i) at
    any time prior to the date the Redemption Price is paid in full.  

          (b) Redemption Procedure.
  The payment of cash pursuant to any redemption hereunder shall be made on the
  date set forth in the applicable Redemption Notice, which shall be at least
  10 Trading Days after the applicable Redemption Notice Date. If any portion
  of the cash payment for a Redemption shall not be paid by the Corporation by
  such date, interest shall accrue thereon at the rate of 12% per annum (or the
  maximum rate permitted by applicable law, whichever is less) until the cash
  payment for such Redemption Price is paid in full. In addition, if any portion
  of a Redemption Price remains unpaid after such date, the Holders subject to
  such redemption may elect, by written notice to the Corporation given at any
  time thereafter, to invalidate ab initio such redemption, notwithstanding
  anything herein contained to the contrary. If a Holder elects to invalidate
  such redemption the Corporation shall promptly, and, in any event, not later
  than 5 Trading Days from receipt of such Holder’s notice of such election,
  return to such Holder all of the Preferred Stock for which the redemption price
  shall not have been paid in full and the Corporation shall have no further right
  to redeem the Preferred Stock hereunder. For purposes of this Section, a share
  of Preferred Stock is outstanding until such date as the Holder shall have received
  Underlying Shares upon a conversion (or attempted conversion) thereof that meets
  the requirements hereof.  

     Section 7. Definitions.
  For the purposes hereof, the following terms shall have the following meanings:
   

            "Common Stock" means
  the Corporation's common stock, par value $.001 per share, and stock of any
  other class into which such shares may hereafter have been reclassified or changed.
   

 13   

 

          "Conversion
  Ratio" means, at any time, a fraction, the numerator of which is Stated
  Value (or Excess Stated Value, as the case may be) and the denominator of which
  is the Conversion Price at such time.  

            "Exchange
  Act" means the Securities Exchange Act of 1934, as amended.  

            "Junior
  Securities" means the Common Stock and all other series of Preferred Stock
  (other than the Preferred Stock) of the Corporation other than those securities
  which are explicitly senior in rights or liquidation preference to the Preferred
  Stock.  

             
    "OTC Market" shall be as defined in Section 2(b)(ii).  

            "Per
    Share Market Value" means on any particular date (a) the lowest sale price
    for a share of the Common Stock (other than a sale by the Holder) on such
    date on the Principal Market on which the Common Stock is then listed or quoted,
    or if there is no such price on such date, then the lowest sale price of the
    Common Stock (other than a sale by the Holder) on the Principal Market on
    the date nearest preceding such date, or (b) if the Common Stock is not then
    listed or quoted on a Principal Market, the lowest sale price of the Common
    Stock (other than a sale by the Holder) in the OTC Market, as reported by
    the National Quotation Bureau Incorporated (or similar organization or agency
    succeeding to its functions of reporting prices) at the close of business
    on such date, or (c) if the Common Stock is not then reported by the National
    Quotation Bureau Incorporated (or similar organization or agency succeeding
    to its functions of reporting prices), then the lowest "Pink Sheet" quotes
    for the relevant conversion period, as determined in good faith by the Holder,
    or (d) if the Common Stock are not then publicly traded the fair market value
    of a share of Common Stock as determined by an independent appraiser selected
    in good faith by the Board of Directors of the Corporation.  

           
  "Person" means a corporation, an association, a partnership, an organization,
  a business, an individual, a government or political subdivision thereof or
  a governmental agency.  

             
    "Principal Market" shall be as defined in Section 2(b)(ii). 
  

           
  "Trading Day" means (a) a day on which the Common Stock is traded on
  a Principal Market on which the Common Stock is then listed or quoted, as the
  case may be, or (b) if the Common Stock is not listed on a Principal Market,
  a day on which the Common Stock is traded in the OTC Market, as reported by
  the National Quotation Bureau Incorporated (or any similar organization or agency
  succeeding its functions of reporting prices); provided, however, that in the
  event that the Common Stock is not listed or quoted as set forth in (a) and
  (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
  any day which  

 14   

 

  shall be a legal holiday or a day on which
    banking institutions in the State of New York are authorized or required by
    law or other government action to close.

             
    "Underlying Shares" means, collectively, the shares of Common Stock
    into which the shares of Preferred Stock are convertible in accordance with
    the terms hereof.

           
  RESOLVED, FURTHER, that the President and the Secretary of the Corporation be
  and they hereby are authorized and directed to prepare and file a Certificate
  of Designation of Preferences, Rights and Limitations in accordance with the
  foregoing resolution and the provisions of Nevada law.

          
  IN WITNESS WHEREOF, the undersigned have executed this Certificate of Designation
  this 31st day of December, 2004.

 

	Martin Nielson	Anthony Lee
	Martin Nielson, President	Anthony Lee, Secretary

 

 

 

 

 

15

 
 ANNEX A  

 NOTICE OF CONVERSION  

 (To be Executed by the Registered Holder in order to Convert
  shares of Preferred Stock)  

 The undersigned hereby elects to convert the number of
  shares of 4% Series A Convertible Preferred Stock indicated below, into shares
  of common stock, par value $.001 per share (the  "Common Stock"), of Pacific
  Magtron International Corp., a Nevada corporation (the  "Corporation"),
  according to the conditions hereof, as of the date written below. If shares
  are to be issued in the name of a person other than undersigned, the undersigned
  will pay all transfer taxes payable with respect thereto and is delivering herewith
  such certificates and opinions as reasonably requested by the Corporation in
  accordance therewith. No fee will be charged to the Holder for any conversion,
  except for such transfer taxes, if any.  

 The undersigned represents to the Corporation that it
  has sold or will promptly sell upon receipt, such shares of Common Stock. [REQUIRED
  TO RECEIVE UNLEGENDED SHARES IMMEDIATELY PURSUANT TO THE REGISTRATION STATEMENT]
   

 Conversion calculations:  

	Date to Effect Conversion
	 
	___________________________ 
	 
	Number of shares of Preferred Stock owned prior to
      Conversion
	 
	___________________________
	 
	Number of shares of Preferred Stock to be Converted
	 
	___________________________
	 
	Stated Value of shares of Preferred Stock to be Converted
	 
	___________________________
	 
	Number of shares of Common Stock to be Issued
	 
	___________________________
	 
	Applicable Conversion Price
	 
	___________________________
	 
	Number of shares of Preferred Stock subsequent to Conversion
	 
	___________________________
	 

	 	 
	 	[HOLDER]
	 	 
	 	By: ____________________
	 	      Name:
	 	      Title:

 16a8756_ex10-1

  
 EMPLOYMENT AGREEMENT 

  

  EMPLOYMENT AGREEMENT (this
    "Agreement"), dated as of this 30th day of December 2004
    ("Effective Date"), by and among Pacific Magtron International Corp.,
    a Nevada corporation ("PMIC"), Encompass Group Affiliates, Inc., a
    Delaware corporation ("Encompass"), Advanced Communication Technologies,
    Inc., a Florida corporation ("ACT"), and Theodore S. Li, an individual
    whose address is ________________________________ ("Executive"). For
    purposes hereof, the terms PMIC, Encompass and ACT shall include each of their
    respective subsidiaries and PMIC, Encompass and ACT shall be referred to collectively
    herein as the "Company."  

 WITNESSETH  

   WHEREAS, Executive presently serves
    as a Director and as President, Chief Executive Officer, Chief Financial Officer
    and Treasurer of PMIC;  

   WHEREAS, ACT, Executive and certain
    other shareholders of PMIC have entered into a Stock Purchase Agreement, pursuant
    to which ACT will purchase all of the shares of common stock of PMIC owned
    by Executive and each such other shareholder (the "Stock Purchase");
    and  

   WHEREAS, it is a condition to
    the Stock Purchase that Executive enter into this Agreement with the Company
    effective as of the Effective Date. 

   NOW, THEREFORE, in consideration
    of the mutual covenants and promises herein contained, and other good and
    valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
    the parties hereto agree as follows:  

   1. Employment. PMIC hereby
    employs Executive, and Executive hereby accepts employment with PMIC, as Chief
    Financial Officer and Chief Operating Officer, or such other senior executive
    position as may be determined by the Board of Directors of PMIC (the "Board")
    from time to time during the Employment Period (as defined below). For purposes
    of this Agreement, “senior executive position” shall mean a position
    of Vice President or a more senior position. In addition to his duties set
    forth in this Section 1 and Section 3 below, Executive shall at the request
    of the PMIC CEO (as defined below) or the Board serve as an officer or director
    of PMIC or any subsidiary of PMIC, without additional compensation and subject
    to any policy of the Compensation Committee of the Board (the "PMIC Compensation
    Committee") with regard to directors' fees.  

   2.  Term; Renewal.
    The term of this Agreement shall commence on the Effective Date and expire
    on the third anniversary thereof (the "Employment Period"), unless
    earlier terminated in accordance with its terms; provided, however,
    that the Employment Period may, by written agreement between the parties hereto,
    be extended for an additional one-year period.  

 1 

  

   3.   Employment
    and Duties.  

   3.1 Duties and Responsibilities.
  

    (a) Executive’s area of responsibility
    during the Employment Period shall be that of Chief Financial Officer and
    Chief Operating Officer of PMIC. Executive shall directly report to the Chief
    Executive Officer of PMIC (the "PMIC CEO"), or such other senior executive
    officer of Encompass or ACT, as determined from time to time by the Company.
    The services to be rendered by Executive pursuant to this Agreement shall
    consist of such services as defined and directed by the Board or the PMIC
    CEO.  

    (b) During the Employment Period, Executive
    shall serve the Company faithfully and to the best of his ability; shall devote
    his entire working time, attention, energy and skill to his employment and
    the benefit and business of the Company; and shall use his best efforts, skills
    and ability to promote the Company's interests and to perform such duties
    as from time to time may be reasonably assigned to him and are consistent
    with his titles and positions with the Company.  

    (c) During the Employment Period, in
    addition to any other duties or responsibilities the Company may give to Executive
    consistent with Section 1, Executive shall, subject to Section 3.2 herein,
    be required to sign, and shall sign, all certifications and such other documents
    or instruments requested by the Board, the Chief Executive Officer of ACT,
    or the PMIC CEO in connection with PMIC's and/or ACT's obligations under or
    to (i) the Securities and Exchange Commission, (ii) any exchange or association
    on which the Company's shares of capital stock are listed, (iii) any federal,
    state or local authority, and/or (iv) any other governmental, quasi-governmental
    or non-governmental entity or organization (foreign or domestic) that regulates
    or has authority over PMIC and/or ACT. In addition, in the event Executive,
    in his current position or in any position Executive accepts in the future,
    becomes obligated to sign certifications and such other documents or instruments
    as may be required by the rules and regulations promulgated by any of (i)
    through (iv) above, Executive shall, subject to Section 3.2 herein, sign all
    such certifications and other documents or instruments as required thereby.
     

    3.2 Observance of Rules and Regulations.
    Executive agrees to observe and comply with all applicable laws and regulations,
    as well as the rules and regulations of the Company with respect to the performance
    of his duties.  

   4.   Compensation;
    Benefits and Expenses.  

    4.1 Base Salary. As compensation
    for the services to be rendered hereunder, during the Employment Period, the
    Company shall pay to Executive a minimum annual base salary (the "Base
    Salary") of $120,000.00. The Base Salary shall be payable in accordance
    with usual payroll practices of the Company. Executive’s Base Salary
    shall be reviewed annually by the PMIC Compensation Committee during the Employment
    Period and may be increased, but not decreased, from time to time by the PMIC
    Compensation Committee in its sole discretion.  

 2 

  

    4.2 Bonus.  

    (a) Within thirty (30) days after the
    Effective Date, Executive shall receive a signing bonus in the amount of $225,000.
  

    (b) Immediately following each fiscal
    year, the Company shall set aside for the payment of PMIC executive bonuses,
    an amount equal to ten percent (10%) of net income of PMIC during such fiscal
    year (the "PMIC Bonus Pool"). For each fiscal year or portion thereof
    after the Effective Date and during the Employment Period, the Company shall
    pay to Executive an annual performance bonus, in cash, equal to a portion
    of the PMIC Bonus Pool, as determined by the PMIC Compensation Committee,
    in its sole discretion (the "PMIC Performance Bonus").  

 For purposes hereof, "net income"
  shall mean, with respect to PMIC, for any fiscal year, the net income (loss)
  of PMIC for such fiscal year, determined in accordance with generally accepted
  accounting principles, consistently applied; provided, however,
  that there shall be excluded from net income (a) the net income (loss) of any
  person in which PMIC has a joint interest with a third party, except to the
  extent such net income is actually paid to PMIC by dividend or other distribution
  during such fiscal year, (b) the net income (or loss) of any person accrued
  prior to the date it becomes a subsidiary of PMIC or is merged into or becomes
  consolidated with PMIC or its assets are purchased by PMIC, and (c) the net
  income (if positive) of any subsidiary of PMIC to the extent that the declaration
  or payment of dividends or similar distributions of such net income by such
  subsidiary (i) is not at that time permitted by operation of the terms of its
  charter or any agreement, instrument, judgment, decree, order statute, rule
  or governmental regulation or (ii) would be subject to any taxes payable on
  such dividends or distributions.  

    (c) In addition to the PMIC Performance
    Bonus, Executive may receive, and ACT may grant to Executive, restricted shares
    of common stock of ACT, with a vesting schedule and other terms established
    by the Compensation Committee of the Board of Directors of ACT (the "ACT
    Compensation Committee"), in its sole discretion (the "Incentive Bonus").
     

    (d) Executive acknowledges that the
    amount of the PMIC Performance Bonus and the amount of the Incentive Bonus
    shall at all times be determined by the PMIC Compensation Committee and the
    ACT Compensation Committee, respectively, in their respective sole discretion.
    The Company shall pay each of the Performance Bonus and the Incentive Bonus
    to Executive within thirty (30) days after the Company's audited results for
    the applicable fiscal year are delivered to the Company.  

    4.3 Earn-Out.  

    (a) Earn-Out Shares. In the event
    Pacific Magtron, Inc. ("PMI"), Pacific Magtron (GA), Inc. ("PMI-GA"),
    and LiveWarehouse, Inc. ("LW") achieve the Milestones (as defined in Section
    4.3(b) below) for any year during the three (3) year period commencing January
    1, 2005 and expiring December 31, 2007, Executive shall have the right to
    receive on March 31 of the immediately following calendar year, the applicable
    ratable portion  

 3 

  
 of 66,666,666 shares of restricted common
  stock of ACT (priced at $.01 per share, or $666,666 in the aggregate), to be
  earned at the end of each such year at the rate of 25% for each of the first
  and second years and 50% for the third year (the "Shares"); provided,
  that in the event the Milestones are not achieved in any year, except as provided
  below, such ratable portion of Shares shall be forfeited entirely, without any
  ability to re-earn such Shares in a future year; provided further, that
  in the event Executive's employment with the Company is terminated for "cause"
  by the Company (as contemplated by Section 6.1 of this Agreement) prior to the
  expiration of the initial Employment Period, all of the Shares earned or to
  be earned by Executive shall be forfeited. In the event that Executive's employment
  with the Company is terminated prior to the expiration of the initial Employment
  Period for any reason other than "cause," Executive shall be permitted to receive
  the Shares earned by him prior to such termination, but shall in no event be
  entitled to receive Shares to be earned after the Termination Date (as defined
  in Section 6.1 below). Notwithstanding the foregoing, the number of Shares and
  the price per Share shall be adjusted accordingly for stock splits, reverse
  stock splits and other recapitalizations effected by ACT, so that Executive
  retains the right, after accounting for such adjustment, to receive the same
  percentage of ACT's outstanding shares of Common Stock as Executive would have
  had the right to receive had such adjustment not been so effected.  

 Upon earning the Shares at the end of each
  year, if applicable, the Shares will be placed in escrow with a mutually agreeable
  escrow agent to be held and released in accordance with the terms of an escrow
  agreement in substantially the form of Exhibit "A" hereto; provided,
  however, that in the event that the employment of Executive is terminated
  by the Company prior to the expiration of the initial Employment Period without
  cause (as contemplated by Section 6.2 of this Agreement), Executive terminates
  this Agreement for Good Reason (as contemplated by Section 6.3 of this Agreement),
  or this Agreement is terminated due to Executive's death or Disability (as defined
  below), Executive shall receive any Shares earned by him no later than the later
  of (a) the immediately following March 31 or (b) thirty (30) days after the
  Termination Date. Upon release from escrow, the Shares will include piggyback
  registration rights, subject to customary underwriters' cutbacks. 

 Upon receipt of the Shares, Executive will
  acquire the Shares for his own account and not with a view to their distribution
  within the meaning of Section 2(11) of the Securities Act of 1933, as amended.
  Executive is an "accredited investor," as such term is defined in Rule 501(a)
  promulgated pursuant to the Securities Act of 1933, as amended. Executive acknowledges
  that Executive has had the opportunity to ask questions of and receive answers
  from, or obtain additional information from, the executive officers of the Company
  concerning the financial and other affairs of the Company, and to the extent
  deemed necessary in light of such personal knowledge of the Company's affairs,
  Executive has asked such questions and received answers to the full satisfaction
  of Executive. Executive understands that no United States federal or state agency
  or any other government or governmental agency has passed on or made any recommendation
  or endorsement of the Shares or the fairness of suitability of the investment
  in the Shares nor have such authorities passed upon or endorsed the merits of
  the offering of the Shares.  

 Notwithstanding the foregoing, in the event
  that the Milestones are not achieved in a given year, the Board of Directors
  of ACT shall have the right, in its sole and absolute discretion, to grant to
   

 4 

  
 Executive all or a portion of the Shares
  that could have been earned by Executive during such year.  

   (b) Milestones. Revenue and EBITDA
    (earnings before interest, taxes, depreciation and amortization) herein shall
    be defined according to generally accepted accounting principles and no allocation
    from PMIC, ACT or Encompass overhead shall be included in the calculation
    of EBITDA. The Milestones for the combined Revenues and EBITDA of PMI, PMI-GA
    and LW are:  

	 	Calendar Year End	Revenues	 	EBITDA	 
	 	December 31, 2005	$	70,000,000	 	$	490,000	 
	 	December 31, 2006	$	82,000,000	 	$	738,000	 
	 	December 31, 2007	$	95,000,000	 	$	950,000	 

    Notwithstanding anything contained herein
    to the contrary, the determination of the Milestones shall be based on unaudited
    pro forma financial statements of PMI, PMI-GA and LW, prepared by the management
    of PMIC and approved by Executive, the Chief Executive Officer of ACT and
    the ACT Compensation Committee. 

    4.4 Other Benefits. Executive
    shall also be eligible to participate in any life and health insurance programs
    and any incentive, savings and retirement plans that the Company makes available
    to all of its executives of similar seniority. Executive shall also be eligible
    to receive discretionary performance based bonuses as approved and authorized
    by the ACT Compensation Committee, including any incentive stock programs
    approved by ACT’s shareholders.  

    4.5 Business Expenses. Executive
    will be reimbursed, in accordance with the Company’s expense reimbursement
    policy, for business expenses that have been pre-approved by the Board or
    the PMIC CEO upon presentation of vouchers or other documents reasonably necessary
    to verify the expenditures and sufficient, in form and substance, to satisfy
    Internal Revenue Service requirements for such expenses. 

    4.6 Vacation. Executive shall
    be entitled to take up to four (4) weeks of vacation per calendar year, which
    shall be taken in accordance with the Company’s vacation policy in effect
    from time to time for executives of comparable seniority. 

   5.  No Competitive
    Activities; Confidentiality; Invention  

    5.1 General Restriction. During
    the Employment Period and for a period of two (2) years thereafter (the "Restricted
    Period"), Executive covenants and agrees that, except on behalf of the
    Company, he will not, directly or indirectly:  

    (a) Competing Business. Own,
    manage, operate, control, participate in the ownership, management, operation
    or control of, be employed by, or provide services as a consultant to, any
    individual or business that is involved in business activities that are the
    same as, similar to or in competition with, directly or indirectly, any business
    activities conducted, or actively being planned, by Encompass and/or PMIC
    during the Restricted Period and anywhere  

 5 

  
 in the United States and Canada (it being
  acknowledged that Encompass' and/or PMIC's businesses are international in scope).
  The ownership of less than one percent (1%) of the outstanding stock of any
  public corporation shall not be deemed a violation of this provision. 

    (b) Soliciting Customers. Attempt
    in any manner to contact or solicit any individual, firm, corporation or other
    entity (i) that is or has been, a customer of Encompass and/or PMIC at any
    time during the Restricted Period, (ii) to which a proposal has been made
    by Encompass and/or PMIC during the Restricted Period or (iii) appearing Encompass’
    and/or PMIC’s new business target list on the date of Executive's termination
    (as such list has been prepared and maintained in accordance with Encompass’
    and/or PMIC’s past practice), for the purpose of providing services or
    products similar to the services and products provided by Encompass and/or
    PMIC, or engaging in any activity which could be, directly or indirectly,
    competitive with the business of Encompass and/or PMIC. 

    (c) Interfering with Other Relations.
    Persuade or attempt to persuade any supplier, vendor, licensor or other entity
    or individual doing business with Encompass and/or PMIC to discontinue or
    reduce its business with Encompass and/or PMIC or otherwise interfere in any
    way with the business relationships and activities of Encompass and/or PMIC.
  

    (d) Employees. Attempt in any
    manner to solicit any individual, who is at the time of such attempted solicitation,
    or was at any time during the one (1) year period preceding the termination
    of Executive's employment, an employee or consultant of Encompass and/or PMIC,
    to terminate his or her employment or relationship with Encompass and/or PMIC,
    or engage such individual, as an employee or consultant. Cooperate with any
    other person in persuading, enticing or aiding, or attempting to persuade,
    entice or aid, any employee of or consultant to Encompass and/or PMIC to terminate
    his or her employment or business relationship with Encompass and/or PMIC,
    or to become employed as an employee or retained as a consultant by any person
    other than Encompass and/or PMIC.  

 In the event of a voluntary or involuntary
  filing under Chapter 7 of the United States Bankruptcy Code by PMIC and Encompass
  that is not dismissed within ninety (90) days, Executive shall no longer be
  bound by the restrictions contained in this Section 5.1.  

   5.2 Confidentiality Agreement.
    Executive shall not, either during the Employment Period or at any time thereafter,
    use or disclose to any third person any Confidential Information (as defined
    below) of the Company, other than at the direction of the Company, or pursuant
    to a court order or subpoena, provided that Executive will give notice of
    such court order or subpoena to the Company prior to such disclosure. Upon
    the termination of Executive’s employment with the Company for any reason,
    Executive shall return any notes, records, charts, formulae or other materials
    (whether in hard copy or computer readable form) containing Confidential Information
    (as defined below), and will not make or retain any copies of such materials.
    Without limiting the generality of the foregoing, the parties acknowledge
    that the Company from time to time may be subject to agreements with its customers,
    suppliers or licensors to maintain the confidence of such other persons’
    confidential information. The terms of such agreements may require that the
    Company's employees, including Executive, be bound by such agreements, and
    Executive shall be deemed so bound upon notice to him of the terms of such
    agreements. The term "Confidential Information" as used herein shall
    mean any  

 6 

  
 confidential or proprietary information
  of the Company whether of a technical, engineering, operational, financial or
  economic nature, including, without limitation, all prices, discounts, terms
  and conditions of sale, trade secrets, know-how, customers, inventions, business
  affairs or practices, systems, products, product specifications, designs, plans,
  manufacturing and other processes, data, ideas, details and other information
  of the Company. Confidential Information shall not include information which
  can be proven by Executive to have been developed by his own work as of the
  Effective Date completely independent of its disclosure by the Company or which
  is in the public domain, provided such information did not become available
  to the general public as a result of Executive's breach of this Section 5.2.
   

 5.3 Disclosure of Innovations. Executive
  shall make prompt and full written disclosure to the Company and solely the
  Company of all writings, inventions, processes, methods, plans, developments,
  improvements, procedures, techniques and other innovations of any kind that
  Executive may make, develop or reduce to practice, alone or jointly with others,
  at any time during the Employment Period, whether during working hours or at
  any other time and whether at the request or upon the suggestion of the Company
  or otherwise, and whether or not they are eligible for patent, copyright, trademark,
  trade secret or other legal protection (collectively, "Innovations").
  Examples of Innovations shall include, but are not limited to, discoveries,
  research, formulas, tools, know-how, marketing plans, new product plans, production
  processes, advertising, packaging and marketing techniques and improvements
  to computer hardware or software. The written disclosures provided for herein
  shall be made to the PMIC CEO or the Board.  

 5.4 Assignment of Ownership of Innovations.
  All Innovations shall be the sole and exclusive property of the Company. Executive
  hereby assigns all rights, title or interest in and to the Innovations to the
  Company. At the Company's request and expense, during the Employment Period
  and at any time thereafter, Executive will assist and cooperate with the Company
  in all respects and will execute documents and give testimony to obtain, maintain,
  perfect and enforce for the Company any and all patent, copyright, trademark,
  trade secret and other legal protections for the Innovations.  

 5.5 Remedies. Executive acknowledges
  that the restrictions contained in the foregoing Sections 5.1 through 5.4, in
  view of the nature of the business in which the Company is engaged, are reasonable
  and necessary in order to protect the legitimate interests of the Company, and
  that the legal remedies for a breach of any of the provisions of this Section
  5 will be inadequate and that such provisions may be enforced by restraining
  order, injunction, specific performance or other equitable relief. Such equitable
  remedies shall be cumulative and in addition to any other remedies which the
  injured party or parties may have under applicable law, equity, this Agreement
  or otherwise. Executive shall not, in any action or proceeding to enforce any
  of the provisions of this Section 5, assert the claim or defense that an adequate
  remedy at law exists. The prevailing party shall be entitled to recover its
  legal fees and expenses in any action or proceeding for breach of this Section
  5.  

 5.6 Company Property. All Confidential
  Information; all Innovations; and all correspondence, files, documents, advertising,
  sales, manufacturers' and other materials or articles or other information of
  any kind, in any media, form or format furnished to Executive by the Company,
  which may not deemed confidential, shall be and remain the sole property of
  the  

 7 

  
 Company ("Company Property"). Upon
  termination of Executive's employment or at the Company's request, whichever
  is earlier, Executive shall immediately deliver to the Company all such Company
  Property.  

 5.7 Public Policy/Severability.
  The parties do not wish to impose any undue or unnecessary hardship upon Executive
  following his departure from employment with PMIC and/or Encompass, as the case
  may be. The parties have attempted to limit the provisions of this Section 5
  to achieve such a result, and the parties expressly intend that all provisions
  of this Section 5 be construed to achieve such result. If, contrary to the effort
  and intent of the parties, any covenant or other obligation contained in this
  Section 5 shall be found not to be reasonably necessary for the protection of
  the Company, to be unreasonable as to duration, scope or nature of restrictions,
  or to impose an undue hardship on Executive, then it is the desire of the parties
  that such covenant or obligation not be rendered invalid thereby, but rather
  that the duration, scope or nature of the restrictions be deemed reduced or
  modified, with retroactive effect, to render such covenant or obligation reasonable,
  valid and enforceable. The parties further agree that in the event a court,
  despite the efforts and intent of the parties, declares any portion of the covenants
  or obligations in this Section 5 invalid, the remaining provisions of this Section
  5 shall nonetheless remain valid and enforceable.  

 6.   Termination.
   

  6.1 Termination For Cause. Notwithstanding
  anything to the contrary contained herein, this Agreement may be terminated
  immediately for "cause," at which time the Company shall have no further obligations
  or liabilities to Executive whether under this Agreement or otherwise and Executive's
  right to further compensation and benefits hereunder (including, but not limited
  to, unearned Shares) shall immediately cease, other than payment to Executive
  of Base Salary accrued, and reimbursement of expenses incurred in accordance
  with Section 4.5, prior to the effective date of termination of this Agreement
  (the "Termination Date"). As used herein and throughout this Agreement,
  the term “cause” shall mean (i) any act or omission by Executive that
  constitutes malfeasance or misfeasance in the course of Executive’s duties
  hereunder, or in the objectively reasonable judgment of the Chief Executive
  Officer of ACT, the Board of Directors of ACT, the Board or the PMIC CEO, Executive
  has been grossly negligent (including habitual neglect of duties), or insubordinate
  in carrying out his duties hereunder, (ii) a material breach of this Agreement
  by Executive that is not cured within twenty (20) days of receipt of written
  notice thereof, (iii) Executive's breach of a fiduciary duty owed to the Company
  or its affiliates, or (iv) Executive’s conviction of, or pleading nolo
  contendere to, a criminal offense or crime constituting a misdemeanor or felony,
  or conviction in respect to any act involving fraud, dishonesty or moral turpitude
  (other than minor traffic infractions or similar minor offenses).  

  6.2 Termination without Cause.

  (a) Without Cause. This Agreement
  may be terminated by the Company without cause and for any reason or no reason
  prior to the expiration of the Employment Period upon thirty (30) days' prior
  written notice from the Company to the Executive. 

 8 

  

  (b) Severance. In the event that
  the Company terminates Executive’s employment without cause, the Company
  shall pay to Executive (i) Base Salary accrued, Shares earned in accordance
  with Section 4.3, and expenses incurred in accordance with Section 4.5, prior
  to the Termination Date, (ii) any unpaid bonus owed to Executive for a prior
  fiscal year, (iii) other benefits earned by Executive in accordance with Section
  4.4 ((i), (ii) and (iii), collectively, the "Accrued Payments"), which
  Accrued Payments shall be paid to Executive in accordance with Section 4.1,
  Section 4.2, Section 4.3 and Section 4.5, as applicable, (iv) any accrued vacation
  under Section 4.6, and (v) an additional amount of Base Salary which would have
  been payable to Executive during the six (6) month period immediately following
  the Termination Date (the "Severance Payment"), which Severance Payment
  shall be payable in cash to Executive in equal monthly installments on the first
  business day of each calendar month during the six (6) month period immediately
  following the Termination Date. Except as provided in the preceding sentence,
  the Company shall have no further obligations or liabilities to Executive whether
  under this Agreement or otherwise and Executive's right to further compensation
  and benefits hereunder (including, but not limited to, unearned Shares) shall
  immediately cease.  

  6.3 Termination for Good Reason.
   

  (a) Good Reason. Executive may
  terminate this Agreement for Good Reason at any time within ninety (90) days
  after the Executive first has actual knowledge of the occurrence of such Good
  Reason. For purposes of this Agreement, the term "Good Reason" shall mean any
  of the following: (i) the assignment to Executive of any duties that are not
  consistent with the duties set forth in Sections 1 and 3 of this Agreement or
  any other action by the Company that results in a material diminution in any
  of the Executive's positions with the Company or in the Executive's authority,
  duties or responsibilities and to which Executive has not consented (excluding
  for this purpose an isolated, insubstantial and inadvertent action not taken
  in bad faith and which is remedied by the Company within ten (10) days after
  receipt of notice thereof given by Executive); (ii) any failure by the Company
  to comply with any of the provisions of Section 4 of this Agreement provided
  such failure is for an amount in excess of $10,000 and not cured within five
  (5) days after receipt of notice thereof given by Executive or is an isolated,
  insubstantial and inadvertent failure which is not remedied by the Company within
  ten (10) days after receipt of notice thereof given by the Executive; (iii)
  the Company's requiring Executive, without Executive's consent and full agreement,
  to be based at any office other than at PMIC’s headquarters located in
  Milpitas, California; and (iv) any failure by the Company to require any successor
  (whether direct or indirect, by purchase, merger, consolidation or otherwise)
  to all or substantially all of the business and/or assets of Encompass, ACT
  or PMIC to assume expressly and agree to perform this Agreement in the same
  manner and to the same extent that the Company would be required to perform
  it if no such succession had taken place.  

  (b) Severance. In the event that
  Executive terminates this Agreement for Good Reason, the Company shall pay to
  Executive the Severance Payment in accordance with Section 6.2(b) of this Agreement.
  Except as provided in the preceding sentence, the Company shall have no further
  obligations or liabilities to Executive whether under this Agreement or otherwise
  and Executive’s right to further compensation and benefits hereunder (including,
  but not limited to, unearned Shares) shall immediately cease.  

 9 

  

  6.4 Termination of Other Positions.
  Upon the Termination Date, Executive hereby resigns as Chief Financial Officer
  and Chief Operating Officer of PMIC and from any and all other positions as
  officer and/or director Executive may then hold with the Company, and as fiduciary
  of any benefit plan of the Company. Executive shall promptly execute any further
  reasonable documentation as requested by the Company and, if Executive is to
  receive any payments from the Company, execution of such further documentation
  shall be a condition thereof.  

 7.   Disability
  or Death.  

 7.1 Disability. If, during the Employment
  Period, Executive becomes disabled or incapacitated as determined under the
  Company's Long Term Disability Policy ("Permanently Disabled"), the Company
  shall have the right at any time thereafter (but in no event less than 120 days
  after the event causing such disability or incapacity), so long as Executive
  is then still Permanently Disabled, to terminate this Agreement upon thirty
  (30) days' prior written notice to Executive. In the event the Company does
  not have a Long Term Disability Policy at the time of the event causing the
  Executive to become Permanently Disabled, "Permanently Disabled" shall
  mean Executive's inability to fully perform his duties and responsibilities
  hereunder to the full extent required by the Company by reason of illness, injury
  or incapacity for 120 consecutive days or for more than six (6) months during
  any twelve (12) month period. If the Company elects to terminate this Agreement
  in the event that Executive becomes Permanently Disabled, the Company shall
  have no further obligations or liabilities to Executive, whether under this
  Agreement or otherwise (including, but not limited to, unearned Shares), other
  than payment to Executive of the Accrued Payments, which Accrued Payments shall
  be paid to Executive in accordance with Section 4.1, Section 4.2, Section 4.4
  and Section 4.5, as applicable.  

  7.2 Death. If Executive dies during
  the Employment Period, this Agreement shall automatically terminate as of the
  date of Executive's death, and the Company shall have no further obligations
  or liabilities to Executive, whether under this Agreement or otherwise (including,
  but not limited to, unearned Shares), other than payment to Executive's estate
  of the Accrued Payments, which Accrued Payments shall be paid to Executive in
  accordance with Section 4.1, Section 4.2, Section 4.3 and Section 4.5, as applicable.
   

 8.  Dispute Resolution.
  If there shall be any dispute between the Company and  Executive
  (i) in the event of any termination of Executive’s employment by the Company,
  or (ii) otherwise arising out of this Agreement, such dispute shall be resolved
  in accordance with the dispute resolution procedures set forth in Exhibit B attached to this Agreement, the provisions of which are incorporated as
  a part of this Agreement, and the parties of this Agreement agree that such
  dispute resolution procedures will be the exclusive method for resolution of
  disputes under this Agreement; provided, however, that (a) the Company
  or Executive may seek preliminary judicial relief if, in such party’s judgment,
  such action is necessary to avoid irreparable injury during the pendency of
  such procedures, and (b) nothing in Exhibit B will prevent either party
  from exercising the rights of termination set forth in this Agreement. IT IS
  EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS AGREEMENT, WHICH INCORPORATES 

 10 

  
 BINDING ARBITRATION, THE COMPANY AND EXECUTIVE
  AGREE TO WAIVE COURT OR JURY TRIAL  

 9.  Indemnification. Each
  of the Company and Executive shall indemnify the other for any losses, damages,
  liabilities, judgments, claims, costs, penalties and expenses incurred by such
  other party (including, without limitation, costs and reasonable attorneys’
  fees and costs), resulting from the indemnifying party’s failure to perform
  any of their respective obligations contained in this Agreement. 

 10.  Governing Law. This
  Agreement shall be governed by the internal laws of the State of Delaware, without
  regard to its or any other jurisdiction's conflict of laws principles. Any action
  to enforce any term hereof shall be brought exclusively within the state or
  federal courts of Delaware to which jurisdiction and venue all parties hereby
  submit themselves.  

 11.  Binding Effect. Except
  as otherwise herein expressly provided, this Agreement shall be binding upon,
  and shall inure to the benefit of the parties hereto, their respective heirs,
  legal representatives, successors and assigns.  

 12.  Assignment. Any
  assignee of the Company shall have the right to enforce the restrictive covenants
  set forth in this Agreement, and the Company shall have the right to assign
  this Agreement, including the right to enforce such covenants to any successor
  or assign of the Company. Executive shall not assign this Agreement or his rights
  and obligations hereunder.  

 13.  Notices. All
  notices, designations, consents, offers, acceptances, waivers or any other communication
  provided for herein, or required hereunder, shall be sufficient if in writing
  and if sent by registered or certified mail, return receipt requested, overnight
  courier, or delivered by hand or confirmed facsimile transmission to (i) Executive
  at his last known address on the books of the Company or (ii) the Company at
  its principal place of business.  

 14.  Additional Documents.
  Each of the parties hereto agrees to execute and deliver, without cost or
  expense to any other party, any and all such further instruments or documents
  and to take any and all such further action reasonably requested by such other
  of the parties hereto as may be necessary or convenient in order to effectuate
  this Agreement and the intents and purposes thereof. 

 15.  Counterparts. This
  Agreement may be executed simultaneously in several counterparts, each of which
  shall be deemed an original, but all of which together shall constitute one
  and the same instrument, and such counterparts may be delivered by facsimile
  transmission, which facsimile copies shall be deemed originals. 

 16.  Entire Agreement.
  This Agreement contains the sole and entire agreement and understanding
  of the parties and supersedes any and all prior agreements, discussions, negotiations,
  commitments and understandings among the parties hereto with respect to the
  subject matter hereof, including, without limitation, that certain expired Letter
  of Intent, dated May 18, 2004, by and among Executive, the Company and the other
  parties named therein. There are no representations, agreements, arrangements
  or understandings, oral or written, between or among the parties concerning
  the subject matter hereto, which are not fully expressed herein or in any supplemental
  written agreements of even or subsequent date hereof.  

 11 

  

 17.  Severability. If
  any provision of this Agreement, or the application thereof to any person or
  circumstances, shall, for any reason and to any extent, be invalid or unenforceable,
  the remainder of this Agreement and the application of such provision to other
  persons or circumstances shall not be affected thereby, but rather shall be
  enforced to the greatest extent permitted by law. 

 18.  Modification. This
  Agreement cannot be changed, modified or discharged orally, but only if consented
  to in writing by both parties.  

 19.  Contract Headings.
  All headings of the Sections of this Agreement have been inserted for convenience
  of reference only, are not to be considered a part of this Agreement, and shall
  in no way affect the interpretation of any of the provisions of this Agreement.
   

 20.  Waiver. Failure
  to insist upon strict compliance with any of the terms, covenants, or conditions
  hereof shall not be deemed a waiver of such term, covenant, or condition, nor
  shall any waiver or relinquishment of any right or power hereunder at any one
  time or more times be deemed a waiver or relinquishment of such right or power
  at any other time or times. 

 21.  Representation of Executive.
  Executive, with the full knowledge that the Company is relying thereon,
  represents and warrants that he has not made any commitment inconsistent with
  the provisions hereof and that he is not under any disability which would prevent
  him from entering into this Agreement and performing all of his obligations
  hereunder.  

 22.  Joint Participation in
  Drafting. Each party to this Agreement participated in the drafting
  of this Agreement. As such, the language used herein shall be deemed to be the
  language chosen by the parties hereto to express their mutual intent, and no
  rule of strict construction shall be applied against any party to this Agreement.
   

  

[SIGNATURE PAGE FOLLOWS]  

  

 

 

 

 

 

 

 

12 

  

 IN WITNESS WHEREOF the parties hereto
  have executed this Agreement as of the day and year first above written. 

	 	PACIFIC MAGTRON INTERNATIONAL CORP.,
	 	a Nevada corporation
	 	 
	 	By: ________________________________
	 	     Name:
	 	     Title:
	 	 
	 	ENCOMPASS GROUP AFFILIATES, INC., a
	 	Delaware corporation
	 	 
	 	By: ________________________________
	 	     Name:
	 	     Title:
	 	 
	 	ADVANCED COMMUNICATIONS
	 	TECHNOLOGIES, INC., a Florida corporation
	 	 
	 	By: ________________________________
	 	     Name:
	 	     Title:
	 	 
	 	EXECUTIVE:
	 	 
	 	________________________________
	 	THEODORE S. LI

  

13 

  
 EXHIBIT A  

 DISPUTE RESOLUTION PROCEDURES 

 1. If a controversy arises that is covered
  by Section 8 of the Agreement, then not later than twelve (12) months from the
  date of the event that is the subject of dispute Executive or the Company may
  serve on the other a written notice specifying the existence of such controversy
  and setting forth in reasonably specific detail the grounds of the notice ("Notice
  of Controversy"); provided that, in any event, the other party will have
  at least thirty (30) days from and after the date of the Notice of Controversy
  to serve a written notice of any counterclaim ("Notice of Counterclaim"). The
  Notice of Counterclaim will specify the claim or claims in reasonably specific
  detail. If the Notice of Controversy or the Notice of Counterclaim, as the case
  may be, is not served within the applicable period, the claim set forth therein
  will be deemed to have been waived, abandoned and rendered unenforceable. 

   2.  For a three (3) week period
    following receipt of the Notice of Controversy or the Notice
    of Counterclaim, as the case may be, the parties will make a good faith effort
    to resolve the dispute through negotiation ("Period of Negotiation"). Neither
    party will take any action during the Period of Negotiation to initiate arbitration
    proceedings.  

 3. If the parties agree during the Period
  of Negotiation to mediate the dispute, then the Period of Negotiation will be
  extended by an amount of time to be agreed upon by the parties to permit such
  mediation. In no event, however, may the Period of Negotiation be extended by
  more than five weeks or, stated differently, in no event may the Period of Negotiation
  be extended to encompass more than a total of eight weeks.  

 4. If the parties agree to mediate the
  dispute but are thereafter unable to agree within a week on the format and procedures
  for the mediation, then the effort to mediate will cease, and the period of
  Negotiation will terminate four weeks from the Notice of Controversy or the
  Notice of Counterclaim, as the case may be.  

 5. Following the termination of the Period
  of Negotiation, the dispute, including the main claim and counterclaim, if any,
  will be settled by arbitration, governed by the Federal Arbitration Act, 9 U.S.C.
  §1 et seq. ("FAA"), and judgment upon the award may be entered in any court
  having jurisdiction. The format and procedures of the arbitration are set forth
  below (referred to below as the "Arbitration Agreement").  

 6. A notice of intention to arbitrate ("Notice
  of Arbitration") will be served within forty-five (45) days of the termination
  of the Period of Negotiation. If the Notice of Arbitration is not served within
  this period, the claim set forth in the Notice of Controversy or the Notice
  of Counterclaim, as the case may be, will be deemed to have been waived, abandoned
  and rendered unenforceable.  

   7.  The arbitration, including the
    Notice of Arbitration, will be governed by the  Commercial
    Rules of the American Arbitration Association ("AAA") in effect on the date
    of the Notice of Arbitration, except that the terms of this Arbitration Agreement
    will control in the  

  
 event of any difference or conflict between
  such Rules and the terms of this Arbitration Agreement.  

 8. The arbitrator will reach a decision
  on the merits on the basis of applicable legal principles as embodied in the
  law of the State of Delaware. The arbitration hearing will take place in Delaware.
   

 9. There will be one arbitrator, regardless
  of the amount in controversy. The arbitrator selected, in order to be eligible
  to serve, will be a lawyer in Delaware with at least fifteen (15) years experience
  specializing in either general commercial litigation or general corporate and
  commercial matters. In the event the parties cannot agree on a mutually acceptable
  single arbitrator from the list submitted by the AAA, the AAA will appoint the
  arbitrator who will meet the foregoing criteria.  

 10. At the time of appointment and as a
  condition of the appointment, the arbitrator will be apprised of the time limitations
  and other provisions of this Arbitration Agreement and will indicate such dispute
  resolver's agreement to the Tribunal Administrator to comply with such provisions
  and time limitations.  

 11. During the thirty (30) day period following
  appointment of the arbitrator, either party may serve on the other a request
  for limited numbers of documents directly related to the dispute. Such documents
  will be produced within seven (7) days of the request.  

 12. Following the thirty-day period of
  document production, there will be a forty-five (45) day period during which
  limited depositions will be permissible. Neither party will take more than five
  (5) depositions, and no deposition will exceed three (3) hours of direct testimony.
   

 13. Disputes as to discovery or prehearing
  matters of a procedural nature will be promptly submitted to the arbitrator
  pursuant to telephone conference call or otherwise. The arbitrator will make
  every effort to render a ruling on such interim matters at the time of the hearing
  (or conference call) or within five (5) business days thereafter.  

 14. Following the period of depositions,
  the arbitration hearing will promptly commence. The arbitrator will make every
  effort to commence the hearing within thirty (30) days of the conclusion of
  the deposition period and, in addition, will make every effort to conduct the
  hearing on consecutive business days to conclusion.  

 15. An award will be rendered, at the latest,
  within nine (9) months of the date of the Notice of Arbitration and within thirty
  (30) days of the close of the arbitration hearing. The award will set forth
  the grounds for the decision (findings of fact and conclusions of law) in reasonably
  specific detail. The award will be final and nonappealable except as provided
  in the FAA and except that a court of competent jurisdiction will have the power
  to review whether, as a matter of law, based upon the findings of fact by the
  arbitrator, the award should be confirmed or should be modified or vacated in
  order to correct any errors of law made by the arbitrator. Such judicial review
  will be limited to issues of law, and the parties agree that the findings of
  fact made by the arbitrator will be final and binding on the parties and will
  serve as the facts to be relied upon by the court in determining the extent
  to which the award should be confirmed, modified or vacated.  

  

 Except for consequential damages arising
  from Executive's breach of Section 5 of the Agreement, which shall not be limited,
  the award may only be made for compensatory damages, and if any other damages
  (whether exemplary, punitive, consequential, statutory or other) are included,
  the award will be vacated and remanded, or modified or corrected, as appropriate
  to promote this damage limitation.  

   Notwithstanding the foregoing, nothing
    contained herein shall limit the Company's ability to seek a permanent injunction
    for Executive's breach of Section 5 of the Agreement.

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