Document:

amendrestatedmgmtagrmt.htm

     

     

    
      

      

    

    EXHIBIT
10.1

     

    AMENDED AND RESTATED
MANAGEMENT AGREEMENT

     

    THIS
AMENDED AND RESTATED MANAGEMENT AGREEMENT dated as of June 30, 2008 by and among
RESOURCE CAPITAL CORP., a Maryland corporation (the “Company”), RESOURCE
CAPITAL MANAGER, INC., a Delaware corporation (together with its permitted
assignees, the “Manager”) and
Resource America, Inc., a Delaware Corporation (“Resource
America”).

     

    WHEREAS,
the Company is a corporation that has elected and has qualified to be treated as
a real estate investment trust for federal income tax purposes;

     

    WHEREAS,
pursuant to a Management Agreement dated as of March 8, 2005, the Company
retained the Manager to provide investment advisory services to the Company and
its subsidiaries on the terms and conditions set forth therein; and

     

    WHEREAS,
the Company and Manager desire to amend and restate the Management Agreement in
its entirety, as set forth below.

     

    NOW
THEREFORE, in consideration of the mutual agreements herein set forth, the
parties hereto agree as follows:

     

    SECTION
1.                                DEFINITIONS.  The
following terms have the meanings assigned them:

     

    (a)         “Adjusted Operating
Earnings” means Operating Earnings plus realized gains, net foreign
currency gains and decreases in expense associated with reversals of provisions
for loan and lease losses; less realized losses and net foreign currency
losses.

     

    (b)         “Affiliate” means a
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person
specified.

     

    (c)         “Agreement” means this
Amended and Restated Management Agreement, as amended from time to
time.

     

    (d)         “Base Management Fee”
means the base management fee, calculated and paid monthly in arrears, in an
amount equal to (i) 1/12 of Equity multiplied by
(ii) 1.50%.

     

    (e)         “Board of Directors”
means the Board of Directors of the Company.

     

    (f)         “Change of Control”
means the occurrence of any of the following:

     

    (i)           the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the assets of the Manager, taken as a whole, to any Person
other than an indirect wholly-owned subsidiary of Resource America;
or

     

    (ii)           the
acquisition by any Person or group (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
successor provision), including any group acting for the purpose of acquiring,
holding or disposing of securities (within the meaning of Rule
13d-5(b)(1) under the Exchange Act), in a single transaction or in a
related series of transactions, by way of merger, consolidation or other
business combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3

     

    
      
        
           

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    under the
Exchange Act, or any successor provision) of 50% or more of the total
voting power of the voting capital interests of the Manager.

     

    (g)         “Code” means the
Internal Revenue Code of 1986, as amended.

     

    (h)         “Common Share” means a
share of capital stock of the Company now or hereafter authorized as common
voting stock of the Company.

     

    (i)         “Company Account” has
the meaning set forth in Section 5 hereof.

     

    (j)         “Company Indemnified
Party” has the meaning set forth in Section
11(b) hereof.

     

    (k)         “Effective Termination
Date” has the meaning set forth in Section
13(a) hereof.

     

    (l)         “Equity” means, for
purposes of calculating the Base Management Fee, for any month the sum of the
net proceeds from any issuance of the Company’s Common Shares, after deducting
any underwriting discounts and commissions and other expenses and costs relating
to the issuance, plus (or minus) the Company’s retained earnings (or
deficit) at the end of such month (without taking into account any non-cash
equity compensation expense incurred in current or prior periods), which amount
shall be reduced by any amount that the Company pays for repurchases of Common
Shares; provided, that
the foregoing calculation of Equity shall be adjusted to exclude one-time events
pursuant to changes in GAAP, as well as non-cash charges after discussion
between the Manager and the Independent Directors and approval by a majority of
the Independent Directors in the case of non-cash charges.

     

    (m)         “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    (n)         “Federal Reserve
Board” means the Board of Governors of the Federal Reserve
System.

     

    (o)         “GAAP” means generally
accepted accounting principles, as applied in the United States.

     

    (p)         “Governing
Instruments” means, with regard to any entity, the articles of
incorporation and bylaws in the case of a corporation, certificate of limited
partnership (if applicable) and the partnership agreement in the case of a
general or limited partnership, the articles of formation and the operating
agreement in the case of a limited liability company, the trust instrument in
the case of a trust, or similar governing documents, in each case as amended
from time to time.

     

    (q)         “Guidelines” shall
have the meaning set forth in Section 2(b)(i) hereof.

     

    (r)         “Incentive
Compensation” means an incentive management fee calculated and payable
each fiscal quarter in an amount, not less than zero, equal to the product of:
(i) twenty-five percent (25%) of the dollar amount by which
(A) the Company’s Adjusted Operating Earnings (before Incentive
Compensation but after the Base Management Fee) for such quarter per Common
Share (based on the weighted average number of Common Shares outstanding for
such quarter) exceeds (B) an amount equal to (1) the weighted
average of the price per share of the Common Shares in the initial offering by
the Company and the prices per share of the Common Shares in any subsequent
offerings by the Company, in each case at the time of issuance thereof,
multiplied by (2) the greater of (a) 2.00% and (b) 0.50% plus
one-fourth of the Ten Year Treasury Rate for such quarter, multiplied by
(ii) the weighted average number of Common Shares outstanding during such
quarter; provided, that
the foregoing calculation of Incentive Compensation shall be adjusted to exclude
events pursuant to changes in GAAP or the
application of GAAP, as well as non-recurring or unusual transactions or events,
after discussion between the Manager and the Independent Directors and approval
by a majority of the Independent Directors in the case of non-recurring or
unusual transactions or events.

    
      
         

      

      
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    (s)         “Indemnified Party”
has the meaning set forth in Section 11(a) hereof.

     

    (t)         “Independent
Directors” means the members of the Board of Directors who are not, and
have not been within the last two years, officers or employees of the Manager or
any Person directly or indirectly controlling or controlled by, or otherwise an
Affiliate of, the Manager and who are otherwise “independent” in accordance with
the Company’s Governing Instruments and, if applicable, the rules of any
national securities exchange on which the Common Shares are listed.

     

    (u)         “Initial Term” has the
meaning set forth in Section 13(a) hereof.

     

    (v)         “Investment Company
Act” means the Investment Company Act of 1940, as amended.

     

    (w)         “Investments” means
the investments of the Company.

     

    (x)         “Operating Earnings”
means net income after operating expenses (which operating expenses will include
Base Management Fees but will not include Incentive Compensation) and preferred
dividends, but before realized and unrealized gains (losses), non-cash equity
compensation expense, net foreign currency gain (loss), gain (loss) on early
retirement of interest rate hedge obligations and income (loss) associated with
credit impairments on investments, loans and leases.

     

    (y)         “Notice of Proposal to
Negotiate” has the meaning set forth in Section
13(a) hereto.

     

    (z)         “Person” means any
individual, corporation, partnership, joint venture, limited liability company,
estate, trust, unincorporated association, any federal, state, county or
municipal government or any bureau, department or agency thereof and any
fiduciary acting in such capacity on behalf of any of the
foregoing.

     

    (aa)           “REIT” means a “real
estate investment trust” as defined under the Code.

     

    (bb)           “Renewal Term” has the
meaning as set forth in Section 13(a) hereto.

     

    (cc)           “Subsidiary” means any
subsidiary of the Company; any partnership, the general partner of which is the
Company or any subsidiary of the Company; and any limited liability company, the
managing member of which is the Company or any subsidiary of the
Company.  The Company's Subsidiaries as of the date hereof are listed
on Exhibit C
hereto.

     

    (dd)           “Ten Year Treasury
Rate” means the average of weekly average yield to maturity for U.S.
Treasury securities (adjusted to a constant maturity of ten
(10) years) as published weekly by the Federal Reserve Board in
publication H.15, or any successor publication, during a fiscal quarter, or if
such rate is not published by the Federal Reserve Board, any Federal Reserve
Bank or agency or department of the federal government selected by the
Company.  If the Company determines in good faith that the Ten-Year
U.S. Treasury Rate cannot be calculated as provided above, then the rate shall
be the arithmetic average of the per annum average yields to maturities, based
upon closing asked prices on each business day during a quarter, for each
actively-traded marketable U.S. Treasury fixed interest rate security with a
final maturity date not less than eight no more than twelve years from the date
of the closing
asked prices as chosen and quoted for each business day in each such quarter in
New York City by at least three recognized dealers in U.S. government securities
selected by the Company.

     

    
      
         

      

      
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    (ee)           “Termination Fee” has
the meaning set forth in Section 13(b) hereof.

     

    (ff)         “Termination Notice”
has the meaning set forth in Section 13(a) hereof.

     

    (gg)           “Treasury Regulations”
means the regulations promulgated under the Code from time to time, as
amended.

     

    SECTION
2.                                APPOINTMENT AND DUTIES OF
THE MANAGER.

     

    (a)           The
Company hereby appoints the Manager to manage the assets of the Company and its
Subsidiaries subject to the further terms and conditions set forth in this
Agreement and the Manager hereby agrees to use its commercially reasonable
efforts to perform each of the duties set forth herein.  The
appointment of the Manager shall be exclusive to the Manager except to the
extent that the Manager otherwise agrees, in its sole and absolute discretion,
and except to the extent that the Manager elects, in accordance with the terms
of this Agreement, to cause the duties of the Manager hereunder to be provided
by third parties.

     

    (b)           The
Manager, in its capacity as manager of the assets and the day-to-day operations
of the Company, at all times will be subject to the supervision of the Company’s
Board of Directors and will have only such functions and authority as the
Company may delegate to it including, without limitation, the functions and
authority identified herein and delegated to the Manager hereby.  The
Manager will be responsible for the day-to-day operations of the Company and
will perform (or cause to be performed) such services and activities
relating to the assets and operations of the Company as may be appropriate,
including, without limitation:

     

    (i)           serving
as the Company’s consultant with respect to the periodic review of the
investment criteria and parameters for Investments, borrowings and operations,
any modifications to which shall be approved by a majority of the Independent
Directors (such policy guidelines as initially approved, as the same may be
modified with such approval, the “Guidelines”) and
other policies for approval by the Board of Directors;

     

    (ii)           investigation,
analysis and selection of investment opportunities;

     

    (iii)           with
respect to any prospective investment by the Company and any sale, exchange or
other disposition of any Investment by the Company, conducting negotiations on
behalf of the Company with sellers and purchasers and their respective agents,
representatives and investment bankers;

     

    (iv)           engaging
and supervising, on behalf of the Company and at the Company’s expense,
independent contractors which provide investment banking, mortgage brokerage,
securities brokerage and other financial services and such other services as may
be required relating to the Investments;

     

    (v)           coordinating
and managing operations of any joint venture or co-investment interests held by
the Company and conducting all matters with the joint venture or co-investment
partners;

     

    
      
         

      

      
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    (vi)           providing
executive and administrative personnel, office space and office services
required in rendering services to the Company;

     

    (vii)           administering
the day-to-day operations of the Company and performing and supervising the
performance of such other administrative functions necessary in the management
of the Company as may be agreed upon by the Manager and the Board of Directors,
including, without limitation, the collection of revenues and the payment of the
Company’s debts and obligations and maintenance of appropriate computer services
to perform such administrative functions;

     

    (viii)           communicating
on behalf of the Company with the holders of any equity or debt securities of
the Company as required to satisfy the reporting and other requirements of any
governmental bodies or agencies or trading markets and to maintain effective
relations with such holders;

     

    (ix)           counseling
the Company in connection with policy decisions to be made by the Board of
Directors;

     

    (x)           evaluating
and recommending to the Board of Directors hedging strategies and engaging in
hedging activities on behalf of the Company, consistent with such strategies, as
so modified from time to time, with the Company’s status as a REIT, and with the
Guidelines;

     

    (xi)           counseling
the Company regarding the maintenance of its status as a REIT and monitoring
compliance with the various REIT qualification tests and other rules set out in
the Code and Treasury Regulations thereunder;

     

    (xii)           counseling
the Company regarding the maintenance of its exclusion from status as an
investment company under the Investment Company Act and monitoring compliance
with the requirements for maintaining such exclusion;

     

    (xiii)           assisting
the Company in developing criteria for asset purchase commitments that are
specifically tailored to the Company’s investment objectives and making
available to the Company its knowledge and experience with respect to mortgage
loans, real estate, real estate securities, other real estate-related assets and
non-real estate related assets;

     

    (xiv)           furnishing
reports and statistical and economic research to the Company regarding the
Company’s activities and services performed for the Company by the Manager or
the Subsidiaries;

     

    (xv)           monitoring
the operating performance of the Investments and providing periodic reports with
respect thereto to the Board of Directors, including comparative information
with respect to such operating performance and budgeted or projected operating
results;

     

    (xvi)           investing
and re-investing any moneys and securities of the Company (including investing
in short-term Investments pending investment in other Investments, payment of
fees, costs and expenses, or payments of dividends or distributions to
stockholders and partners of the Company) and advising the Company as to
its capital structure and capital raising;

     

    
      
         

      

      
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    (xvii)                      causing
the Company to retain qualified accountants and legal counsel, as applicable, to
assist in developing appropriate accounting procedures, compliance procedures
and testing systems with respect to financial reporting obligations and
compliance with the provisions of the Code applicable to REITs and non-taxable
REIT subsidiaries and to conduct quarterly compliance reviews with respect
thereto;

     

    (xviii)                      causing
the Company to qualify to do business in all applicable jurisdictions and to
obtain and maintain all appropriate licenses;

     

    (xix)           assisting
the Company in complying with all regulatory requirements applicable to the
Company in respect of its business activities, including preparing or causing to
be prepared all financial statements required under applicable regulations and
contractual undertakings and all reports and documents, if any, required under
the Exchange Act;

     

    (xx)           taking
all necessary actions to enable the Company and its Subsidiaries to make
required tax filings and reports, including soliciting stockholders for required
information to the extent provided by the provisions of the Code and Treasury
Regulations applicable to REITs;

     

    (xxi)           handling
and resolving all claims, disputes or controversies (including all litigation,
arbitration, settlement or other proceedings or negotiations) in which the
Company may be involved or to which the Company may be subject arising out of
the Company’s day-to-day operations, subject to such limitations or parameters
as may be imposed from time to time by the Board of Directors;

     

    (xxii)                      using
commercially reasonable efforts to cause expenses incurred by or on behalf of
the Company to be commercially reasonable or commercially customary and within
any budgeted parameters or expense guidelines set by the Board of Directors from
time to time;

     

    (xxiii)                      advising
the Company with respect to obtaining appropriate warehouse or other financings
for its assets;

     

    (xxiv)                      advising
the Company with respect to and structuring long-term financing vehicles for the
Company’s portfolio of assets, and offering and selling securities publicly or
privately in connection with any such structured financing;

     

    (xxv)                      performing
such other services as may be required from time to time for management and
other activities relating to the assets of the Company as the Board of Directors
shall reasonably request or the Manager shall deem appropriate under the
particular circumstances; and

     

    (xxvi)                      using
commercially reasonable efforts to cause the Company to comply with all
applicable laws.

     

    Without
limiting the foregoing, the Manager will perform portfolio management services
(the “Portfolio
Management Services”) on behalf of the Company with respect to the
Investments.  Such services will include, but not be limited to,
consulting with the Company on the purchase and sale of, and other investment
opportunities in connection with, the Company’s portfolio of assets; the
collection of information and the submission of reports pertaining to the
Company’s assets, interest rates and general

    
      
         

      

      
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    economic
conditions; periodic review and evaluation of the performance of the Company’s
portfolio of assets; acting as liaison between the Company and banking, mortgage
banking, investment banking and other parties with respect to the purchase,
financing and disposition of assets; and other customary functions related to
portfolio management.  Additionally, the Manager will perform
monitoring services (the “Monitoring Services”)
on behalf of the Company with respect to any loan servicing activities provided
by third parties.  Such Monitoring Services will include, to the
extent applicable, negotiating servicing agreements; acting as a liaison between
the servicers of the assets and the Company; review of servicers’ delinquency,
foreclosure and other reports on assets; supervising claims filed under any
insurance policies; and enforcing the obligation of any servicer to repurchase
assets.

     

    (c)           The
Manager may enter into agreements with other parties, including its Affiliates,
for the purpose of engaging one or more parties for and on behalf, and at the
sole cost and expense, of the Company to provide property management, asset
management, leasing, development and/or other services to the Company
(including, without limitation, Portfolio Management Services and Monitoring
Services) pursuant to agreement(s) with terms which are then customary
for agreements regarding the provision of services to companies that have assets
similar in type, quality and value to the assets of the Company; provided, that (i) any
such agreements entered into with Affiliates of the Manager shall be (A) on
terms no more favorable to such affiliate than would be obtained from a third
party on an arm’s-length basis and (B) to the extent the same do not fall
within the provisions of the Guidelines, approved by a majority of the
Independent Directors, (ii) with respect to Portfolio Management Services,
(A) any such agreements shall be subject to the Company’s prior written
approval (and approved by a majority of the Independent Directors) and
(B) the Manager shall remain liable for the performance of such Portfolio
Management Services, and (iii) with respect to Monitoring Services, any
such agreements shall be subject to the Company’s prior written approval (and
approved by a majority of the Independent Directors).

     

    (d)           The
Manager may retain, for and on behalf, and at the sole cost and expense, of the
Company, such services of accountants, legal counsel, appraisers, insurers,
brokers, transfer agents, registrars, developers, investment banks, financial
advisors, banks and other lenders and others as the Manager deems necessary or
advisable in connection with the management and operations of the
Company.  Notwithstanding anything contained herein to the contrary,
the Manager shall have the right to cause any such services to be rendered by
its employees or Affiliates.  The Company shall pay or reimburse the
Manager or its Affiliates performing such services for the cost thereof; provided, that such costs and
reimbursements are no greater than those which would be payable to outside
professionals or consultants engaged to perform such services pursuant to
agreements negotiated on an arm’s-length basis.

     

    (e)           As
frequently as the Manager may deem necessary or advisable, or at the direction
of the Board of Directors, the Manager shall, at the sole cost and expense of
the Company, prepare, or cause to be prepared, with respect to any Investment,
reports and other information with respect to such Investment as may be
reasonably requested by the Company.

     

    (f)           The
Manager shall prepare, or cause to be prepared, at the sole cost and expense of
the Company, all reports, financial or otherwise, with respect to the Company
reasonably required by the Board of Directors in order for the Company to comply
with its Governing Instruments, or any other materials required to be filed with
any governmental body or agency, and shall prepare, or cause to be prepared, all
materials and data necessary to complete such reports and other materials
including, without limitation, an annual audit of the Company’s books of account
by a nationally recognized independent accounting firm.

     

    (g)           The
Manager shall prepare, at the sole cost and expense of the Company, regular
reports for the Board of Directors to enable the Board of Directors to review
the Company’s acquisitions, portfolio
composition and characteristics, credit quality, performance and compliance with
the Guidelines and policies approved by the Board of
Directors.

    
      
         

      

      
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    (h)           Notwithstanding
anything contained in this Agreement to the contrary, except to the extent that
the payment of additional moneys is proven by the Company to have been required
as a direct result of the Manager’s acts or omissions which result in the right
of the Company to terminate this Agreement pursuant to Section 15 of this
Agreement, the Manager shall not be required to expend money (“Excess
Funds”) in connection with any expenses that are required to be paid
for or reimbursed by the Company pursuant to Section 9 in excess of that
contained in any applicable Company Account (as herein defined) or
otherwise made available by the Company to be expended by the Manager
hereunder.  Failure of the Manager to expend Excess Funds
out-of-pocket shall not give rise or be a contributing factor to the right of
the Company under Section 13(a) of this Agreement to terminate this
Agreement due to the Manager’s unsatisfactory performance.

     

    (i)           In
performing its duties under this Section 2, the Manager shall be entitled to
rely reasonably on qualified experts and professionals (including, without
limitation, accountants, legal counsel and other professional service
providers) hired by the Manager at the Company’s sole cost and
expense.

     

    SECTION
3.                                DEVOTION OF TIME; ADDITIONAL
ACTIVITIES OF THE MANAGER.

     

    (a)           The
Manager will provide the Company with a management team, including a Chief
Executive Officer, President and Chief Financial Officer, along with appropriate
support personnel, to provide the management services to be provided by the
Manager to the Company hereunder, the members of which team shall devote such of
their time to the management of the Company as may be reasonably necessary and
appropriate, commensurate with the level of activity of the Company from time to
time.  Prior to the effective date of any registration statement
registering a class or series of the Company’s securities under the Securities
Act of 1933, as amended, the Manager shall provide the Company with a Chief
Financial Officer who shall be exclusively dedicated to the operations of the
Company.

     

    (b)           The
Manager agrees to offer the Company the right to participate in all investment
opportunities that the Manager determines are appropriate for the Company in
view of its investment objectives, policies and strategies, and other relevant
factors, subject to the exception that, in accordance with the Manager’s
Conflict of Interests Policy (attached hereto as
Exhibit A and as may be amended from time to time in the sole discretion of the
Manager), the Company might not participate in each such opportunity but will on
an overall basis equitably participate with the Manager’s other clients in all
such opportunities.  Except as provided in the penultimate sentence of
this Section 3(b), nothing in this Agreement shall (i) prevent the Manager
or any of its Affiliates, officers, directors or employees, from engaging in
other businesses or from rendering services of any kind to any other Person,
including, without limitation, investing in, or rendering advisory services to
others investing in, any type of Conduit CMBS or other mortgage loans
(including, without limitation, investments that meet the principal investment
objectives of the Company), whether or not the investment objectives or policies
of any such other Person or entity are similar to those of the Company or
(ii) in any way bind or restrict the Manager or any of its Affiliates,
officers, directors or employees from buying, selling or trading any securities
or commodities for their own accounts or for the account of others for whom the
Manager or any of its Affiliates, officers, directors or employees may be
acting.  While information and recommendations supplied to the Company
shall, in the Manager’s reasonable and good faith judgment, be appropriate under
the circumstances and in light of the investment objectives and policies of the
Company, they may be different from the information and recommendations supplied
by the Manager or any Affiliate of the Manager to other investment companies,
funds and advisory accounts.  The Company shall be entitled to
equitable treatment under the circumstances in receiving information,
recommendations and any other

     

    
      
         

      

      
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    services,
but the Company recognizes that it is not entitled to receive preferential
treatment as compared with the treatment given by the Manager or any Affiliate
of the Manager to any investment company, fund or advisory account other than
any fund or advisory account which contains only funds invested
by the Manager, its Affiliates (and not any funds of any
of their clients or customers) or their officers and
directors.  Notwithstanding anything to the contrary in this
Section 3(b), the Manager hereby agrees that, during the term of this
Agreement set forth in Section 13 hereof, neither the Manager nor any entity
controlled by the Manager shall raise, sponsor or advise any new REIT that
invests primarily in domestic mortgage backed securities in the United
States.   The Company shall have the benefit of the Manager’s
best judgment and effort in rendering services hereunder and, in furtherance of
the foregoing, the Manager shall not undertake activities that, in its good
faith judgment, will adversely affect the performance of its obligations under
this Agreement.

     

    (c)           Directors,
officers, employees and agents of the Manager or Affiliates of the Manager may
serve as directors, officers, employees, agents, nominees or signatories for the
Company or any Subsidiary, to the extent permitted by their Governing
Instruments, as from time to time amended, or by any resolutions duly adopted by
the Board of Directors pursuant to the Company’s Governing
Instruments.  When executing documents or otherwise acting in such
capacities for the Company, such Persons shall use their respective titles in
the Company.

     

    (d)           The
Manager is authorized, for and on behalf, and at the sole cost and expense of
the Company, to employ such securities dealers for the purchase and sale of
investment assets of the Company as may, in the good faith judgment of the
Manager, be necessary to obtain the best commercially available net results for
the Company taking into account such factors as the policies of the Company,
price, dealer spread, the size, type, timing and difficulty of the transaction
involved, the firm’s general execution and operational facilities and the firm’s
risk in positioning the securities involved.  Consistent with this
policy, the Manager is authorized to direct the execution of the Company’s
portfolio transactions to dealers and brokers furnishing statistical information
or research deemed by the Manager to be useful or valuable to the performance of
its investment advisory functions for the Company.

     

    (e)           The
Company (including the Board of Directors) agrees to take all actions
reasonably required to permit and enable the Manager to carry out its duties and
obligations under this Agreement, including, without limitation, all steps
reasonably necessary to allow the Manager to file any registration statement on
behalf of the Company in a timely manner or to deliver any financial statements
or other reports with respect to the Company.  If the Manager is not
able to provide a service, or in the reasonable judgment of the Manager it is
not prudent to provide a service, without the approval of the Board of Directors
or the Independent Directors, as applicable, then the Manager shall be excused
from providing such service (and shall not be in breach of this
Agreement) until the applicable approval has been obtained.

     

    SECTION
4.                                AGENCY.  The
Manager shall act as agent of the Company in making, acquiring, financing and
disposing of Investments, disbursing and collecting the Company’s funds, paying
the debts and fulfilling the obligations of the Company, supervising the
performance of professionals engaged by or on behalf of the Company and
handling, prosecuting and settling any claims of or against the Company, the
Board of Directors, holders of the Company’s securities or the Company’s
representatives or properties.

     

    SECTION
5.                                BANK
ACCOUNTS.  At the direction of the Board of Directors, the
Manager may establish and maintain one or more bank accounts in the name of the
Company or any Subsidiary (any such account, a “Company Account”),
and may collect and deposit funds into any such Company Account or Company
Accounts, and disburse funds from any such Company Account or Company Accounts,
under such terms and conditions as the Board of Directors may approve; and the
Manager

     

    
      
         

      

      
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    shall,
from time to time and upon request, render appropriate accountings of such
collections and payments to the Board of Directors and to the auditors of the
Company or any Subsidiary.

     

    SECTION
6.                                RECORDS;
CONFIDENTIALITY.  The Manager shall maintain appropriate books
of accounts and records relating to services performed under this Agreement, and
such books of account and records shall be accessible for inspection by
representatives of the Company or any Subsidiary at any time during normal
business hours upon one (1) business day’s advance written
notice.  The Manager shall keep confidential any and all information
obtained in connection with the services rendered under this Agreement and shall
not disclose any such information (or use the same except in furtherance of its
duties under this Agreement) to nonaffiliated third parties except
(i) with the prior written consent of the Board of Directors, (ii) to
legal counsel, accountants and other professional advisors; (iii) to
appraisers, financing sources and others in the ordinary course of the Company’s
business; (iv) to governmental officials having jurisdiction over the
Company; (v) in connection with any governmental or regulatory filings of
the Company or disclosure or presentations to Company investors; or (vi) as
required by law or legal process to which the Manager or any Person to whom
disclosure is permitted hereunder is a party.  The foregoing shall not
apply to information which has previously become publicly available through the
actions of a Person other than the Manager not resulting from the Manager’s
violation of this Section 6.  The provisions of this Section 6 shall
survive the expiration or earlier termination of this Agreement for a period of
one year.

     

    SECTION
7.                                OBLIGATIONS OF MANAGER;
RESTRICTIONS.

     

    (a)           The
Manager shall require each seller or transferor of investment assets to the
Company to make such representations and warranties regarding such assets as
may, in the reasonable judgment of the Manager, be necessary and appropriate or
as advised by the Board of Directors and consistent with standard industry
practice.  In addition, the Manager shall take such other action as it
deems necessary or appropriate or as advised by the Board of Directors and
consistent with standard industry practice with regard to the protection of the
Investments.

     

    (b)           The
Manager shall refrain from any action that, in its sole judgment made in good
faith, (i) is not in compliance with the Guidelines, (ii) would
adversely affect the status of the Company as a REIT under the Code or the
Company’s status as an entity excluded from investment company status under the
Investment Company Act or (iii) would violate any law, rule or regulation
of any governmental body or agency having jurisdiction over the Company or any
Subsidiary or that would otherwise not be permitted by the Company’s Governing
Instruments.  If the Manager is ordered to take any such action by the
Board of Directors, the Manager shall promptly notify the Board of Directors of
the Manager’s judgment that such action would adversely affect such status or
violate any such law, rule or regulation or the Governing
Instruments.  Notwithstanding the foregoing, the Manager, its
directors, officers, stockholders and employees shall not be liable to the
Company or any Subsidiary, the Board of Directors, or the Company’s or any
Subsidiary’s stockholders or partners, for any act or omission by the Manager,
its directors, officers, stockholders or employees except as provided in Section
11 of this Agreement.

     

    (c)           The
Company shall not invest in joint ventures with the Manager or any affiliate
thereof, unless (i) such Investment is made in accordance with the
Guidelines and (ii) such Investment is approved in advance by a majority of
the Independent Directors.

     

    (d)           The
Manager shall not (i) consummate any transaction which would involve the
acquisition by the Company of an asset in which the Manager or any Affiliate
thereof has an ownership interest or the sale by the Company of an asset to the
Manager or any Affiliate thereof, or (ii) under circumstances where the
Manager is subject to an actual or potential conflict of interest, in the
reasonable judgment of the Manager or the Board of Directors, because it manages
both the Company and another

     

    
      
         

      

      
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    Person
(not an Affiliate of the Company) with which the Company has a contractual
relationship, take any action constituting the granting to such Person of a
waiver, forbearance or other relief, or the enforcement against such Person of
remedies, under or with respect to the applicable contract, unless such
transaction or action, as the case may be and in each case, is approved by a
majority of the Independent Directors.

     

    (e)           The
Board of Directors periodically reviews the Guidelines and the Company’s
portfolio of Investments but will not review each proposed investment, except as
otherwise provided herein.  If a majority of the Independent Directors
determines in the periodic review of transactions by the Independent Directors,
that a particular transaction does not comply with the Guidelines (including as
a result of violation of the provisions of Section 7(d) above), then a
majority of the Independent Directors will consider what corrective action, if
any, can be taken.  The Manager shall be permitted to rely upon the
direction of the Secretary of the Company to evidence the approval of the Board
of Directors or the Independent Directors with respect to a proposed
investment.

     

    (f)           The
Manager shall at all times during the term of this Agreement (including the
Initial Term and any Renewal Term)  maintain a tangible net worth equal to
or greater than $1,000,000.  The Manager shall at all times during the
term of this Agreement maintain “errors and omissions” insurance coverage and
other insurance coverage which is customarily carried by property, asset and
investment managers performing functions similar to those of the Manager under
this Agreement with respect to assets similar to the assets of the Company, in
an amount which is comparable to that customarily maintained by other managers
or servicers of similar assets.

     

    SECTION
8.                                COMPENSATION.

     

    (a)           During
the Initial Term of this Agreement, as the same may be extended from time to
time, the Company shall pay the Manager the Base Management Fee monthly in
arrears commencing with the month in which this Agreement was executed (with
such initial payment pro-rated based on the number of days during such month
that this Agreement was in effect).

     

    (b)           The
Manager shall compute each installment of the Base Management Fee within fifteen
(15) business days after the end of the calendar month with respect to
which such installment is payable.  A copy of the computations made by
the Manager to calculate such installment shall thereafter, for informational
purposes only and subject in any event to Section 13(a) of this Agreement,
promptly be delivered to the Board of Directors and, upon such delivery, payment
of such installment of the Base Management Fee shown therein shall be due and
payable no later than the date which is twenty (20) business days after the
end of the calendar month with respect to which such installment is
payable.

     

    (c)           The
Base Management Fee is subject to adjustment pursuant to and in accordance with
the provisions of Section 13(a) of this Agreement.

     

    (d)           In
addition to the Base Management Fee otherwise payable hereunder, the Company
shall pay the Manager quarterly Incentive Compensation.  The Incentive
Compensation calculation and payment shall be made for each fiscal quarter in
arrears.

     

    (e)           The
Manager shall compute each installment of the Incentive Compensation within 30
days after the end of each fiscal quarter with respect to which such installment
is payable.  A copy of the computations made by the Manager to
calculate such installment shall thereafter, subject to Section 13(a) of
this Agreement, promptly be delivered to the Board of Directors and payment of
such Incentive Compensation, or such other amount as may be determined pursuant
to the last sentence of this Section 8(e), shall be due and payable no later
than the date which is five (5) business days after the date
of

     

    
      
         

      

      
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    delivery
to the Board of Directors of such computations.  The amount of
Incentive Compensation may be increased or decreased, if the Manager agrees and
if a majority of the Independent Directors determines in the exercise of
reasonable discretion that the amount so calculated is not equitable based upon
facts and circumstances that may include, without limitation, dividend payments,
market conditions, managerial performance or other factors not reflected in
Adjusted Operating Earnings.

     

    (f)           Twenty-five
percent (25%) of the Incentive Compensation shall (subject to the remaining
provisions of this Section 8(f) and the provisions of Sections 8(g),
8(h) and 8(i)) be payable to the Manager in Common Shares, and the
remainder thereof shall be paid in cash; provided, the Manager may (subject to
the remaining provisions of this Section 8(f) and the provisions of
Sections 8(g), 8(h) and 8(i)) elect, by so indicating in the
installment calculation delivered to the Board of Directors, to receive more
than twenty-five percent (25%) of the Incentive Compensation in the form of
Common Shares; provided, however, the Manager may not
receive payment of any portion of the Incentive Compensation in the form of
Common Shares, either automatically or by election, if such payment would result
in the Manager directly or indirectly through one or more subsidiaries owning in
the aggregate more than 9.8% of the outstanding Common Shares.  For
purposes of this computation, Common Shares include shares issued and
outstanding (whether vested or unvested or forfeitable or
non-forfeitable) and shares to be issued upon exercise of outstanding stock
options (whether such options are exercisable or nonexercisable).  The
Manager’s receipt of Common Shares in accordance herewith shall be subject to
all applicable securities exchange rules and securities laws (including, without
limitation, prohibitions on insider trading).  All Common Shares paid
to the Manager as Incentive Compensation will be fully vested upon issuance,
provided that the Manager hereby agrees not to sell such shares prior to the
date that is one year after the date such shares are due and
payable.  Notwithstanding such restriction and subject to compliance
with all applicable securities laws (including, without limitation, prohibitions
on insider trading), the Manager shall have the right to allocate such shares in
its sole and absolute discretion to its officers, employees and other
individuals who provide services to it at any time.  In addition, the
foregoing restriction regarding the sale of such shares shall terminate upon
termination of this Agreement.

     

    (g)           Common
Shares payable as Incentive Compensation shall be valued as
follows:

     

    (i)           if
such shares are traded on a securities exchange, the value shall be deemed to be
the average of the closing prices of the shares on such exchange over the thirty
(30) day period ending three (3) days prior to the issuance of such
shares;

     

    (ii)           if
such shares are actively traded over-the-counter, the value shall be deemed to
be the average of the closing bid or sales price as applicable over the thirty
(30) day period ending three (3) days prior to the issuance of such
shares; and

     

    (iii)           if
there is no active public market for such shares, the value shall be the fair
market value thereof, as reasonably determined in good faith by the Board of
Directors of the Company.

     

    (h)           If
at any time the Manager shall, in connection with a determination of fair market
value made by the Board of Directors, (i) dispute such determination in
good faith by more than five percent (5%), and (ii) such dispute cannot be
resolved between the Independent Directors and the Manager within ten
(10) business days after the Manager provides written notice to the Company
of such dispute (the “Valuation Notice”),
then the matter shall be resolved by an independent appraiser of recognized
standing selected jointly by the Independent Directors and the Manager within
not more than twenty (20) days after the Valuation Notice.  In
the event the Independent Directors and the Manager cannot agree with respect to
such selection within the aforesaid twenty (20) day time-frame, the
Independent Directors shall select one such independent appraiser and the
Manager shall select one

     

    
      
         

      

      
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    independent
appraiser within five (5) business days after the expiration of the twenty
(20) day period, with one additional such appraiser (the “Last
Appraiser”) to be selected by the appraisers so designated within
five (5) business days after their selection.  Any valuation
decision made by the appraisers shall be deemed final and binding upon the Board
of Directors and the Manager and shall be delivered to the Manager and the
Company within not more than fifteen (15) days after the selection of the
Last Appraiser.  The expenses of the appraisal shall be paid by the
party with the estimate which deviated the furthest from the final valuation
decision made by the appraisers.

     

    (i)           The
Company agrees to register the issuance and resale of the stock portion of the
Incentive Compensation in accordance with the provisions of Exhibit
B.

     

    SECTION
9.                                EXPENSES OF THE
COMPANY.  The Company shall pay all of its expenses and shall
reimburse the Manager and its Affiliates for documented expenses of the Manager
and its Affiliates incurred on its behalf (collectively, the “Expenses”).  Expenses
include all costs and expenses which are expressly designated elsewhere in this
Agreement as the Company’s, together with the following:

     

    (a)           expenses
in connection with the issuance and transaction costs incident to the
acquisition, disposition and financing of Investments;

     

    (b)           costs
of legal, tax, accounting, consulting, auditing, administrative and other
similar services rendered for the Company by providers retained by the Manager
or, if provided by the employees of the Manager or its Affiliates, in amounts
which are no greater than those which would be payable to outside professionals
or consultants engaged to perform such services pursuant to agreements
negotiated on an arm’s-length basis;

     

    (c)           the
compensation and expenses of the Company’s directors and the cost of liability
insurance to indemnify the Company’s directors and officers;

     

    (d)           costs
associated with the establishment and maintenance of any credit facilities and
other indebtedness of the Company (including commitment fees, accounting fees,
legal fees, closing and other costs) or any securities offerings of the
Company;

     

    (e)           expenses
connected with communications to holders of securities of the Company or its
Subsidiaries and other bookkeeping and clerical work necessary in maintaining
relations with holders of such securities and in complying with the continuous
reporting and other requirements of governmental bodies or agencies, including,
without limitation, all costs of preparing and filing required reports with the
Securities and Exchange Commission, the costs (including transfer agent and
registrar costs) in connection with the listing and/or trading of the Company’s
securities on any exchange or inter-dealer quotation system, the fees to any
such exchange or inter-dealer quotation system in connection with its listing,
costs of complying with the rules, regulations or policies of such exchange or
inter-dealer quotation system, costs of preparing, printing and mailing the
Company’s annual report to its stockholders and proxy materials with respect to
any meeting of the stockholders of the Company;

     

    (f)           the
allocable costs associated with any computer software or hardware, electronic
equipment or purchased information technology services from third party vendors
that is used for the Company;

     

    (g)           expenses
incurred by managers, officers, employees and agents of the Manager and its
Affiliates for travel on the Company’s behalf and other out-of-pocket expenses
incurred by managers, officers, employees and agents of the Manager and its
Affiliates in connection with the purchase,

     

    
      
         

      

      
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    financing,
refinancing, sale or other disposition of an Investment or establishment and
maintenance of any credit facilities and other indebtedness or any securities
offerings of the Company;

     

    (h)           the
allocable costs and expenses incurred with respect to market information systems
and publications, research publications and materials, and settlement, clearing
and custodial fees and expenses;

     

    (i)           compensation
and expenses of the Company’s custodian and transfer agent, if any;

     

    (j)           the
costs of maintaining compliance with all federal, state and local rules and
regulations or any other regulatory agency;

     

    (k)           all
taxes and license fees;

     

    (l)           all
insurance costs incurred in connection with the operation of the Company’s
business except for the costs attributable to the insurance that the Manager
elects to carry for itself and its employees;

     

    (m)           costs
and expenses incurred in contracting with third parties, including Affiliates of
the Manager, for the servicing and special servicing of assets of the
Company;

     

    (n)           all
other costs and expenses relating to the Company’s business and investment
operations, including, without limitation, the costs and expenses of acquiring,
owning, protecting, maintaining, developing and disposing of Investments,
including appraisal, reporting, audit and legal fees;

     

    (o)           expenses
relating to any office(s) or office facilities, including but not limited
to disaster backup recovery sites and facilities, maintained for the Company or
Investments separate from the office or offices of the Manager;

     

    (p)           expenses
connected with the payments of interest, dividends or distributions in cash or
any other form authorized or caused to be made by the Board of Directors to or
on account of the holders of securities of the Company or its Subsidiaries,
including, without limitation, in connection with any dividend reinvestment
plan;

     

    (q)           any
judgment or settlement of pending or threatened proceedings (whether civil,
criminal or otherwise) against the Company or any Subsidiary, or against
any trustee, director or officer of the Company or of any Subsidiary in his or
her capacity as such for which the Company or any Subsidiary is required to
indemnify such trustee, director or officer by any court or governmental agency,
or settlement of pending or threatened proceedings or by the charter and bylaws
of the Company;

     

    (r)           the
allocable portion of rent, telephone, utilities, office furniture, equipment,
machinery and other office, internal and overhead expenses of the Manager and
its Affiliates required for the Company’s operations; and

     

    (s)           all
other expenses actually incurred by the Manager or its Affiliates which are
reasonably necessary for the performance by the Manager of its duties and
functions under this Agreement.

     

    Without
regard to the amount of compensation received under this Agreement by the
Manager, the Manager shall bear the expense of the wages and salaries of
the Manager’s officers and employees.

     

    
      
         

      

      
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    The
provisions of this Section 9 shall survive the expiration or earlier termination
of this Agreement to the extent such expenses have previously been incurred or
are incurred in connection with such expiration or termination.

     

    SECTION
10.                                CALCULATIONS OF
EXPENSES.

     

    The
Manager shall prepare a statement documenting the Expenses of the Company and
the Expenses incurred by the Manager on behalf of the Company during each
calendar month, and shall deliver such statement to the Company within 20 days
after the end of each calendar month.  Expenses incurred by the
Manager on behalf of the Company shall be reimbursed by the Company to the
Manager on the first business day of the month immediately following the date of
delivery of such statement; provided, however, that such
reimbursements may be offset by the Manager against amounts due to the
Company.  The provisions of this Section 10 shall survive the
expiration or earlier termination of this Agreement.

     

    SECTION
11.                                LIMITS OF MANAGER
RESPONSIBILITY; INDEMNIFICATION.

     

    (a)           The
Manager assumes no responsibility under this Agreement other than to render the
services called for under this Agreement in good faith and shall not be
responsible for any action of the Board of Directors in following or declining
to follow any advice or recommendations of the Manager, including as set forth
in Section 7(b) of this Agreement.  The Manager, its members,
managers, officers, employees and Affiliates (including Resource America) will
not be liable to the Company or any Subsidiary, to the Board of Directors, or
the Company’s or any Subsidiary’s stockholders or partners for any acts or
omissions by the Manager, its members, managers, officers, employees or
Affiliates (including Resource America), pursuant to or in accordance with this
Agreement, except by reason of acts constituting bad faith, willful misconduct,
gross negligence or reckless disregard of the Manager’s duties under this
Agreement.  The Company shall, to the full extent lawful, reimburse,
indemnify and hold the Manager, its members, managers, officers, employees and
Affiliates (including Resource America) and each other Person, if any,
controlling the Manager (each, an “Indemnified Party”),
harmless of and from any and all expenses, losses, damages, liabilities,
demands, charges and claims of any nature whatsoever (including attorneys’
fees) in respect of or arising from any acts or omissions of such
Indemnified Party made in good faith in the performance of the Manager’s duties
under this Agreement and not constituting such Indemnified Party’s bad faith,
willful misconduct, gross negligence or reckless disregard of the Manager’s
duties under this Agreement.

     

    (b)           The
Manager and Resource America, jointly and severally, shall, to the full extent
lawful, reimburse, indemnify and hold the Company, its stockholders, directors,
officers and employees and each other Person, if any, controlling the Company
(each, a “Company
Indemnified Party”), harmless of and from any and all expenses, losses,
damages, liabilities, demands, charges and claims of any nature whatsoever
(including attorneys’ fees) in respect of or arising from the Manager’s bad
faith, willful misconduct, gross negligence or reckless disregard of its duties
under this Agreement or any claims by Manager’s employees relating to the terms
and conditions of their employment by Manager.

     

    SECTION
12.                                NO JOINT
VENTURE.  Nothing in this Agreement shall be construed to make
the Company, the Manager and Resource America partners or joint venturers or
impose any liability as such on either of them.

     

    SECTION
13.                                TERM;
TERMINATION.

     

    (a)           Until
this Agreement is terminated in accordance with its terms, this Agreement shall
be in effect until March 31, 2009 (the “Initial Term”) and
shall be automatically renewed for a one-year

     

    
      
         

      

      
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    term on
that date and each anniversary date thereafter (a “Renewal
Term”) unless at least two-thirds of the Independent Directors or
the holders of at least a majority of the outstanding Common Shares agree not to
automatically renew because (i) there has been unsatisfactory performance
by the Manager that is materially detrimental to the Company or (ii) the
compensation payable to the Manager hereunder is unfair; provided, that the Company
shall not have the right to terminate this Agreement under clause
(ii) above if the Manager agrees to continue to provide the services under
this Agreement at a fee that at least two-thirds of the Independent Directors
determines to be fair pursuant to the procedure set forth below.  If
the Company elects not to renew this Agreement at the expiration of the Initial
Term or any such one-year extension term as set forth above, the Company shall
deliver to the Manager prior written notice (the “Termination
Notice”) of the Company’s intention not to renew this Agreement
based upon the terms set forth in this Section 13(a) not less than 180 days
prior to the expiration of the then existing term.  If the Company so
elects not to renew this Agreement, the Company shall designate the date (the
“Effective Termination
Date”), not less than 180 days from the date of the notice, on which the
Manager shall cease to provide services under this Agreement and this Agreement
shall terminate on such date; provided, however, that in the event
that such Termination Notice is given in connection with a determination that
the compensation payable to the Manager is unfair, the Manager shall have the
right to renegotiate such compensation by delivering to the Company, no fewer
than forty-five (45) days prior to the prospective Effective Termination
Date, written notice (any such notice, a “Notice of Proposal to
Negotiate”) of its intention to renegotiate its compensation under
this Agreement.  Thereupon, the Company (represented by the
Independent Directors) and the Manager shall endeavor to negotiate in good
faith the revised compensation payable to the Manager under this
Agreement.  Provided that the Manager and at least two-thirds of the
Independent Directors agree to the terms of the revised compensation to be
payable to the Manager within 45 days following the receipt of the Notice of
Proposal to Negotiate, the Termination Notice shall be deemed of no force and
effect and this Agreement shall continue in full force and effect on the terms
stated in this Agreement, except that the compensation payable to the Manager
hereunder shall be the revised compensation then agreed upon by the parties to
this Agreement.  The Company and the Manager agree to execute and
deliver an amendment to this Agreement setting forth such revised compensation
promptly upon reaching an agreement regarding same.  In the event that
the Company and the Manager are unable to agree to the terms of the revised
compensation to be payable to the Manager during such 45 day period, this
Agreement shall terminate, such termination to be effective on the date which is
the later of (A) ten (10) days following the end of such 45 day period
and (B) the Effective Termination Date originally set forth in the
Termination Notice.

     

    (b)           In
the event that this Agreement is terminated in accordance with the provisions of
Section 13(a) of this Agreement, the Company shall pay to the Manager, on
the date on which such termination is effective, a termination fee (the “Termination
Fee”) equal to the amount of four times the sum of the average
annual Base Management Fee and the average annual Incentive Compensation earned
by the Manager during the two 12-month periods immediately preceding the date of
such termination, calculated as of the end of the most recently completed fiscal
quarter prior to the date of termination.  The obligation of the
Company to pay the Termination Fee shall survive the termination of this
Agreement.

     

    (c)           No
later than 180 days prior to the expiration of the Initial Term or any Renewal
Term, the Manager may deliver written notice to the Company informing it of the
Manager’s intention to decline to renew this Agreement, whereupon this Agreement
shall not be renewed and extended and this Agreement shall terminate effective
upon expiration of the then current term.

     

    (d)           If
this Agreement is terminated pursuant to this Section 13, such termination shall
be without any further liability or obligation of either party to the other,
except as provided in Sections 6, 9, 10, 13(b) and 16 of this
Agreement.  In addition, Sections 8(i) (including the provisions
of Exhibit B) and 11 of this Agreement shall survive termination of this
Agreement.

     

    
      
         

      

      
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    SECTION
14.                                ASSIGNMENT.

     

    (a)           Except
as set forth in Section 14(b) of this Agreement, this Agreement shall
terminate automatically in the event of its assignment, in whole or in part, by
the Manager, unless such assignment is consented to in writing by the Company
with the consent of a majority of the Independent Directors.  Any such
permitted assignment shall bind the assignee under this Agreement in the same
manner as the Manager is bound, and the Manager shall be liable to the Company
for all errors or omissions of the assignee under any such
assignment.  In addition, the assignee shall execute and deliver to
the Company a counterpart of this Agreement naming such assignee as
Manager.  This Agreement shall not be assigned by the Company without
the prior written consent of the Manager, except in the case of assignment by
the Company to another REIT or other organization which is a successor (by
merger, consolidation or purchase of assets) to the Company, in which case
such successor organization shall be bound under this Agreement and by the terms
of such assignment in the same manner as the Company is bound under this
Agreement.

     

    (b)           Notwithstanding
any provision of this Agreement, the Manager may subcontract and assign any or
all of its responsibilities under Sections 2(b), 2(c) and 2(d) of this
Agreement to any of its Affiliates in accordance with the terms of this
Agreement applicable to any such subcontract or assignment, and the Company
hereby consents to any such assignment and subcontracting.  In
addition, provided that the Manager provides prior written notice to the Company
for informational purposes only, nothing contained in this Agreement shall
preclude any pledge, hypothecation or other transfer of any amounts payable to
the Manager under this Agreement.

     

    SECTION
15.                                TERMINATION FOR
CAUSE.

     

    (a)           The
Company may terminate this Agreement effective upon thirty (30) days’ prior
written notice of termination from the Company to the Manager, without payment
of any Termination Fee, if (i) the Manager materially breaches any
provision of this Agreement and such breach shall continue for a period of 30
days after the Manager’s receipt of written notice thereof specifying such
breach and requesting that the same be remedied in such 30 day period,
(ii) the Manager engages in any act of fraud, misappropriation of funds, or
embezzlement against the Company, (iii) there is an event of any gross
negligence on the part of the Manager in the performance of its duties under
this Agreement, (iv) there is a Change of Control of the Manager and a
majority of the Independent Directors determines, in their sole discretion, at
any point during the 18 months following such Change of Control, that such
Change of Control was detrimental to the ability of the Manager to perform its
duties hereunder in substantially the manner conducted prior to such Change of
Control, or (v) there is entered an order for relief or similar decree or
order with respect to the Manager by a court having competent jurisdiction in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or (vi) the Manager (A) ceases, or admits in
writing its inability to pay its debts as they become due and payable, or makes
a general assignment for the benefit of, or enters into an composition or
arrangement with, creditors; (B) applies for, or consents (by admission of
material allegations of a petition or otherwise) to a sequestrator (or
other similar official) of the Manager or of any substantial part of its
properties or assets, or authorizes such an application or consent, or
proceedings seeking such appointment are commenced without such authorization,
consent or application against the Manager and continue undismissed for 60 days;
(C) authorizes or files a voluntary petition in bankruptcy, or applies for
or consents (by admission of material allegations of a petition or
otherwise) to the application of any bankruptcy, reorganization,
arrangement, readjustment of debt, insolvency, dissolution, liquidation or other
similar law of any jurisdiction, or authorizes such application or consent, or
proceedings to such end are instituted against the Manager without such
authorization, application or consent and are approved as properly instituted
and remain undismissed for 60 days or result in adjudication of bankruptcy or
insolvency; or (D) permits

     

    
      
         

      

      
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    or
suffers all or any substantial part of its properties or assets to be
sequestered or attached by court order and the order remains undismissed for 60
days.

     

    (b)           The
Manager agrees that if any of the events specified above occur, it will give
prompt written notice thereof to the Company’s Board of Directors after the
occurrence of such event.

     

    (c)           The
Manager may terminate this Agreement effective upon sixty (60) days’ prior
written notice of termination to the Company in the event that the Company shall
default in the performance or observance of any material term, condition or
covenant contained in this Agreement and such default shall continue for a
period of 30 days after written notice thereof specifying such default and
requesting that the same be remedied in such 30 day period.

     

    (d)           The
Manager may terminate this Agreement, without the Company being required to pay
the Termination Fee, in the event the Company becomes regulated as an
“investment company” under the Investment Company Act, with such termination
deemed to have occurred immediately prior to such event.

     

    SECTION
16.                                ACTION UPON
TERMINATION.  From and after the effective date of termination
of this Agreement, pursuant to Sections 13, 14, or 15 of this Agreement, the
Manager shall not be entitled to compensation for further services under this
Agreement, but shall be paid all compensation accruing to the date of
termination and, if terminated pursuant to Section 13 or Section 15(c), the
applicable Termination Fee.  Upon such termination, the Manager shall
forthwith:

     

    (i)           after
deducting any accrued compensation and reimbursement for its Expenses to which
it is then entitled, pay over to the Company or a Subsidiary all money collected
and held for the account of the Company or a Subsidiary pursuant to this
Agreement;

     

    (ii)           deliver
to the Board of Directors a full accounting, including a statement showing all
payments collected by it and a statement of all money held by it, covering the
period following the date of the last accounting furnished to the Board of
Directors with respect to the Company or a Subsidiary; and

     

    (iii)           deliver
to the Board of Directors all property and documents of the Company or any
Subsidiary then in the custody of the Manager.

     

    SECTION
17.                                RELEASE OF MONEY OR OTHER
PROPERTY UPON WRITTEN REQUEST.  The Manager agrees that any
money or other property of the Company or Subsidiary held by the Manager under
this Agreement shall be held by the Manager as custodian for the Company or
Subsidiary, and the Manager’s records shall be appropriately marked clearly to
reflect the ownership of such money or other property by the Company or such
Subsidiary.  Upon the receipt by the Manager of a written request
signed by a duly authorized officer of the Company requesting the Manager to
release to the Company or any Subsidiary any money or other property then held
by the Manager for the account of the Company or any Subsidiary under this
Agreement, the Manager shall release such money or other property to the Company
or any Subsidiary within a reasonable period of time, but in no event later than
sixty (60) days following such request.  The Manager shall not be
liable to the Company, any Subsidiary, the Independent Directors, or the
Company’s or a Subsidiary’s stockholders or partners for any acts performed or
omissions to act by the Company or any Subsidiary in connection with the money
or other property released to the Company or any Subsidiary in accordance with
the second sentence of this Section 17.  The Company and any
Subsidiary shall indemnify the Manager and its members, managers, officers and
employees against any and all expenses, losses, damages, liabilities, demands,
charges and claims of
any nature whatsoever, which arise in connection with the Manager’s release of
such money or other property to the Company or any Subsidiary in accordance with
the terms of this Section 17.  Indemnification pursuant to this
provision shall be in addition to any right of the Manager to indemnification
under Section 11 of this Agreement.

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    SECTION
18.                                REPRESENTATIONS AND
WARRANTIES.

     

    (a)           The
Company hereby represents and warrants to the Manager as follows:

     

    (i)           The
Company is duly organized, validly existing and in good standing under the laws
of the State of Maryland, has the corporate power to own its assets and to
transact the business in which it is now engaged and is duly qualified as a
foreign corporation and in good standing under the laws of each jurisdiction
where its ownership or lease of property or the conduct of its business requires
such qualification, except for failures to be so qualified, authorized or
licensed that could not in the aggregate have a material adverse effect on the
business operations, assets or financial condition of the Company.

     

    (ii)           The
Company has the corporate power and authority to execute, deliver and perform
this Agreement and all obligations required hereunder and has taken all
necessary corporate action to authorize this Agreement on the terms and
conditions hereof and the execution, delivery and performance of this Agreement
and all obligations required hereunder.  No consent of any other
person including, without limitation, stockholders or creditors of the Company,
and no license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required by the Company in connection with this Agreement or the
execution, delivery or performance of this Agreement and all obligations
required hereunder.  This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
officer of the Company, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.

     

    (iii)           The
execution, delivery and performance of this Agreement and the documents or
instruments required hereunder will not violate any provision of any existing
law or regulation binding on the Company, or any order, judgment, award or
decree of any court, arbitrator or governmental authority binding on the
Company, or the charter or bylaws of, or any securities issued by, the Company
or of any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Company is a party or by which the Company or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Company,
and will not result in, or require, the creation or imposition of any lien on
any of its property, assets or revenues pursuant to the provisions of any such
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking.

     

    (b)           The
Manager hereby represents and warrants to the Company as follows:

     

    (i)           The
Manager is duly organized, validly existing and in good standing under the laws
of the State of Delaware, has the corporate power to own its assets and
to

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    transact
the business in which it is now engaged and is duly qualified to do business and
is in good standing under the laws of each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
except for failures to be so qualified, authorized or licensed that could not in
the aggregate have a material adverse effect on the business operations, assets
or financial condition of the Manager and its Subsidiaries, taken as a
whole.

     

    (ii)           The
Manager has the corporate power and authority to execute, deliver and perform
this Agreement and all obligations required hereunder and has taken all
necessary corporate action to authorize this Agreement on the terms and
conditions hereof and the execution, delivery and performance of this Agreement
and all obligations required hereunder.  No consent of any other
person including, without limitation, stockholders or creditors of the Manager,
and no license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required by the Manager in connection with this Agreement or the
execution, delivery or performance of this Agreement and all obligations
required hereunder.  This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
agent of the Manager, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the valid and binding obligation of the Manager enforceable against
the Manager in accordance with its terms.

     

    (iii)           The
execution, delivery and performance of this Agreement and the documents or
instruments required hereunder, will not violate any provision of any existing
law or regulation binding on the Manager, or any order, judgment, award or
decree of any court, arbitrator or governmental authority binding on the
Manager, or the charter or bylaws of, or any securities issued by, the Manager
or of any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Manager is a party or by which the Manager or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Manager
and its subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.

     

    (c)           Resource
America hereby represents and warrants to the Company as follows:

     

    (i)           Resource
America is duly organized, validly existing and in good standing under the laws
of the State of Delaware, has the corporate power to own its assets and to
transact the business in which it is now engaged and is duly qualified to do
business and is in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial condition of Resource America and its
Subsidiaries, taken as a whole.

     

    (ii)           Resource
America has the corporate power and authority to execute, deliver and perform
this Agreement and all obligations required hereunder and has taken all
necessary corporate action to authorize this Agreement on the terms and
conditions hereof and the execution, delivery and performance of this Agreement
and all obligations

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    required
hereunder.  No consent of any other person including, without
limitation, stockholders or creditors of Resource America, and no license,
permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
by Resource America in connection with this Agreement or the execution, delivery
or performance of this Agreement and all obligations required
hereunder.  This Agreement has been, and each instrument or document
required hereunder will be, executed and delivered by a duly authorized agent of
Resource America, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the valid and binding obligation of Resource America enforceable
against Resource America in accordance with its terms.

     

    (iii)           The
execution, delivery and performance of this Agreement and the documents or
instruments required hereunder, will not violate any provision of any existing
law or regulation binding on Resource America, or any order, judgment, award or
decree of any court, arbitrator or governmental authority binding on Resource
America, or the charter or bylaws of, or any securities issued by, Resource
America or of any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which Resource America is a party or by which
Resource America or any of its assets may be bound, the violation of which would
have a material adverse effect on the business operations, assets or financial
condition of Resource America and its subsidiaries, taken as a whole, and will
not result in, or require, the creation or imposition of any lien on any of its
property, assets or revenues pursuant to the provisions of any such mortgage,
indenture, lease, contract or other agreement, instrument or
undertaking.

     

    SECTION
19.                                NOTICES.  Unless
expressly provided otherwise in this Agreement, all notices, requests, demands
and other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received when
delivered against receipt or upon actual receipt of (i) personal delivery,
(ii) delivery by reputable overnight courier, (iii) delivery by
facsimile transmission with telephonic confirmation or (iv) delivery by
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:

     

    (a)           If
to the Company:

     

    Resource
Capital Corp.

    712 Fifth
Avenue, 10th Floor

    New York,
NY 10019

    Attention:  Chief
Executive Officer

     

    (b)           If
to Resource America:

     

    Resource
America, Inc.

    1845
Walnut Street, 10th
Floor

    Philadelphia,
PA 19103

    Attention:
Chief Legal Officer

     

    (c)           If
to the Manager:

     

    Resource
Capital Manager, Inc.

    712 Fifth
Avenue, 10th Floor

    New York,
NY 10019

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    Attention:  Chief
Executive Officer

    With a
copy to:

    Resource
America, Inc.

    1845
Walnut Street, 10th
Floor

    Philadelphia,
PA 19103

    Attention:
Chief Legal Officer

     

    Either
party may alter the address to which communications or copies are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section 19 for the giving of notice.

     

    SECTION
20.                                BINDING NATURE OF AGREEMENT;
SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns as provided in this
Agreement.  Each of the Company, the Manager and Resource America
agrees that the representations, warrantees, covenants and agreements of the
Company contained herein are made on behalf of the Company and its wholly-owned
Subsidiaries for the benefit of each of the Manager and Resource America, and
the representations, warranties, covenants and agreements of each of the Manager
and Resource America are for the benefit of the Company and its wholly-owned
Subsidiaries.

     

    SECTION
21.                                ENTIRE
AGREEMENT.  This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter of
this Agreement, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter of this
Agreement.  The express terms of this Agreement control and supersede
any course of performance and/or usage of the trade inconsistent with any of the
terms of this Agreement.  This Agreement may not be modified or
amended other than by an agreement in writing signed by the parties
hereto.

     

    SECTION
22.                                GOVERNING
LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     

    SECTION
23.                                NO WAIVER; CUMULATIVE
REMEDIES.  No failure to exercise and no delay in exercising,
on the part of any party hereto, any right, remedy, power or privilege hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.  No waiver of any provision hereto shall
be effective unless it is in writing and is signed by the party asserted to have
granted such waiver.

     

    SECTION
24.                                COSTS AND
EXPENSES.  Each party hereto shall bear its own costs and
expenses (including the fees and disbursements of counsel and accountants) 
incurred in connection with the negotiations and preparation of and the closing
under this Agreement, and all matters incident thereto.

     

    SECTION
25.                                HEADINGS.  The
headings of the sections of this Agreement have been inserted for convenience of
reference only and shall not be deemed part of this Agreement.

     

    SECTION
26.                                COUNTERPARTS.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original as against any party whose signature

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    appears
thereon, and all of which shall together constitute one and the same
instrument.  This Agreement shall become binding when one or more
counterparts of this Agreement, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the
signatories.

     

    SECTION
27.                                SEVERABILITY.  Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction

     

    SECTION
28.                                GENDER.  Words
used herein regardless of the number and gender specifically used, shall be
deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context
requires.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

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

     

    RESOURCE
CAPITAL CORP.

     

    By:______________________________                                                                

     

    Name: ________________________                                                          

     

    Title:_________________________                                                           

     

    RESOURCE
CAPITAL MANAGER, INC.

    
       

      By:______________________________                                                                

       

      Name: ________________________                                                          

       

      Title:_________________________                                                           

    

    

     

    RESOURCE
AMERICA, INC.

    
       

      By:______________________________                                                                

       

      Name: ________________________                                                          

       

      Title:_________________________                                                           

    

    

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    Exhibit
A

     

     

    RESOURCE CAPITAL MANAGER,
INC.

    

    CONFLICT
OF INTERESTS POLICY

    

    

    Resource Capital Manager, Inc. (the
“Company”) provides investment advisory services and manages the assets and
day-to-day operations of various entities, including Resource Capital Corp.
(“Resource”).  The Company is responsible for all activities relating
to the assets and operations of Resource and, in such capacity, hereby sets
forth the following policies with respect to conflicts of interest that might
arise among Resource and the Company’s other advisees:

    

    
      	
               
      

            	
              ·

            	
              Resource
      will not be permitted to invest in any investment fund or collateralized
      debt obligation (“CDO”) structured, co-structured or managed by the
      Company other than those structured, co-structured or managed on
      Resource’s behalf.  The Company will not receive duplicate
      management fees from any such investment fund or CDO to the extent
      Resource invests in it.

            

    

     

    
      	
               
      

            	
              ·

            	
              Resource
      will not be permitted to purchase investments from, or sell investments
      to, the Company, Resource America, Inc. (“Resource America”) or their
      affiliates, except that we may purchase investments originated by those
      entities within 60 days before Resource’s
  investment.

            

    

     

    
      	
               
      

            	
              ·

            	
              Any
      transaction between entities managed by the Company, Resource America or
      their affiliates and Resource must be approved by a majority of Resource’s
      independent directors.

            

    

     

    With respect to equipment leases, if an
investment is appropriate for more than one investment program, including
Resource’s, the Company will allocate the investment based on the following
factors:

    

    
      	
               
      

            	
              ·

            	
              which
      investment program has been seeking investments for the longest period of
      time;

            

    

     

    
      	
               
      

            	
              ·

            	
              whether
      the investment program has the cash required for the
      investment;

            

    

     

    
      	
               
      

            	
              ·

            	
              whether
      the amount of debt to be incurred with respect to the investment is
      acceptable for the investment
program;

            

    

     

    
      	
               
      

            	
              ·

            	
              the
      effect the investment will have on the investment program’s cash
      flow;

            

    

     

    
      	
               
      

            	
              ·

            	
              whether
      the investment would further diversify, or unduly concentrate, the
      investment program’s investments in a particular lessee, class or type of
      equipment, location, industry; and

            

    

     

    
      	
               
      

            	
              ·

            	
              whether
      the term of the investment is within the term of the investment
      program.

            

    

     

    The
Company may make exceptions to these general policies when other circumstances
make application of the policies inequitable or uneconomic.

     

    
      
        
          LW:
443660.3

        

         

      

      
        A-1

        
          

        

      

      
         

      

    

    Exhibit
B

     

    

     

    Registration
Rights Agreements

     

    1.           Piggyback
Rights.  The Manager and any Permitted Transferee (as
hereinafter defined) shall have the unlimited right to piggyback on to any
registration statement of the Company (other than a registration statement on
Form S-4 or Form S-8 or any successor form); provided, however,
that in the event of an underwritten offering, the managing underwriters
may exclude the shares of the Manager and any Permitted Transferee to the same
extent and in the same proportion that shares of holders (other than the
Company) are excluded, if the managing underwriters determine in good faith
that marketing factors require a limitation on the number of shares to be
included in such offering.

     

    2.           Demand
Rights.  (a)  The Manager and any Permitted
Transferee shall also have the right to require the Company to prepare, file and
maintain at all times such number of registration statements as are specified in
the next sentence of this Section 2(a) exclusively for the issuance and resale
of the stock portion of the Incentive Compensation (the “Compensation
Shares”).  The Manager and any Permitted Transferee shall be entitled
to (i) an unlimited number of registrations on Form S-3 or any successor or
replacement forms and (ii) if the Management Agreement terminates and the
Company is not then eligible to use Form S-3 or any successor or replacement
form, a single registration on such other form as the Company is then eligible
to use.  Notwithstanding anything herein to the contrary, the demand
rights described herein may only be exercised upon request of the Manager and
any Permitted Transferee, in the case of clause (i), who hold in the aggregate
at least twenty percent (20%) of all outstanding Compensation Shares and,
in the case of clause (ii), who hold in the aggregate at least one-third of all
outstanding Compensation Shares.

     

    (b)           The
Manager and any Permitted Transferee shall also have the right to require the
Company to prepare, file and maintain at all times such number of registration
statements as are specified in the next sentence of this Section 2(b)
exclusively for the issuance and resale of (i) the 345,000 common shares and
(ii) the common shares underlying the 651,666 stock options, originally granted
to the Manager in March 2005 (the “2005 Grants” and, together with the
Compensation Shares, the “Incentive Shares”).  The Manager and any
Permitted Transferee shall be entitled to (i) an unlimited number of
registrations on Form S-3 or any successor or replacement forms and (ii) if
the Management Agreement terminates and the Company is not then eligible to use
Form S-3 or any successor or replacement form, a single registration on such
other form as the Company is then eligible to use.  Notwithstanding
anything herein to the contrary, the demand rights described herein may only be
exercised upon request of the Manager and any Permitted Transferee, in the case
of clause (i), who hold in the aggregate at least twenty percent (20%) of
all outstanding 2005 Grants and, in the case of clause (ii), who hold in the
aggregate at least one-third of all outstanding 2005
Grants.  Notwithstanding the foregoing, shares referred to in this
Section 2(b) shall cease to be 2005 Grants when the restrictive legend has been
removed pursuant to Rule 144 of the Securities Act of 1933, as amended (the
“Securities Act).

     

    3.           Registration
Procedures.  The Company shall use its commercially reasonable
efforts to effect or cause to be effected the registration of the Incentive
Shares under the Securities Act to permit the resale of the Incentive Shares by
the Manager or any Permitted Transferee.

     

    4.           Expenses.  The
Company shall bear all expenses of registration, including its professional fees
and registration and filing fees with the SEC, state securities administrators
and applicable stock exchanges, and printing, word processing and delivery and
distribution fees with respect to any registration statement, prospectus
(preliminary or final), or any amendments or supplements thereto,
and

     

    
      
        
           

        

         

      

      
        B-1

        
          

        

      

      
         

      

    

    reasonable
fees and disbursements of one counsel to the Manager and any Permitted
Transferees, provided, however, the Company shall not be liable for the
underwriting discounts and commissions associated with the sale of the Incentive
Shares.

     

    5.           Successors and Assigns;
Permitted Transferees.  The agreements in this Exhibit B shall
inure to the benefit of and be binding upon the successors and assigns of each
of the Company and the Manager.  For purposes of this Exhibit B, the
term Permitted Transferee shall mean each person or entity to whom the Manager
transfers any Incentive Shares.

     

    6.           Indemnification and
Contribution.  (a) The Company agrees to indemnify and
hold harmless (i) the Manager and its Permitted Transferees and
(ii) each person, if any, who controls the Manager and its Permitted
Transferees within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and (iii) the respective
officers, directors, partners, employees, representatives and agents of the
Manager and its Permitted Transferees or any person who controls any of the
foregoing (each person referred to in clause (i), (ii) or (iii) are
referred to collectively as the “Indemnified Parties”), from and against any
losses, claims, damages or liabilities, joint or several, or any actions in
respect thereof (including, but not limited to, any losses, claims, damages,
judgments, expenses, liabilities or actions relating to purchases and sales of
the Incentive Shares) to which each Indemnified Party may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, judgments, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus, including any document
incorporated by reference therein, or in any amendment or supplement thereto or
in any preliminary prospectus relating to a registration statement, or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse, as incurred, the Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) the
Company shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in a
registration statement or prospectus, or in any amendment or supplement thereto
or in any preliminary prospectus relating to a registration statement, in
reliance upon and in conformity with written information pertaining to the
Manager or its Permitted Transferees or furnished to the Company by or on behalf
of the Manager or its Permitted Transferees specifically for inclusion therein
and (ii) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus relating to a
registration statement, the indemnity agreement contained in this subsection
(a) shall not inure to the benefit of the Manager or any Permitted
Transferee from whom the person asserting any such losses, claims, damages or
liabilities purchased the Incentive Shares concerned, to the extent that a
prospectus relating to such Incentive Shares was required to be delivered by the
Manager or such Permitted Transferee, as the case may be, under the Securities
Act in connection with such purchase and any such loss, claim, damage or
liability of the Manager or such Permitted Transferee results from the fact that
there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Incentive Shares to such person, a copy of the
final prospectus if the Company had previously furnished copies thereof to the
Manager or such Permitted Transferee; provided further, however, that this indemnity
agreement will be in addition to any liability which the Company may otherwise
have to such Indemnified Party.  The Company shall also indemnify
underwriters, their officers and directors and each person who controls such
underwriters within the meaning of the Securities Act or the Exchange Act to the
same extent as provided above with respect to the indemnification of the Manager
or any Permitted Transferee if requested by the Manager or such Permitted
Transferee.

     

    
      
        
           

        

         

      

      
        B-2

        
          

        

      

      
         

      

    

    (b)           In
connection with any registration statement in which the Manager or a Permitted
Transferee is participating and as a condition to such participation, the
Manager and such Permitted Transferee, severally and not jointly, will indemnify
and hold harmless the Company, its officers, directors, partners, employees,
representatives, agents and investment advisers and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act (the “Company Indemnified Persons”) from and against any losses,
claims, damages or liabilities or any actions in respect thereof, to which the
Company or any such controlling person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to the registration statement, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that the untrue statement or
omission or alleged untrue statement or omission was made in reliance upon and
in conformity with written information pertaining to the Manager or such
Permitted Transferee or furnished to the Company by or on behalf of the Manager
or such Permitted Transferee specifically for inclusion therein; and, subject to
the limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Company or any Company Indemnified Person for any legal or other
expenses reasonably incurred by the Company or such Company Indemnified Person
in connection with investigating or defending any loss, claim, damage, liability
or action in respect thereof.  This indemnity agreement will be in
addition to any liability which the Manager or such Permitted Transferee may
otherwise have to the Company or any Company Indemnified Person.

     

    (c)           Promptly
after receipt by an indemnified party under this Section 6 of notice of the
commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 6, notify the
indemnifying party of the commencement thereof; but the failure to notify the
indemnifying party shall not relieve it from any liability that it may have
under subsection (a) or (b) above except to the extent that it has
been materially prejudiced by such failure; and provided further that the
failure to notify the indemnifying party shall not relieve it from any liability
that it may have to an indemnified party otherwise than under subsection
(a) or (b) above.  In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who may be counsel to the indemnifying
party unless, in the reasonable judgment of the indemnified party, a potential
conflict exists), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 6 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof.  No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement (i) includes any unconditional
release of such indemnified party from all liability on any claims that are the
subject matter of such action, and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.

     

    (d)           If
the indemnification provided for in this Section 6 is unavailable or
insufficient to hold harmless an indemnified party under subsections (a) or
(b) above, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to in subsection
(a) or (b) above in such proportion as is appropriate to reflect the
relative fault of the indemnifying party or parties on the one

     

    
      
        
           

        

         

      

      
        B-3

        
          

        

      

      
         

      

    

    hand and
the indemnified party on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations.  The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Manager or such Permitted Transferee or such other indemnified party, as the
case may be, on the other, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.  The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection
(d).  Notwithstanding any other provision of this Section 6(d),
neither the Manager nor any Permitted Transferee shall be required to contribute
any amount in excess of the amount by which the net proceeds received by the
Manager or such Permitted Transferee from the sale of the Incentive Shares
pursuant to the registration statement exceeds the amount of damages which the
Manager or such Permitted Transferees have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.  No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.  For purposes of this paragraph (d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.

     

    (e)           The
agreements contained in this Section 6 shall survive the sale of the Incentive
Shares pursuant to a registration statement and shall remain in full force and
effect, regardless of any termination or cancellation of the Management
Agreement or any investigation made by or on behalf of any indemnified
party.

     

    
      
        
           

        

         

      

      
        B-4

        
          

        

      

      
         

      

    

    EXHIBIT
C

    

    
      	
              RCC
      Real Estate, Inc.

            
	
              Resource
      Real Estate Funding 2006-1 CDO Investor, LLC

            
	
              Resource
      Real Estate Funding CDO 2006-1 Ltd.

            
	
              Resource
      Real Estate Funding 2007-1 CDO Investor, LLC

            
	
              Resource
      Real Estate Funding CDO 2007-1 Ltd.

            
	
              RCC
      Real Estate SPE, LLC

            
	
              RCC
      Real Estate SPE 2, LLC

            
	
              RCC
      Real Estate SPE 3, LLC

            
	
              RCC
      Commercial, Inc.

            
	
              Resource
      Capital Funding LLC

            
	
              Ischus
      II, LLC

            
	
              Ischus
      CDO II, Ltd.

            
	
              Apidos
      CDO I, Ltd.

            
	
              Apidos
      CDO III, Ltd.

            
	
              Apidos
      Cinco CDO, Ltd.

            
	
              Resource
      TRS, Inc.

            

    

    

    C-1STANDBY EQUITY DISTRIBUTION AGREEMENT

EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT

 

THIS AGREEMENT dated as of the 27th day of June 2008 (the “Agreement”) between TANGIERS INVESTORS, LP, a limited partnership (the “Investor”), and CORD BLOOD AMERICA, INC., a corporation organized and existing under the laws of the State of Florida (the “Company”).

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company up to Four Million Dollars ($4,000,000) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”); and

 

WHEREAS, such investments will be made in reliance upon the provisions of Regulation D (“Regulation D”) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder (the “Securities Act”), and or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the investments to be made hereunder.

  

NOW, THEREFORE, the parties hereto agree as follows:

 

ARTICLE I.

Certain Definitions

 

Section 1.1. “Advance” shall mean the portion of the Commitment Amount requested by the Company in the Advance Notice.

 

Section 1.2. “Advance Date” shall mean the first (1st) Trading Day after expiration of the applicable Pricing Period for each Advance.

 

Section 1.3. “Advance Notice” shall mean a written notice in the form of Exhibit A attached hereto to the Investor executed by an officer of the Company and setting forth the Advance amount that the Company requests from the Investor.

 

Section 1.4. “Advance Notice Date” shall mean each date the Company delivers (in accordance with Section 2.2(b) of this Agreement) to the Investor an Advance Notice requiring the Investor to advance funds to the Company, subject to the terms of this Agreement. No Advance Notice Date shall be less than ten (10) Trading Days after the prior Advance Notice Date.

 

Section 1.5. “Bid Price” shall mean, on any date, the closing bid price (as reported by Bloomberg L.P.) of the Common Stock on the Principal Market or if the Common Stock is not traded on a Principal Market, the highest reported bid price for the Common Stock, as furnished by the National Association of Securities Dealers, Inc.

 

Section 1.6. “Closing” shall mean one of the closings of a purchase and sale of Common Stock pursuant to Section 2.3.

 

Section 1.7. “Commitment Amount” shall mean the aggregate amount of up to Four Million Dollars ($4,000,000) which the Investor has agreed to provide to the Company in order to purchase the Company’s Common Stock pursuant to the terms and conditions of this Agreement.

 

Section 1.8. “Commitment Period” shall mean the period commencing on the Effective Date, and expiring on the earliest to occur of (x) the date on which the Investor shall have made payment of 

1

Advances pursuant to this Agreement in the aggregate amount of the Commitment Amount, (y) the date this Agreement is terminated pursuant to Section 10.2 or (z) the date occurring twenty-four (24) months after the Effective Date or thirty six (36) months after the Effective Date if twenty-four (24) months after the Effective Date the Company files either an amendment to the then effective registration statement or a new registration statement is declared effective.

 

Section 1.9. “Common Stock” shall mean the Company’s common stock, par value $0.0001 per share.

 

Section 1.10. “Condition Satisfaction Date” shall have the meaning set forth in Section 7.2.

 

Section 1.11. “Damages” shall mean any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorney’s fees and disbursements and costs and expenses of expert witnesses and investigation).

 

Section 1.12. “Effective Date” shall mean the date on which the SEC first declares effective a Registration Statement registering the resale of the Registrable Securities as set forth in Section 7.2(a). 

 

Section 1.13. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Section 1.14. “Material Adverse Effect” shall mean any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement or the Registration Rights Agreement in any material respect.

 

Section 1.15. “Market Price” shall mean the bid price daily volume weighted average price  of the Common Stock during the Pricing Period.

 

Section 1.16. “Maximum Advance Amount” shall be Two Hundred Fifty Thousand Dollars ($250,000) per Advance Notice. 

Section 1.17. “Minimum Advance Amount” shall be Ten Thousand Dollars ($10,000) per Advance Notice.

 

Section 1.18. “NASD” shall mean the National Association of Securities Dealers, Inc.

 

Section 1.19. “Person” shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

Section 1.20. “Pricing Period” shall mean the five (5) consecutive Trading Days after the Advance Notice Date subject to any reduction pursuant to Section 2.2(c).

 

Section 1.21. “Principal Market” shall mean the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the American Stock Exchange, the OTC Bulletin Board or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

 

Section 1.22. “Purchase Price” shall be set at ninety percent (90%) of the Market Price during the Pricing Period. 

2

 

Section 1.23. “Registrable Securities” shall mean the shares of Common Stock to be issued hereunder (i) in respect of which the Registration Statement has not been declared effective by the SEC, (ii) which have not been sold under circumstances meeting all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act (“Rule 144”) or (iii) which have not been otherwise transferred to a holder who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend.

 

Section 1.24. “Registration Rights Agreement” shall mean the Registration Rights Agreement dated the date hereof, regarding the filing of the Registration Statement for the resale of the Registrable Securities, entered into between the Company and the Investor.

 

Section 1.25. “Registration Statement” shall mean a registration statement on Form S-1 (if use of such form is then available to the Company pursuant to the rules of the SEC and, if not, on such other form promulgated by the SEC for which the Company then qualifies and which counsel for the Company shall deem appropriate, and which form shall be available for the resale of the Registrable Securities to be registered thereunder in accordance with the provisions of this Agreement and the Registration Rights Agreement, and in accordance with the intended method of distribution of such securities), for the registration of the resale by the Investor of the Registrable Securities under the Securities Act.

 

Section 1.26. “Regulation D” shall have the meaning set forth in the recitals of this Agreement.

 

Section 1.27. “SEC” shall mean the United States Securities and Exchange Commission.

 

Section 1.28. “Securities Act” shall have the meaning set forth in the recitals of this Agreement.

 

Section 1.29. “SEC Documents” shall mean Annual Reports on Form 10-KSB, 10-K, Quarterly Reports on Form 10-QSB, 10-Q, Current Reports on Form 8-K and Proxy Statements of the Company as supplemented to the date hereof, filed by the Company for a period of at least twelve (12) months immediately preceding the date hereof or the Advance Date, as the case may be, until such time as the Company no longer has an obligation to maintain the effectiveness of a Registration Statement as set forth in the Registration Rights Agreement.

 

Section 1.30. “Trading Day” shall mean any day during which the New York Stock Exchange shall be open for business.

 

Section 1.31. “VWAP” shall mean the volume weighted average price of the Company’s Common Stock as quoted by Bloomberg, LP.

 

ARTICLE II.

Advances

 

Section 2.1. Advances.

 

3

Subject to the terms and conditions of this Agreement (including, without limitation, the provisions of Article VII hereof), the Company, at its sole and exclusive option, may issue and sell to the Investor, and the Investor shall purchase from the Company, shares of the Company’s Common Stock by the delivery, in the Company’s sole discretion, of Advance Notices. The number of shares of Common Stock that the Investor shall purchase pursuant to each Advance shall be determined by dividing the amount of the Advance by the Purchase Price. No fractional shares shall be issued. Fractional shares shall be rounded to the next higher whole number of shares. The aggregate maximum amount of all Advances that the Investor shall be obligated to make under this Agreement shall not exceed the Commitment Amount.

 

Section 2.2. Mechanics.

 

(a) Advance Notice. At any time during the Commitment Period, the Company may require the Investor to purchase shares of Common Stock by delivering an Advance Notice to the Investor, subject to the conditions set forth in Section 7.2; provided, however, the amount for each Advance as designated by the Company in the applicable Advance Notice shall not be less than the Minimum Advance Amount, nor more than the Maximum Advance Amount and the aggregate amount of the Advances pursuant to this Agreement shall not exceed the Commitment Amount. The Company acknowledges that the Investor may sell shares of the Company’s Common Stock corresponding with a particular Advance Notice after the Advance Notice is received by the Investor. There shall be a minimum of ten (10) Trading Days between each Advance Notice Date.

 

(b) Date of Delivery of Advance Notice. An Advance Notice shall be deemed delivered on (i) the Trading Day it is received by facsimile or otherwise by the Investor if such notice is received prior to 5:00 pm Eastern Time, or (ii) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 5:00 pm Eastern Time on a Trading Day or at any time on a day which is not a Trading Day. No Advance Notice may be deemed delivered on a day that is not a Trading Day. 

 

(c)  Purchase Price Floor.  The Company and the Investor shall not effect any sales under this Agreement on any Advance Date where the Market Price for any purchases of Common Stock would be less than the Floor Price.   “Floor Price” means $0.01, which shall be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction.

Section 2.3. Closings. On each Advance Date (i) the Company shall deliver to the Investor such number of shares of the Common Stock registered in the name of the Investor as shall equal (x) the amount of the Advance specified in such Advance Notice pursuant to Section 2.1 herein, divided by (y) the Purchase Price and (ii) upon receipt of such shares, the Investor shall deliver to the Company the amount of the Advance specified in the Advance Notice by wire transfer of immediately available funds. In addition, on or prior to the Advance Date, each of the Company and the Investor shall deliver to the other all documents, instruments and writings required to be delivered by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein. To the extent the Company has not paid the fees, expenses, and disbursements of the Investor in accordance with Section 12.4, the amount of such fees, expenses, and disbursements may be deducted by the Investor (and shall be paid to the relevant party) directly out of the proceeds of the Advance with no reduction in the amount of shares of the Company’s Common Stock to be delivered on such Advance Date. 

 

 

(a)

Company’s Obligations Upon Closing.

 

On each Advance Date:  

(i) The Company shall deliver to the Investor the shares of Common Stock applicable to the Advance in accordance with Section 2.3. The certificates evidencing such shares shall be 

4

free of restrictive legends, provided such shares are registered pursuant to an effective registration statement.

(ii) the Company’s Registration Statement with respect to the resale of the shares of Common Stock delivered in connection with the Advance shall have been declared effective by the SEC;

 

(iii) the Company shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the Registrable Securities, or shall have the availability of exemptions therefrom. The sale and issuance of the Registrable Securities shall be legally permitted by all laws and regulations to which the Company is subject; 

 

(iv) the Company shall have filed with the SEC in a timely manner all reports, notices and other documents required of a “reporting company” under the Exchange Act and applicable Commission regulations;

 

(v) the fees as set forth in Section 12.4 below shall have been paid or can be withheld as provided in Section 2.3; and

 

(vi) The Company’s transfer agent shall be DWAC eligible.

 

(b) Investor’s Obligations Upon Closing Upon receipt of the shares referenced in Section 2.3(a)(i) above and provided the Company is in compliance with its obligations in Section 2.3, the Investor shall deliver to the Company the amount of the Advance specified in the Advance Notice by wire transfer of immediately available funds. 

 

Section 2.4. Lock Up Period. On the date hereof, the Company shall obtain from each officer and director a lock-up agreement, as defined below, in the form annexed hereto as Exhibit “B”. The lock up period under such lock-up agreements shall be for a period of 12 months from the date hereof. 

 

Section 2.5. Hardship.  In the event the Investor sells shares of the Company’s Common Stock after receipt of an Advance Notice and the Company fails to perform its obligations as mandated in Section 2.3, and specifically the Company fails to deliver to the Investor on the Advance Date the shares of Common Stock corresponding to the applicable Advance pursuant to Section 2.3(a)(i), the Company acknowledges that the Investor shall suffer financial hardship and, provided that the Investor has performed its obligations pursuant to Section 2.3,therefore shall be liable for any and all losses, commissions, fees, or financial hardship caused to the Investor.

 

ARTICLE III.

Representations and Warranties of Investor

 

Investor hereby represents and warrants to, and agrees with, the Company that the following are true and correct as of the date hereof and as of each Advance Date:

 

Section 3.1. Organization and Authorization. The Investor is duly incorporated or organized and validly existing in the jurisdiction of its incorporation or organization and has all requisite power and authority to purchase and hold the securities issuable hereunder. The decision to invest and the execution and delivery of this Agreement by such Investor, the performance by such Investor of its obligations hereunder and the consummation by such Investor of the transactions contemplated hereby have been duly authorized and requires no other proceedings on the part of the Investor. The undersigned has the right, power and authority to execute and deliver this Agreement and all other instruments (including, without limitations, the Registration Rights Agreement), on behalf of the Investor. This Agreement has been duly executed and delivered by the Investor and, assuming the execution and delivery hereof and acceptance 

5

thereof by the Company, will constitute the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with its terms.

 

Section 3.2. Evaluation of Risks. The Investor has such knowledge and experience in financial, tax and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and of protecting its interests in connection with this transaction. It recognizes that its investment in the Company involves a high degree of risk.

 

Section 3.3. No Legal Advice From the Company. The Investor acknowledges that it had the opportunity to review this Agreement and the transactions contemplated by this Agreement with his or its own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.

 

Section 3.4. Investment Purpose. The securities are being purchased by the Investor for its own account, and for investment purposes. The Investor agrees not to assign or in any way transfer the Investor’s rights to the securities or any interest therein and acknowledges that the Company will not recognize any purported assignment or transfer except in accordance with applicable Federal and state securities laws. No other person has or will have a direct or indirect beneficial interest in the securities. The Investor agrees not to sell, hypothecate or otherwise transfer the Investor’s securities unless the securities are registered under Federal and applicable state securities laws or unless, in the opinion of counsel satisfactory to the Company, an exemption from such laws is available.

 

Section 3.5. Accredited Investor. The Investor is and shall be on each Advance Date, an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.

 

Section 3.6. Information. The Investor and its advisors (and its counsel), if any, have been furnished with all materials relating to the business, finances and operations of the Company and information it deemed material to making an informed investment decision. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management. Neither such inquiries nor any other due diligence investigations conducted by such Investor or its advisors, if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in this Agreement. The Investor understands that its investment involves a high degree of risk.  The Investor has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to this transaction.

 

Section 3.7. Receipt of Documents. The Investor and its counsel have received and read in their entirety: (i) this Agreement and the Exhibits annexed hereto; (ii) all due diligence and other information necessary to verify the accuracy and completeness of such representations, warranties and covenants; (iii) the Company’s most recent periodic filings filed with the SEC; and (iv) answers to all questions the Investor submitted to the Company regarding an investment in the Company; and the Investor has relied on the information contained therein and has not been furnished any other documents, literature, memorandum or prospectus. 

 

Section 3.8. Registration Rights Agreement. The parties have entered into the Registration Rights Agreement dated the date hereof.

 

Section 3.9. No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the shares of Common Stock offered hereby.

6

 

Section 3.10. Not an Affiliate. The Investor is not an officer, director or a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with the Company or any “Affiliate” of the Company (as that term is defined in Rule 405 of the Securities Act). 

 

Section 3.11. Trading Activities. The Investor’s trading activities with respect to the Company’s Common Stock shall be in compliance with all applicable federal and state securities laws, rules and regulations and the rules and regulations of the Principal Market on which the Company’s Common Stock is listed or traded. Neither the Investor nor its affiliates has an open short position in the Common Stock of the Company, the Investor agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the Common Stock, provided that the Company acknowledges and agrees that upon receipt of an Advance Notice the Investor has the right to sell the shares to be issued to the Investor pursuant to the Advance Notice during the applicable Pricing Period. 

Section 3.12

Reliance on Exemptions. The Investor  understands that the Common Stock is being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that they Company is relying in part upon the truth and accuracy of, and such Investor’ compliance with, the representations, warranties, agreements, acknowledgements and understandings of such Investor set forth here in order to determine the availability of such exemptions and the eligibility of such Investor to acquire the Common Stock. 

Section 3.13

No Governmental Review.  The Investor understands that no United States, federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Common Stock issuable pursuant to this Agreement or the fairness or suitability of the investment in the Common Stock nor have such authorities passed upon or endorsed the merits of the offering of the Common Stock. 

 

ARTICLE IV.

Representations and Warranties of the Company

 

Except as stated below, on the disclosure schedules attached hereto or in the SEC Documents (as defined herein), the Company hereby represents and warrants to, and covenants with, the Investor that the following are true and correct as of the date hereof:

 

Section 4.1. Organization and Qualification. The Company is duly incorporated or organized and validly existing in the jurisdiction of its incorporation or organization and has all requisite corporate power to own its properties and to carry on its business as now being conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole.

 

Section 4.2. Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement, and any related agreements, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Registration Rights Agreement and any related agreements by the Company and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders provided however the Company does not have enough shares of its authorized common stock to issue to the Investor pursuant to this Agreement and the Company will need to (i) seek the approval of its board of directors and stock 

7

holders to amend its certificate of incorporation to increase the number of shares of common stock that it is authorized to issue to 750,000,000 shares of common stock (“Amended Certificate of Incorporation”) and (ii) assuming the Company’s board of directors and shareholders have approved the certificate of amendment to the Company’s certificate of incorporation to increase the number of shares of common stock that the Company is authorized to issue to 750,000,000 shares of common stock (“Amendment Certificate of Incorporation Approval”) and (ii) file the Amended Certificate of Incorporation with the State of Florida (“Amended Certificate of Incorporation Filing”), (iii) this Agreement, the Registration Rights Agreement and any related agreements have been duly executed and delivered by the Company, (iv) this Agreement, the Registration Rights Agreement and assuming the execution and delivery thereof and acceptance by the Investor and any related agreements constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

 

Section 4.3. Capitalization. The authorized capital stock of the Company consists of 300,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, $0.001 par value per share (“Preferred Stock”), of which 195,558,923 shares of Common Stock and no shares of Preferred Stock are issued and outstanding. All of such outstanding shares have been validly issued and are fully paid and nonassessable. Except as disclosed in the SEC Documents, no shares of Common Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. Except as disclosed in the SEC Documents, as of the date hereof, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt securities (iii) there are no outstanding registration statements other than on Form S-8 and (iv) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except pursuant to the Registration Rights Agreement). Except as disclosed in the SEC Documents, there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein. The Company has furnished to the Investor true and correct copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.

 

Section 4.4. No Conflict. Subject to the Amended Certificate of Incorporation Approval and the Amended Certificate of Incorporation Filing the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby will not (i) result in a violation of the Certificate of Incorporation, any certificate of designations of any outstanding series of preferred stock of the Company or By-laws or (ii) conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market on which the Common Stock is quoted) applicable to the Company or any of its subsidiaries or by which any material property or asset of the Company or any of its subsidiaries is bound or affected and which would cause a Material Adverse Effect. Except as disclosed in the SEC Documents, neither the Company nor its subsidiaries is in violation of any term of or in default under its Articles of Incorporation or By-laws or their organizational charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order 

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or any statute, rule or regulation applicable to the Company or its subsidiaries. The business of the Company and its subsidiaries is not being conducted in violation of any material law, ordinance, regulation of any governmental entity. Except as specifically contemplated by this Agreement and subject to the Amended Certificate of Incorporation Approval and the Amended Certificate of Incorporation Filing and as required under the Securities Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement or the Registration Rights Agreement in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. Subject to the Amended Certificate of Incorporation Approval and the Amended Certificate of Incorporation Filing, the Company and its subsidiaries are unaware of any fact or circumstance which might give rise to any of the foregoing.

 

Section 4.5. SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC under the Exchange Act since the 10-KSB for the year ended December 31, 2007. The Company has delivered to the Investor or its representatives, or made available through the SEC’s website at http://www.sec.gov, true and complete copies of the SEC Documents. As of their respective dates, the financial statements of the Company disclosed in the SEC Documents (the “Financial Statements”) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and, fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

Section 4.6. 10b-5. The SEC Documents do not include any untrue statements of material fact, nor do they omit to state any material fact required to be stated therein necessary to make the statements made, in light of the circumstances under which they were made, not misleading.

 

Section 4.7. No Default. Except as disclosed in the SEC Documents, the Company is not in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust or other material instrument or agreement to which it is a party or by which it is or its property is bound (which has not been waived) and neither the execution, nor the delivery by the Company, nor the performance by the Company of its obligations under this Agreement or any of the exhibits or attachments hereto will conflict with or result in the breach or violation (which has not been waived)  of any of the terms or provisions of, or constitute a default or result in the creation or imposition of any lien or charge on any assets or properties of the Company under its Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of trust or other material agreement applicable to the Company or instrument to which the Company is a party or by which it is bound, or any statute, or any decree, judgment, order, rules or regulation of any court or governmental agency or body having jurisdiction over the Company or its properties, in each case which default, lien or charge is likely to cause a Material Adverse Effect on the Company’s business or financial condition.

 

Section 4.8. Absence of Events of Default. Except for matters described in the SEC Documents and/or this Agreement, no Event of Default, as defined in the respective agreement to which the Company is a party, and no event which, with the giving of notice or the passage of time or both, would become an Event of Default (as so defined), has occurred and is continuing, which would have a Material 

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Adverse Effect on the Company’s business, properties, prospects, financial condition or results of operations.

 

Section 4.9. Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. The Company and its subsidiaries do not have any knowledge of any infringement by the Company or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and, to the knowledge of the Company, there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. 

 

Section 4.10. Employee Relations. Neither the Company nor any of its subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened. None of the Company’s or its subsidiaries’ employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good.

 

Section 4.11. Environmental Laws. The Company and its subsidiaries are (i) in compliance with any and all applicable material foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval.

 

Section 4.12. Title. Except as set forth in the SEC Documents, the Company has good and marketable title to its properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are not material to the business of the Company. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries.

 

Section 4.13. Insurance. The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole.

 

Section 4.14. Regulatory Permits. The Company and its subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

 

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Section 4.15. Internal Accounting Controls. The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Schedule 4.15 discloses the deficiencies that have been noted in the SEC Documents.

 

Section 4.16. No Material Adverse Breaches, etc. Except as set forth in the SEC Documents, neither the Company nor any of its subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries. Except as set forth in the SEC Documents, neither the Company nor any of its subsidiaries is in breach of any contract or agreement which breach, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries.

 

Section 4.17. Absence of Litigation. Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have a Material Adverse Effect on the transactions contemplated hereby (ii) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the documents contemplated herein, or (iii) except as expressly disclosed in the SEC Documents, have a Material Adverse Effect on the business, operations, properties, financial condition or results of operation of the Company and its subsidiaries taken as a whole.

 

Section 4.18. Subsidiaries. Except as disclosed in the SEC Documents, the Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, association or other business entity.

 

Section 4.19. Tax Status. Except as disclosed in the SEC Documents, the Company and each of its subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

Section 4.20. Certain Transactions. Except as set forth in the SEC Documents none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

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Section 4.21. Fees and Rights of First Refusal. Except for the Company’s contractual arrangement with Enable Capital Partners in existence prior to the date of this Agreement and as set forth on Schedule 4.21,  the Company is not obligated to offer the securities offered hereunder on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties. 

 

Section 4.22. Use of Proceeds. The Company shall use the net proceeds from this offering for general corporate purposes, including, without limitation, the payment of loans incurred by the Company. However, in no event shall the Company use the net proceeds from this offering for the payment (or loan to any such person for the payment) of any judgment, or other liability, incurred by any executive officer, officer, director or employee of the Company, except for any liability owed to such person for services rendered, [expense reimbursement] or if any judgment or other liability is incurred by such person originating from services rendered to the Company, or the Company has indemnified such person from liability.

 

Section 4.23. Further Representation and Warranties of the Company. For so long as any securities issuable hereunder held by the Investor remain outstanding, the Company acknowledges, represents, warrants and agrees that it will use its best efforts to maintain the listing of its Common Stock on the Principal Market.

  

Section 4.25. Opinion of Counsel. The Company will obtain, subject to applicable securities laws, for the Investor, at the Company’s expense, any and all opinions of counsel which may be reasonably required in order to sell the securities issuable hereunder without restriction.

 

Section 4.26. Dilution. The Company is aware and acknowledges that issuance of shares of the Company’s Common Stock could cause dilution to existing shareholders and could significantly increase the outstanding number of shares of Common Stock. 

 

ARTICLE V.

Indemnification

 

The Investor and the Company represent to the other the following with respect to itself:

 

Section 5.1. Indemnification.

 

(a) In consideration of the Investor’s execution and delivery of this Agreement, and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Investor, and all of its officers, directors, partners, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Investor Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by the Investor Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Investor Indemnitee not arising out of any action or inaction of an Investor Indemnitee, and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Investor Indemnitees. To the 

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extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law. Notwithstanding anything to the contrary herein, the Company will not be liable to any Investor Indemnitee under this Agreement (d) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (e) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Investor Indmnitees’s breach of any of the representations, warranties, covenants or agreements made by such Investor Indemnitee in this Agreement or in the other Registration Rights Agreement or any other document executed pursuant to or in connection with this Agreement. 

(b) In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of the Investor’s other obligations under this Agreement, the Investor shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, shareholders, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Company Indemnitees”) from and against any and all Indemnified Liabilities incurred by the Company Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Investor in this Agreement, the Registration Rights Agreement, or any instrument or document contemplated hereby or thereby executed by the Investor, (b) any breach of any covenant, agreement or obligation of the Investor(s) contained in this Agreement, the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby executed by the Investor, or (c) any cause of action, suit or claim brought or made against such Company Indemnitee based on misrepresentations or due to a breach by the Investor and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Company Indemnitees. To the extent that the foregoing undertaking by the Investor may be unenforceable for any reason, the Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.

 

(c) The obligations of the parties to indemnify or make contribution under this Section 5.1 shall survive termination.

 

ARTICLE VI.

Covenants of the Company

 

Section 6.1. RESERVED. 

 

Section 6.2. Listing of Common Stock. During the term of the Commitment Period, the Company shall maintain the Common Stock’s authorization for quotation on the Principal Market. 

 

Section 6.3. Exchange Act Registration. During the term of the Commitment Period, the Company will cause its Common Stock to continue to be registered under Section 12(g) of the Exchange Act, will file in a timely manner all reports and other documents required of it as a reporting company under the Exchange Act and will not take any action or file any document (whether or not permitted by Exchange Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said Exchange Act.

Section 6.4. Transfer Agent Instructions. Upon effectiveness of the Registration Statement the Company shall deliver instructions to its transfer agent to issue shares of Common Stock to the Investor free of restrictive legends on or before each Advance Date.

 

Section 6.5. Corporate Existence. During the Commitment period, the Company will take all steps necessary to preserve and continue the corporate existence of the Company.

 

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Section 6.6. Notice of Certain Events Affecting Registration; Suspension of Right to Make an Advance. The Company will immediately notify the Investor upon its becoming aware of the occurrence of any of the following events in respect of a registration statement or related prospectus relating to an offering of Registrable Securities: (i) receipt of any request for additional information by the SEC or any other Federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the registration statement or related prospectus; (ii) the issuance by the SEC or any other Federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related prospectus of any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; and the Company will promptly make available to the Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to the Investor any Advance Notice during the continuation of any of the foregoing events.  

Section 6.7. Restriction on Sale of Capital Stock. During the Commitment Period, the Company shall not, without the prior written consent of the Investor, (i) issue or sell any Common Stock or Preferred Stock without consideration or for a consideration per share less than the Bid Price of the Common Stock determined immediately prior to its issuance, or (ii) issue or sell any Preferred Stock warrant, option, right, contract, call, or other security or instrument granting the holder thereof the right to acquire Common Stock without consideration or for a consideration per share less than the Bid Price of the Common Stock determined immediately prior to its issuance. Notwithstanding the foregoing this Section shall not apply in respect of an Exempt Issuance or an underwritten public offering of Common Stock.  For purposes of this Agreement “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors or consultants of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities,(c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities and (d) the issuance of Common Stock set forth on Schedule 6.7. 

Section 6.8. Consolidation; Merger. During the Commitment Period, the Company shall not, at any time after the date hereof, effect any merger or consolidation of the Company with or into, or a transfer of all or substantially all the assets of the Company to another entity (a “Consolidation Event”) unless the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligation to deliver to the Investor such shares of stock and/or securities as the Investor is entitled to receive pursuant to this Agreement.

 

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Section 6.9. Issuance of the Company’s Common Stock. The sale of the shares of Common Stock shall be made in accordance with the provisions and requirements of Regulation D and any applicable state securities law.

 

Section 6.10. Review of Public Disclosures. All SEC filings (including, without limitation, all filings required under the Exchange Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other public disclosures made by the Company, including, without limitation, all press releases, investor relations materials, and scripts of analysts meetings and calls, shall be reviewed and approved for release by the Company’s attorneys and, if containing financial information, the Company’s independent certified public accountants. 

 

Section 6.11. Market Activities. The Company will not, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Common Stock or (ii) sell, bid for or purchase the Common Stock, or pay anyone any compensation for soliciting purchases of the Common Stock.

 

ARTICLE VII.

Conditions for Advance and Conditions to Closing

 

Section 7.1. Conditions Precedent to the Obligations of the Company. The obligation hereunder of the Company to issue and sell the shares of Common Stock to the Investor incident to each Closing is subject to the satisfaction, or waiver by the Company, at or before each such Closing, of each of the conditions set forth below.

 

(a) Accuracy of the Investor’s Representations and Warranties. The representations and warranties of the Investor shall be true and correct in all material respects.

 

(b) Performance by the Investor. The Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Investor at or prior to such Closing.

    

Section 7.2. Conditions Precedent to the Right of the Company to Deliver an Advance Notice. The right of the Company to deliver an Advance Notice is subject to the fulfillment by the Company, on such Advance Notice (a “Condition Satisfaction Date”), of each of the following conditions:

 

(a) Registration of the Common Stock with the SEC. The Company shall have filed with the SEC a Registration Statement with respect to the resale of the Registrable Securities in accordance with the terms of the Registration Rights Agreement. As set forth in the Registration Rights Agreement, the Registration Statement shall have previously become effective and shall remain effective on each Condition Satisfaction Date and (i) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to the Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC’s concerns have been addressed and the Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action), and (ii) no other suspension of the use or withdrawal of the effectiveness of the Registration Statement or related prospectus shall exist. The Registration Statement must have been declared effective by the SEC prior to the first Advance Notice Date.

 

(b) Authority. The Company shall have obtained all permits and qualifications required by any applicable state in accordance with the Registration Rights Agreement for the offer and sale of the 

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shares of Common Stock, or shall have the availability of exemptions therefrom. The sale and issuance of the shares of Common Stock shall be legally permitted by all laws and regulations to which the Company is subject.

 

(c) Fundamental Changes. There shall not exist any fundamental changes to the information set forth in the Registration Statement which would require the Company to file a post-effective amendment to the Registration Statement. 

 

(d) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Company at or prior to each Condition Satisfaction Date.

 

(e) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly and adversely affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement.

 

(f) No Suspension of Trading in or Delisting of Common Stock. The trading of the Common Stock is not suspended by the SEC or the Principal Market (if the Common Stock is traded on a Principal Market). The issuance of shares of Common Stock with respect to the applicable Closing, if any, shall not violate the shareholder approval requirements of the Principal Market (if the Common Stock is traded on a Principal Market). The Company shall not have received any notice threatening the continued listing of the Common Stock on the Principal Market (if the Common Stock is traded on a Principal Market).

 

 

(g) Maximum Advance Amount. The amount of an Advance requested by the Company shall not exceed the Maximum Advance Amount. In addition, in no event shall the number of shares issuable to the Investor pursuant to an Advance cause the aggregate number of shares of Common Stock beneficially owned by the Investor and its affiliates to exceed nine and 9/10 percent (9.9%) of the then outstanding Common Stock of the Company. For the purposes of this section beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.

 

(h) No Knowledge. The Company has no knowledge of any event which would be more likely than not to have the effect of causing such Registration Statement to be suspended or otherwise ineffective.

 

(i) Executed Advance Notice. The Investor shall have received the Advance Notice executed by an officer of the Company and the representations contained in such Advance Notice shall be true and correct as of each Condition Satisfaction Date.

 

ARTICLE VIII.

Due Diligence Review; Non-Disclosure of Non-Public Information

 

Section 8.1. Non-Disclosure of Non-Public Information.

 

(a) The Company covenants and agrees that it shall refrain from disclosing, and shall cause its officers, directors, employees and agents to refrain from disclosing, any material non-public information to the Investor without also disseminating such information to the public, unless prior to disclosure of such information the Company identifies such information as being material non-public information and 

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provides the Investor with the opportunity to accept or refuse to accept such material non-public information for review.

 

(b) Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 8.2 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading.

 

ARTICLE IX.

Choice of Law/Jurisdiction

 

Section 9.1. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California without regard to the principles of conflict of laws. The parties further agree that any action between them shall be heard in the State of California, and expressly consent to the jurisdiction and venue of the courts, sitting in California and the United States District Court of California for the adjudication of any civil action asserted pursuant to this paragraph.

 

ARTICLE X.

Assignment; Termination

 

Section 10.1. Assignment. Neither this Agreement nor any rights of the Company hereunder may be assigned to any other Person. 

 

Section 10.2. Termination. 

 

(a) The obligations of the Investor to make Advances under Article II hereof shall terminate twenty-four (24) months after the Effective Date or thirty six (36) months after the Effective Date if twenty-four (24) months after the Effective Date the Company filed either an amendment to the then effective registration statement or a new registration statement was declared effective. The Company’s obligations under this Agreement shall terminate on the date that the Investor is no longer obligated to make Advances.  

 

(b) The obligation of the Investor to make an Advance to the Company pursuant to this Agreement shall terminate permanently (including with respect to an Advance Date that has not yet occurred) in the event that (i) there shall occur any stop order or suspension of the effectiveness of the Registration Statement for an aggregate of fifty (50) Trading Days, other than due to the acts of the Investor, during the Commitment Period, or (ii) the Company shall at any time fail materially to comply with the requirements of Article VI and such failure is not cured within thirty (30) days after receipt of 

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written notice from the Investor, provided, however, that this termination provision shall not apply to any period commencing upon the filing of a post-effective amendment to such Registration Statement and ending upon the date on which such post effective amendment is declared effective by the SEC.

(c)

In the event that the price of the Company’s Common Stock remains at a price equal to 50% of the Floor Price for a period of at least 90 consecutive days or more, then the Company may terminate this Agreement by providing Investor 45 days written notice of its intent to terminate.   

 

ARTICLE XI.

Notices

 

Section 11.1. Notices. Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

				
	If to the Company, to:

	Cord Blood America, Inc.

	 

	501 Santa Monica Blvd. Suite 700

Santa Monica, California 90401

	 

	 

	 

	Attention: 

	Matthew Schissler

	 

	Telephone:

	310.432.4090

	 

	Facsimile:

	310.432.4098

	 
	 
	 

	 
	With a copy to : Darrin Ocasio, Esq.

                           Sichenzia Ross Friedman Ference LLP

                           61 Broadway, 32 Floor

                           New York, NY 10006

	 
	 
	 

	 

	Tangiers Investors, LP

	 

	If to the Investor(s):

	Edward Liceaga

	 

	1446 Front Street 

Suite 400

	 

	San Diego, California 92101

	 

	 
	 

	 

	Telephone:  

	619-398-9264

	 

	Facsimile:  

	619-566-2011

Each party shall provide five (5) days’ prior written notice to the other party of any change in address or facsimile number.

 

ARTICLE XII.

Miscellaneous

 

Section 12.1. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event any signature page is delivered by facsimile transmission, the party using such means of delivery shall cause four (4) additional original executed signature pages to be physically delivered to the other party within five (5) days of the execution and delivery hereof, though failure to deliver such copies shall not affect the validity of this Agreement.

18

 

Section 12.2. Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Investor, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. 

 

Section 12.3. Reporting Entity for the Common Stock. The reporting entity relied upon for the determination of the trading price or trading volume of the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.

 

Section 12.4. Commitment Fee. The Company hereby agrees to pay the following fees:

(a) Upon the execution of this Agreement the Company shall issue to the Investor shares of Common Stock in an amount equal to One Hundred Sixty Thousand Dollars ($160,000) divided by the lowest VWAP of the Company’s Common Stock, as quoted by Bloomberg, LP, on the date hereof (the “Investor’s Shares”).

 

(b) Fully Earned. The Investor’s Shares shall be deemed fully earned as of the date hereof. 

 

(c) Registration Rights. The Investor’s Shares will have “piggy-back” registration rights.

 

Section 12.5. Brokerage. Each of the parties hereto represents that it has had no dealings in connection with this transaction with any finder or broker who will demand payment of any fee or commission from the other party.  The Company on the one hand, and the Investor, on the other hand, agree to indemnify the other against and hold the other harmless from any and all liabilities to any person claiming brokerage commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby.

 

Section 12.6. Confidentiality. If for any reason the transactions contemplated by this Agreement are not consummated, each of the parties hereto shall keep confidential any information obtained from any other party (except information publicly available or in such party’s domain prior to the date hereof, and except as required by court order) and shall promptly return to the other parties all schedules, documents, instruments, work papers or other written information without retaining copies thereof, previously furnished by it as a result of this Agreement or in connection herein.

 

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.

 

		
	COMPANY:

	Cord Blood America, Inc.

	 

	 

	 
	 

	 
	/s/ Matthew Schissler________

	Name:

	Matthew Schissler

	Title:

	Chief Executive Officer 

	 

	 

	 

	 

	INVESTOR:

	Tangiers Investors, LP

	 
	 

	 
	 

	 
	/s/  Edward Liceaga _________

	By:

	Tangiers Capital, LLC

	Its:

	General Partner

	 
	 

	 
	 

20

EXHIBIT A

 

ADVANCE NOTICE

 

CORD BLOOD AMERICA, INC.

 

The undersigned, _______________________ hereby certifies, with respect to the sale of shares of Common Stock of CORD BLOOD AMERICA, INC. (the “Company”) issuable in connection with this Advance Notice, delivered pursuant to the Securities Purchase Agreement (the “Agreement”), as follows: 

 

1. The undersigned is the duly elected ______________ of the Company.

 

2. There are no fundamental changes to the information set forth in the Registration Statement which would require the Company to file a post effective amendment to the Registration Statement. 

 

3.  The Company has performed in all material respects all covenants and agreements to be performed by the Company and has complied in all material respects with all obligations and conditions contained in the Agreement on or prior to the Advance Notice Date, and shall continue to perform in all material respects all covenants and agreements to be performed by the Company through the applicable Advance Date. All conditions to the delivery of this Advance Notice are satisfied as of the date hereof.

 

4. The undersigned hereby represents, warrants and covenants that it has made all filings (“SEC Filings”) required to be made by it pursuant to applicable securities laws (including, without limitation, all filings required under the Securities Exchange Act of 1934, which include Forms 10-Q or 10-QSB, 10-K or 10-KSB, 8-K, etc.). All SEC Filings and other public disclosures made by the Company, including, without limitation, all press releases, analysts meetings and calls, etc. (collectively, the “Public Disclosures”), have been reviewed and approved for release by the Company’s attorneys and, if containing financial information, the Company’s independent certified public accountants. None of the Company’s Public Disclosures contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

5. The Advance requested is _____________________.

 

The undersigned has executed this Certificate this ____ day of _________________.

 

		
	CORD BLOOD AMERICA, INC.

	 

	 

	By:

	 

	Name:

	 

	Title:

	 

If Returning This Advance Notice via Facsimile Please Send To: (201) 946-0851 

		
	If by Mail, via Federal Express To: 

	Tangiers Investors, LP

	 

	1446 Front Street, Suite 400, San Diego, CA 92101

21

 

EXHIBIT B

 

CORD BLOOD AMERICA, INC.

 

The undersigned hereby agrees that for a period commencing on June ___, 2008 and expiring on the termination of the Securities Purchase Agreement dated June ___, 2009 between the Company and the Investor (the “Lock-up Period”), he, she or it will not, directly or indirectly, without the prior written consent of the Investor, issue, offer, agree or offer to sell, sell, grant an option for the purchase or sale of, transfer, pledge, assign, hypothecate, distribute or otherwise encumber or dispose of any securities of the Company, including common stock or options, rights, warrants or other securities underlying, convertible into, exchangeable or exercisable for or evidencing any right to purchase or subscribe for any common stock (whether or not beneficially owned by the undersigned), or any beneficial interest therein (collectively, the “Securities”) except in accordance with the volume limitations set forth in Rule 144(e) of the General Rules and Regulations under the Securities Act of 1933, as amended.

 

In order to enable the aforesaid covenants to be enforced, the undersigned hereby consents to the placing of legends and/or stop-transfer orders with the transfer agent of the Company’s securities with respect to any of the Securities registered in the name of the undersigned or beneficially owned by the undersigned, and the undersigned hereby confirms the undersigned’s investment in the Company.

 

Dated: _______________, 2008

	
	Signature

	 

	 

	Name: _______________________________________

	Address: _____________________________________

	City, State, Zip Code: ____________________________

	 

	 

	Print Social Security Number

	or Taxpayer I.D. Number

22

SCHEDULE 4.15

 

SEC Deficiencies 

SCHEDULE 4.21

 

Contractual Arrangement with Enable Capital Partners

SCHEDULE 6.7

 

Issuance of Common Stock

23

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