Document:

EX-10.1

EXHIBIT 10.1

 

 

CREDIT AGREEMENT

dated as of September 22, 2008

among

PAYCHEX OF NEW YORK LLC

as Borrower

and

JPMORGAN CHASE BANK,

NATIONAL ASSOCIATION

as Administrative Agent

J.P. MORGAN SECURITIES INC.,

as Co-Bookrunner and Co-Arranger

BANK OF AMERICA,

NATIONAL ASSOCIATION

as Co-Arranger and Co-Bookrunner

and

The Lenders Party Hereto

 

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I.     DEFINITIONS	 	 	1	 
	Section 1.01.
	 	Defined Terms	 	 	1	 
	Section 1.02.
	 	Classification of Loans and Borrowings	 	 	12	 
	Section 1.03.
	 	Terms Generally	 	 	12	 
	Section 1.04.
	 	Accounting Terms; GAAP	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE II.     THE CREDITS	 	 	13	 
	Section 2.01.
	 	Commitments	 	 	13	 
	Section 2.02.
	 	Loans and Borrowings	 	 	13	 
	Section 2.03.
	 	Requests for Revolving Borrowings	 	 	14	 
	Section 2.04.
	 	Funding of Borrowings	 	 	15	 
	Section 2.05.
	 	Interest Elections	 	 	15	 
	Section 2.06.
	 	Termination and Reduction of Commitments	 	 	16	 
	Section 2.07.
	 	Repayment of Loans; Evidence of Debt	 	 	16	 
	Section 2.08.
	 	Prepayment of Loans	 	 	17	 
	Section 2.09.
	 	Fees	 	 	17	 
	Section 2.10.
	 	Interest	 	 	18	 
	Section 2.11.
	 	Alternate Rate of Interest	 	 	18	 
	Section 2.12.
	 	Increased Costs	 	 	19	 
	Section 2.13.
	 	Break Funding Payments	 	 	 	 
	Section 2.14.
	 	Taxes	 	 	20	 
	Section 2.15.
	 	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	 	 	21	 
	Section 2.16.
	 	Mitigation Obligations; Replacement of Lenders	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE III.     GUARANTEES AND COLLATERAL SECURITY	 	 	23	 
	Section 3.01.
	 	Guarantee of Obligations	 	 	23	 
	Section 3.02.
	 	Security for Obligations	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE IV.     REPRESENTATIONS AND WARRANTIES	 	 	24	 
	Section 4.01.
	 	Organization; Powers	 	 	24	 
	Section 4.02.
	 	Authorization; Enforceability	 	 	24	 
	Section 4.03.
	 	Governmental Approvals; No Conflicts	 	 	24	 
	Section 4.04.
	 	Financial Condition; No Material Adverse Change	 	 	24	 

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TABLE OF CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 4.05.
	 	Properties	 	 	25	 
	Section 4.06.
	 	Litigation and Environmental Matters	 	 	25	 
	Section 4.07.
	 	Compliance with Laws and Agreements	 	 	25	 
	Section 4.08.
	 	Investment and Holding Company Status	 	 	25	 
	Section 4.09.
	 	Taxes	 	 	26	 
	Section 4.10.
	 	ERISA	 	 	26	 
	Section 4.11.
	 	Disclosure	 	 	26	 
	 
	 	 	 	 	 	 
	ARTICLE V.     CONDITIONS	 	 	26	 
	Section 5.01.
	 	Effective Date	 	 	26	 
	Section 5.02.
	 	Each Credit Event	 	 	27	 
	 
	 	 	 	 	 	 
	ARTICLE VI.     AFFIRMATIVE COVENANTS	 	 	28	 
	Section 6.01.
	 	Financial Statements; Ratings Change and Other Information	 	 	28	 
	Section 6.02.
	 	Notices of Material Events	 	 	29	 
	Section 6.03.
	 	Existence; Conduct of Business	 	 	29	 
	Section 6.04.
	 	Payment of Obligations	 	 	30	 
	Section 6.05.
	 	Maintenance of Properties; Insurance	 	 	30	 
	Section 6.06.
	 	Books and Records; Inspection Rights	 	 	30	 
	Section 6.07.
	 	Compliance with Laws	 	 	30	 
	Section 6.08.
	 	Use of Proceeds	 	 	30	 
	Section 6.09.
	 	Environmental Laws	 	 	30	 
	 
	 	 	 	 	 	 
	ARTICLE VII.     NEGATIVE COVENANTS	 	 	31	 
	Section 7.01.
	 	Indebtedness	 	 	31	 
	Section 7.02.
	 	Liens	 	 	31	 
	Section 7.03.
	 	Fundamental Changes	 	 	32	 
	Section 7.04.
	 	Investments, Loans, Advances, Guarantees and Acquisitions	 	 	33	 
	Section 7.05.
	 	Restricted Payments	 	 	33	 
	Section 7.06.
	 	Transactions with Affiliates	 	 	33	 
	Section 7.07.
	 	Restrictive Agreements	 	 	33	 
	 
	 	 	 	 	 	 
	ARTICLE VIII.     EVENTS OF DEFAULT	 	 	34	 
	 
	 	 	 	 	 	 
	ARTICLE IX.     THE ADMINISTRATIVE AGENT	 	 	36	 

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TABLE OF CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE X.     MISCELLANEOUS	 	 	38	 
	Section 10.01.
	 	Notices	 	 	38	 
	Section 10.02.
	 	Waivers; Amendments	 	 	39	 
	Section 10.03.
	 	Expenses; Indemnity; Damage Waiver	 	 	40	 
	Section 10.04.
	 	Successors and Assigns	 	 	41	 
	Section 10.05.
	 	Survival	 	 	44	 
	Section 10.06.
	 	Counterparts; Integration; Effectiveness	 	 	45	 
	Section 10.07.
	 	Severability	 	 	45	 
	Section 10.08.
	 	Right of Setoff	 	 	45	 
	Section 10.09.
	 	Governing Law; Jurisdiction; Consent to Service of Process	 	 	45	 
	Section 10.10.
	 	WAIVER OF JURY TRIAL	 	 	46	 
	Section 10.11.
	 	Headings	 	 	46	 
	Section 10.12.
	 	Confidentiality	 	 	46	 
	Section 10.13.
	 	Interest Rate Limitation	 	 	47	 
	Section 10.14.
	 	USA PATRIOT Act	 	 	48	 

iii

 

SCHEDULES:

Schedule 2.01 — Commitments

Schedule 4.06 — Disclosed Matters

Schedule 7.01 — Existing Indebtedness

Schedule 7.02 — Existing Liens

Schedule 7.07 — Existing Restrictions

EXHIBITS:

The Registrant has omitted from this filing the Exhibits listed below. The Registrant will furnish
supplementally to the Commission, upon request, a copy of any omitted exhibit.

Exhibit A — Form of Assignment and Assumption

Exhibit B — Form of Collateral Spreadsheet

Exhibit C — Investment Policy

Exhibit D — Form of Borrowing Request

Exhibit E — Form of Interest Election Request

Exhibit F — Form of Opinion of Borrower’s Counsel

Exhibit G — Form of Compliance Certificate

 

 

     CREDIT AGREEMENT dated as of September 22, 2008, among PAYCHEX OF NEW YORK LLC, the LENDERS
party hereto, JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Administrative Agent, and BANK OF AMERICA, N.A., as Co-Arranger and
Co-Bookrunner.

     The parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

     SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the
meanings specified below:

     “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to
the Alternate Base Rate.

     “Accounts” means the Accounts as defined in the Intercreditor Agreement.

     “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any day, an
interest rate per annum equal to (a) the Overnight LIBO Rate for such day multiplied by (b) the
Statutory Reserve Rate.

     “Administrative Agent” means JPMorgan Chase Bank, in its capacity as administrative
agent for the Lenders hereunder.

     “Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

     “Affiliate” means, with respect to a specified Person, another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.

     “Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.

     “Applicable Percentage” means, with respect to any Lender, the percentage of the total
Commitments represented by such Lender’s Commitment. If the Commitments have terminated or
expired, the Applicable Percentages shall be determined based upon the Commitments most recently in
effect, giving effect to any assignments.

 

 

     “Applicable Rate” means, for any day, (a) with respect to any Money Market Revolving
Loan, 0.18% per annum, and (b) with respect to any Eurodollar Revolving Loan, 0.18% per annum.

     “Approved Fund” has the meaning assigned to such term in Section 10.04.

     “Assessment Rate” means, for any day, the annual assessment rate in effect on such day
that is payable by a member of the Bank Insurance Fund classified as “well-capitalized” and within
supervisory subgroup “B” (or a comparable successor risk classification) within the meaning of 12
C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for
insurance by such Corporation of time deposits made in dollars at the offices of such member in the
United States; provided that if, as a result of any change in any law, rule or regulation,
it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate
shall be such annual rate as shall be determined by the Administrative Agent to be representative
of the cost of such insurance to the Lenders.

     “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required by Section 10.04),
and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by
the Administrative Agent.

     “Authorized Person” means any of the following, acting individually: (a) Jonathan J.
Judge, (b) John M. Murphy, (c) Melinda Janik, or (d) such other persons who may be designated in
writing by Borrower as an Authorized Person.

     “Availability Period” means the period from and including the Effective Date to but
excluding the earlier of the Maturity Date and the date of termination of the Commitments.

     “Base CD Rate” means the sum of (a) the Three-Month Secondary CD Rate multiplied by
the Statutory Reserve Rate plus (b) the Assessment Rate.

     “Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

     “Borrower” means Paychex of New York LLC, a Delaware limited liability company.

     “Borrowing” means Revolving Loans of the same Type, made, converted or continued on
the same date.

     “Borrowing Request” means a request by the Borrower for a Revolving Borrowing in
accordance with Section 2.03.

     “Business Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain closed;
provided that, when used in connection with a Eurodollar Loan, the term “Business
Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in
the London interbank market.

2

 

     “Capital Lease Obligations” of any Person means the obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

     “Change in Control” means (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the Securities Exchange
Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the
date hereof) other than an Affiliate of the Borrower of Equity Interests representing more than 50%
of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests
of any Parent Entity; (b) occupation of a majority of the seats (other than vacant seats) on the
board of directors of any Parent Entity or the Borrower by Persons who were neither (i) nominated
by the board of directors of such Parent Entity or the Borrower nor (ii) appointed by directors so
nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or
group other than a Parent Entity.

     “Change in Law” means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by any Lender (or, for purposes of Section 2.12(b), by any lending office of such Lender
or by such Lender’s holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after the date of this
Agreement.

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

     “Collateral” has the meaning given to such term in the Pledge Security Agreement.

     “Collateral Account” has the meaning given such term in the Pledge Security Agreement.

     “Collateral Spreadsheet” means a spreadsheet provided by the Borrower showing the Net
Market Value of the Collateral in each of the Accounts and, if any of the Collateral has been
segregated, the Collateral Account (each as defined in the Pledge Security Agreement), a form of
which is attached hereto as Exhibit B.

     “Commitment” means, with respect to each Lender, the commitment of such Lender to make
Revolving Loans hereunder, expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to
time pursuant to Section 2.06 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender’s
Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which
such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the
Lenders’ Commitments is $400,000,000.

     “Control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through the ability to
exercise

3

 

voting power, by contract or otherwise. “Controlling” and “Controlled” have
meanings correlative thereto.

     “Credit Documents” means this Agreement, the Guarantee Agreement, the Intercreditor
Agreement, the Security Documents, and any other documents entered into by any of the parties
hereto in connection with the foregoing, and as the same may be amended, modified, restated, or
extended from time to time.

     “Default” means any event or condition which constitutes an Event of Default or which
upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

     “Disclosed Matters” means the actions, suits and proceedings and the environmental
matters disclosed in Schedule 4.06.

     “dollars” or “$” refers to lawful money of the United States of America.

     “Effective Date” means the date on which the conditions specified in Section 5.01 are
satisfied (or waived in accordance with Section 10.02).

     “Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into
by any Governmental Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the management, release or threatened release of any Hazardous Material or to
health and safety matters.

     “Environmental Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the
Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any contract, agreement
or other consensual arrangement pursuant to which liability is assumed or imposed with respect to
any of the foregoing.

     “Equity Interests “ means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the holder thereof to
purchase or acquire any such equity interest.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) that,
together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.

4

 

     “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or
the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived;
(c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC
or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is,
or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

     “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate.

     “Event of Default” has the meaning assigned to such term in ARTICLE VIII.

     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, or any
other recipient of any payment to be made by or on account of any obligation of the Borrower
hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which its applicable
lending office is located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the
case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.15(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office)
or is attributable to such Foreign Lender’s failure to comply with Section 2.13(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation
of a new lending office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.13(a).

     “Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received
by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

5

 

     “Financial Officer” means the chief financial officer, principal accounting officer,
treasurer or controller of the Borrower.

     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction
other than that in which the Borrower is located. For purposes of this definition, the United
States of America, each State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.

     “GAAP” means generally accepted accounting principles in the United States of America.

     “Governmental Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.

     “Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or obligation;
provided, that the term Guarantee shall not include endorsements for collection or deposit
in the ordinary course of business.

     “Guarantee Agreement” means the Guarantee Agreement dated on or about the date hereof
made by the Guarantors in favor of the Administrative Agent and the Lenders, and as the same may be
amended, modified, restated, or extended from time to time.

     “Guarantors” means, collectively, Paychex Inc., Paychex Investment Partnership LP,
Paychex of North America, Inc., Advantage Payroll Services, Inc., Paychex Recordkeeping Services,
Inc., and Paychex Benefit Technologies Inc.

     “Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.

     “Indebtedness” of any Person means, without duplication, (a) all obligations of such
Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all

6

 

obligations of such Person upon which interest charges are customarily paid, (d) all
obligations of such Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect of the deferred
purchase price of property or services (excluding current accounts payable incurred in the ordinary
course of business), (f) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed,
(g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of
such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness of any Person shall
include the Indebtedness of any other entity (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a result of such Person’s
ownership interest in or other relationship with such entity, except to the extent the terms of
such Indebtedness provide that such Person is not liable therefor.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Index Debt” means senior, unsecured, long-term indebtedness for borrowed money of the
Borrower that is not guaranteed by any other Person or subject to any other credit enhancement.

     “Intercreditor Agreement” means the Amended and Restated Intercreditor Agreement dated
on or about the date hereof among the Administrative Agent, Bank of America, N.A., Wells Fargo
Bank, N.A., and other financial institutions offering discretionary advised lines of credit to the
Borrower from time to time, and as the same may be amended, modified, restated, or extended from
time to time.

     “Interest Election Request” means a request by the Borrower to convert or continue a
Revolving Borrowing in accordance with Section 2.05.

     “Interest Payment Date” means with respect to any Loan the last day of each calendar
month.

     “Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall
have become a party hereto pursuant to an Assignment and Assumption, other than any such Person
that ceases to be a party hereto pursuant to an Assignment and Assumption.

     “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call
or similar right of a third party with respect to such securities.

     “Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

7

 

     “Material Adverse Effect” means a material adverse effect on (a) the business, assets,
operations, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries
taken as a whole or (b) the validity or enforceability of any of the Credit Documents or the rights
or remedies of the Administrative Agent and the Lenders thereunder.

     “Material Indebtedness” means Indebtedness (other than the Loans), or obligations in
respect of one or more Swap Agreements, of any one or more of the Borrower and its Subsidiaries in
an aggregate principal amount exceeding $500,000,000. For purposes of determining Material
Indebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in
respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to
any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Swap
Agreement were terminated at such time.

     “Maturity Date” means September 20, 2009.

     “Money Market”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Money Market Rate.

     “Money Market Rate” means, for any day, a rate per annum equal to the rate quoted by
the Administrative Agent as its money market rate for such day.

     “Moody’s” means Moody’s Investors Service, Inc.

     “Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.

     “Net Market Value” shall have the meaning given to such term in the Pledge Security
Agreement.

     “Obligations” means all advances to, and debts, liabilities, obligations, covenants
and duties of, the Borrower arising under any Credit Document or otherwise with respect to any
Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent,
due or to become due, now existing or hereafter arising and including interest and fees that accrue
after the commencement by or against the Borrower or any Affiliate thereof of any proceeding under
any bankruptcy or insolvency laws naming such Person as the debtor in such proceeding, regardless
of whether such interest and fees are allowed claims in such proceeding.

     “Other Taxes” means any and all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any payment made hereunder
or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.

     “Overnight LIBO Rate” means, with respect to any Eurodollar Borrowing for any day, the
rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute page
of such Service, or any successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as determined

8

 

by the Administrative Agent from time to time for purposes of providing quotations of interest
rates applicable to dollar deposits in the London interbank market), as the rate for overnight
dollar deposits for delivery on such day. In the event that such rate is not available at such
time for any reason, then the “Overnight LIBO Rate” with respect to such Eurodollar
Borrowing on such day shall be the rate at which overnight dollar deposits for delivery on such day
are offered by the principal London office of the Administrative Agent in immediately available
funds in the London interbank market.

     “Parent Entity” means Paychex, Inc. and/or PXC Inc., as applicable.

     “Participant” has the meaning set forth in Section 10.04.

     “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA
and any successor entity performing similar functions.

     “Permitted Acquisitions” means any acquisition consummated after the Effective Date,
by the Borrower, any Guarantor, or any Subsidiary thereof, so long as, in each case, (a) no Default
or Event of Default exists or would result from the acquisition immediately after such acquisition,
and (b) in the event (i) the purchase price in the acquisition equals or exceeds $75,000,000, and
(ii) there are any outstanding Loans or the Borrower intends to borrow any Loans at such time, the
Borrower shall provide the Agent and the Lenders prior written notice of any such proposed
acquisition, including a reasonably detailed description thereof, such notice to be given on the
date such acquisition becomes public. On the date such notice is required to be given, the Lenders
shall be deemed to have requested segregation in accordance with section 3.2 of the Pledge Security
Agreement and the Borrower shall immediately take all actions necessary to segregate Collateral
sufficient to cover the outstanding and requested Loans.

     “Permitted Encumbrances” means:

     (a) Liens imposed by law for taxes that are not yet due or are being contested in
compliance with Section 6.04;

     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like
Liens imposed by law, arising in the ordinary course of business and securing obligations
that are not overdue by more than 30 days or are being contested in compliance with Section
6.04;

     (c) pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or
regulations;

     (d) deposits to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business;

     (e) judgment liens in respect of judgments that do not constitute an Event of Default
under clause (k) of ARTICLE VIII; and

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     (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the affected
property or interfere with the ordinary conduct of business of the Borrower or any
Subsidiary;

provided that the term “Permitted Encumbrances” shall not include any Lien securing
Indebtedness.

     “Permitted Investments” means investments in accordance with the Investment Policy
approved by the Board of Directors of Paychex, Inc. attached hereto as Exhibit C, as modified from
time to time, provided that any such modifications conform in quality to the then current
Investment Policy, and the Administrative Agent is promptly informed of all such modifications as
set forth in Section 10.01.

     “Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.

     “Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.

     “Pledge Security Agreement” means that certain Pledge Security Agreement dated on or
about the date hereof among the Borrower, the Administrative Agent and each Lender, and as the
same may be amended, modified, restated, or extended from time to time.

     “Primary Obligations” shall have the meaning given to such term in the Pledge Security
Agreement.

     “Prime Rate” means the rate of interest per annum publicly announced from time to time
by JPMorgan Chase Bank as its prime rate in effect at its office located at 270 Park Avenue, New
York, New York; each change in the Prime Rate shall be effective from and including the date such
change is publicly announced as being effective.

     “Register” has the meaning set forth in Section 10.04.

     “Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.

     “Required Lenders” means, at any time that there are three or fewer Lenders, Lenders
having Revolving Credit Exposures and unused Commitments representing more than 75% of the sum of
the total of the total Revolving Credit Exposures and unused Commitments at such time, and at any
time that there are four or more Lenders, Lenders having Revolving Credit Exposures and unused
Commitments representing more than 66 2/3% of the sum of the total of the total Revolving Credit
Exposures and unused Commitments at such time.

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     “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the Borrower or any
Subsidiary, or any payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interests in the Borrower or any option, warrant or
other right to acquire any such Equity Interests in the Borrower.

     “Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of
the outstanding principal amount of such Lender’s Revolving Loans at such time.

     “Revolving Loan” means a Loan made pursuant to Section 2.03.

     “S&P” means Standard & Poor’s.

     “Securities Intermediary” means JPMorgan Chase Bank, N.A., in its capacity as
securities intermediary pursuant to the Security Documents.

     “Security Documents” means the Pledge Security Agreement and any and all control
agreements and any other documentation entered into by the Borrower, any Guarantor and/or the
Secured Parties evidencing or perfecting the Secured Parties’ rights in the Collateral.

     “Secured Party” shall have the meaning given to such term in Section 3.02.

     “Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Board to which the Administrative Agent is subject (a)
with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over
$100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted
LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration, exemptions or
offsets that may be available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.

     “subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity the accounts of
which would be consolidated with those of the parent in the parent’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50% of the equity or
more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as
of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by
the parent and one or more subsidiaries of the parent.

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     “Subsidiary” means any subsidiary of the Borrower.

     “Swap Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk or value or any
similar transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a
Swap Agreement.

     “Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

     “Three-Month Secondary CD Rate” means, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such day (or, if such day is not
a Business Day, the next preceding Business Day) by the Board through the public information
telephone line of the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at approximately 10:00 a.m., New York
City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day)
by the Administrative Agent from three negotiable certificate of deposit dealers of recognized
standing selected by it.

     “Transactions” means the execution, delivery and performance by the Borrower of this
Agreement, the borrowing of Loans, and the use of the proceeds thereof hereunder.

     “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the
Adjusted LIBO Rate, the Money Market Rate or the Alternate Base Rate.

     “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.

     SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by class (e.g., a “Revolving
Loan”) or by Type (e.g., a “Eurodollar Loan”) or by class and Type
(e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified and
referred to by class (e.g., a “Revolving Borrowing”) or by Type
(e.g., a “Eurodollar Borrowing”) or by class and Type (e.g., a
“Eurodollar Revolving Borrowing”).

     SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The
word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the
context

12

 

requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights.

     SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time; provided that, if the Borrower notifies the Administrative Agent
that the Borrower requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on the operation of
such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders
request an amendment to any provision hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in the application thereof, then such
provision shall be interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.

ARTICLE II.

THE CREDITS

     SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Revolving Loans to the Borrower from time to time during the
Availability Period in an aggregate principal amount that will not result in such Lender’s
Revolving Credit Exposure exceeding such Lender’s Commitment set forth in Schedule 2.01, as may be
modified, supplemented or amended from time to time. Within the foregoing limits and subject to
the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving
Loans.

     SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part
of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their
respective Commitments. The failure of any Lender to make any Loan required to be made by it shall
not relieve any other Lender of its obligations hereunder; provided that the Commitments
are several and no Lender shall be responsible for any other Lender’s failure to make Loans as
required.

     (a) Subject to Section 2.11, (i) each Revolving Borrowing shall be comprised entirely
of ABR Loans, Money Market Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make such Loan; provided
that any exercise of such option shall not affect the obligation of the Borrower to repay
such Loan in accordance with the terms of this Agreement.

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     (b) At the time that each Eurodollar Revolving Borrowing is made, such Borrowing shall
be in an aggregate amount that is an integral multiple of $500,000 and not less than
$1,000,000. At the time that each ABR Revolving Borrowing or Money Market Revolving
Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral
multiple of $500,000 and not less than $1,000,000; provided that an ABR Revolving
Borrowing or Money Market Revolving Borrowing may be in an aggregate amount that is equal
to the entire unused balance of the total Commitments. Borrowings of more than one Type
may be outstanding at the same time.

     SECTION 2.03. Requests for Revolving Borrowings. (a) To request a Revolving
Borrowing, an Authorized Person shall notify the Administrative Agent of such request by telephone
(i) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of the proposed Borrowing, or (ii) in the case of an ABR Borrowing or
a Money Market Borrowing, not later than 11:00 a.m., New York City time, on the date of the
proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing
Request in the form attached hereto as Exhibit D which shall be accompanied by a Collateral
Spreadsheet, each signed by the Borrower.

     (b) Each such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:

     (i) the aggregate amount of the requested Borrowing;

     (ii) the date of such Borrowing, which shall be a Business Day;

     (iii) whether such Borrowing is to be an ABR Borrowing, a Money Market
Borrowing or a Eurodollar Borrowing;

     (iv) whether Collateral is, at the time of such Borrowing, segregated in favor
of any Secured Party, Wells Fargo Bank, N.A. or PNC Bank, N.A.; and

     (v) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.04.

     (c) In the event that the segregation of Collateral is required pursuant to Section
3.2 of the Pledge Security Agreement, the Administrative Agent shall inform the Borrower
that such segregation is required by 12:00 p.m. and the Borrower shall cause such
Collateral to be segregated and shall provide the Administrative Agent with a revised
Collateral Spreadsheet reflecting the segregation of such Collateral by 12:30 p.m. as a
condition precedent to any Loans being advanced.

     (d) If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. Promptly following receipt of a
Borrowing Request in accordance with this Section, the Administrative Agent shall advise
each Lender of the details thereof and of the amount of such Lender’s Loan to be made as
part of the requested Borrowing.

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     SECTION 2.04. Funding of Borrowings. (a) Each Lender shall make each Loan to be made
by it hereunder on the proposed date thereof by wire transfer of immediately available funds by
2:00, New York City time, to the account of the Administrative Agent most recently designated by it
for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available
to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the
Borrower maintained with the Administrative Agent in New York City and designated by the Borrower
in the applicable Borrowing Request.

     (b) Unless the Administrative Agent shall have received notice from a Lender prior to
the proposed date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may
assume that such Lender has made such share available on such date in accordance with
paragraph (a) of this Section and may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. In such event, if a Lender has not in fact made its
share of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each day from and
including the date such amount is made available to the Borrower to but excluding the date
of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of
the Federal Funds Effective Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender’s Loan included in
such Borrowing.

     SECTION 2.05. Interest Elections. (a) Each Revolving Borrowing initially shall be of
the Type specified in the applicable Borrowing Request and interest thereon shall be payable in
accordance with Section 2.10. Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing, all as provided in this Section. The Borrower may
elect different options with respect to different portions of the affected Borrowing, in which case
each such portion shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

     (b) To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing Request
would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing
of the Type resulting from such election to be made on the effective date of such election.
Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written Interest
Election Request in the form attached hereto as Exhibit E signed by the Borrower.

     (c) Each telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:

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     (i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof, the
portions thereof to be allocated to each resulting Borrowing (in which case the
information to be specified pursuant to clauses (iii) and (iv) below shall be
specified for each resulting Borrowing);

     (ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day; and

     (iii) whether the resulting Borrowing is to be an ABR Borrowing, a Money Market
Borrowing or a Eurodollar Borrowing.

     (d) Promptly following receipt of an Interest Election Request, the Administrative
Agent shall advise each Lender of the details thereof and of such Lender’s portion of each
resulting Borrowing.

     SECTION 2.06. Termination and Reduction of Commitments. (a) Unless previously
terminated, the Commitments shall terminate on the Maturity Date.

     (b) The Borrower may at any time terminate, or from time to time reduce, the
Commitments; provided that (i) each reduction of the Commitments shall be in an
amount that is an integral multiple of $500,000 and not less than $1,000,000 and (ii) the
Borrower shall not terminate or reduce the Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.08, the Revolving Credit
Exposures would exceed the total Commitments.

     (c) The Borrower shall notify the Administrative Agent of any election to terminate or
reduce the Commitments under paragraph (b) of this Section at least three Business Days
prior to the effective date of such termination or reduction, specifying such election and
the effective date thereof. Promptly following receipt of any notice, the Administrative
Agent shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; provided that a notice of
termination of the Commitments delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case such notice
may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the
specified effective date) if such condition is not satisfied. Any termination or reduction
of the Commitments shall be permanent. Each reduction of the Commitments shall be made
ratably among the Lenders in accordance with their respective Commitments.

     SECTION 2.07. Repayment of Loans at Maturity; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender
the then unpaid principal amount of each Revolving Loan on the Maturity Date.

     (b) Each Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to such Lender resulting from each
Loan made by such Lender, including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder.

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     (c) The Administrative Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder and the Type thereof, (ii) the amount of any principal
or interest due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder
for the account of the Lenders and each Lender’s share thereof.

     (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of
this Section shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in any manner
affect the obligation of the Borrower to repay the Loans in accordance with the terms of
this Agreement.

     (e) Any Lender may request that Loans made by it be evidenced by a promissory note.
In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory
note payable to the order of such Lender (or, if requested by such Lender, to such Lender
and its registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all
times (including after assignment pursuant to Section 10.04) be represented by one or more
promissory notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).

     SECTION 2.08. Optional Repayment of Loans. (a) The Borrower shall have the right at
any time and from time to time to repay any Borrowing in whole or in part, subject to prior notice
in accordance with paragraph (b) of this Section.

     (b) The Borrower shall notify the Administrative Agent of any repayment hereunder
either (i) as a date certain indicated on the Borrowing Request, or (ii) by telephone
(confirmed by telecopy) not later than 11:00 a.m., New York City time, on the date of
repayment, (in either case, such date being a Business Day). Each such notice shall be
irrevocable and shall specify the repayment date and the principal amount of each Borrowing
or portion thereof to be repaid. Promptly following receipt of any such notice relating to
a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof. Each partial repayment of any Revolving Borrowing shall be in an amount that
would be permitted in the case of an advance of a Revolving Borrowing of the same Type as
provided in Section 2.02. Each repayment of a Revolving Borrowing shall be applied ratably
to the Loans included in the repaid Borrowing. Repayments shall be accompanied by accrued
interest to the extent required by Section 2.10.

     SECTION 2.09. Fees. (a) The Borrower agrees to pay to the Administrative Agent for
the account of each Lender a facility fee, which shall accrue at a rate of 5.0 basis points per
annum on the average daily unused amount of the Commitment of such Lender during the period from
and including the Effective Date to but excluding the date on which such Commitment terminates.
Accrued facility fees shall be payable in arrears on the last day of each calendar month and on the

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date on which the Commitments terminate, commencing on the first such date to occur after the
date hereof. All facility fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but excluding the last day).

     (b) The Borrower agrees to pay to the Administrative Agent, for its own account, fees
payable in the amounts and at the times separately agreed upon between the Borrower and the
Administrative Agent.

     (c) All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, in the case of facility
fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

     SECTION 2.10. Interest. (a) The Loans comprising each ABR Borrowing shall bear
interest for each day outstanding at the Alternate Base Rate in effect on such day.

     (b) The Loans comprising each Money Market Borrowing shall bear interest for each day
outstanding at the Money Market Rate in effect on such day plus the Applicable Rate.

     (c) The Loans comprising each Eurodollar Borrowing shall bear interest for each day
outstanding at the Adjusted LIBO Rate in effect for such day plus the Applicable Rate.

     (d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any
fee or other amount payable by the Borrower hereunder is not paid when due, whether at
stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest,
after as well as before judgment, at a rate per annum equal to (i) in the case of overdue
principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in
the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus
the rate applicable to ABR Loans as provided in paragraph (a) of this Section.

     (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment
Date for such Loan and, in the case of Revolving Loans, upon termination of the
Commitments; provided that interest accrued pursuant to paragraph (e) of this
Section shall be payable on demand.

     (f) All interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate at times when the
Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of
365 days (or 366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The
applicable Alternate Base Rate, Money Market Rate, Adjusted LIBO Rate or Overnight LIBO
Rate shall be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.

     SECTION 2.11. Alternate Rate of Interest. If prior to the commencement of any
Borrowing of or conversion into a Eurodollar Loan:

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     (a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for ascertaining the
Adjusted LIBO Rate or the Overnight LIBO Rate, as applicable, for such day; or

     (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO
Rate or the Overnight LIBO Rate, as applicable, for such day will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its
Loan) included in such Borrowing for such day;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by
telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer
exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing
to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective and
(ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be
made as an ABR Borrowing or Money Market Borrowing, at Borrower’s request; provided that if
the circumstances giving rise to such notice affect only one Type of Borrowings, then the other
Type of Borrowings shall be permitted.

     SECTION 2.12. Increased Costs. (a) If any Change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate); or

     (ii) impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to
reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise), then the Borrower will pay to such Lender, such additional amount or
amounts as will compensate such Lender, for such additional costs incurred or reduction suffered.

     (b) If any Lender determines that any Change in Law regarding capital requirements has
or would have the effect of reducing the rate of return on such Lender’s capital or on the
capital of such Lender’s holding company, if any, as a consequence of this Agreement or the
Loans made by such Lender to a level below that which such Lender or such Lender’s holding
company could have achieved but for such Change in Law (taking into consideration such
Lender’s policies and the policies of such Lender’s holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender such additional
amount or amounts as will compensate such Lender or such Lender’s holding company for any
such reduction suffered.

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     (c) A certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified in
paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as
due on any such certificate within 10 days after receipt thereof.

     (d) Failure or delay on the part of any Lender to demand compensation pursuant to this
Section shall not constitute a waiver of such Lender’s right to demand such compensation;
provided that the Borrower shall not be required to compensate a Lender pursuant to
this Section for any increased costs or reductions incurred more than 270 days prior to the
date that such Lender notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s intention to claim compensation
therefor; provided further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 270-day period referred to above
shall be extended to include the period of retroactive effect thereof.

     SECTION 2.13. Taxes. (a) Any and all payments by or on account of any obligation of
the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified
Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent or Lender (as the case may be)
receives an amount equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant Governmental Authority in accordance with applicable law.

     (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.

     (c) The Borrower shall indemnify the Administrative Agent and each Lender, within 10
days after written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with
respect to any payment by or on account of any obligation of the Borrower hereunder
(including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other
Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to the Borrower by a
Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

     (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by
the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative
Agent the original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such

20

 

payment or other evidence of such payment reasonably satisfactory to the
Administrative Agent.

     (e) Any Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the Borrower is located, or any
treaty to which such jurisdiction is a party, with respect to payments under this Agreement
shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or
times prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law or reasonably requested by the Borrower as will permit such
payments to be made without withholding or at a reduced rate.

     (f) If the Administrative Agent or a Lender determines, in its sole discretion, that
it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by
the Borrower or with respect to which the Borrower has paid additional amounts pursuant to
this Section 2.13, it shall pay over such refund to the Borrower (but only to the extent of
indemnity payments made, or additional amounts paid, by the Borrower under this Section
2.13 with respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without interest
(other than any interest paid by the relevant Governmental Authority with respect to such
refund); provided, that the Borrower, upon the request of the Administrative Agent or such
Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest
or other charges imposed by the relevant Governmental Authority) to the Administrative
Agent or such Lender in the event the Administrative Agent or such Lender is required to
repay such refund to such Governmental Authority. This Section shall not be construed to
require the Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the Borrower or any
other Person.

     SECTION 2.14. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The
Borrower shall make each payment required to be made by it hereunder (whether of principal,
interest, fees, or of amounts payable under Section 2.12 or Section 2.13, or otherwise) prior to
12:00 noon, New York City time, on the date when due, in immediately available funds, without
set-off or counterclaim. Any amounts received after such time on any date may, in the discretion
of the Administrative Agent, be deemed to have been received on the next succeeding Business Day
for purposes of calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices at 270 Park Avenue, New York, New York, except that payments
pursuant to Section 2.12, Section 2.13 and Section 10.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments received by it for
the account of any other Person to the appropriate recipient promptly following receipt thereof.
If any payment hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.

     (b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest and fees

21

 

then due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards payment of
principal then due hereunder, ratably among the parties entitled thereto in accordance with
the amounts of principal then due to such parties.

     (c) If any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of its
Revolving Loans resulting in such Lender receiving payment of a greater proportion of the
aggregate amount of its Revolving Loans and accrued interest thereon than the proportion
received by any other Lender, then the Lender receiving such greater proportion shall
purchase (for cash at face value) participations in the Revolving Loans of other Lenders to
the extent necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and accrued
interest on their respective Revolving Loans; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest, and (ii) the provisions of this paragraph shall
not be construed to apply to any payment made by the Borrower pursuant to and in accordance
with the express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its Loans to any
assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply). The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount of such
participation.

     (d) Unless the Administrative Agent shall have received notice from the Borrower prior
to the date on which any payment is due to the Administrative Agent for the account of the
Lenders hereunder that the Borrower will not make such payment, the Administrative Agent
may assume that the Borrower has made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Lenders the amount due. In such
event, if the Borrower has not in fact made such payment, then each of the Lenders
severally agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the Administrative
Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank compensation.

     (e) If any Lender shall fail to make any payment required to be made by it pursuant to
Section 2.04(b), Section 2.14(d) or Section 10.03(c), then the Administrative Agent may, in
its discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender to satisfy
such Lender’s obligations under such Sections until all such unsatisfied obligations are
fully paid.

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     SECTION 2.15. Mitigation Obligations; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.12, or if the Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.13, then such Lender shall use reasonable efforts to designate a different lending office
for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or
Section 2.13, as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

     (b) If any Lender requests compensation under Section 2.12, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.13, or if any Lender defaults in its obligation
to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice
to such Lender and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained in Section
10.04), all its interests, rights and obligations under this Agreement to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender accepts
such assignment); provided that (i) the Borrower shall have received the prior
written consent of the Administrative Agent, which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for compensation under
Section 2.12 or payments required to be made pursuant to Section 2.13, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be required to
make any such assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.

ARTICLE III.

GUARANTEES AND COLLATERAL SECURITY

     SECTION 3.01. Guarantee of Obligations. The Borrower will cause each of the
Guarantors to continue to jointly and severally Guarantee the Obligations hereunder pursuant to the
Guarantee Agreement executed and delivered by such Guarantors until such time as the Administrative
Agent has confirmed that all Commitments have been terminated and all Obligations have been
indefeasibly paid in full.

     SECTION 3.02. Security for Obligations. The Borrower will, and will cause each
Guarantor to, maintain in force the Pledge Security Agreement executed and delivered by the
Borrower and such Guarantors on the date hereof to the Administrative Agent and the Lenders (each a
“Secured Party” and together with the other secured parties party to the Intercreditor
Agreement, the “Secured Parties”), provided that the Borrower and the Guarantors
must, at all times that any Commitment or Loan remains outstanding, maintain securities (i) in the
Accounts at the Securities Intermediary, such

23

 

securities having a Net Market Value of not less than the aggregate amount of the “Primary
Obligations” as defined in the Intercreditor Agreement, and (ii) in the Collateral Account and the
Accounts, such securities having a Net Market Value of not less than the aggregate amount of the
Primary Obligations (as defined in the Pledge Security Agreement). On each Business Day that any
Loan is outstanding, the Borrower shall deliver a Collateral Spreadsheet to the Administrative
Agent by 12:00 p.m. New York time. The Borrower will, and will cause each Guarantor to, enter into
a control agreement or agreements and any other documentation that the Secured Parties or any of
them determine is necessary or desirable to perfect, evidence or protect the security interest
granted pursuant to the Pledge Security Agreement.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

          The Borrower represents and warrants to the Lenders that:

     SECTION 4.01. Organization; Powers. Each of the Borrower and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.

     SECTION 4.02. Authorization; Enforceability. The Transactions are within the
Borrower’s corporate powers and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and delivered by the Borrower
and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors’ rights generally and subject to general principles of equity, regardless
of whether considered in a proceeding in equity or at law.

     SECTION 4.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other action by, any
Governmental Authority, except that this Agreement must be filed with the Securities and Exchange
Commission, and except such as have been obtained or made and are in full force and effect, (b)
will not violate any applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority,
(c) will not violate or result in a default under any indenture, agreement or other instrument
binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right
thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (d)
will not result in the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.

     SECTION 4.04. Financial Condition; No Material Adverse Change. (a) The Borrower has
heretofore furnished to the Lenders consolidated balance sheet and statements of income,
stockholders equity and cash flows of Paychex, Inc. (i) as of and for the fiscal year ended May 31,
2008, reported on by Ernst & Young LLP, independent public accountants, and certified by its chief
financial officer. Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of Paychex, Inc. and its consolidated
Subsidiaries as

24

 

of such dates and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the statements referred to in clause (ii)
above.

     (b) Since May 31, 2008, there has been no material adverse change in the business,
assets, operations, prospects or condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole.

     SECTION 4.05. Properties. (a) Each of the Borrower and its Subsidiaries has good
title to, or valid leasehold interests in, all its real and personal property material to its
business, except for minor defects in title that do not interfere with its ability to conduct its
business as currently conducted or to utilize such properties for their intended purposes.

     (b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property material to its
business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon
the rights of any other Person, except for any such infringements that, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

     SECTION 4.06. Litigation and Environmental Matters. (a) There are no actions, suits
or proceedings by or before any arbitrator or Governmental Authority pending against or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries
(i) as to which there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the aggregate, to result in
a Material Adverse Effect (other than as described in Schedule 4.06 (“the Disclosed Matters”)) or
(ii) that involve this Agreement or the Transactions.

     (b) Except for the Disclosed Matters and except with respect to any other matters
that, individually or in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to
comply with any Environmental Law or to obtain, maintain or comply with any permit, license
or other approval required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental Liability.

     (c) Since the date of this Agreement, there has been no change in the status of the
Disclosed Matters that, individually or in the aggregate, has resulted in, or materially
increased the likelihood of, a Material Adverse Effect.

     SECTION 4.07. Compliance with Laws and Agreements. Each of the Borrower and its
Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures, agreements and other instruments binding upon
it or its property, except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.

     SECTION 4.08. Investment and Holding Company Status. Neither the Borrower nor any of
its Subsidiaries is (a) an “investment company” as defined in, or subject to regulation under, the

25

 

Investment Company Act of 1940 or (b) a “holding company” as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935.

     SECTION 4.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or
caused to be filed all Tax returns and reports required to have been filed and has paid or caused
to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in
good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable,
has set aside on its books adequate reserves or (b) to the extent that the failure to do so could
not reasonably be expected to result in a Material Adverse Effect.

     SECTION 4.10. ERISA. Neither the Borrower nor any ERISA Affiliate maintains any Plan
or any Multiemployer Plan.

     SECTION 4.11. Disclosure. The Borrower has disclosed to the Lenders all agreements,
instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject,
and all other matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither the information memorandum nor any of the
other reports, financial statements, certificates or other information furnished by or on behalf of
the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading; provided that, with respect to projected financial information, the Borrower
represents only that such information was prepared in good faith based upon assumptions believed to
be reasonable at the time.

ARTICLE V.

CONDITIONS

     SECTION 5.01. Effective Date. The obligations of the Lenders to make Loans hereunder
shall not become effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 10.02):

     (a) The Administrative Agent (or its counsel) shall have received from each party
hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii)
written evidence satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement.

     (b) The Administrative Agent (or its counsel) shall have received from each party
thereto either (i) a counterpart of each Credit Document (other than this Agreement and
including the Intercreditor Agreement) signed on behalf of such party or (ii) written
evidence satisfactory to the Administrative Agent (which may include telecopy transmission
of a signed signature page of such Credit Document) that such party has signed a
counterpart of such Credit Document.

     (c) The Administrative Agent shall have received a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated the Effective Date) of
Nixon Peabody, LLP, counsel for the Borrower, substantially in the form of

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Exhibit F, and covering such other matters relating to the Borrower, this Agreement or
the Transactions as the Required Lenders shall reasonably request. The Borrower hereby
requests such counsel to deliver such opinion.

     (d) The Administrative Agent shall have received such documents and certificates as
the Administrative Agent or its counsel may reasonably request relating to the
organization, existence and good standing of the Borrower, the authorization of the
Transactions and any other legal matters relating to the Borrower, this Agreement or the
Transactions, all in form and substance satisfactory to the Administrative Agent and its
counsel.

     (e) The Administrative Agent shall have received evidence satisfactory to it that all
governmental and third party approvals necessary or, in the discretion of the
Administrative Agent, advisable, in connection with the Transactions contemplated hereby
have been obtained.

     (f) The Administrative Agent shall have received (i) satisfactory audited consolidated
financial statements of the Borrower for the two most recent fiscal years ended prior to
the Effective Date as to which such financial statements are available and (ii)
satisfactory unaudited interim financial statements of the Borrower for each fiscal
quarterly period ended subsequent to the date of the latest financial statements delivered
pursuant to clause (i) hereof as to which financial statements are available.

     (g) The Administrative Agent shall have received all fees and other amounts due and
payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement
or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such
notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the
Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions
is satisfied (or waived pursuant to Section 10.02).

     SECTION 5.02. Each Credit Event. The obligation of each Lender to make a Loan on the
occasion of any Borrowing is subject to the satisfaction of the following conditions:

     (a) The representations and warranties of the Borrower set forth in this Agreement
shall be true and correct on and as of the date of such Borrowing.

     (b) The Net Market Value of the Collateral shall be greater than or equal to the
aggregate amount of each of (i) the Primary Obligations (as defined in the Pledge

27

 

Security Agreement) and (ii) the “Primary Obligations” as defined in the Intercreditor
Agreement, on and as of the date of such Borrowing and after giving effect thereto, as set
forth on the Collateral Spreadsheet provided to the Administrative Agent simultaneously
with the Borrowing Request.

     (c) At the time of and immediately after giving effect to such Borrowing, no Default
or Event of Default shall have occurred and be continuing.

Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the
date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section.

ARTICLE VI.

AFFIRMATIVE COVENANTS

     Until the Commitments have expired or been terminated and the principal of and interest on
each Loan and all fees payable hereunder shall have been paid in full the Borrower covenants and
agrees with the Lenders that:

     SECTION 6.01. Financial Statements; Ratings Change and Other Information. The
Borrower will furnish to the Administrative Agent and each Lender:

     (a) within 90 days after the end of each fiscal year of Paychex, Inc., its audited
consolidated balance sheet and related statements of operations, stockholders’ equity and
cash flows as of the end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by Ernst & Young LLP or
other independent public accountants of recognized national standing (without a “going
concern” or like qualification or exception and without any qualification or exception as
to the scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of operations
of Paychex, Inc. and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;

     (b) within 45 days after the end of each of the first three fiscal quarters of each
fiscal year of Paychex, Inc., its consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by one of
Paychex, Inc.’s Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of Paychex, Inc. and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments and the absence of footnotes;

     (c) concurrently with any delivery of financial statements under clause (a) or (b)
above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, and (ii) stating whether any
change in GAAP or in the application thereof has occurred since the date of the

28

 

audited financial statements referred to in Section 4.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements accompanying
such certificate, a form of which is attached hereto as Exhibit G;

     (d) promptly after the same become publicly available, copies of all periodic and
other reports, proxy statements and other materials filed by Paychex, Inc. or any
Subsidiary with the Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all of the functions of said Commission, or with any national
securities exchange, or distributed by Paychex, Inc. to its shareholders generally, as the
case may be;

     (e) promptly after Moody’s or S&P shall have announced a change in the rating
established or deemed to have been established for the Index Debt, written notice of such
rating change; and

     (f) promptly following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Borrower or any Subsidiary, or
compliance with the terms of this Agreement, as the Administrative Agent or any Lender may
reasonably request.

     SECTION 6.02. Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

     (a) the occurrence of any Default;

     (b) the filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate
thereof that, if adversely determined, could reasonably be expected to result in a Material
Adverse Effect;

     (c) the occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, could reasonably be expected to have a Material Adverse Effect;
and

     (d) any other development that results in, or could reasonably be expected to result
in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer
or other executive officer of the Borrower setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect thereto.

     SECTION 6.03. Existence; Conduct of Business. The Borrower will, and will cause each
of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business; provided that the foregoing shall not
prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.03.

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     SECTION 6.04. Payment of Obligations. The Borrower will, and will cause each of its
Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in
a Material Adverse Effect before the same shall become delinquent or in default, except where (a)
the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the
Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably
be expected to result in a Material Adverse Effect.

     SECTION 6.05. Maintenance of Properties; Insurance. The Borrower will, and will cause
each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted, and (b) maintain,
with financially sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.

     SECTION 6.06. Books and Records; Inspection Rights. The Borrower will, and will cause
each of its Subsidiaries to, keep proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its business and
activities. Upon reasonable prior notice and, in any event, not more than two times in any twelve
month period, the Borrower will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender to visit and inspect the
properties, to discuss its affairs, finances and condition with is officers and independent
accountants; provided however, that upon the occurrence and during the continuation of an Event of
Default, at such reasonable times and as often as reasonably requested, the Borrower will, and will
cause each of its Subsidiaries to, permit any representatives designated by the Administrative
Agent or any Lender to visit and inspect its properties, to examine and make extracts from its
books and records, and to discuss its affairs, finances and condition with its officers and
independent accountants.

     SECTION 6.07. Compliance with Laws. The Borrower will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority
and any material contractual obligations applicable to it or its property, except where the failure
to do so, individually or in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect.

     SECTION 6.08. Use of Proceeds. The proceeds of the Loans will be used only for short
term liquidity in lieu of liquidation of the Borrower’s investment portfolio for the benefit of
clients in the normal course of business. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of any of the Regulations
of the Board, including Regulations T, U and X.

     SECTION 6.09. Environmental Laws. The Borrower will, and will cause each of its
Subsidiaries to, comply with any Environmental Law and to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, applicable to it or its
property, except where the failure to do so, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect, and to provide prompt notice to the
Administrative Agent of any claim with respect to any Environmental Liability for which notice has
been received by the Borrower or any of its Subsidiaries.

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ARTICLE VII.

NEGATIVE COVENANTS

     Until the Commitments have expired or terminated and the principal of and interest on each
Loan and all fees payable hereunder have been paid in full the Borrower covenants and agrees with
the Lenders that:

     SECTION 7.01. Indebtedness. The Borrower will not, and will not permit any Subsidiary
to, create, incur, assume or permit to exist any Indebtedness, except:

     (a) Indebtedness created hereunder;

     (b) Indebtedness existing on the date hereof and set forth in Schedule 7.01 and
extensions, renewals and replacements of any such Indebtedness that do not materially
increase the outstanding principal amount thereof;

     (c) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the
Borrower or any other Subsidiary, provided, that any loans and advances by the
Borrower or a Guarantor to a non-Guarantor Subsidiary are made in compliance with section
7.04(c);

     (d) Guarantees by the Borrower of Indebtedness of any Subsidiary and by any Subsidiary
of Indebtedness of the Borrower or any other Subsidiary;

     (e) Indebtedness of the Borrower or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets, including Capital
Lease Obligations and any Indebtedness assumed in connection with the acquisition of any
such assets or secured by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof; provided that the aggregate principal amount
of Indebtedness permitted by this clause (e) shall not exceed $50,000,000 at any time
outstanding;

     (f) Indebtedness of any Person that becomes a Subsidiary after the date hereof;
provided that (i) such Indebtedness exists at the time such Person becomes a
Subsidiary and is not created in contemplation of or in connection with such Person
becoming a Subsidiary and (ii) the aggregate principal amount of Indebtedness permitted by
this clause (f) shall not exceed $100,000,000 at any time outstanding; and

     (g) other unsecured Indebtedness in an aggregate principal amount not exceeding
$500,000,000 at any time outstanding.

     SECTION 7.02. Liens. The Borrower will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Lien on any material property or asset now owned or
hereafter acquired by it (provided that no Lien shall be permitted to exist on any
Collateral at any time), or assign or sell any income or revenues (including accounts receivable)
or rights in respect of any thereof, except:

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     (a) Permitted Encumbrances;

     (b) any Lien on any property or asset of the Borrower or any Subsidiary existing on
the date hereof and set forth in Schedule 7.02; provided that (i) such Lien shall
not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such
Lien either is covered by the Intercreditor Agreement or shall secure only those
obligations which it secures on the date hereof and extensions, renewals and replacements
thereof that do not increase the outstanding principal amount thereof;

     (c) any Lien existing on any property or asset prior to the acquisition thereof by the
Borrower or any Subsidiary or existing on any property or asset of any Person that becomes
a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary;
provided that (i) such Lien is not created in contemplation of or in connection
with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such
Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and
(iii) such Lien shall secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as the case may be and
extensions, renewals and replacements thereof that do not increase the outstanding
principal amount thereof;

     (d) Liens on fixed or capital assets acquired, constructed or improved by the Borrower
or any Subsidiary; provided that (i) such security interests secure Indebtedness
permitted by clause (e) of Section 7.01, (ii) such security interests and the Indebtedness
secured thereby are incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement, (iii) the Indebtedness secured thereby does
not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital
assets and (iv) such security interests shall not apply to any other property or assets of
the Borrower or any Subsidiary; and

     (e) Liens in favor of the Lenders securing the Obligations.

     SECTION 7.03. Fundamental Changes. The Borrower will not, and will not permit any
Guarantor to, merge into or consolidate with any other Person, or permit any other Person to merge
into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction
or in a series of transactions) all or substantially all/any substantial part of its assets, or all
or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately
after giving effect thereto no Default shall have occurred and be continuing (i) any Person may
merge into the Borrower in a transaction in which the Borrower is the surviving corporation,
(ii) any Person may merge into any Guarantor in a transaction in which the surviving entity is a
Guarantor, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the
Borrower or to a Guarantor and (iv) any non-Guarantor may liquidate or dissolve if the Borrower
determines in good faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders; provided that any such
merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger
shall not be permitted unless also permitted by Section 7.04.

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     SECTION 7.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Borrower
will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including
pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger)
any capital stock, evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to,
Guarantee any obligations of, or make or permit to exist any investment or any other interest in,
any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, except:

     (a) Permitted Investments;

     (b) investments by the Borrower in the capital stock of its Subsidiaries, provided,
that investments by the Borrower in the capital stock of non-Guarantor Subsidiaries, when
aggregated with loans and advances to non-Guarantor Subsidiaries under section 7.04(c)
shall not exceed $100,000,000;

     (c) loans or advances made by the Borrower to any Guarantor and made by any Guarantor
to the Borrower, or any other Guarantor or any non-Guarantor Subsidiary to any other
non-Guarantor Subsidiary and other loans or advances made by the Borrower or any Subsidiary
in an aggregate amount not to exceed $100,000,000;

     (d) Guarantees constituting Indebtedness permitted by Section 7.01;

     (e) investments consisting of Permitted Acquisitions.

     SECTION 7.05. Restricted Payments. The Borrower will not, and will not permit any
Guarantor to, declare or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, except that (a) any of the Borrower’s Subsidiaries may pay dividends to the Borrower or
other Subsidiaries, (b) the Borrower may pay dividends to Paychex Inc., and (c) Paychex Inc. may
pay dividends to shareholders, provided that in the case of (c) above, the aggregate amount
of all such dividends in any rolling four fiscal quarter period shall not exceed an amount equal to
(i) one hundred percent of the current consolidated net income of Paychex, Inc. for such rolling
four fiscal quarter period plus (ii) consolidated corporate cash on hand of Paychex, Inc., which
for the avoidance of doubt, shall not include pledged securities or customer cash.

     SECTION 7.06. Transactions with Affiliates. The Borrower will not, and will not
permit any Guarantor to, sell, lease or otherwise transfer any property or assets to, or purchase,
lease or otherwise acquire any property or assets from, or otherwise engage in any other
transactions with, any of its non-Guarantor Affiliates, except in the ordinary course of business
at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than
could be obtained on an arm’s-length basis from unrelated third parties and in an aggregate amount
not to exceed $50,000,000.

     SECTION 7.07. Restrictive Agreements. The Borrower will not, and will not permit any
of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement
or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the
Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or
assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its capital stock or to make or repay loans or advances to the Borrower or any
other Subsidiary or to

33

 

Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (i) the
foregoing shall not apply to restrictions and conditions imposed by law or by this Agreement, (ii)
the foregoing shall not apply to restrictions and conditions existing on the date hereof identified
on Schedule 7.07 (but shall apply to any extension or renewal of, or any amendment or modification
expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary
pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is
to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply
to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted
by this Agreement if such restrictions or conditions apply only to the property or assets securing
such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in
leases restricting the assignment thereof.

ARTICLE VIII.

EVENTS OF DEFAULT

     If any of the following events (“Events of Default”) shall occur:

     (a) the Borrower shall fail to pay any principal of any Loan when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;

     (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other
amount (other than an amount referred to in clause (a) of this Article) payable under this
Agreement, when and as the same shall become due and payable, and such failure shall
continue unremedied for a period of three Business Days;

     (c) any representation or warranty made or deemed made by or on behalf of the Borrower
or any Subsidiary in or in connection with this Agreement or any amendment or modification
hereof or waiver hereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with this Agreement or any amendment or
modification hereof or waiver hereunder, shall prove to have been materially incorrect when
made or deemed made;

     (d) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in Section 6.02, Section 6.03 (with respect to the Borrower’s existence) or
Section 6.08 or in ARTICLE III (provided, that with respect to failure to maintain the
required Net Market Value of pledged securities, such failure continues beyond the one
business day period for delivery of additional collateral set forth in section 3.2 of the
Pledge Security Agreement), or ARTICLE VII or the Pledge Security Agreement or any
Guarantor fails to perform or observe any term, covenant or agreement contained in Section
1, Section 2, Section 5 or Section 6 of the Guarantee Agreement;

     (e) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in this Agreement or any of the Security Documents, or any Guarantor shall fail
to observe or perform any other provision of the Guarantee

34

 

Agreement (other than those specified in clause (a), (b) or (d) of this Article), and
such failure shall continue unremedied for a period of 30 days after notice thereof from
the Administrative Agent to the Borrower (which notice will be given at the request of any
Lender);

     (f) the Borrower or any Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material Indebtedness,
when and as the same shall become due and payable;

     (g) any event or condition occurs that results in any Material Indebtedness becoming
due prior to its scheduled maturity or that enables or permits (with or without the giving
of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or
any trustee or agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity; provided that this clause (g) shall not apply to secured
Indebtedness that becomes due as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;

     (h) an involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or
any Subsidiary or its debts, or of a substantial part of its assets, under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Borrower or any Subsidiary or for a substantial part of its
assets, and, in any such case, such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the foregoing shall be entered;

     (i) the Borrower or any Guarantor shall (i) voluntarily commence any proceeding or
file any petition seeking liquidation, reorganization or other relief under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Borrower or any Subsidiary or for a substantial part of its
assets, (iv) file an answer admitting the material allegations of a petition filed against
it in any such proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;

     (j) the Borrower or any Guarantor shall become unable, admit in writing its inability
or fail generally to pay its debts as they become due;

     (k) one or more judgments for the payment of money in an aggregate amount in excess of
$25,000,000 shall be rendered against the Borrower, any Subsidiary or any combination
thereof and the same shall remain undischarged, unbonded or otherwise unsecured for a
period of 30 consecutive days (or the maximum period permitted under

35

 

the laws of the applicable jurisdiction) during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment creditor to attach
or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment;

     (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders,
when taken together with all other ERISA Events that have occurred, could reasonably be
expected to result in a Material Adverse Effect; or

     (m) a Change in Control shall occur;

then, and in every such event (other than an event with respect to the Borrower described in clause
(h) or (i) of this Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by notice to the
Borrower, take either or both of the following actions, at the same or different
times:  (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately,
and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which
case any principal not so declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to
the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.

ARTICLE IX.

THE ADMINISTRATIVE AGENT

     Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and
authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers
as are delegated to the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto including the authority, without the necessity of any
notice to or further consent of the Lenders, from time to time to take any action on behalf of the
Lenders with respect to any Collateral or the Security Documents which may be necessary to perfect,
maintain perfected or insure the priority of the security interest in and liens upon the Collateral
granted pursuant to the Security Documents.

     The bank serving as the Administrative Agent hereunder shall have the same rights and powers
in its capacity as a Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

     As an independent contractor empowered by the Lenders to exercise certain rights and perform
certain duties and responsibilities hereunder and under the other Credit Documents, the

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Administrative Agent is nevertheless a “representative” of the Lenders, as that term is
defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the
Lenders and the Administrative Agent with respect to all Collateral security and Guarantees
contemplated by the Credit Documents. Such actions include the designation of the Administrative
Agent as “secured party”, “mortgagee” or the like on all financing statements and other documents
and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or
enforcement of any security interests, mortgages or deeds of trust in collateral security intended
to secure the payment or performance of any of the Obligations, all for the benefit of the Lenders
and the Administrative Agent.

     The Administrative Agent shall not have any duties or obligations except those expressly set
forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall
not be subject to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby that the Administrative Agent is required to exercise in writing as
directed by the Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 10.02), and (c) except as expressly set
forth herein the Administrative Agent shall not have any duty to disclose, and shall not be liable
for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries
that is communicated to or obtained by the bank serving as Administrative Agent or any of its
Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or
not taken by it with the consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as provided in Section
10.02) or in the absence of its own gross negligence or willful misconduct. The Administrative
Agent shall not be deemed not to have knowledge of any Default unless and until written notice
thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative
Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement, (ii) the contents of any
certificate, report or other document delivered hereunder or in connection herewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or
any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in
ARTICLE V or elsewhere herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.

     The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument, document or other
writing believed by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any liability for relying
thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall not be liable for
any action taken or not taken by it in accordance with the advice of any such counsel, accountants
or experts.

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     The Administrative Agent may perform any and all their duties and exercise their rights and
powers by or through any one or more sub-agents appointed by the Administrative Agent. The
Administrative Agent and any such sub-agent may perform any and all their duties and exercise their
rights and powers through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.

     Subject to the appointment and acceptance of a successor Administrative Agent as provided in
this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the
Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation
with the Borrower, to appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may,
on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an
office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and
become vested with all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same
as those payable to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article
and Section 10.03 shall continue in effect for the benefit of such retiring Administrative Agent,
its sub-agents and their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while it was acting as Administrative Agent.

     Each Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon the Administrative
Agent or any other Lender and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any related agreement or any document furnished hereunder or thereunder.

ARTICLE X.

MISCELLANEOUS

     SECTION 10.01. Notices. (a) Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and
other communications provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail, as follows:

     (i) if to the Borrower, to it at 911 Panorama Trail South, Rochester, New York
14625, Attention of Secretary, with a copy to Paychex, Inc., 911

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Panorama Trail South, Rochester, New York 14624, Attention of Chief Legal
Officer;

     (ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., One Chase
Square (T-9), Rochester, NY 14643, Attn: Hollie Calderon, Senior Vice President,
Tel: (585) 797-0153, Fax: (585) 797-1880, with a copy to James Kibler, Senior Vice
President, at the same address; and

     (iii) if to any other Lender, to it at its address (or telecopy number) set
forth in its Administrative Questionnaire.

     (b) Notices and other communications to the Lenders hereunder may be delivered or
furnished by electronic communications pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices pursuant to
ARTICLE II unless otherwise agreed by the Administrative Agent and the applicable Lender.
The Administrative Agent or the Borrower may, in its discretion, agree to accept notices
and other communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be limited to
particular notices or communications.

     (c) Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and other
communications given to any party hereto in accordance with the provisions of this
Agreement shall be deemed to have been given on the date of receipt.

     SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the Administrative
Agent, or any Lender in exercising any right or power hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of the Administrative
Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of this Agreement or consent to any
departure by the Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. Without limiting the generality of
the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless
of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default
at the time.

     (b) Neither this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by the Borrower and
the Required Lenders or by the Borrower and the Administrative Agent with the consent of
the Required Lenders; provided that no such agreement shall (i) increase the
Commitment of any Lender without the written consent of such Lender, (ii) reduce the
principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby, (iii)
postpone the scheduled date of payment of the principal amount of any Loan, or any interest
thereon, or any fees payable hereunder, or

39

 

reduce the amount of, waive or excuse any such payment, or postpone the scheduled date
of expiration of any Commitment, without the written consent of each Lender affected
thereby, (iv) release all or a substantial portion of the Collateral or one or more
significant Guarantors without the written consent of each Lender affected thereby, (v)
change Section 2.14(b) or (c) in a manner that would alter the pro rata sharing of payments
required thereby, without the written consent of each Lender, or (vi) change any of the
provisions of this Section or the definition of “Required Lenders” or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend or modify
any rights hereunder or make any determination or grant any consent hereunder, without the
written consent of each Lender; provided further that no such agreement
shall amend, modify or otherwise affect the rights or duties of the Administrative Agent
hereunder without the prior written consent of the Administrative Agent.

     SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all
reasonable out-of-pocket expenses incurred by the Administrative
Agent and its Affiliates as more particularly set forth in the Fee Letter, including the
reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection
with the syndication of the credit facilities provided for herein, the preparation and
administration of this Agreement or any amendments, modifications or waivers of the provisions
hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii)
all reasonable out-of-pocket expenses incurred by the Lenders, other than the Administrative Agent
associated with review by their respective counsel of
the definitive financing documentation, such expenses to be reimbursed by the Borrower up to an
amount not to exceed $5,000 per Lender (other than Administrative Agent), (iii) all out-of-pocket
expenses incurred by the Administrative Agent or any Lender, including the fees, charges and
disbursements of any counsel for the Administrative Agent or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement, including its rights
under this Section, or in connection with the Loans made hereunder, including all such
out-of-pocket expenses incurred during any workout or, restructuring.

     (b) The Borrower shall indemnify the Administrative Agent and each Lender, and each
Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses,
liabilities, costs and related expenses, including the fees, charges and disbursements of
any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this Agreement
or any agreement or instrument contemplated hereby, the performance by the parties hereto
of their respective obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, other than in connection with an assignment or
other transfer by a Lender of all or any portion of its rights and obligations, (ii) any
Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release
of Hazardous Materials on or from any property owned or operated by the Borrower or any of
its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any
of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether

40

 

any Indemnitee is a party thereto; provided that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses resulted from the gross negligence or willful misconduct of
such Indemnitee.

     (c) To the extent that the Borrower fails to pay any amount required to be paid by it
to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender
severally agrees to pay to the Administrative Agent such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount; provided that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case may be, was
incurred by or asserted against the Administrative Agent in its capacity as such.

     (d) To the extent permitted by applicable law, the Borrower shall not assert, and
hereby waives, any claim against any Indemnitee, on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds
thereof.

     (e) All amounts due under this Section shall be payable promptly after written demand
therefor.

     SECTION 10.04. Successors and Assigns. (a) The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby except that (i) the Borrower may not assign or otherwise transfer any of
its rights or obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be null and void) and
(ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in
accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed
to confer upon any Person (other than the parties hereto, their respective successors and assigns
permitted hereby (to the extent provided in paragraph (c) of this Section) and, to the extent
expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the
Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may
assign to one or more assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans at the time owing to
it) with the prior written consent (such consent not to be unreasonably withheld) of:

     (A) the Borrower, provided that no consent of the Borrower
shall be required for an assignment to a Lender, an Affiliate of a Lender,
an Approved Fund or, if an Event of Default has occurred and is continuing,
any other assignee;

     (B) the Administrative Agent.

41

 

     (ii) Assignments shall be subject to the following additional conditions:

     (A) except in the case of an assignment to a Lender, an Affiliate of a
Lender or an Approved Fund or an assignment of the entire remaining amount
of the assigning Lender’s Commitment, the amount of the Commitment or Loans
of the assigning Lender subject to each such assignment (determined as of
the date the Assignment and Assumption with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $10,000,000
unless each of the Borrower and the Administrative Agent otherwise consent,
provided that no such consent of the Borrower shall be required if
an Event of Default has occurred and is continuing;

     (B) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations
under this Agreement; 

     (C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500; and

     (D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire in which the assignee
designates one or more Credit Contacts to whom all syndicate-level
information (which may contain material non-public information about the
Borrower, the Guarantors and their related parties or their respective
securities) will be made available and who may receive such information in
accordance with the assignee’s compliance procedures and applicable laws,
including Federal and state securities laws.

     (E) the assignee hereby agrees to be bound by the terms of the
Intercreditor Agreement as if it was an original signatory thereto.

          For the purposes of this Section 10.04(b), the term “Approved Fund” has the
following meaning:

     “Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions of credit
in the ordinary course of its business and that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers
or manages a Lender.

      (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv)
of this Section, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and obligations
of a Lender under this Agreement, and the

42

 

assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender shall
cease to be a party hereto but shall continue to be entitled to the benefits of
Section 2.12, Section 2.13, and Section 10.03. Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with this
Section 10.04 shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (c) of this Section.

     (iv) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the Loans
owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be conclusive, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose name
is recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.

     (v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and any
written consent to such assignment required by paragraph (b) of this Section, the
Administrative Agent shall accept such Assignment and Assumption and record the
information contained therein in the Register; provided that if either the
assigning Lender or the assignee shall have failed to make any payment required to
be made by it pursuant to Section 2.04(b), Section 2.14(d) or Section
10.04(b)(ii)(C), the Administrative Agent shall have no obligation to accept such
Assignment and Assumption and record the information therein in the Register unless
and until such payment shall have been made in full, together with all accrued
interest thereon. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.

     (c) (i) Any Lender may, without the consent of the Borrower or the Administrative
Agent, sell participations to one or more banks or other entities (a “Participant”)
(other than an entity that could reasonably be considered to be a direct competitor of the
Borrower) in all or a portion of such Lender’s rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it); provided
that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrower, the Administrative

43

 

Agent and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided that
such agreement or instrument may provide that such Lender will not, without the consent of
the Participant, agree to any amendment, modification or waiver described in Section
10.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of Section 2.12 and
Section 2.13 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 10.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 2.14(c) as though it were
a Lender. Subject to Section 2.10(e), participants may request a promissory note
evidencing the Loan.

     (ii) A Participant shall not be entitled to receive any greater payment under
Section 2.12 or Section 2.13 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the sale
of the participation to such Participant is made with the Borrower’s prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall not
be entitled to the benefits of Section 2.13 unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the benefit
of the Borrower, to comply with Section 2.13(e) as though it were a Lender.

     (d) Any Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such Lender, including
without limitation any pledge or assignment to secure obligations to a Federal Reserve
Bank, and this Section shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest shall
release a Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

     SECTION 10.05. Survival. All covenants, agreements, representations and warranties
made by the Borrower herein and in the certificates or other instruments delivered in connection
with or pursuant to this Agreement shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery of this Agreement and the making of any
Loans, regardless of any investigation made by any such other party or on its behalf and
notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any accrued interest on any
Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so
long as the Commitments have not expired or terminated. The provisions of Section 2.12, Section
2.13, and Section 10.03 and ARTICLE IX shall survive and remain in full force and effect regardless
of the consummation of the transactions contemplated hereby, the repayment of the Loans, the
expiration or termination of the Commitments or the termination of this Agreement or any provision
hereof.

44

 

     SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different counterparts), each of which
shall constitute an original, but all of which when taken together shall constitute a single
contract. This Agreement and any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof. Except as provided in Section 5.01, this Agreement shall
become effective when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.

     SECTION 10.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such invalidity, illegality or unenforceability without affecting the validity, legality
and enforceability of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

     SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other obligations at any
time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against
any of and all the obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of setoff) which such
Lender may have.

     SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This
Agreement shall be construed in accordance with and governed by the law of the State of New York.

     (b) The Administrative Agent, each Lender and the Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive jurisdiction of the
Supreme Court of the State of New York sitting in Monroe County and of the United States
District Court of the Western District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent permitted
by law, in such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

45

 

     (c) The Administrative Agent, each Lender and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

     (d) Each party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 10.01. Nothing in this Agreement will affect the
right of any party to this Agreement to serve process in any other manner permitted by law.

     SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION.

     SECTION 10.11. Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and shall not affect
the construction of, or be taken into consideration in interpreting, this Agreement.

     SECTION 10.12. Confidentiality. (a) Each of the Administrative Agent and the Lenders
agrees to maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (i) to its and its Affiliates’ directors, officers, employees and
agents, including accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential) solely in connection with their
relationships with each of the Borrower, the Guarantors, and affiliates thereof, (ii) to the extent
requested by any regulatory authority, (iii) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement,
(v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement
containing provisions substantially the same as those of this Section, to (A) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Borrower and its obligations, (vii) with the consent of the
Borrower or (viii) to the extent such Information (A) becomes publicly available other than as a
result of a breach of this Section or (B) becomes available to the Administrative Agent or any
Lender on a nonconfidential basis from a source other than the

46

 

Borrower. For the purposes of this Section, “Information” means all nonpublic
information received from the Borrower relating to the Borrower or any affiliate of the Borrower or
its or their business, other than any such information that is available to the Administrative
Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower. Any Person
required to maintain the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such Person would accord to
its own confidential information, provided that such Person shall, at a minimum, exercise
reasonable care.

     (b) EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN SECTION 10.12(a) FURNISHED
TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING THE
BORROWER AND ITS RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS
DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND
THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE
PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

     (c) ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE
BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS
AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC
INFORMATION ABOUT THE BORROWER, AND ITS RELATED PARTIES OR SECURITIES. ACCORDINGLY, EACH
LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN
ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY
CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND
APPLICABLE LAW.

     SECTION 10.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges
and other amounts which are treated as interest on such Loan under applicable law (collectively the
“Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be
contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance
with applicable law, the rate of interest payable in respect of such Loan hereunder, together with
all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent
lawful, the interest and Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be increased (but not
above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

47

 

     SECTION 10.14. USA PATRIOT Act. Each Lender that is subject to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”)
hereby notifies the Borrower that pursuant to the requirements of the Act, it is required to
obtain, verify and record information that identifies the Borrower, which information includes the
name and address of the Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Act.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.

48

 

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

	 	 	 	 	 	 	 
	 	 	PAYCHEX OF NEW YORK LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ John M. Morphy
	 	 
	 

	 	Name:
	 	John M. Morphy
	 	 
	 

	 	Title:	 	Senior Vice President, Chief Financial Officer, and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A., as Lender and as
Administrative Agent,	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ Hollie E. Calderon
	 	 
	 

	 	Name:
	 	Hollie E. Calderon
	 	 
	 

	 	Title:	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as Lender and as 

Co-Arranger
and
Co-Bookrunner	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ Colleen M. O’Brien
	 	 
	 

	 	Name:
	 	Colleen M. O’Brien
	 	 
	 

	 	Title:	 	Senior Vice PresidentUnassociated Document

Exhibit 10.1

    AGREEMENT
AND PLAN OF MERGER

    

    

    THIS AGREEMENT AND PLAN OF
MERGER is made as of the 17th day of September, 2008

    

    AMONG:

    

    MAC FILMWORKS, INC., a
corporation formed pursuant to the laws of the State of Delaware and having an
office for business located at 3 Riverway, Suite 1800, Houston, Texas
77056

    

    
      	
               
      

            	
              (“MFI”)

            

    

    

    
       
AND:

    

    

    SAHARA MEDIA ACQUISITIONS,
INC., a corporation formed pursuant to the laws of the State of Delaware
and a wholly owned subsidiary of MFI

    

    (the
"Acquirer")

    

    AND:

    

    SAHARA MEDIA, INC., a
corporation formed pursuant to the laws of the State of Delaware and having an
office for business located at 75 Franklin Street, 2nd Floor,
New York, NY 10013

    

    ("Sahara")

    

    
       
WHEREAS:

    

    

    A.              Sahara
is a Delaware corporation and a development-stage multimedia company which plans
to operate an online magazine and social network;

    

    B.              The
Sahara Shareholders own an aggregate of Eighteen Million Two Hundred Fifty
Thousand (18,250,000) Sahara Shares, being 100% of the presently issued and
outstanding Sahara Shares;

    

    C.              MFI
is a reporting company whose common stock is quoted on the OTC Bulletin Board
and which has been engaged in a search for potential merger candidates;
and

    

    D.             
The
respective Boards of Directors of MFI, Sahara and the Acquirer deem it advisable
and in the best interests of MFI, Sahara and the Acquirer that the Acquirer
merge with and into Sahara (the "Merger") pursuant to this Agreement and the
Certificate of Merger, and the applicable provisions of the laws of the State of
Delaware.

    

    NOW THEREFORE, WITNESSETH THAT
in consideration of the premises and the mutual covenants, agreements,
representations and warranties contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:

    

    

    ARTICLE
1

    DEFINITIONS
AND INTERPRETATION

    

    Definitions

    

    
      1.1              
In this
Agreement the following terms will have the following
meanings:

    

    

    
      	
              (a)  

            	
              “Acquisition Shares”
      means the 18,250,000 MFI Common Shares, which shares are to be issued and
      delivered to the Sahara Shareholders (subject to the placement of
      5,000,000 shares in escrow pursuant to the Escrow Agreement) at Closing
      pursuant to the terms of the Merger in accordance with Schedule A, annexed
      hereto;

            

    

     

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    
 

    
      	
              (b)  

            	
              “Agreement” means this
      agreement and plan of merger among MFI, the Acquirer, and
      Sahara;

            

    

    

    
      	
              (c)  

            	
              “DGCL” means the Delaware
      General Corporation Law;

            

    

    

    
      	
              (d)  

            	
               “Closing” means the
      completion, on the Closing Date, of the transactions contemplated hereby
      in accordance with Article 9
hereof;

            

    

    

    
      	
              (e)  

            	
              “Closing Date” means the
      day on which all conditions precedent to the completion of the transaction
      as contemplated hereby have been satisfied or
  waived;

            

    

    

    
      	
              (f)  

            	
              “Commission” means the
      Securities and Exchange Commission;

            

    

    

    
      	
              (g)  

            	
              “Effective Time” means
      the date of the filing of an appropriate Certificate of Merger in the form
      required by the State of Delaware provided that the Merger shall become
      effective as provided in the DGCL;

            

    

    

    
      	
              (h)  

            	
              “Exchange Act” means the
      Securities Exchange Act of 1934, as
amended;

            

    

    

    
      	
              (i)  

            	
              “Merger” means the
      merger, at the Effective Time, of Sahara and the Acquirer pursuant to this
      Agreement;

            

    

    

    
      	
              (j)  

            	
               “MFI Business” means all
      aspects of any business conducted by MFI and its
    subsidiaries;

            

    

    

    
      	
              (k)  

            	
               “MFI Common Shares” means
      the shares of common stock in the capital of MFI, it being understood that
      the shareholders and the board of directors of MFI have approved and prior
      to Closing will effect a 30-1 reverse
split;

            

    

    

    
      	
              (l)  

            	
              “MFI Financial
      Statements” means, collectively, the audited financial statements
      of MFI for the two fiscal years ended December 31, 2007 and 2006, and the
      unaudited financial statements of MFI for the period ending June 30,
      2008;

            

    

    

    
      	
              (m)  

            	
              “Place of Closing” means
      the offices of Sichenzia Ross Friedman Ference LLP, or such other place as
      MFI and Sahara may mutually agree
upon;

            

    

    

    
      	
              (n)  

            	
              “PPM” means the private
      placement memorandum of MFI (including all exhibits and supplements
      thereto), dated August 11, 2008;

            

    

    

    
      	
              (o)  

            	
              “Sahara Accounts
      Receivable” means all accounts receivable and other amounts owing
      to Sahara;

            

    

    

    
      	
              (p)  

            	
              “Sahara Assets” means all
      the property and assets of the Sahara Business of every kind and
      description wherever situated including, without limitation, Sahara
      Inventory, Sahara Material Contracts, Sahara Accounts Receivable, Sahara
      Cash, Sahara Intangible Assets and Sahara Goodwill, and all credit cards,
      charge cards and banking cards issued to
Sahara;

            

    

    

    
      	
              (q)  

            	
              “Sahara Business” means
      all aspects of the business conducted by Sahara and the Subsidiary (as
      defined herein);

            

    

    

    
      	
              (r)  

            	
              “Sahara Cash” means all
      cash on hand or on deposit to the credit of Sahara on the Closing Date,
      subject to reduction pursuant to Section 7.1(f)
  below;

            

    

    

    
      	
              (s)  

            	
              “Sahara Financial
      Statements” means collectively, the audited financial statements of
      Sahara for the fiscal years ending December 31, 2007 and December 31,
      2006, and the unaudited financial statements of Sahara for the period
      ending June 30, 2008, which shall be delivered at Closing, all of which
      will be prepared in accordance with United States generally accepted
      accounting principles and the requirements of Regulation S-X as
      promulgated by the Commission;

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	
              (t)  

            	
              “Sahara Goodwill” means
      the goodwill of the Sahara Business together with the exclusive right of
      Sahara to represent itself as carrying on the Sahara Business in
      succession of Sahara subject to the terms hereof, and the right to use any
      words indicating that the Sahara Business is so carried on including the
      right to use the name "Sahara Media” or any variation thereof as part of
      the name of or in connection with the Sahara Business or any part thereof
      carried on or to be carried on by Sahara, the right to all corporate,
      operating and trade names associated with the Sahara Business, or any
      variations of such names as part of or in connection with the Sahara
      Business, all telephone listings and telephone advertising contracts, all
      lists of customers, books and records and other information relating to
      the Sahara Business, all necessary licenses and authorizations and any
      other rights used in connection with the Sahara
  Business;

            

    

    

    
      	
              (u)  

            	
              “Sahara Intangible
      Assets” means all of the intangible assets of Sahara, including,
      without limitation, Sahara Goodwill, all trademarks, logos, copyrights,
      designs, and other intellectual and industrial property of
      Sahara;

            

    

    

    
      	
              (v)  

            	
              “Sahara Inventory” means
      all inventory and supplies of the Sahara Business as of December 31, 2007
      as increased or decreased in the ordinary course of
    business;

            

    

    

    
      	
              (w)  

            	
              “Sahara Material
      Contracts” means the burden and benefit of and the right, title and
      interest of Sahara in, to and under all trade and non-trade contracts,
      engagements or commitments, whether written or oral, to which Sahara is
      entitled in connection with the Sahara Business under which Sahara is
      obligated to pay or entitled to receive the sum of Ten Thousand Dollars
      ($10,000) or more annually including, without limitation, any pension
      plans, profit sharing plans, bonus plans, loan agreements, security
      agreements, indemnities and guarantees, any agreements with employees,
      lessees, licensees, managers, accountants, suppliers, agents,
      distributors, officers, directors, attorneys or others which cannot be
      terminated without liability on not more than one month's notice;
      and

            

    

    

    
      	
              (x)  

            	
              “Sahara Shares” means all
      of the issued and outstanding shares of Sahara's equity
    stock;

            

    

    

    
      	
              (y)  

            	
              “Sahara Shareholders”
      means all of the holders of the issued and outstanding Sahara
      Shares;

            

    

    

    
      	
              (z)  

            	
              “Securities Act” means
      the Securities Act of 1933, as
amended;

            

    

    

    
      	
              (aa)  

            	
              “SEC Reports” means all
      forms, reports and documents filed and required to be filed by MFI with
      the Commission under the Exchange Act on and after January 1, 2006 through
      the date hereof;

            

    

    

    
      	
              (bb)  

            	
              “Subscription Agreements”
      means the series of subscription agreements between MFI and a group of
      investors, pursuant to the PPM, pursuant to which the investors will
      subscribe for shares of MFI’s common
stock;

            

    

    

    
      	
              (cc)  

            	
              “Surviving Company” means
      Sahara following the merger with the
Acquirer;

            

    

    

    

    Any other
terms defined within the text of this Agreement will have the meanings so
ascribed to them.

    

    Captions
and Section Numbers

     

    1.2              The
headings and section references in this Agreement are for convenience of
reference only and do not form a part of this Agreement and are not intended to
interpret, define or limit the scope, extent or intent of this Agreement or any
provision hereof.

    

    Section
References and Schedules

    

    1.3              Any
reference to a particular “Article”, “section”, “paragraph”, “clause” or other
subdivision is to the particular Article, section, clause or other subdivision
of this Agreement and any reference to a Schedule by letter will mean the
appropriate Schedule attached to this Agreement and by such reference the
appropriate Schedule is incorporated into and made part of this
Agreement.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    Severability
of Clauses

    

    1.4              If
any part of this Agreement is declared or held to be invalid for any reason,
such invalidity will not affect the validity of the remainder which will
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion, and it is hereby declared the intention of
the parties that this Agreement would have been executed without reference to
any portion which may, for any reason, be hereafter declared or held to be
invalid.

    

    ARTICLE
2

    THE
MERGER

    

    The
Merger

    

    2.1              At
Closing, the Acquirer shall be merged with and into Sahara pursuant to this
Agreement and the separate corporate existence of the Acquirer shall cease and
Sahara, as it exists from and after the Closing, shall be the Surviving
Company.

    

    Effect
of the Merger

    

    2.2              The
Merger shall have the effect provided therefore by the DGCL. Without limiting
the generality of the foregoing, and subject thereto, at Closing (i) all the
rights, privileges, immunities, powers and franchises, of a public as well as of
a private nature, and all property, real, personal and mixed, and all debts due
on whatever account, including without limitation subscriptions to shares, and
all other choices in action, and all and every other interest of or belonging to
or due to Sahara or the Acquirer, as a group, subject to the terms hereof, shall
be taken and deemed to be transferred to, and vested in, the Surviving Company
without further act or deed; and all property, rights and privileges,
immunities, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Company, as they were of
Sahara and the Acquirer, as a group, and (ii) all debts, liabilities, duties and
obligations of Sahara and the Acquirer, as a group, subject to the terms hereof,
shall become the debts, liabilities and duties of the Surviving Company and the
Surviving Company shall thenceforth be responsible and liable for all debts,
liabilities, duties and obligations of Sahara and the Acquirer, as a group, and
neither the rights of creditors nor any liens upon the property of Sahara or the
Acquirer, as a group, shall be impaired by the Merger, and may be enforced
against the Surviving Company.

    

    Articles
of Incorporation; Bylaws; Directors and Officers

    

    2.3              The
Articles of Incorporation of the Surviving Company from and after the Closing
shall be the Articles of Incorporation of Sahara as in effect immediately prior
to the Closing until thereafter amended in accordance with the provisions
therein and as provided by the applicable provisions of the DGCL.  The
Bylaws of the Surviving Company from and after the Closing shall be the Bylaws
of Sahara as in effect immediately prior to the Closing, continuing until
thereafter amended in accordance with their terms, the Articles of Incorporation
of the Surviving Company and as provided by the DGCL.  The directors
and officers of the Surviving Company from and after the Closing shall be the
directors and officers of Sahara immediately prior to the Closing.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    Conversion
of Securities

    

    2.4              At
the Effective Time, by virtue of the Merger and without any action on the part
of the Acquirer or Sahara, the shares of capital stock of each of Sahara and the
Acquirer shall be converted as follows:

    

    
      	
              (a)  

            	
              Capital Stock of the
      Acquirer. Each issued and outstanding share of the Acquirer's
      capital stock shall continue to be issued and outstanding and shall be
      converted into one share of validly issued, fully paid, and non-assessable
      common stock of the Surviving Company. Each stock certificate of the
      Acquirer evidencing ownership of any such shares shall continue to
      evidence ownership of such shares of capital stock of the Surviving
      Company.

            

    

    

    
      	
              (b)  

            	
              Conversion of Sahara
      Shares. Each Sahara Share that is issued and outstanding at the
      Effective Time, set forth on Schedule A, shall automatically be cancelled
      and extinguished and converted, without any action on the part of the
      holder thereof, into the right to receive one (1) Acquisition Share for
      each Sahara Share (subject to the placement of an aggregate 5,000,000
      shares in escrow pursuant to the Escrow Agreement). All such Sahara
      Shares, when so converted, shall no longer be outstanding and shall
      automatically be cancelled and retired and shall cease to exist, and each
      holder of a certificate representing any such shares shall cease to have
      any rights with respect thereto, except the right to receive the
      Acquisition Shares paid in consideration therefor upon the surrender of
      such certificate in accordance with this
  Agreement.

            

    

    

    ARTICLE
3

    REPRESENTATIONS
AND WARRANTIES

    OF
MFI

    

    Representations
and Warranties

    

    3.1              MFI
and the Acquirer jointly and severally represent and warrant in all material
respects to Sahara, with the intent that Sahara will rely thereon in entering
into this Agreement and in approving and completing the transactions
contemplated hereby, that:

    

    MFI
- Corporate Status and Capacity

    

    
      	
              (a)  

            	
              Incorporation.
      MFI is a corporation duly incorporated and validly existing under the laws
      of the State of Delaware, and is in good standing with the office of the
      Secretary of State for the State of Delaware. Mac Filmworks, Inc., a Texas
      corporation (“Subsidiary”), is a corporation duly incorporated and validly
      existing under the laws of the State of
Texas;

            

    

    

    
      	
              (b)  

            	
              Carrying on
      Business. MFI and its subsidiaries, including the Subsidiary
      currently do not carry on any material business activity in any
      jurisdiction. The nature of the MFI Business does not require MFI and its
      subsidiaries to register or otherwise be qualified to carry on business in
      any jurisdiction other than the respective states of their organization,
      where MFI and its subsidiaries  are each dully qualified and
      authorized to do business;

            

    

    

    
      	
              (c)  

            	
              Corporate
      Capacity. MFI has the corporate power, capacity and authority to
      own its assets and to enter into and complete this Agreement. None of
      MFI’s subsidiaries, including the Subsidiary has any assets or
      liabilities;

            

    

    

    
      	
              (d)  

            	
              Reporting Status;
      Listing. MFI’s common stock is registered under Section 12(g) of
      the Exchange Act and MFI is required to file current reports with the
      Commission pursuant to Section 13(a) of the Exchange Act. The MFI Common
      Shares are quoted on the OTC Bulletin Board under the symbol “MFWO”. None
      of MFI’s subsidiaries, including the Subsidiary has common stock that is
      registered under Section 12(g) of the Exchange Act and none of MFI’s
      subsidiaries is required to file current reports with Commission pursuant
      to Section 13(a) or 15(d) of the Exchange
Act;

            

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	
              (e)  

            	
              SEC Reports.
      MFI has filed all SEC Reports with the Commission under the Exchange Act.
      The SEC Reports, at the time filed, complied as to form in all material
      respects with the requirements of the Exchange Act. None of the SEC
      Reports, including without limitation any financial statements or
      schedules included therein, contains any untrue statements of a material
      fact or omits to state a material fact necessary in order to make the
      statements made, in light of the circumstances under which they were made,
      not misleading;

            

    

    

    Acquirer
- Corporate Status and Capacity

    

    
      	
              (f)  

            	
              Incorporation.
      The Acquirer is a corporation duly incorporated and validly existing under
      the laws of the State of Delaware, and is in good standing with the office
      of the Secretary of State for the State of
  Delaware;

            

    

    

    
      	
              (g)  

            	
              Carrying on
      Business. Other than corporate formation and organization, the
      Acquirer has not carried on business activities to
  date;

            

    

    

    
      	
              (h)  

            	
              Corporate
      Capacity. The Acquirer has the corporate power, capacity and
      authority to enter into and complete this
  Agreement;

            

    

    

    
       
MFI
- Capitalization

    

    

    
      	
              (i)  

            	
              Authorized
      Capital. The authorized capital of MFI consists of 50,000,000
      shares of common stock, $0.003 par value, and 10,000,000 shares of
      preferred stock, $0.0001 par value, of which  24,540,000 MFI
      Common Shares are presently issued and outstanding (which shares of common
      stock outstanding will be 818,000 subsequent to the 30-1 reverse split to
      be effected prior to Closing), and MFI has not created or authorized any
      series of preferred stock and has no obligation or understanding to do
      so.  The authorized capital of the Subsidiary consists of
      10,000,000 shares of Class A common stock $.001 par value and 10,000,000
      shares of preferred, of which only 4,747,680 shares of Class A common
      stock is issued and outstanding all of which is owned by MFI free of any
      liens or encumbrances;

            

    

    

    
      	
              (j)  

            	
              No Option.
      Except as provided in, contemplated by, or set forth in this Agreement,
      the SEC Reports, the purchase agreement entered into between Sahara and
      John Thomas Bridge & Opportunity Fund dated on or about June 30, 2008,
      the PPM or the Subscription Agreements, no person, firm or corporation has
      any agreement or option or any right capable of becoming an agreement or
      option for the acquisition of any common or preferred shares of MFI or for
      the purchase, subscription or issuance of any of the unissued shares in
      the capital of MFI;

            

    

    

    Acquirer
- Capitalization

    

    
      	
              (k)  

            	
              Authorized
      Capital. The authorized capital of the Acquirer consists of 300
      shares of common stock, of which 300 shares of common stock are presently
      issued and outstanding and which are owned by
  MFI;

            

    

    

    
      	
              (l)  

            	
              No Option. No
      person, firm or corporation has any agreement or option or any right
      capable of becoming an agreement or option for the acquisition of any
      common or preferred shares in Acquirer or for the purchase, subscription
      or issuance of any of the unissued shares in the capital of
      Acquirer;

            

    

    

    
       
MFI
- Records and Financial Statements

    

    

    
      	
              (m)  

            	
              Charter
      Documents. The charter documents of MFI, the Subsidiary and the
      Acquirer are as set forth as exhibits to the officers certificate to be
      delivered at Closing pursuant to Section 9.3
  hereof;

            

    

    

    
      	
              (n)  

            	
              Corporate Minute
      Books.  MFI and its subsidiaries, including the
      Subsidiary are not in violation or breach of, or in default with respect
      to, any term of their respective Certificates of Incorporation (or other
      charter documents) or by-laws;

            

    

     

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    
 

    
      	
              (o)  

            	
              MFI Financial
      Statements. The MFI Financial Statements present fairly, in all
      material respects, the assets and liabilities (whether accrued, absolute,
      contingent or otherwise) of MFI, including the assets and liabilities, if
      any of MFI’s subsidiaries, as of the respective dates thereof, and the
      results of operations and changes in financial position of MFI during the
      period covered thereby, in all material respects and have been prepared in
      accordance with generally accepted accounting principles consistently
      applied throughout the periods
indicated;

            

    

    

    
      	
              (p)  

            	
              MFI Accounts Payable
      and Liabilities. There are no material liabilities, contingent or
      otherwise, of MFI or its subsidiaries, including the Subsidiary which are
      not reflected in the MFI Financial Statements except those incurred in the
      ordinary course of business since the date of the MFI Financial
      Statements, and neither MFI nor its subsidiaries have guaranteed or agreed
      to guarantee any debt, liability or other obligation of any person, firm
      or corporation;

            

    

    

    
      	
              (q)  

            	
              MFI Accounts
      Receivable. There are no accounts receivable of MFI or any of MFI’s
      subsidiaries, including the
Subsidiary;

            

    

    

    
      	
              (r)  

            	
              No Debt.
      Neither MFI nor its subsidiaries, including the Subsidiary are, on the
      date hereof and on Closing will be, materially indebted to any, person or
      entity or other third party, including any  affiliate, director
      or officer of MFI except for accounts payable to Brewer & Pritchard PC
      in an amount not to exceed $60,000 which amount will be paid off at
      Closing as described in Section 9.4
hereof;

            

    

    

    
      	
              (s)  

            	
              No Related Party Debt
      to MFI. No director or officer or affiliate of MFI or its
      subsidiaries, including the Subsidiary is now indebted to or under any
      financial obligation to MFI or its subsidiaries on any account whatsoever,
      except for advances on account of travel and other expenses not exceeding
      One Thousand Dollars ($1,000) in
total;

            

    

    

    
      	
              (t)  

            	
              No Dividends.
      No dividends or other distributions on any shares in the capital of MFI or
      the Subsidiary have been made, declared or authorized since the date of
      the MFI Financial Statements;

            

    

    

    
      	
              (u)  

            	
              No Payments. No
      payments of any kind have been made or authorized since the date of the
      MFI Financial Statements to or on behalf of officers, directors,
      shareholders or employees of MFI or its subsidiaries or under any
      management agreements with MFI or its subsidiaries, except payments made
      in the ordinary course of business and at the regular rates of salary or
      other remuneration payable to them;

            

    

    

    
      	
              (v)  

            	
              No Pension
      Plans. There are no pension, profit sharing, group insurance or
      similar plans or other deferred compensation plans affecting MFI or its
      subsidiaries;

            

    

    

    
      	
              (w)  

            	
              No Adverse
      Events. Since June 30, 2008,

            

    

    

    
      	
              (i)  

            	
              there
      has not been any material adverse change in the properties, results of
      operations, financial position or condition (financial or otherwise) of
      MFI, its subsidiaries, its assets or liabilities or any damage, loss or
      other change in circumstances materially affecting MFI, the MFI Business
      or MFI’s right to carry on the MFI Business, other than non-material
      changes in the ordinary course of business or as contemplated pursuant to
      this Agreement,

            

    

    

    
      	
              (ii)  

            	
              there
      has not been any damage, destruction, loss or other event (whether or not
      covered by insurance) materially and adversely affecting MFI, its
      subsidiaries, or the MFI Business,

            

    

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      	
              (iii)  

            	
              there
      has not been any material increase in the compensation payable or to
      become payable by MFI to any of MFI’s officers, employees or agents or any
      bonus, payment or arrangement made to or with any of
  them,

            

    

    

    
      	
              (iv)  

            	
              the
      MFI Business has been and continues to be carried on in the ordinary
      course,

            

    

    

    
      	
              (v)  

            	
              MFI
      has not waived or surrendered any right of material
  value,

            

    

    

    
      	
              (vi)  

            	
              Neither
      MFI nor its subsidiaries, including the Subsidiary  have
      discharged, satisfied or paid any lien or encumbrance or obligation or
      liability other than current liabilities in the ordinary course of
      business; and

            

    

    

    
      	
              (vii)  

            	
              no
      capital expenditures in excess of Thirty Thousand Dollars ($30,000) have
      been authorized or made by MFI.

            

    

    

    MFI
- Income Tax Matters

    

    
      	
              (x)  

            	
              Tax Returns. As
      of the Closing Date, tax returns for 2007, 2006, 2005 and 2004 and reports
      of MFI and its subsidiaries, including the Subsidiary, required by law to
      be filed have been filed and are true, complete and correct, and any taxes
      payable in accordance with any return filed by MFI and its subsidiaries,
      including the Subsidiary or in accordance with any notice of assessment or
      reassessment issued by any taxing authority have been so paid and no
      amounts are owed to any taxing authority as of the Closing Date. Without
      limiting the generality of the foregoing, MFI hereby repreents that no
      amounts are owed to any taxing authorities by MFI and/or its subsidiaries,
      including the Subsidiary, for the period commencing on the
      formation(incorporation) of MFI though the Closing
  Date;

            

    

    

    
      	
              (y)  

            	
              Current Taxes.
      At December 31, 2007, deferred tax assets consisted of a NOL carry forward
      of $488,000, less a valuation allowance of $488,000, with zero net taxes
      owed. MFI had a net operating loss carry forward of approximately $1.28
      million at December 31, 2007. Adequate provisions have been made for taxes
      payable for the current period for which tax returns are not yet required
      to be filed and there are no agreements, waivers, or other arrangements
      providing for an extension of time with respect to the filing of any tax
      return by, or payment of, any tax, governmental charge or deficiency by
      MFI or its subsidiaries.  There are no contingent tax
      liabilities or any grounds which would prompt a reassessment including
      aggressive treatment of income and expenses in filing earlier tax returns
      for MFI or its subsidiaries including the
  Subsidiary;

            

    

    

    MFI
- Applicable Laws and Legal Matters

    

    
      	
              (z)  

            	
              Licenses. MFI
      and its subsidiaries hold all licenses and permits as may be requisite for
      carrying on the MFI Business in the manner in which it has heretofore been
      carried on, which licenses and permits have been maintained and continue
      to be in good standing except where the failure to obtain or maintain such
      licenses or permits would not have a material adverse effect on the MFI
      Business;

            

    

    

    
      	
              (aa)  

            	
              Applicable
      Laws. Neither MFI nor its subsidiaries have been charged with or
      received notice of breach of any laws, ordinances, statutes, regulations,
      by-laws, orders or decrees to which they are subject or which apply to
      them the violation of which would have a material adverse effect on the
      MFI Business, and to MFI’s knowledge, neither MFI nor its subsidiaries are
      in breach of any laws, ordinances, statutes, regulations, bylaws, orders
      or decrees the contravention of which would result in a material adverse
      impact on the MFI Business;

            

    

    

    
      	
              (bb)  

            	
              Pending or Threatened
      Litigation. There is no litigation or administrative or
      governmental proceeding pending or threatened against or relating to MFI,
      its subsidiaries, or the MFI Business nor does MFI have any knowledge of
      any act or omission of MFI or its subsidiaries that would form any
      material basis for any such action or
  proceeding;

            

    

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	
              (cc)  

            	
              No Bankruptcy.
      Neither MFI nor its subsidiaries have made any voluntary assignment or
      proposal under applicable laws relating to insolvency and bankruptcy and
      no bankruptcy petition has been filed or presented against MFI or its
      subsidiaries and no order has been made or a resolution passed for the
      winding-up, dissolution or liquidation of MFI or its
      subsidiaries;

            

    

    

    
      	
              (dd)  

            	
              Labor Matters.
      Neither MFI nor its subsidiaries are party to any collective agreement
      relating to the MFI Business with any labor union or other association of
      employees and no part of the MFI Business has been certified as a unit
      appropriate for collective bargaining or, to the knowledge of MFI, has
      made any attempt in that regard;

            

    

    

    
      	
              (ee)  

            	
              Finder's Fees.
      Neither MFI nor its subsidiaries are party to any agreement which provides
      for the payment of finder's fees, brokerage fees, commissions or other
      fees or amounts which are or may become payable to any third party in
      connection with the execution and delivery of this Agreement and the
      transactions contemplated herein, except as set forth in Section 9.4
      hereof;

            

    

    

    Execution
and Performance of Agreement

    

    
      	
              (ff)  

            	
              Authorization and
      Enforceability. The execution and delivery of this Agreement, and
      the completion of the transactions contemplated hereby, have been duly and
      validly authorized by all necessary corporate action on the part of MFI,
      the Subsidiary and the Acquirer;

            

    

    

    
      	
              (gg)  

            	
              No Violation or
      Breach. The execution and performance of this Agreement will
      not:

            

    

    

    
      	
              (i)  

            	
              violate
      the charter documents of MFI, the Subsidiary or the Acquirer or result in
      any breach of, or default under, any loan agreement, mortgage, deed of
      trust, or any other agreement to which MFI or its subsidiaries are
      party,

            

    

    

    
      	
              (ii)  

            	
              give
      any person any right to terminate or cancel any agreement or any right or
      rights enjoyed by MFI or its
subsidiaries,

            

    

    

    
      	
              (iii)  

            	
              result
      in any alteration of MFI’s or its subsidiaries’ obligations under any
      agreement to which MFI or its subsidiaries are
  party,

            

    

    

    
      	
              (iv)  

            	
              result
      in the creation or imposition of any lien, encumbrance or restriction of
      any nature whatsoever in favor of a third party upon or against the assets
      of MFI,

            

    

    

    
      	
              (v)  

            	
              result
      in the imposition of any tax liability to MFI or its subsidiaries relating
      to the assets of MFI, or

            

    

    

    
      	
              (vi)  

            	
              violate
      any court order or decree to which either MFI or its subsidiaries is
      subject;

            

    

    

    The
MFI Business

    

    
      	
              (hh)  

            	
              Maintenance of
      Business. Since the date of the MFI Financial Statements, MFI and
      its subsidiaries have not entered into any material agreement or
      commitment except in the ordinary course and except as provided in,
      contemplated by, or set forth in this Agreement, the PPM, the Subscription
      Agreements or in the SEC Reports;

            

    

    

    
      	
              (ii)  

            	
              Subsidiaries.
      Except for the Acquirer and the Subsidiary, MFI does not own any
      subsidiaries and does not otherwise own, directly or indirectly, any
      shares or interest in any other corporation, partnership, joint venture or
      firm.  References in this Agreement to any subsidiaries of the
      MFI shall include the Acquirer, the Subsidiary and any other subsidiary
      that MFI may have but has not disclosed in this
  Agreement;

            

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    MFI
- Acquisition Shares

    

    
      	
              (jj)  

            	
              Acquisition
      Shares. The Acquisition Shares when delivered to the holders of
      Sahara Shares pursuant to the Merger shall be validly issued and
      outstanding as fully paid and non-assessable shares and the Acquisition
      Shares shall be transferable upon the books of MFI, in all cases subject
      to the provisions and restrictions of all applicable securities laws;
      and

            

    

    

    
      	
              (kk)  

            	
              Securities Law
      Compliance.  Except as set forth in the SEC Reports, MFI
      has not issued any shares of its common stock (or securities convertible
      into or exercisable for shares of common stock).  Neither MFI
      nor any person acting on its behalf has taken or will take any action
      (including, without limitation, any offering of any securities of MFI
      under circumstances which would require the integration of such offering
      with the offering of the Acquisition Shares issued to the Sahara
      Shareholders) which subject the issuance or sale of such shares to the
      Sahara Shareholders to the registration requirements of Section 5 of the
      Securities Act.

            

    

    

    Non-Merger
and Survival

    

    3.2              The
representations and warranties of MFI and the Acquirer contained herein are true
and correct as of the date of this Agreement and will be true at and as of
Closing in all material respects as though such representations and warranties
were made as of such time.  Notwithstanding the completion of the
transactions contemplated hereby, the waiver of any condition contained herein
(unless such waiver expressly releases a party from any such representation or
warranty) or any investigation made by the Sahara Shareholders, the
representations and warranties of MFI shall survive the Closing for a period of
two (2) years.

    

    Indemnity

    

    3.3              The
John Thomas Bridge and Opportunity Fund (“JTO”) shall, pursuant to the terms,
conditions and limitations of that certain Indemnification Agreement between
Sahara and JTO defend, indemnify and save harmless Sahara from and against any
and all claims, demands, actions, suits, proceedings, assessments, judgments,
damages, costs, losses and expenses, including any payment made in good faith in
settlement of any claim (subject to the right of the JTO to defend any such
claim), resulting from the breach by MFI of any representation, covenant or
warranty made under this Agreement or from any misrepresentation in or omission
from any certificate or other instrument furnished or to be furnished by MFI
and/or the Acquirer to Sahara hereunder; notwithstanding the foregoing, the
extent of JTO’s liability regarding any claims arising from the failure to file
tax returns for prior periods shall be limited to the amount described in
Section 4.1(f).

    

    

    ARTICLE
4

    COVENANTS
OF MFI

    

    Covenants

    

    4.1              MFI
covenants and agrees with Sahara that MFI will:

    

    
      	
              (a)  

            	
              Conduct of
      Business. Until the Closing, conduct its business diligently and in
      the ordinary course consistent with the manner in which it generally has
      been operated up to the date of execution of this
    Agreement;

            

    

    

    
      	
              (b)  

            	
              Access. Until
      the Closing, give the Sahara Shareholders and their representatives full
      access to all of the properties, books, contracts, commitments and records
      of Sahara, and furnish to the Sahara Shareholders and their
      representatives all such information as they may reasonably
      request;

            

    

    

    
      	
              (c)  

            	
              Procure
      Consents. Until the Closing, take all reasonable steps required to
      obtain, prior to Closing, any and all third party consents required to
      permit the Merger;

            

    

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    
      

      
        	
                (d)  

              	      
                Public
      Information.  Make and keep public information available,
      as those terms are understood and defined in Rule 144 (defined below);
      and

              

      

       

    

    
      	
              (e)  

            	
              SEC
      Filings.  File with the Commission in a timely manner,
      all reports and other documents required of MFI under either the
      Securities Act or the Exchange Act.

            

    

    

    
      	
              (f)  

            	
              Tax Returns.
      MFI shall on and after the Closing Date be responsible for any taxes owed
      or penalties thereon pertaining to the failure of MFI and its subsidiaries
      to file tax returns with the appropriate jurisdictions, but MFI shall not
      be liable for expenses incurred in filing any such tax returns other than
      for the years set forth in Section
3.1(x).

            

    

    

    Authorization

    

    4.2             
MFI hereby agrees to authorize and direct any and all federal, state, municipal,
foreign and international governments and regulatory authorities having
jurisdiction respecting MFI and its subsidiaries to release any and all
information in their possession respecting MFI and its subsidiaries to Sahara.
MFI shall promptly execute and deliver to Sahara any and all consents to the
release of information and specific authorizations which Sahara reasonably
requires to gain access to any and all such information.

    

    Reports
Under the Exchange Act

    

    4.3             
With a view to making available to the Sahara Shareholders the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the Commission that may at any time permit the Sahara Shareholders to sell
securities of MFI to the public without registration and without imposing
restrictions arising under the federal securities laws on the purchases thereof
(“Rule 144”), and provided that the applicable holding period imposed by Rule
144 has been met, MFI agrees to furnish to each Sahara Shareholder, so long as
such Sahara Shareholder owns MFI Common Shares, promptly upon request, (i) a
written statement by MFI that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of MFI and such other reports and documents so
filed by MFI, and (iii) such other information as may be reasonably requested to
permit the Sahara Shareholders to sell such securities pursuant to Rule 144
without registration.

    

    Survival

    

    4.4             
The
covenants set forth in this Article shall survive the Closing for the benefit of
the Sahara Shareholders.

    

    

    ARTICLE
5

    REPRESENTATIONS
AND WARRANTIES OF

    SAHARA

    

    Representations
and Warranties

    

    5.1              Sahara
represents and warrants in all material respects to MFI, with the intent that it
will rely thereon in entering into this Agreement and in approving and
completing the transactions contemplated hereby, that:

    

    Sahara
- Corporate Status and Capacity

    

    
      	
              (a)  

            	
              Incorporation.
      Sahara is a corporation duly incorporated and validly existing under the
      laws of the State of Delaware, and is in good standing with the office of
      the Secretary of State for the State of
  Delaware;

            

    

    

    
      	
              (b)  

            	
              Carrying on
      Business. Sahara carries on business primarily in the State of New
      York and does not carry on any material business activity in any other
      jurisdiction. The nature of the Sahara Business does not require Sahara to
      register or otherwise be qualified to carry on business in any other
      jurisdiction;

            

    

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    
      	
              (c)  

            	
              Corporate
      Capacity. Sahara has the corporate power, capacity and authority to
      own the Sahara Assets and to carry on the Sahara Business and Sahara has
      the corporate power, capacity and authority to enter into and complete
      this Agreement;

            

    

    

    Sahara
- Capitalization

    

    
      	
              (d)  

            	
              Authorized
      Capital. The authorized capital of Sahara consists of 50,000,000
      shares of common stock, $0.00001 par value per
  share;

            

    

    

    
      	
              (e)  

            	
              Ownership of Sahara
      Shares. The issued and outstanding share capital of Sahara will on
      Closing consist of 18,250,000 common shares (being the Sahara Shares),
      which shares on Closing shall be validly issued and outstanding as fully
      paid and non-assessable shares. The Sahara Shareholders will be at Closing
      the registered and beneficial owner of the Sahara Shares. The Sahara
      Shares owned by the Sahara Shareholders will on Closing be free and clear
      of any and all liens, charges, pledges, encumbrances, restrictions on
      transfer and adverse claims whatsoever not created by or through MFI
      and/or the Acquirer;

            

    

    
      	
               
      

            	 

    

    
      	
              (f)  

            	
              No
      Restrictions. There are no restrictions on the transfer, sale or
      other disposition of Sahara Shares contained in the charter documents of
      Sahara or under any agreement;

            

    

    

    Sahara
- Records and Financial Statements

    

    
      	
              (g)  

            	
              Charter
      Documents. The charter documents of Sahara have not been altered
      since its incorporation date, except as filed in the record books of
      Sahara, and Sahara is not in violation or breach of, or in default with
      respect to, any term of its Articles of Incorporation (or other charter
      documents) or by-laws;

            

    

    

    
      	
              (h)  

            	
              Sahara Financial
      Statements. The Sahara Financial Statements present fairly, in all
      material respects, the assets and liabilities (whether accrued, absolute,
      contingent or otherwise) of Sahara as of the respective dates thereof, and
      the results of operations and changes in financial position of Sahara
      during the periods covered thereby, and will be prepared in accordance
      with generally accepted accounting principles consistently applied
      throughout the periods indicated;

            

    

    

    
      	
              (i)  

            	
              Sahara Accounts
      Payable and Liabilities. There are no material liabilities,
      contingent or otherwise, of Sahara which are not reflected in the Sahara
      Financial Statements except those incurred in the ordinary course of
      business since the date of the Sahara Financial
  Statements;

            

    

    

    

    
      	
              (j)  

            	
              No Dividends.
      No dividends or other distributions on any shares in the capital of Sahara
      have been made, declared or authorized since the date of the Sahara
      Financial Statements;

            

    

    
    

    
      	
               
      

            	 

    

    Sahara
- Income Tax Matters

    

    
      	
              (k)  

            	
              Tax Returns.
      All tax returns and reports of Sahara required by law to be filed have
      been filed and to the best of Sahara’s knowledge and belief are true,
      complete and correct, and any taxes payable in accordance with any return
      filed by Sahara or in accordance with any notice of assessment or
      reassessment issued by any taxing authority have been so
    paid;

            

    

    

    
      	
              (l)  

            	
              Current Taxes.
      Adequate provisions have been made for taxes payable for the current
      period for which tax returns are not yet required to be filed and there
      are no agreements, waivers, or other arrangements providing for an
      extension of time with respect to the filing of any tax return by, or
      payment of, any tax, governmental charge or deficiency by Sahara. Sahara
      is not aware of any contingent tax liabilities or any grounds which would
      prompt a reassessment including aggressive treatment of income and
      expenses in filing earlier tax
returns;

            

    

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    Sahara
- Applicable Laws and Legal Matters

    

    
      	
              (m)  

            	
              Licenses.
      Sahara holds all licenses and permits as may be requisite for carrying on
      the Sahara Business in the manner in which it has heretofore been carried
      on, which licenses and permits have been maintained and continue to be in
      good standing except where the failure to obtain or maintain such licenses
      or permits would not have a material adverse effect on the Sahara
      Business;

            

    

    

    
      	
              (n)  

            	
              Applicable
      Laws. Sahara has not been charged with or received notice of breach
      of any laws, ordinances, statutes, regulations, by-laws, orders or decrees
      to which it is subject or which applies to it the violation of which would
      have a material adverse effect on the Sahara Business, and, to Sahara’s
      knowledge and belief, Sahara is not in breach of any laws, ordinances,
      statutes, regulations, by-laws, orders or decrees the contravention of
      which would result in a material adverse impact on the Sahara
      Business;

            

    

    

    
      	
              (o)  

            	
              Pending or Threatened
      Litigation. There is no material litigation or administrative or
      governmental proceeding pending or threatened against or relating to
      Sahara, the Sahara Business, or any of the Sahara Assets, nor does Sahara
      have any knowledge of any deliberate act or omission of Sahara that would
      form any material basis for any such action or
  proceeding;

            

    

    

    
      	
              (p)  

            	
              No Bankruptcy.
      Sahara has not made any voluntary assignment or proposal under applicable
      laws relating to insolvency and bankruptcy and no bankruptcy petition has
      been filed or presented against Sahara and no order has been made or a
      resolution passed for the winding-up, dissolution or liquidation of
      Sahara;

            

    

    

    
      	
              (q)  

            	
              Labor Matters.
      Sahara is not a party to any collective agreement relating to the Sahara
      Business with any labor union or other association of employees and no
      part of the Sahara Business has been certified as a unit appropriate for
      collective bargaining or, to the knowledge of Sahara, has made any attempt
      in that regard and Sahara has no reason to believe that any current
      employees will leave Sahara's employ as a result of this
      Merger;

            

    

    
      	
               
      

            	 

    

    Execution
and Performance of Agreement

    

    
      	
              (r)  

            	
              Authorization and
      Enforceability. The execution and delivery of this Agreement, and
      the completion of the transactions contemplated hereby, have been duly and
      validly authorized by all necessary corporate action on the part of Sahara
      and the Sahara Shareholders;

            

    

    

    
      	
              (s)  

            	
              No Violation or
      Breach. The execution and performance of this Agreement will
      not

            

    

    

    
      	
              (i)  

            	
              violate
      the charter documents of Sahara or result in any breach of, or default
      under, any loan agreement, mortgage, deed of trust, or any other agreement
      to which Sahara is a party,

            

    

    

    
      	
              (ii)  

            	
              except
      as provided in, contemplated by, or set forth in the PPM or the
      Subscription Agreements, give any person any right to terminate or cancel
      any agreement including, without limitation, Sahara Material Contracts, or
      any right or rights enjoyed by
Sahara,

            

    

    

    
      	
              (iii)  

            	
              except
      as provided in, contemplated by, or set forth in the PPM or the
      Subscription Agreements, result in any material alteration of Sahara's
      obligations under any agreement to which Sahara is a party including,
      without limitation, the Sahara Material
  Contracts,

            

    

    

    
      	
              (iv)  

            	
              result
      in the creation or imposition of any lien, encumbrance or restriction of
      any nature whatsoever in favor of a third party upon or against the Sahara
      Assets,

            

    

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    
      	
              (v)  

            	
              result
      in the imposition of any tax liability to Sahara relating to Sahara Assets
      or the Sahara Shares, or

            

    

    

    
      	
              (vi)  

            	
              violate
      any court order or decree to which Sahara is
  subject;

            

    

    

    Sahara
Assets - Ownership and Condition

    
    

    
      	
               
      

            	 

    

    
      	
              (t)  

            	
              No Option.
      Except as provided in, contemplated by, or set forth in the PPM or the
      Subscription Agreements, no person, firm or corporation has any agreement
      or option or a right capable of becoming an agreement for the purchase of
      any of the Sahara Assets;

            

    

    
      	
               
      

            	 

    

    
      	
              (u)  

            	
              Sahara Material
      Contracts. Except as provided in, contemplated by, or set forth in
      the PPM or the Subscription Agreements, the Sahara Material Contracts
      constitute all of the material contracts of
  Sahara;

            

    

    

    
      	
              (v)  

            	
              No Default.
      There has not been any default in any material obligation of Sahara or any
      other party to be performed under any of the Sahara Material Contracts,
      each of which is in good standing and in full force and effect and
      unamended, and Sahara is not aware of any default in the obligations of
      any other party to any of the Sahara Material
  Contracts;

            

    

    
    

    
      	
               
      

            	 

    

    Sahara
Assets - Sahara Goodwill and Other Assets

    

    
      	
              (w)  

            	
              Sahara
      does not have any knowledge of any infringement by Sahara of any patent,
      trademark, copyright or trade
secret;

            

    

    

    
       
The
Business of Sahara

    

    

    
      	
              (x)  

            	
              Maintenance of
      Business. Since the date of the Sahara Financial Statements, the
      Sahara Business has been carried on in the ordinary course, and Sahara has
      not entered into any material agreement or commitment except in the
      ordinary course or as provided in, contemplated by, or set forth in the
      PPM or the Subscription Agreements;
and

            

    

    

    
      	
              (y)  

            	
              Subsidiaries.
      Sahara does not have any subsidiaries and does not otherwise own, directly
      or indirectly, any shares or interest in any other corporation,
      partnership, joint venture or firm.

            

    

     

    Non-Merger
and Survival

    

    5.2              The
representations and warranties of Sahara contained herein will be true at and as
of Closing in all material respects as though such representations and
warranties were made as of such time.  Notwithstanding the completion
of the transactions contemplated hereby, the waiver of any condition contained
herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by MFI, the
representations and warranties of Sahara shall survive the Closing for a period
of two (2) years.

    

    Indemnity

    

    5.3              Sahara
agrees to indemnify and save harmless MFI from and against any and all claims,
demands, actions, suits, proceedings, assessments, judgments, damages, costs,
losses and expenses, including any payment made in good faith in settlement of
any claim (subject to the right of Sahara to defend any such claim), resulting
from the breach by Sahara of any representation or warranty of Sahara made under
this Agreement or from any misrepresentation in or omission from any certificate
or other instrument furnished or to be furnished by Sahara to MFI
hereunder.  Legal fees and other costs of defending and prosecuting
this action shall be borne by Sahara.

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    ARTICLE
6

    COVENANTS
OF SAHARA

    

    Covenants

    

    6.1              Sahara
covenants and agrees with MFI that it will:

    

    
      	
              (a)  

            	
              Conduct of
      Business. Until the Closing, conduct the Sahara Business diligently
      and in the ordinary course consistent with the manner in which the Sahara
      Business generally has been operated up to the date of execution of this
      Agreement;

            

    

    

    
      	
              (b)  

            	
              Preservation of
      Business.  Until the Closing, use their best efforts to
      preserve the Sahara Business and the Sahara
  Assets;

            

    

    
      	
               
      

            	 

    

    
      	
              (c)  

            	
              Procure
      Consents. Until the Closing, take all reasonable steps required to
      obtain, prior to Closing, any and all third party consents required to
      permit the Merger and to preserve and maintain the Sahara Assets,
      including the Sahara Material Contracts;
and

            

    

    

    
      	
              (d)  

            	
              Reporting and Internal
      Controls. From and after the Effective Time, forthwith take all
      required actions to implement internal controls on the business of the
      Surviving Company to ensure that the Surviving Company complies with
      Section 13(b)(2) of the Exchange
Act.

            

    

    

    Authorization

    

    6.2              Sahara
hereby agrees to authorize and direct any and all federal, state, municipal,
foreign and international governments and regulatory authorities having
jurisdiction respecting Sahara to release any and all information in their
possession respecting Sahara to MFI.  Sahara shall promptly execute
and deliver to MFI any and all consents to the release of information and
specific authorizations which MFI reasonably require to gain access to any and
all such information.

    

    Survival

    

    6.3              The
covenants set forth in this Article shall survive the Closing for the benefit of
MFI.

    

    

    ARTICLE
7

    CONDITIONS
PRECEDENT

    

    Conditions
Precedent in favor of MFI

    

    7.1              MFI’s
obligations to carry out the transactions contemplated hereby are subject to the
fulfillment (or waiver by MFI) of each of the following conditions precedent on
or before the Closing:

    

    
      	
              (a)  

            	
              all
      documents or copies of documents, securities issuances and wire transfers
      required to be executed and delivered to MFI as set forth in Article 9
      hereof will have been so executed and
delivered;

            

    

    

    
      	
              (b)  

            	
              all
      of the terms, covenants and conditions of this Agreement to be complied
      with or performed by Sahara at or prior to the Closing will have been
      complied with or performed;

            

    

    
      	
               
      

            	 

    

    
      	
              (c)  

            	
              title
      to the Sahara Shares held by the Sahara Shareholders will be free and
      clear of all mortgages, liens, charges, pledges, security interests,
      encumbrances or other claims whatsoever not created by or through MFI
      and/or the Acquirer;

            

    

    

    
      	
              (d)  

            	
              the
      Certificate of Merger shall be executed by Sahara in form acceptable for
      filing with the Delaware Secretary of
State;

            

    

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

       

    

    
    

    
      
        	
                (e)  

              	      
                the
      Sahara Shareholders shall have entered into an escrow agreement,
      reasonably acceptable to MFI, pursuant to which 5,000,000 Acquisition
      Shares shall be held in escrow (the “Escrow
      Agreement”);

              

      

      
      

      
      

       

    

    
      	
              (f)  

            	
              subject
      to Article 8 hereof, there will not have
  occurred:

            

    

    
      	
               
      

            	
               

            

    

    
      	
              (i)  

            	
              any
      material adverse change in the financial position or condition of Sahara,
      its liabilities or the Sahara Assets or any damage, loss or other change
      in circumstances materially and adversely affecting the Sahara Business or
      the Sahara Assets or Sahara's right to carry on the Sahara Business, other
      than changes in the ordinary course of business, none of which has been
      materially adverse, or

            

    

     

    
      	
              (ii)  

            	
              any
      damage, destruction, loss or other event, including changes to any laws or
      statutes applicable to Sahara or the Sahara Business (whether or not
      covered by insurance) materially and adversely affecting Sahara, the
      Sahara Business or the Sahara
Assets;

            

    

    
    

    
    

     

    
      
        
          	
                  (g)  

                	      
                  the
      transactions contemplated hereby shall have been approved by all other
      regulatory authorities having jurisdiction over the subject matter hereof,
      if any; and

                

        

         

      

      
        	
                (h)  

              	      
                all
      representations and warranties of Sahara contained herein shall be true
      and correct as of the Closing
Date.

              

      

       

    

    
      	
              (i)  

            	
              Sahara
      and Marathon Advisors shall have entered into a consulting
      agreement;

            

    

    

    
      	
              (j)  

            	
              the
      completion of the sale of Units (as defined in the PPM) for an aggregate
      purchase price of at least $5,000,000 pursuant to the PPM and the
      Subscription Agreements, contemporaneously  with the Merger
      contemplated by this Agreement;

            

    

    

    
      	
              (k)  

            	
              Sahara
      shall have no liabilities and shall have more than $60,000 in assets as of
      June 30, 2008;

            

    

    

    
      	
              (l)  

            	
              MFI
      shall have delivered the 500,000 shares of MFI common stock and a
      five-year warrant to purchase 500,000 shares of common stock at an
      exercise price of $1.50 per share to John Thomas Bridge & Opportunity
      Fund as required pursuant to the purchase agreement between Sahara and
      John Thomas Bridge & Opportunity Fund, and 3,000,000 shares to John
      Thomas Financial as a finders fee;

            

    

    

    
      	
              (m)  

            	
              A
      disbursement of funds letter shall have been executed by Sahara that
      reflects a wire transfer to Brewer & Pritchard PC in an amount not to
      exceed $60,000, a wire transfer to John Thomas Bridge & Opportunity
      Fund in the amount of $500,000 plus accrued interest  as payment
      in full for a note owed by Sahara,  a wire transfer to John
      Thomas Financial in the amount of $200,000 as a finders fee, and a wire
      transfer in the amount of $400,000 to John Thomas Bridge & Opportunity
      Fund as payment of the indemnification
fee.

            

    

    

    
      	
              (n)  

            	
              Evidence
      that a $10 million life insurance policy has been obtained on the life of
      Mr. Anderson.

            

    

    

    
      	
              (o)  

            	
              A
      signed escrow agreement shall be delivered with respect to 5,000,000
      Acquisition Shares (the “Escrow
Agreement”).

            

    

    

    
      	
              (p)  

            	
              MFI
      shall have delivered a five-year warrant to purchase 1,000,000 shares of
      common stock at an exercise price of $1.30 to John Thomas
      Financial.

            

    

    

    
      	
              (q)  

            	
              MFI
      shall have delivered a five-year warrant to purchase 500,000 shares of
      common stock at an exercise price of $1.50 to Aubry Consulting Group,
      Inc.

            

    

     

    
      	
              (r)  

            	
              MFI
      shall have delivered a five-year warrant to purchase 300,000 shares of
      common stock at an exercise price of $1.10 to Marathon
      Advisors.

            

    

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    Waiver
by MFI

    

    7.2              The
conditions precedent set out in the preceding section are inserted for the
exclusive benefit of MFI and any such condition may be waived in whole or in
part by MFI at or prior to Closing by delivering to Sahara a written waiver to
that effect signed by MFI. In the event that the conditions precedent set out in
the preceding section are not satisfied on or before the Closing, MFI shall be
released from all obligations under this Agreement.

    

    Conditions
Precedent in Favor of Sahara

    

    7.3              The
obligations of Sahara to carry out the transactions contemplated hereby are
subject to the fulfillment of each of the following conditions precedent on or
before the Closing:

    

    
      	
              (a)  

            	
              all
      documents or copies of documents required to be executed and delivered to
      Sahara or the Sahara Shareholders hereunder will have been so executed and
      delivered;

            

    

    

    
      	
              (b)  

            	
              the
      completion of the sale of Units (as defined in the PPM) for an aggregate
      purchase price of at least $5,000,000 pursuant to the PPM and the
      Subscription Agreements, contemporaneously  with the Merger
      contemplated by this Agreement;

            

    

    

    
      	
              (c)  

            	
              all
      directors and officers of MFI shall have tendered their resignations in a
      form reasonably acceptable to Sahara, and the Sahara’s Shareholders’
      nominees shall have been appointed to MFI’s board of directors in a form
      reasonably acceptable to Sahara;

            

    

    

    
      	
              (d)  

            	
              Sahara
      shall be in receipt of the Sahara Financial
  Statements;

            

    

    

    
      	
              (e)  

            	
              Sahara
      shall have no liabilities and shall have more than $60,000 in assets as of
      June 30, 2008;

            

    

    

    
      	
              (f)  

            	
              MFI
      shall have no assets and MFI’s total liabilities shall not exceed $60,000,
      which shall consist solely of accounts payable for legal fees incurred in
      connection with the transactions contemplated by this Agreement to be paid
      at Closing;

            

    

    

    
      	
              (g)  

            	
              MFI
      and John Thomas Bridge & Opportunity Fund shall have entered into an
      indemnitee agreement in a form reasonable acceptable to
      Sahara;

            

    

    

    
      	
              (h)  

            	
              the
      completion by MFI of a 30-to-1 reverse split of MFI’s common stock, such
      that MFI’s common stock issued and outstanding shall be reduced to
      approximately 818,000 shares;

            

    

    

    
      	
              (i)  

            	
              Sahara
      and Marathon Advisors shall have entered into a consulting
      agreement;

            

    

    

    
      	
              (j)  

            	
              all
      of the terms, covenants and conditions of this Agreement to be complied
      with or performed by MFI or the Acquirer at or prior to the Closing shall
      have been complied with or
performed;

            

    

    

    
      	
              (k)  

            	
              Sahara
      shall have completed its review and inspection of the books and records of
      MFI and its subsidiaries and shall be reasonably satisfied with same in
      all material respects;

            

    

    

    
      	
              (l)  

            	
              MFI
      will have delivered the Acquisition Shares to be issued pursuant to the
      terms of the Merger to the Sahara Shareholders at the Closing and the
      Acquisition Shares will be registered on the books of MFI in the name of
      the Sahara Shareholders at the Effective
Time;

            

    

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    
      	
              (m)  

            	
              title
      to the Acquisition Shares will be free and clear of all mortgages, liens,
      charges, pledges, security interests, encumbrances or other claims
      whatsoever;

            

    

    

    
      	
              (n)  

            	
              the
      Certificate of Merger shall be executed by the Acquirer in form acceptable
      for filing with the Delaware Secretary of
State;

            

    

    

    
      	
              (o)  

            	
              subject
      to Article 8 hereof, there will not have
  occurred

            

    

    

    
      	
              (i)  

            	
              any
      material adverse change in the financial position or condition of MFI, its
      subsidiaries, their assets or liabilities or any damage, loss or other
      change in circumstances materially and adversely affecting MFI or the MFI
      Business or MFI’s right to carry on the MFI Business, other than changes
      in the ordinary course of business, none of which has been materially
      adverse, or

            

    

    

    
      	
              (ii)  

            	
              any
      damage, destruction, loss or other event, including changes to any laws or
      statutes applicable to MFI or the MFI Business (whether or not covered by
      insurance) materially and adversely affecting MFI, its subsidiaries or its
      assets;

            

    

    

    
      	
              (s)  

            	
              the
      transactions contemplated hereby shall have been approved by all other
      regulatory authorities having jurisdiction over the subject matter hereof,
      if any; and

            

    

    

    
      	
              (t)  

            	
              all
      representations and warranties of MFI and the Acquirer contained herein
      shall be true and correct as of the Closing
  Date.

            

    

    

    
      	
              (u)  

            	
              The
      note payable by Sahara to John Thomas Bridge & Opportunity Fund in the
      principal amount of $500,000 shall be marked “cancelled and paid in
      full.”

            

    

    

    
      	
              (v)  

            	
              MFI
      shall prepare appropriate tax returns for MFI and any of its subsidiaries
      as contemplated in Section 3.1(x) and shall submit such return to Sahara
      for its review and comment; MFI shall incorporate any reasonable comments
      of Sahara into such tax returns and after MFI shall file such returns with
      the appropriate jurisdiction. MFI shall pay and be responsible for all
      filing fees, penalties and payments related to such tax
      returns.

            

    

    

    
      	
              (w)  

            	
              An
      opinion of counsel to MFI reasonably acceptable to Sahara shall be
      delivered.

            

    

    
      	
               
      

            	 

    

    Waiver
by Sahara

    

    7.4              The
conditions precedent set out in the preceding section are inserted for the
exclusive benefit of Sahara and any such condition may be waived in whole or in
part by Sahara at or prior to the Closing by delivering to MFI a written waiver
to that effect signed by Sahara. In the event that the conditions precedent set
out in the preceding section are not satisfied on or before the Closing Sahara
shall be released from all obligations under this Agreement.

    

    Nature
of Conditions Precedent

    

    7.5              The
conditions precedent set forth in this Article are conditions of completion of
the transactions contemplated by this Agreement and are not conditions precedent
to the existence of a binding agreement. Each party acknowledges receipt of the
sum of $1.00 and other good and valuable consideration as separate and distinct
consideration for agreeing to the conditions precedent in favor of the other
party or parties set forth in this Article.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    Confidentiality

    

    7.6              Notwithstanding
any provision herein to the contrary, the parties hereto agree that the
existence and terms of this Agreement are confidential and that if this
Agreement is terminated pursuant to the preceding section the parties agree to
return to one another any and all financial, technical and business documents
delivered to the other party or parties in connection with the negotiation and
execution of this Agreement and shall keep the terms of this Agreement and all
information and documents received from Sahara and MFI and the contents thereof
confidential and not utilize nor reveal or release same, provided, however, that
MFI may be required to issue news releases regarding the execution and
consummation of this Agreement and file a Current Report on Form 8-K with the
Commission respecting the proposed Merger contemplated hereby together with such
other documents as are required to maintain the currency of MFI’s filings with
the Commission.

    

    ARTICLE
8

    RISK

    

    Material
Change in the Business of Sahara

    

    8.1              If
any material loss or damage to the Sahara Business occurs prior to Closing and
such loss or damage, in MFI's reasonable opinion, cannot be substantially
repaired or replaced within sixty (60) days, MFI shall, within two (2) days
following any such loss or damage, by notice in writing to Sahara, at its
option, either:

    

    
      	
              (a)  

            	
              terminate
      this Agreement, in which case no party will be under any further
      obligation to any other party; or

            

    

    

    
      	
              (b)  

            	
              elect
      to complete the Merger and the other transactions contemplated hereby, in
      which case the proceeds and the rights to receive the proceeds of all
      insurance covering such loss or damage will, as a condition precedent to
      MFI's obligations to carry out the transactions contemplated hereby, be
      vested in Sahara or otherwise adequately secured to the satisfaction of
      MFI on or before the Closing Date.

            

    

     

    Material
Change in the MFI Business

    

    8.2              If
any material loss or damage to the MFI Business occurs prior to Closing and such
loss or damage, in Sahara's reasonable opinion, cannot be substantially repaired
or replaced within sixty (60) days, Sahara shall, within two (2) days following
any such loss or damage, by notice in writing to MFI, at its option,
either:

    

    
      	
              (a)  

            	
              terminate
      this Agreement, in which case no party will be under any further
      obligation to any other party; or

            

    

    

    
      	
              (b)  

            	
              elect
      to complete the Merger and the other transactions contemplated hereby, in
      which case the proceeds and the rights to receive the proceeds of all
      insurance covering such loss or damage will, as a condition precedent to
      Sahara's obligations to carry out the transactions contemplated hereby, be
      vested in MFI or otherwise adequately secured to the satisfaction of
      Sahara on or before the Closing
Date.

            

    

    

    

    ARTICLE
9

    CLOSING

    

    Closing

    

    9.1              The
Merger and the other transactions contemplated by this Agreement will be closed
on or before September 30, 2008, in accordance with the closing procedure set
out in this Article.

    

    Documents
to be Delivered by Sahara

    

    9.2              On
or before the Closing, Sahara will deliver or cause to be delivered to
MFI:

    
      	
               
      

            	 

    

    
      	
              (a)  

            	
              all
      reasonable consents or approvals required to be obtained by Sahara for the
      purposes of completing the Merger and preserving and maintaining the
      interests of Sahara under any and all Sahara Material Contracts and in
      relation to Sahara Assets;

            

    

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    
      	
              (b)  

            	
              an
      officers certificate containing articles, bylaws, and certified copies of
      such resolutions of the shareholders and directors of Sahara as are
      required to be passed to authorize the execution, delivery and
      implementation of this Agreement;

            

    

    

    
      	
              (c)  

            	
              an
      acknowledgement from Sahara of the satisfaction of the conditions
      precedent set forth in section 7.3
hereof;

            

    

    

    
      	
              (d)  

            	
              such
      other documents as MFI may reasonably require to give effect to the terms
      and intention of this Agreement.

            

    

    

    Documents
to be Delivered by MFI

    

    9.3              On
or before the Closing, MFI and the Acquirer shall deliver or cause to be
delivered to Sahara:

    

    
      	
              (a)  

            	
              share
      certificates representing the Acquisition Shares duly registered in the
      names of the Sahara Shareholders;

            

    

    

    
      	
              (b)  

            	
              an
      officers certificate containing articles, bylaws, and certified copies of
      such resolutions of the directors of MFI and the Acquirer as are required
      to be passed to authorize the execution, delivery and implementation of
      this Agreement;

            

    

    

    
      	
              (c)  

            	
              a
      certified copy of a resolution of the directors of MFI dated as of the
      Closing Date appointing the nominees of the Sahara Shareholders to the
      board of directors of MFI;

            

    

    

    
      	
              (d)  

            	
              resignations
      of each of the officers and directors of MFI in a form reasonably
      acceptable to Sahara;

            

    

    

    
      	
              (e)  

            	
              an
      acknowledgement from MFI of the satisfaction of the conditions precedent
      set forth in section 7.1 hereof;

            

    

    

    
      	
              (f)  

            	
              an
      opinion of counsel to MFI reasonably acceptable to
  Sahara;

            

    

    

    
      	
              (g)  

            	
              such
      other documents as Sahara may reasonably require to give effect to the
      terms and intention of this
Agreement.

            

    

    

    
      	
              (h)  

            	
              proof
      of the filing of all tax returns referred to in Section 3.1(x) in the
      appropriate jurisdictions for MFI and any of its
    subsidiaries.

            

    

     

    Other
Documents and Wires to be Delivered by MFI and Sahara

     

    
      	
              9.4  

            	
              On
      or before the Closing, the following shall be
  delivered:

            

    

    

    
      	
              (a)  

            	
              Wire
      transfers shall be made pursuant to the disbursement letter in the amounts
      and to the parties as set forth in Section 7.1(m);
  and

            

    

    
      	
              (b)  

            	
              Securities
      representing the MFI shares and MFI warrant shall be delivered in the
      amounts and to the parties as set forth in Section
  7.1(l).

            

    

    

    

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    
 

    ARTICLE
10

    POST-CLOSING
MATTERS

    

    General

    

    10.1              Forthwith
after the Closing, MFI and Sahara agree to use all their best efforts
to:

    

    
      	
              (a)  

            	
              file
      the Certificate of Merger with the Secretary of State of
      Delaware;

            

    

    

    
      	
              (b)  

            	
              issue
      a news release reasonably acceptable to each party reporting the
      Closing;

            

    

    

    
      	
              (c)  

            	
              file
      a Form 8-K with the Securities and Exchange Commission disclosing the
      terms of this Agreement which includes audited financial statements of
      Sahara as well as pro forma financial information of Sahara and MFI as
      required by Regulation S-X as promulgated by the Commission (all at no
      cost to the Sahara Shareholders);
and

            

    

    

    
      	
              (d)  

            	
              RESERVED.

            

    

    

    
      	
              (e)  

            	
              Complete
      the funding of at least $5,000,000 under the PPM and the Subscription
      Agreements.

            

    

    

    
      	
              (f)  

            	
              Complete
      the issuance of 100,000 shares of common stock of MFI to Marathon
      Advisors, within 10 business days after the
  Closing.

            

    

    

    

    

    ARTICLE
11

    GENERAL
PROVISIONS

    

    Arbitration

    

    11.1             The
parties hereto shall attempt to resolve any dispute, controversy, difference or
claim arising out of or relating to this Agreement by negotiation in good
faith.  If such good negotiation fails to resolve such dispute,
controversy, difference or claim within thirty (30) days after any party
delivers to any other party a notice of its intent to submit such matter to
arbitration, then any party to such dispute, controversy, difference or claim
may submit such matter to arbitration.

    

                      
Any action or proceeding seeking to enforce any provision of, or based upon any
right arising out of, this Agreement shall be settled by binding arbitration by
a panel of three (3) arbitrators in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and governed by the laws of the
State of Delaware (without regard to the choice-of-law rules or principles of
that jurisdiction).  Judgment upon the award may be entered in any
court located in the State of New York, and all the parties hereto hereby
expressly waive any objections or defense based upon lack of personal
jurisdiction.

    

                      
Each of the plaintiff and defendant party to the arbitration shall select one
(1) arbitrator (or where multiple plaintiffs and/or defendants exist, one (1)
arbitrator shall be chosen collectively by such parties comprising the
plaintiffs and one (1) arbitrator shall be chosen collectively by those parties
comprising the defendants) and then the two (2) arbitrators shall mutually agree
upon the third arbitrator.  Where no agreement can be reached on the
selection of either a third arbitrator or an arbitrator to be named by either a
group of plaintiffs or a group of defendants, any implicated party may apply to
a judge of the courts of the State of New York, to name an
arbitrator.    Process in any such action or proceeding may
be served on any party anywhere in the world.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    Indemnification
Provisions

    

    11.2           
Notice to Indemnifying Party.  If any party (the "Indemnitee")
receives notice of any claim or the commencement of any action or proceeding
with respect to which the other party (or parties) is obligated to provide
indemnification (the "Indemnifying Party") pursuant to Sections 3.3 or 5.3
hereof, the Indemnitee shall give the Indemnifying Party written notice thereof
within a reasonable period of time following the Indemnitee’s receipt of such
notice.  Such notice shall describe the claim in reasonable detail and
shall indicate the amount (estimated if necessary) of the losses that have been
or may be sustained by the Indemnitee.  The Indemnifying Party may,
subject to the other provisions of this Section 11.2, compromise or defend, at
such Indemnifying Party's own expense and by such Indemnifying Party's own
counsel, any such matter involving the asserted liability of the Indemnitee in
respect of a third-party claim.  If the Indemnifying Party elects to
compromise or defend such asserted liability, it shall within thirty (30) days
(or sooner, if the nature of the asserted liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee, shall reasonably
cooperate, at the request and reasonable expense of the Indemnifying Party, in
the compromise of, or defense against, such asserted liability.  The
Indemnifying Party will not be released from any obligation to indemnify the
Indemnitee hereunder with respect to a claim without the prior written consent
of the Indemnitee, unless the Indemnifying Party delivers to the Indemnitee a
duly executed agreement settling or compromising such claim with no monetary
liability to or injunctive relief against the Indemnitee and a complete release
of the Indemnitee with respect thereto.  The Indemnifying Party shall
have the right to conduct and control the defense of any third-party claim made
for which it has been provided notice hereunder.  All costs and fees
incurred with respect to any such claim will be borne by the Indemnifying
Party.  The Indemnitee will have the right to participate, but not
control, at its own expense, the defense or settlement of any such claim;
provided, that if the Indemnitee and the Indemnifying Party shall have
conflicting claims or defenses, the Indemnifying Party shall not have control of
such conflicting claims or defenses and the Indemnitee shall be entitled to
appoint a separate counsel for such claims and defenses at the cost and expense
of the Indemnifying Party.   If the Indemnifying Party chooses to
defend any claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are reasonably
required for such defense.  The provisions of this Section shall be
subject to that certain Indemnification Agreement between Sahara and
JTO.

    

    Notice

    

    11.3             Any
notice required or permitted to be given by any party will be deemed to be given
when in writing and delivered to the address for notice of the intended
recipient by personal delivery, prepaid  certified or registered mail,
or Facsimile. Any notice delivered by mail shall be deemed to have been received
on the fourth business day after and excluding the date of mailing, except in
the event of a disruption in regular postal service in which event such notice
shall be deemed to be delivered on the actual date of receipt. Any notice
delivered personally or by Facsimile shall be deemed to have been received on
the actual date of delivery.

    

    Addresses
for Service

    

    11.4              The
address for service of notice of each of the parties hereto is as
follows:

    

    
      	
              (a)  

            	
              MFI
      or the Acquirer:

            

    

    

    Mac
Filmworks, Inc.

    3
Riverway, Suite 1800

    Houston,
Texas 77056

    Attn:  Dwayne
Deslatte, Chief Executive Officer

    Phone:  (281)
748-3277

    

    With a
copy to:

    

    Thomas C.
Pritchard

    Brewer
& Pritchard PC

    3
Riverway, Suite 1800

    Houston,
Texas 77056

    Fax: 713
209 2911

    

    
      	
              (b)  

            	
              Sahara:

            

    

    

    Sahara
Media, Inc.

    75
Franklin Street, 2nd
Floor

    New York,
NY 10013

    Attn:  Philmore
Anderson IV, Chief Executive Officer

    Phone:
212-465-3428

    Facsimile:
212-226-7451

    

    With a
copy to:

    

    Sichenzia
Ross Friedman Ference LLP

    61
Broadway

    New York,
New York 10006

    Attn:  Marc
Ross, Esq.

    Phone:  (212)
930-9700

    Telecopier:  (212)
930-9725

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    Change
of Address

    

    11.5              Any
party may, by notice to the other parties change its address for notice to some
other address in North America and will so change its address for notice
whenever the existing address or notice ceases to be adequate for delivery by
hand. A post office box may not be used as an address for service.

    

    Further
Assurances

    

    11.6              Each
of the parties will execute and deliver such further and other documents and do
and perform such further and other acts as any other party may reasonably
require to carry out and give effect to the terms and intention of this
Agreement.

    

    Time
of the Essence

    

    11.7              Time
is expressly declared to be the essence of this Agreement.

    

    Entire
Agreement

    

    11.8              The
provisions contained herein constitute the entire agreement among Sahara, the
Acquirer and MFI respecting the subject matter hereof and supersede all previous
communications, representations and agreements, whether verbal or written, among
Sahara, the Acquirer and MFI with respect to the subject matter
hereof.

    

    Enurement

    

    11.9              This
Agreement will enure to the benefit of and be binding upon the parties hereto
and their respective heirs, executors, administrators, successors and permitted
assigns.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    Assignment

    

    11.10              This
Agreement is not assignable without the prior written consent of the parties
hereto.

    

    Expenses

    

    11.11              
Each party agrees to pay, without right of reimbursement from any other party
and regardless of whether or not the transaction is consummated, the costs
incurred by it in connection with this transaction, including legal fees and
other costs incidental to the negotiation of the terms of the transaction and
the preparation of related documentation; notwithstanding anything to the
contrary herein, legal fees owed to Brewer & Pritchard PC (some of which
relate to the transaction set forth in this Agreement) will be paid at Closing
as set forth in Section 9.4 hereof.

    

    Counterparts

    

    11.12              This
Agreement may be executed in counterparts, each of which when executed by any
party will be deemed to be an original and all of which counterparts will
together constitute one and the same Agreement. Delivery of executed copies of
this Agreement by Facsimile will constitute proper delivery, provided that
originally executed counterparts are delivered to the parties within a
reasonable time thereafter.

    

    Applicable
Law

    

    11.13               This
Agreement is subject to the laws of the State of Delaware.

    

    Termination

    

    11.14                This
Agreement may only be terminated at any time prior to the Closing
Date:

    

             
(a)           upon mutual
written consent authorized by the Board of Directors of MFI and Sahara;
or

    

             
(b)           by either
MFI or Sahara if the Closing shall not have been consummated by the close of
business on September 30, 2008.

     

     

     

    
 

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of page intentionally left blank.]

    

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

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

    

     

    
      
        	 	MAC
      FILMWORKS, INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Dwayne
      Deslatte	 
	 	 	Dwayne
      Deslatte	 
	 	 	Chief
      Executive Officer	 
	 	 	 	 

      

    

     

    
      
        	 	SAHARA
      MEDIA ACQUSITIONS, INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Dwayne
      Deslatte	 
	 	 	Dwayne
      Deslatte	 
	 	 	President	 
	 	 	 	 

      

    

                                                        

    
      
        	 	SAHARA
      MEDIA, INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Philmore
      Anderson	 
	 	 	Philmore
      Anderson	 
	 	 	Chief
      Executive Officer	 
	 	 	 	 

      

                                                                                                                                   

    In
consideration of the execution by Sahara Media, Inc. (“Sahara”) of the certain
Indemnification Agreement by and between Sahara and the John Thomas Bridge &
Opportunity Fund,  the John Thomas Bridge & Opportunity Fund
hereby agrees to be bound to the terms and conditions of Section 3.3 (Indemnity)
of this Agreement:

     

     

    
      
        	 	JOHN
      THOMAS BRIDGE & OPPORTUNITY FUND:	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ George
      R. Jarkesy, Jr.	 
	 	 	George
      R. Jarkesy, Jr.	 
	 	 	Managing
      Partner	 
	 	 	 	 

      

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    Schedule
A

    

    
      	
              Sahara
      Shareholder

            	
              Sahara
      Shares

            	
              Acquisition
      Shares

            
	
              BPA
      Associates, Inc.

            	
              1,425,000

            	
              1,425,000

            
	
              Kevan
      Walker

            	
              200,000

            	
              200,000

            
	
              Anna
      Rothchild

            	
              100,000

            	
              100,000

            
	
              Philmore
      Anderson III

            	
              452,000

            	
              452,000

            
	
              Philmore
      Anderson IV

            	
              100,000

            	
              100,000

            
	
              Arrow
      Capital

            	
              187,500

            	
              187,500

            
	
              Suzanne
      Burge

            	
              210,000

            	
              210,000

            
	
              John
      Evans

            	
              480,000

            	
              480,000

            
	
              Mary
      Ann Halford

            	
              200,000

            	
              200,000

            
	
              Gregg
      Feinstein

            	
              724,000

            	
              724,000

            
	
              Milo
      Zwerling

            	
              31,000

            	
              31,000

            
	
              Tamara
      Reynolds

            	
              120,000

            	
              120,000

            
	
              Alicia
      Gabaldon

            	
              19,610

            	
              19,610

            
	
              Thomas
      Gamble

            	
              5,500

            	
              5,500

            
	
              Stacy
      Lowenthal

            	
              140,000

            	
              140,000

            
	
              Myron
      Stewart

            	
              27,000

            	
              27,000

            
	
              Keith
      Warner

            	
              15,000

            	
              15,000

            
	
              SE,
      LLC

            	
              13,763,390

            	
              13,763,390

            
	
              Cheryl
      Keeling

            	
              50,000

            	
              50,000

            
	 
      	 
      	 
      
	
              Totals

            	
              18,250,000

            	
              18,250,000

            

    

    

    
 

    26

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}]]