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    SECURITIES
      PURCHASE AGREEMENT

     

    THIS
      SECURITIES PURCHASE AGREEMENT
      (the
“Agreement”),
      dated
      as of November 17, 2006 (the “Agreement
      Date”),
      by
      and among DYADIC
      INTERNATIONAL, INC.,
      a
      Delaware corporation with headquarters located at 140 Intracoastal Pointe Drive,
      Suite 404, Jupiter, Florida 33477 (the “Company”),
      and
      the investors listed on the Schedule of Investors attached hereto as
      Exhibit A (individually, an “Investor”
and
      collectively, the “Investors”).
      

     

    BACKGROUND

     

    A. The
      Company and each Investor are executing and delivering this Agreement in
      reliance upon the exemption from registration afforded by Section 4(2) of
      the Securities Act of 1933, as amended (the “Securities
      Act”),
      and
      Rule 506 of Regulation D (“Regulation
      D”)
      as
      promulgated by the United States Securities and Exchange Commission (the
“SEC”)
      under
      the Securities Act.

     

    B. Each
      Investor, severally and not jointly, wishes to purchase, and the Company wishes
      to sell, upon the terms and conditions stated in this Agreement, (i) that
      aggregate number of shares of the Common Stock, par value $.001 per share,
      of
      the Company (the “Common
      Stock”),
      set
      forth opposite such Investor’s name in column two (2) on the Schedule of
      Investors in Exhibit A
      (which
      aggregate amount for all Investors together shall be [INSERT
      FINAL SHARE NUMBER]
      shares
      of Common Stock and shall collectively be referred to herein as the
“Common
      Shares”)
      and
      (ii) warrants, in substantially the form attached hereto as Exhibit
      F
      (the
“Warrants”) to acquire up to that number of additional shares of Common Stock
      set forth opposite such Investor’s name in column three (3) on the Schedule of
      Investors (the shares of Common Stock issuable upon exercise of or otherwise
      pursuant to the Warrants, collectively, the “Warrant
      Shares”).
      

     

    C. The
      Common Shares, the Warrants and the Warrant Shares issued pursuant to this
      Agreement
      are
      collectively are referred to herein as the “Securities.”
      

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and the Investors agree as
      follows:

     

       
      ARTICLE I  

     

    DEFINITIONS

     

    1.1  Definitions.

     

     
In
      addition to the terms defined elsewhere in this Agreement, the following terms
      have the meanings indicated:

     

    “Abengoa”
means
      Abengoa Bioenergy R&D, Inc.

     

    “Abengoa
      Securities Purchase Agreement”
means
      that certain Securities Purchase Agreement dated as of October 26, 2006 by
      and
      among the Company and Abengoa.

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 144 under the Securities
      Act.

     

    “Agent”
has
      the
      meaning set forth in Section
      3.1(l).

     

    “Agreement”
has
      the
      meaning set forth in the Preamble.

     

    “Best
      Efforts”
means
      the efforts that a prudent person desirous of achieving a result would use
      in
      similar circumstances to ensure that such result is achieved as expeditiously
      as
      practical; provided,
      however,
      that an
      obligation to use Best Efforts under this Agreement does not require the Company
      to dispose of or make any change to its business, expend any material funds
      or
      incur any other material burden.

     

    “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    “Closing”
has
      the
      meaning set forth in Section 2.1.

     

    “Closing
      Date”
      means
      the date and time of the Closing, on the later of: (x) two (2) Business Days
      following the Agreement Date or (y) two (2) Business Days following the date
      of
      the approval of the listing of the Common Shares and Warrant Shares by the
      Trading Market (or such other date and time as is mutually agreed to by the
      Company and each Investor).

     

    “Closing
      Price”
means,
      for any date, the closing price per share of the Common Stock for such date
      (or
      the nearest preceding date) on the American Stock Exchange, or if the Common
      Stock is not then listed on the American Stock Exchange, such other primary
      Eligible Market or exchange or quotation system on which the Common Stock is
      then listed or quoted.

     

    “Company”
      has
      the
      meaning set forth in the Preamble.

     

    “Company
      Counsel”
means
      Greenberg Traurig, LLP, counsel to the Company.

     

    “Common
      Shares”
has
      the
      meaning set forth in Recital B. 

     

    “Common
      Stock”
has
      the
      meaning set forth in Recital B.

     

    “Common
      Stock Equivalents”
means,
      collectively, Options and Convertible Securities. 

     

    “Contingent
      Obligation”
has
      the
      meaning set forth in Section
      3.1(aa).
      

     

    “Convertible
      Securities”
means
      any stock or securities (other than Options) convertible into or exercisable
      or
      exchangeable for Common Stock. 

     

    “Disclosure
      Materials”
has
      the
      meaning set forth in Section 3.1(g).

     

    “Effective
      Date”
means
      the date that the Registration Statement is first declared effective by the
      SEC.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Effectiveness
      Period”
has
      the
      meaning set forth in Section 6.1(b).

     

    “8-K
      Filing”
has
      the
      meaning set forth in Section
      4.5.
      

     

    “Eligible
      Market”
means
      any of the New York Stock Exchange, the American Stock Exchange, The Nasdaq
      National Market or The Nasdaq Capital Market.

     

    “Environmental
      Laws”
has
      the
      meaning set forth in Section
      3.1(dd).
      

     

    “Event”
has
      the
      meaning set forth in Section 6.1(d).

     

    “Event
      Payments”
has
      the
      meaning set forth in Section 6.1(d).

     

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

     

    “Excluded
      Events”
has
      the
      meaning set forth in Section 6.1(d)(ii).

     

    “Excluded
      Investors”
means
      Cowen and Company, LLC and its Affiliates.

     

    “Filing
      Date”
means
      forty-five (45) days after the Closing Date.

     

    “GAAP”
has
      the
      meaning set forth in Section
      3.1(g).
      

     

    “Hazardous
      Materials”
has
      the
      meaning set forth in Section
      3.1(dd).

     

    “Indebtedness”
has
      the
      meaning set forth in Section
      3.1(aa).

     

    “Indemnified
      Party”
has
      the
      meaning set forth in Section 6.4(c).

     

    “Indemnifying
      Party”
has
      the
      meaning set forth in Section 6.4(c).

     

    “Insolvent”
has
      the
      meaning set forth in Section
      3.1(h).
      

     

    “Intellectual
      Property Rights”
has
      the
      meaning set forth in Section 3.1(t).

     

    “Investor”
has
      the
      meaning set forth in the Preamble. 

     

    “Lien”
means
      any lien, charge, claim, security interest, encumbrance, right of first refusal
      or other restriction.

     

    “Losses”
means
      any and all losses, claims, damages, liabilities, settlement costs and expenses,
      including, without limitation and reasonable attorneys’ fees.

     

    “Material
      Adverse Effect”
means
      (i) a material adverse effect on the results of operations, assets, business
      or
      financial condition of the Company and the Subsidiaries, taken as a whole on
      a
      consolidated basis, or (ii) an event or occurrence that materially and
      adversely impairs the Company's ability to perform its obligations under any
      of
      the Transaction Documents, provided, that none of the following alone shall
      be
      deemed, in and of itself, to constitute a Material Adverse Effect: (x) a change
      in the market price or trading volume of the Common Stock or (y) changes in
      general economic conditions or changes affecting the industry in which the
      Company operates generally (as opposed to Company-specific changes) so long
      as
      such changes do not have a disproportionate effect on the Company and its
      Subsidiaries taken as a whole.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “Material
      Permits”
has
      the
      meaning set forth in Section 3.1(v).

     

    “Options”
means
      any outstanding rights, warrants or options to subscribe for or purchase Common
      Stock or Convertible Securities.

     

    “Person”
means
      any individual or corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company, or joint
      stock company. 

     

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, or a partial proceeding, such as a deposition), whether commenced
      or
      threatened in writing. 

     

    “Prospectus”
means
      the prospectus included in the Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by the Registration Statement,
      and
      all other amendments and supplements to the Prospectus including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

     

    “Registrable
      Securities”
means
      the Common Shares and the Warrant Shares issued or issuable pursuant to the
      Transaction Documents, together with any securities issued or issuable upon
      any
      stock split, dividend or other distribution, recapitalization or similar event
      with respect to the foregoing.

     

    “Registration
      Statement”
means
      each registration statement required to be filed under Article VI,
      including (in each case) the Prospectus, amendments and supplements to such
      registration statement or Prospectus, including pre- and post-effective
      amendments, all exhibits thereto, and all material incorporated by reference
      or
      deemed to be incorporated by reference in such registration
      statement.

     

    “Regulation
      D”
has
      the
      meaning set forth in Recital A. 

     

    “Related
      Person”
has
      the
      meaning set forth in Section 4.6.

     

    “Repurchase
      Notice”
has
      the
      meaning set forth in Section 6.1.

     

    “Repurchase
      Price”
has
      the
      meaning set forth in Section 6.1.

     

    “Required
      Effectiveness Date”
means
      the date which is the earliest of (i) if the Registration Statement does not
      become subject to review by the SEC, (a) one hundred five (105) days after
      the
      Closing Date or (b) five (5) Trading Days after the Company receives
      notification from the SEC that the Registration Statement will not become
      subject to review and the Company fails to request to accelerate the
      effectiveness of the Registration Statement, or (ii) if the Registration
      Statement becomes subject to review by the SEC, one hundred thirty-five (135)
      days after the Closing Date.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    “Rule 144,”
      “Rule 415,”
and
      “Rule 424”
means
      Rule 144, Rule 415 and Rule 424, respectively, promulgated by the
      SEC pursuant to the Securities Act, as such Rules may be amended from time
      to
      time, or any similar rule or regulation hereafter adopted by the SEC having
      substantially the same effect as such Rule.

     

    “SEC”
      has the
      meaning set forth in Recital A.

     

    “SEC
      Reports”
has
      the
      meaning set forth in Section 3.1(g).

     

    “Securities”
has
      the
      meaning set forth in Recital C.

     

    “Securities
      Act”
has
      the
      meaning set forth in Recital A. 

     

    “Shares”
means
      shares of the Company’s Common Stock.

     

    “Short
      Sales”
has
      the
      meaning set forth in Section
      3.2(h).
      

     

    “Subsidiary”
means
      any direct or indirect subsidiary of the Company.

     

    “Trading
      Day”
means
      (a) any day on which the Common Stock is listed or quoted and traded on its
      primary Trading Market, (b) if the Common Stock is not then listed or
      quoted and traded on any Eligible Market, then a day on which trading occurs
      on
      the The Nasdaq National Market (or any successor thereto), or (c) if
      trading ceases to occur on the The Nasdaq National Market (or any successor
      thereto), any Business Day.

     

    “Trading
      Market”
means
      The American Stock Exchange or any other Eligible Market, or any national
      securities exchange, market or trading or quotation facility on which the Common
      Stock is then listed or quoted.

     

    “Transaction
      Documents”
means
      this Agreement, the schedules and exhibits attached hereto, the Warrants and
      the
      Transfer Agent Instructions.

     

    “Transfer
      Agent”
means
      Continental Stock Transfer & Trust Company, or any successor transfer agent
      for the Company.

     

    “Transfer
      Agent Instructions”
means,
      with respect to the Company, the Irrevocable Transfer Agent Instructions, in
      the
      form of Exhibit E, executed by the Company and delivered to and
      acknowledged in writing by the Transfer Agent.

     

    “Warrants”
has
      the
      meaning set forth in Recital B.

     

    “Warrant
      Shares”
has
      the
      meaning set forth in Recital B.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

       
      ARTICLE II  

     

    PURCHASE
      AND SALE

     

    2.1  Closing.

     

    Subject
      to the terms and conditions set forth in this Agreement, at the Closing the
      Company shall issue and sell to each Investor, and each Investor shall,
      severally and not jointly, purchase from the Company, such number of Common
      Shares
      and Warrants for the price set forth opposite such Investor's name on
      Exhibit A hereto under the headings “Common Shares” and “Warrants”. The
      date and time of the closing shall be 11:00 a.m.,
      New York
      City Time, on the Closing Date (the “Closing”).
      The
      Closing shall take place at the offices of the Company’s Counsel. 

     

    2.2  Closing
      Deliveries.

     

    (a)  At
      the
      Closing, the Company shall deliver or cause to be delivered to each Investor
      the
      following:

     

    (i)  one
      or
      more stock certificates (or copies thereof provided by the Transfer Agent),
      free
      and clear of all restrictive and other legends (except as expressly provided
      in
Section 4.1(b)
      hereof), evidencing such number of Common Shares set forth opposite such
      Investor’s name on Exhibit A
      hereto
      under the heading “Common Shares,” registered in the name of such
      Investor;

     

    (ii)  a
      Warrant, issued in the name of such Investor, pursuant to which such Investor
      shall have the right to acquire such number of Warrant Shares set forth opposite
      such Investor’s name on Exhibit A
      hereto
      under the heading “Warrant Shares”;

     

    (iii)  a
      legal
      opinion of Company Counsel, in the form of Exhibit C,
      executed by such counsel and delivered to the Investors; 

     

    (iv)  duly
      executed Transfer Agent Instructions acknowledged by the Company’s transfer
      agent; and

     

    (v)  approval
      by the American Stock Exchange of an additional shares listing application
      covering all of the Registrable Securities.

     

    (b)  At
      the
      Closing, each Investor shall deliver or cause to be delivered to the Company
      the
      purchase price set forth opposite such Investor’s name on Exhibit A
      hereto
      under the heading “Purchase Price” in United States dollars and in immediately
      available funds, by wire transfer to an account designated in writing to such
      Investor by the Company for such purpose.

     

     
      ARTICLE III  

     

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1  Representations
      and Warranties of the Company.

     

    The
      Company hereby represents and warrants to the Investors as follows (which
      representations and warranties shall be deemed to apply, where appropriate,
      to
      each Subsidiary of the Company):

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (a)  Subsidiaries.
      The
      Company has no Subsidiaries other than those listed in Schedule 3.1(a)
      hereto.
      Except as disclosed in Schedule 3.1(a)
      hereto,
      the Company owns, directly or indirectly, all of the capital stock or comparable
      equity interests of each Subsidiary free and clear of any Lien and all the
      issued and outstanding shares of capital stock or comparable equity interest
      of
      each Subsidiary are validly issued and are fully paid, non-assessable and free
      of preemptive and similar rights.

     

    (b)  Organization
      and Qualification.
      Each of
      the Company and the Subsidiaries is an entity duly organized, validly existing
      and in good standing under the laws of the jurisdiction of its incorporation
      or
      organization (as applicable), with the requisite legal authority to own and
      use
      its properties and assets and to carry on its business as currently conducted.
      Neither the Company nor any Subsidiary is in violation of any of the provisions
      of its respective certificate or articles of incorporation, bylaws or other
      organizational or charter documents. Each of the Company and the Subsidiaries
      is
      duly qualified to do business and is in good standing as a foreign corporation
      or other entity in each jurisdiction in which the nature of the business
      conducted or property owned by it makes such qualification necessary, except
      where the failure to be so qualified or in good standing, as the case may be,
      would not, individually or in the aggregate, have or reasonably be expected
      to
      result in a Material Adverse Effect.

     

    (c)  Authorization;
      Enforcement.
      The
      Company has the requisite corporate authority to enter into and to consummate
      the transactions contemplated by each of the Transaction Documents to which
      it
      is a party and otherwise to carry out its obligations hereunder and thereunder.
      The execution and delivery of each of the Transaction Documents to which it
      is a
      party by the Company and the consummation by it of the transactions contemplated
      hereby and thereby have been duly authorized by all necessary action on the
      part
      of the Company and no further consent or action is required by the Company,
      its
      Board of Directors or its stockholders. Each of the Transaction Documents to
      which it is a party has been (or upon delivery will be) duly executed by the
      Company and is, or when delivered in accordance with the terms hereof, will
      constitute, the valid and binding obligation of the Company enforceable against
      the Company in accordance with its terms, except as may be limited by
      (i) applicable bankruptcy, insolvency, reorganization or other laws of
      general application relating to or affecting the enforcement of creditors rights
      generally, and (ii) the effect of rules of law governing the availability
      of specific performance and other equitable remedies.

     

    (d)  No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents to which it
      is
      a party by the Company and the consummation by the Company of the transactions
      contemplated hereby and thereby do not, and will not, (i) conflict with or
      violate any provision of the Company’s or any Subsidiary’s certificate or
      articles of incorporation, bylaws or other organizational or charter documents,
      (ii) conflict with, or constitute a default (or an event that 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 (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing a Company or Subsidiary debt or otherwise) or other
      understanding to which the Company or any Subsidiary is a party or by which
      any
      property or asset of the Company or any Subsidiary is bound, or affected, except
      to the extent that such conflict, default, termination, amendment, acceleration
      or cancellation right would not reasonably be expected to have a Material
      Adverse Effect, or (iii) result in a violation of any law, rule, regulation,
      order, judgment, injunction, decree or other restriction of any court or
      governmental authority to which the Company or a Subsidiary is subject
      (including, assuming the accuracy of the representations and warranties of
      the
      Investors set forth in Section 3.2 hereof, federal and state securities laws
      and
      regulations and the rules and regulations of any self-regulatory organization
      to
      which the Company or its securities are subject, including all applicable
      Trading Markets), or by which any property or asset of the Company or a
      Subsidiary is bound or affected, except to the extent that such violation would
      not reasonably be expected to have a Material Adverse Effect.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (e)  The
      Securities.
      The
      Securities (including the Warrant Shares) are duly authorized and, when issued
      and paid for in accordance with the Transaction Documents, will be duly and
      validly issued, fully paid and nonassessable, free and clear of all Liens except
      for restrictions on transfer imposed by applicable federal and state securities
      laws and will not be subject to preemptive or similar rights of stockholders
      (other than those imposed by the Investors). The Company has reserved from
      its
      duly authorized capital stock the maximum number of shares of Common Stock
      issuable upon exercise of the Warrants. The offer, issuance and sale to the
      Investors of the Common Shares and the other Securities are exempt from the
      registration requirements of the Securities Act.

     

    (f)  Capitalization.
      The
      aggregate number of shares and type of all authorized, issued and outstanding
      classes of capital stock, options and other securities of the Company (whether
      or not presently convertible into or exercisable or exchangeable for shares
      of
      capital stock of the Company) as of November 16 2006 is set forth in
Schedule 3.1(f)
      hereto.
      All outstanding shares of capital stock are duly authorized, validly issued,
      fully paid and nonassessable and have been issued in compliance in all material
      respects with all applicable securities laws. Except as disclosed in
Schedule 3.1(f)
      hereto
      or disclosed in the SEC Reports, the Company did not have outstanding at
      November 16, 2006 any other options, warrants, script rights to subscribe to,
      calls or commitments of any character whatsoever relating to, or securities,
      rights or obligations convertible into or exercisable or exchangeable for,
      or
      entered into any agreement giving any Person any right to subscribe for or
      acquire, any shares of Common Stock, or securities or rights convertible or
      exchangeable into shares of Common Stock. Except as set forth on Schedule
      3.1(f)
      hereto
      or as disclosed in the SEC Reports, and except for customary adjustments as
      a
      result of stock dividends, stock splits, combinations of shares,
      reorganizations, recapitalizations, reclassifications or other similar events,
      there are no anti-dilution or price adjustment provisions contained in any
      security issued by the Company (or in any agreement providing rights to security
      holders) and the issuance and sale of the Securities will not obligate the
      Company to issue shares of Common Stock or other securities to any Person (other
      than the Investors) and will not result in a right of any holder of securities
      to adjust the exercise, conversion, exchange or reset price under such
      securities. To the knowledge of the Company, except as disclosed in the SEC
      Reports and any Schedules filed with the SEC pursuant to Rule 13d-1 of the
      Exchange Act by reporting persons or in Schedule
      3.1(f)
      hereto,
      no Person or group of related Persons beneficially owns (as determined pursuant
      to Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement
      with or by obligation binding upon the Company, beneficial ownership of in
      excess of 5% of the outstanding Common Stock.

     

    (g)  SEC
      Reports; Financial Statements.
      The
      Company has filed all reports required to be filed by it under the Exchange
      Act,
      including pursuant to Section 13(a)
      or
15(d)
      thereof, for the 12 months preceding the date hereof on a timely basis or has
      received a valid extension of such time of filing and has filed any such SEC
      Reports prior to the expiration of any such extension and has filed all reports
      required to be filed by it under the Exchange Act, including pursuant to Section
      13(a) or 15(d) thereof, for the two years preceding the date hereof. Such
      reports required to be filed by the Company under the Exchange Act, including
      pursuant to Section 13(a) or 15(d) thereof, together with any materials filed
      or
      furnished by the Company under the Exchange Act, whether or not any such reports
      were required being collectively referred to herein as the “SEC
      Reports”
and,
      together with this Agreement and the Schedules to this Agreement, the
“Disclosure
      Materials”.
      As of
      their respective dates, the SEC Reports filed by the Company complied in all
      material respects with the requirements of the Securities Act and the Exchange
      Act and the rules and regulations of the SEC promulgated thereunder, and none
      of
      the SEC Reports, when filed by the Company, contained any untrue statement
      of a
      material fact or omitted to state a material fact required to be stated therein
      or necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading. The financial
      statements of the Company included in the SEC Reports comply in all material
      respects with applicable accounting requirements and the rules and regulations
      of the SEC with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis during
      the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements, the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP or may be condensed or summary statements, and fairly
      present in all material respects the consolidated financial position of the
      Company and its consolidated subsidiaries as of and for the dates thereof and
      the results of operations and cash flows for the periods then ended, subject,
      in
      the case of unaudited statements, to normal, year-end audit adjustments. All
      material agreements to which the Company or any Subsidiary is a party or to
      which the property or assets of the Company or any Subsidiary are subject are
      included as part of or identified in the SEC Reports, to the extent such
      agreements are required to be included or identified pursuant to the rules
      and
      regulations of the SEC.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (h)  Since
      the
      date of the latest audited financial statements included within the SEC Reports,
      except as disclosed in the SEC Reports or in Schedule
      3.1(h)
      hereto,
      (i) there has been no event, occurrence or development that, individually
      or in the aggregate, has had or that would result in a Material Adverse Effect,
      (ii) the Company has not incurred any material liabilities other than
      (A) trade payables and accrued expenses incurred in the ordinary course of
      business consistent with past practice and (B) liabilities not required to
      be reflected in the Company's financial statements pursuant to GAAP or required
      to be disclosed in filings made with the SEC, (iii) the Company has not
      altered its method of accounting or changed its auditors, except as disclosed
      in
      its SEC Reports, (iv) the Company has not declared or made any dividend or
      distribution of cash or other property to its stockholders, in their capacities
      as such, or purchased, redeemed or made any agreements to purchase or redeem
      any
      shares of its capital stock (except for repurchases by the Company of shares
      of
      capital stock held by employees, officers, directors, or consultants pursuant
      to
      an option of the Company to repurchase such shares upon the termination of
      employment or services), and (v) the Company has not issued any equity
      securities to any officer, director or Affiliate, except pursuant to existing
      Company stock-based plans and Convertible Securities acquired and exercised
      by
      the Chief Executive Officer of the Company and (vi) other than in the ordinary
      course of business or as disclosed in Schedule
      3.1(h)
      hereto
      or in the SEC Reports, the Company has not sold, leased, licensed, transferred
      or assigned any of its assets. The Company has not taken any steps to seek
      protection pursuant to any bankruptcy law nor does the Company have any
      knowledge or reason to believe that its creditors intend to initiate involuntary
      bankruptcy proceedings or any actual knowledge of any fact which would
      reasonably lead a creditor to do so. The Company is not as of the date hereof,
      and after giving effect to the transactions contemplated hereby to occur at
      the
      applicable Closing, will not be Insolvent (as defined below). For purposes
      of
      this Section 3.1(h), “Insolvent” means (i) the present fair saleable value of
      the Company's assets is less than the amount required to pay the Company's
      total
      Indebtedness (as defined in Section 3.1(aa)), (ii) the Company is unable to
      pay
      its debts and liabilities, subordinated, contingent or otherwise, as such debts
      and liabilities become absolute and matured or (iii) the Company intends to
      incur or believes that it will incur debts that would be beyond its ability
      to
      pay as such debts mature.

     

    (i)  Absence
      of Litigation.
      Except
      as disclosed in the SEC Reports, there is no action, suit, claim, or proceeding,
      or, to the Company's knowledge, inquiry or investigation, before or by any
      court, public board, government agency, self-regulatory organization or body
      pending or, to the knowledge of the Company, threatened against or affecting
      the
      Company or any of its Subsidiaries that could, individually or in the aggregate,
      have a Material Adverse Effect. Neither the Company, nor any director or officer
      thereof, is or has been the subject of any action involving a claim of violation
      of or liability under federal or state securities laws or a claim of breach
      of
      fiduciary duty relating to the Company. There has not been, and to the knowledge
      of the Company, there is not pending or contemplated, any investigation by
      the
      SEC involving the Company or any current or former director or officer of the
      Company. The Company has not received any stop order or other order suspending
      the effectiveness of any registration statement filed by the Company under
      the
      Exchange Act or the Securities Act and, to the Company’s knowledge, the SEC has
      not issued any such order. There are no material disagreements presently
      existing, or reasonably anticipated by the Company to arise, between the
      accountants formerly or presently employed by the Company.

     

    (j)  Compliance.
      Except
      as described in Schedule
      3.1(j),
      neither
      the Company nor any Subsidiary, except in each case as would not, individually
      or in the aggregate, reasonably be expected to have or result in a Material
      Adverse Effect, (i) is in default under or in violation of (and no event
      has occurred that has not been waived that, with notice or lapse of time or
      both, would result in a default by the Company or any Subsidiary under), nor
      has
      the Company or any Subsidiary received written notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of any order of any court,
      arbitrator or governmental body, or (iii) is or has been in violation of
      any statute, rule or regulation of any governmental authority.  

     

    (k)  Title
      to Assets.
      The
      Company and the Subsidiaries have good and marketable title to all real property
      owned and used in the conduct of their business as it is presently conducted,
      and the Company and the Subsidiaries and good and marketable title in all
      personal property owned and used in the conduct of their business as it is
      presently conducted, in each case, other than the security interest described
      in
Schedule
      3.1(aa),
      free
      and clear of all Liens, except for Liens that do not, individually or in the
      aggregate, have or result in a Material Adverse Effect. Any real property and
      facilities held under lease by the Company and the Subsidiaries are held by
      them
      under valid, subsisting and enforceable leases of which the Company and the
      Subsidiaries are in material compliance.

     

    
      
         

      

      
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    (l)  No
      General Solicitation; Placement Agent's Fees.
      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) in connection with the offer or sale
      of the Securities. The Company shall be responsible for the payment of any
      placement agent’s fees, financial advisory fees, or brokers’ commission (other
      than for Persons engaged by or on behalf of any Investor or its investment
      advisor) relating to or arising out of the issuance of the Securities pursuant
      to this Agreement. The Company shall pay, and hold each Investor harmless
      against, any liability, loss or expense (including, without limitation,
      reasonable attorney's fees and out-of-pocket expenses) arising in connection
      with any such claim for fees arising out of the issuance of the Securities
      pursuant to this Agreement. The Company acknowledges that is has engaged Cowen
      and Company, LLC as its exclusive
      placement
      agent
      (the “Agent”)
      in
      connection with the sale of the Securities. Other than the Agent, the Company
      has not engaged any placement agent or other agent in connection with the sale
      of the Securities.

     

    (m)  Private
      Placement.
      Neither
      the Company nor any of its Affiliates nor, any Person acting on the Company’s
      behalf has, directly or indirectly, at any time within the past six months,
      made
      any offer or sale of any security or solicitation of any offer to buy any
      security under circumstances that would (i) eliminate the availability of
      the exemption from registration under Regulation D under the Securities Act
      in connection with the offer and sale by the Company of the Securities as
      contemplated hereby or (ii) cause the offering of the Securities pursuant
      to the Transaction Documents to be integrated with prior offerings by the
      Company for purposes of any applicable law, regulation or stockholder approval
      provisions, including, without limitation, under the rules and regulations
      of
      any Trading Market. The Company is not required to be registered as, and is
      not
      an Affiliate of, an “investment company” within the meaning of the Investment
      Company Act of 1940, as amended. The Company is not required to be registered
      as, a United States real property holding corporation within the meaning of
      the
      Foreign Investment in Real Property Tax Act of 1980.

     

    (n)  Form
      S-3 Eligibility.
      The
      Company is eligible to register the Common Shares and
      the
      Warrant Shares for resale
      by the
      Investors using Form S-3 promulgated under the Securities Act.

     

    (o)  Listing
      and Maintenance Requirements.
      The
      Company has not, in the twelve months preceding the date hereof, received notice
      (written or oral) from any Trading Market on which the Common Stock is or has
      been listed or quoted to the effect that the Company is not in compliance with
      the listing or maintenance requirements of such Trading Market. The Company
      is
      in compliance with all such listing and maintenance requirements.

     

    (p)  Registration
      Rights.
      Except
      as described in Schedule
      3.1(p)
      or as
      disclosed in the SEC Reports, the Company has not granted or agreed to grant
      to
      any Person any rights (including “piggy-back” registration rights) to have any
      securities of the Company registered with the SEC or any other governmental
      authority that have not been satisfied or waived.

     

    
      
         

      

      
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    (q)  Application
      of Takeover Protections.
      There
      is no control share acquisition, business combination, poison pill (including
      any distribution under a rights agreement) or other similar anti-takeover
      provision under the Company’s charter documents or the laws of its state of
      incorporation that is or could become applicable to any of the Investors as
      a
      result of the Investors and the Company fulfilling their obligations or
      exercising their rights under the Transaction Documents, including, without
      limitation, as a result of the Company’s issuance of the Securities and the
      Investors’ ownership of the Securities.

     

    (r)  Disclosure.
      The
      Company confirms that neither it nor any officers, directors or Affiliates,
      has
      provided any of the Investors (other than Excluded Investors) or their agents
      or
      counsel with any information that constitutes or might constitute material,
      nonpublic information (other than the existence and terms of the issuance of
      Securities, as contemplated by this Agreement). The Company confirms that
      neither it nor any officers, directors or Affiliates, has provided any of the
      Investors (other than Excluded Investors) or their agents or counsel with any
      information that constitutes or might constitute material, nonpublic information
      (other than the existence and terms of the issuance of Securities, as
      contemplated by this Agreement). The Company understands and confirms that
      each
      of the Investors will rely on the foregoing representations in effecting
      transactions in securities of the Company (other than Excluded Investors).
      All
      disclosure provided by the Company to the Investors regarding the Company,
      its
      business and the transactions contemplated hereby, including the Schedules
      to
      this Agreement, furnished by or on the behalf of the Company are true and
      correct in all material respects and do not contain any untrue statement of
      a
      material fact or omit to state any material fact necessary in order to make
      the
      statements made therein, in the light of the circumstances under which they
      were
      made, not misleading. To the Company's knowledge, except for the transactions
      contemplated by this Agreement, no event or circumstance has occurred or
      information exists with respect to the Company or any of its Subsidiaries or
      its
      or their business, properties, operations or financial conditions, which, under
      applicable law, rule or regulation, requires public disclosure or announcement
      by the Company but which has not been so publicly announced or disclosed. The
      Company acknowledges and agrees that no Investor (other than Excluded Investors)
      makes or has made any representations or warranties with respect to the
      transactions contemplated hereby other than those set forth in the Transaction
      Documents. 

     

    (s)  Acknowledgment
      Regarding Investors' Purchase of Securities.
      Based
      upon the assumption that the transactions contemplated by this Agreement are
      consummated in all material respects in conformity with the Transaction
      Documents, the Company acknowledges and agrees that each of the Investors (other
      than Excluded Investors) is acting solely in the capacity of an arm's length
      purchaser with respect to the Transaction Documents and the transactions
      contemplated hereby and thereby. The Company further acknowledges that no
      Investor (other than Excluded Investors) is acting as a financial advisor or
      fiduciary of the Company (or in any similar capacity) with respect to this
      Agreement and the transactions contemplated hereby and any advice given by
      any
      Investor (other than Excluded Investors) or any of their respective
      representatives or agents in connection with the Transaction Documents and
      the
      transactions contemplated hereby and thereby is merely incidental to the
      Investors’ purchase of the Securities. The Company further represents to each
      Investor that the Company’s decision to enter into this Agreement has been based
      solely on the independent evaluation of the transactions contemplated hereby
      by
      the Company and its representatives.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (t)  Patents
      and Trademarks.
      The
      Company and its Subsidiaries own, or possess adequate rights or licenses to
      use,
      all trademarks, trade names, service marks, service mark registrations, service
      names, patents, patent rights, copyrights, inventions, licenses, approvals,
      governmental authorizations, trade secrets and other intellectual property
      rights (“Intellectual
      Property Rights”)
      necessary to conduct their respective businesses as now conducted. None of
      the
      Company's Intellectual Property Rights have expired or terminated, or are
      expected to expire or terminate, within three years from the date of this
      Agreement. The Company does not have any knowledge of any infringement by the
      Company or its Subsidiaries of Intellectual Property Rights of others. Except
      as
      disclosed in the SEC Reports, there is no claim, action or proceeding being
      made
      or brought, or to the knowledge of the Company, being threatened, against the
      Company or its Subsidiaries regarding its Intellectual Property Rights.

     

    (u)  Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses and location in which the Company and the
      Subsidiaries are engaged. The Company has not received any written notice that
      the Company will not be able to renew its existing insurance coverage as and
      when such coverage expires. The Company believes it will be able to obtain
      similar coverage at reasonable cost from similar insurers as may be necessary
      to
      continue its business as currently being conducted.

     

    (v)  Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports (“Material
      Permits”),
      except
      where the failure to possess such permits does not, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse
      Effect, and neither the Company nor any Subsidiary has received any written
      notice of proceedings relating to the revocation or modification of any Material
      Permit.

     

    (w)  Transactions
      With Affiliates and Employees.
      Except
      as set forth or incorporated by reference in the Company’s SEC Reports, none of
      the officers, directors or employees of the Company is presently a party to
      any
      transaction that would be required to be reported on Form 10-KSB with the
      Company or any of its Subsidiaries (other than for ordinary course services
      as
      employees, officers or 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 such officer, director or employee or, to the Company's
      knowledge, any corporation, partnership, trust or other entity in which any
      such
      officer, director, or employee has a substantial interest or is an officer,
      director, trustee or partner.

     

    (x)  Internal
      Accounting Controls.
      The
      Company and the 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.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (y)  Sarbanes-Oxley
      Act.
      The
      Company is in compliance in all material respects with applicable requirements
      of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations
      promulgated by the SEC thereunder.

     

    (z)  Foreign
      Corrupt Practices.
      Neither
      the Company nor any of its Subsidiaries nor, to the knowledge of the Company,
      any director, officer, agent, employee or other Person acting on behalf of
      the
      Company or any of its Subsidiaries has, in the course of its actions for, or
      on
      behalf of, the Company (i) used any corporate funds for any unlawful
      contribution, gift, entertainment or other unlawful expenses relating to
      political activity; (ii) made any direct or indirect unlawful payment to any
      foreign or domestic government official or employee from corporate funds; (iii)
      violated or is in violation of any provision of the U.S. Foreign Corrupt
      Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
      payoff, influence payment, kickback or other unlawful payment to any foreign
      or
      domestic government official or employee.

     

    (aa)  Indebtedness.
      Except
      as disclosed in Schedule
      3.1(aa)
      or in
      the SEC Reports, neither the Company nor any of its Subsidiaries (i) has any
      outstanding Indebtedness (as defined below), (ii) is in violation of any term
      of
      or in default under any contract, agreement or instrument relating to any
      Indebtedness, except where such violations and defaults would not result,
      individually or in the aggregate, in a Material Adverse Effect, or (iii) is
      a
      party to any contract, agreement or instrument relating to any Indebtedness,
      the
      performance of which, in the judgment of the Company's officers, has or is
      expected to have a Material Adverse Effect. Schedule 3.1(aa) provides a detailed
      description of the material terms of any such outstanding Indebtedness. For
      purposes of this Agreement: (x) “Indebtedness” of any Person means, without
      duplication (A) all indebtedness for borrowed money, (B) all obligations
      issued, undertaken or assumed as the deferred purchase price of property or
      services (other than trade payables entered into in the ordinary course of
      business), (C) all reimbursement or payment obligations with respect to letters
      of credit, surety bonds and other similar instruments, (D) all obligations
      evidenced by notes, bonds, debentures or similar instruments, including
      obligations so evidenced incurred in connection with the acquisition of
      property, assets or businesses, (E) all indebtedness created or arising under
      any conditional sale or other title retention agreement, or incurred as
      financing, in either case with respect to any property or assets acquired with
      the proceeds of such indebtedness (even though the rights and remedies of the
      seller or bank under such agreement in the event of default are limited to
      repossession or sale of such property), (F) all monetary obligations under
      any
      leasing or similar arrangement which, in connection with generally accepted
      accounting principles, consistently applied for the periods covered thereby,
      is
      classified as a capital lease, (G) all indebtedness referred to in clauses
      (A) through (F) above secured by (or for which the holder of such Indebtedness
      has an existing right, contingent or otherwise, to be secured by) any mortgage,
      lien, pledge, charge, security interest or other encumbrance upon or in any
      property or assets (including accounts and contract rights) owned by any Person,
      even though the Person which owns such assets or property has not assumed or
      become liable for the payment of such indebtedness, and (H) all Contingent
      Obligations in respect of indebtedness or obligations of others of the kinds
      referred to in clauses (A) through (G) above; and (y) “Contingent Obligation”
means, as to any Person, any direct or indirect liability, contingent or
      otherwise, of that Person with respect to any indebtedness, lease, dividend
      or
      other obligation of another Person if the primary purpose or intent of the
      Person incurring such liability, or the primary effect thereof, is to provide
      assurance to the obligee of such liability that such liability will be paid
      or
      discharged, or that any agreements relating thereto will be complied with,
      or
      that the holders of such liability will be protected (in whole or in part)
      against loss with respect thereto.

     

    
      
         

      

      
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    (bb)  Employee
      Relations.
      Neither
      Company nor any of its Subsidiaries is a party to any collective bargaining
      agreement or employs any member of a union. The Company believes that its
      relations with its employees are as disclosed in the SEC Reports. Except as
      disclosed in the SEC Reports, during the period covered by the SEC Reports,
      no
      executive officer of the Company or any of its Subsidiaries (as defined in
      Rule
      501(f) of the Securities Act) has notified the Company or any such Subsidiary
      that such officer intends to leave the Company or any such Subsidiary or
      otherwise terminate such officer's employment with the Company or any such
      Subsidiary. To the knowledge of the Company or any such Subsidiary, no executive
      officer of the Company or any of its Subsidiaries is in violation of any
      material term of any employment contract, confidentiality, disclosure or
      proprietary information agreement, non-competition agreement, or any other
      contract or agreement or any restrictive covenant, and the continued employment
      of each such executive officer does not subject the Company or any such
      Subsidiary to any liability with respect to any of the foregoing
      matters.

     

    (cc)  Labor
      Matters.
      The
      Company and its Subsidiaries are in compliance in all material respects with
      all
      federal, state, local and foreign laws and regulations respecting labor,
      employment and employment practices and benefits, terms and conditions of
      employment and wages and hours, except where failure to be in compliance would
      not, either individually or in the aggregate, reasonably be expected to result
      in a Material Adverse Effect.

     

    (dd)  Environmental
      Laws.
      The
      Company and its Subsidiaries (i) are in compliance in all material respects
      with
      any and all Environmental Laws (as hereinafter defined), (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 in all material respects with all terms and conditions of any such
      permit, license or approval where, in each of the foregoing clauses (i), (ii)
      and (iii), the failure to so comply would be reasonably expected to have,
      individually or in the aggregate, a Material Adverse Effect. The term
“Environmental Laws” means all federal, state, local or foreign laws relating to
      pollution or protection of human health or the environment (including, without
      limitation, ambient air, surface water, groundwater, land surface or subsurface
      strata), including, without limitation, laws relating to emissions, discharges,
      releases or threatened releases of chemicals, pollutants, contaminants, or
      toxic
      or hazardous substances or wastes (collectively, “Hazardous Materials”) into the
      environment, or otherwise relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of Hazardous Materials,
      as well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, licenses, notices or notice letters, orders, permits,
      plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (ee)  Subsidiary
      Rights.
      The
      Company or one of its Subsidiaries has the unrestricted right to vote, and
      (subject to limitations imposed by applicable law) to receive dividends and
      distributions on, all capital securities of its Subsidiaries as owned by the
      Company or such Subsidiary.

     

    
      
         

      

      
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    (ff)  Tax
      Status.
      The
      Company and each of its Subsidiaries (i) has made or filed all foreign, federal
      and state income and all other tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject, (ii) 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 (iii) 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.

     

    3.2  Representations
      and Warranties of the Investors.

     

    Each
      Investor hereby, as to itself only and for no other Investor, represents and
      warrants to the Company as follows:

     

    (a)  Organization;
      Authority.
      Such
      Investor is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with the requisite
      corporate, partnership or other power and authority to enter into and to
      consummate the transactions contemplated by the Transaction Documents and
      otherwise to carry out its obligations hereunder and thereunder. The purchase
      by
      such Investor of the Securities hereunder has been duly authorized by all
      necessary action on the part of such Investor. This Agreement has been duly
      executed and delivered by such Investor and constitutes the valid and binding
      obligation of such Investor, enforceable against it in accordance with its
      terms, except as may be limited by (i) applicable bankruptcy, insolvency,
      reorganization or other laws of general application relating to or affecting
      the
      enforcement of creditors rights generally, and (ii) the effect of rules of
      law governing the availability of specific performance and other equitable
      remedies.

     

    (b)  No
      Public Sale or Distribution.
      Such
      Investor is (i) acquiring the Common Shares and the Warrants and
      (ii) upon exercise of the Warrants will acquire the Warrant Shares issuable
      upon exercise thereof, in the ordinary course of business for its own account
      and not with a view towards, or for resale in connection with, the public sale
      or distribution thereof, except pursuant to sales registered under the
      Securities Act or under an exemption from such registration and in compliance
      with applicable federal and state securities laws, and such Investor does not
      have a present arrangement to effect any distribution of the Securities to
      or
      through any Person; provided,
      however,
      that by
      making the representations herein, such Investor does not agree to hold any
      of
      the Securities for any minimum or other specific term and reserves the right
      to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the Securities Act.

     

    (c)  Investor
      Status.
      At the
      time such Investor was offered the Securities, it was, and at the date hereof
      it
      is, an “accredited investor” as defined in Rule 501(a) under the Securities Act
      or a “qualified institutional buyer” as defined in Rule 144A(a) under the
      Securities Act. Such Investor is not a registered broker dealer registered
      under
      Section 15(a) of the Exchange Act, or a member of the NASD, Inc. or an entity
      engaged in the business of being a broker dealer. Except as otherwise disclosed
      in writing to the Company on Exhibit B-2 (attached hereto) on or prior to the
      date of this Agreement, such Investor is not affiliated with any broker dealer
      registered under Section 15(a) of the Exchange Act, or a member of the NASD,
      Inc. or an entity engaged in the business of being a broker dealer.

     

    
      
         

      

      
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    (d)  Experience
      of Such Investor.
      Such
      Investor, either alone or together with its representatives has such knowledge,
      sophistication and experience in business and financial matters so as to be
      capable of evaluating the merits and risks of the prospective investment in
      the
      Securities, and has so evaluated the merits and risks of such investment. Such
      Investor understands that it must bear the economic risk of this investment
      in
      the Securities indefinitely, and is able to bear such risk and is able to afford
      a complete loss of such investment.

     

    (e)  Access
      to Information.
      Such
      Investor acknowledges that it has reviewed the Disclosure Materials and has
      been
      afforded: (i) the opportunity to ask such questions as it has deemed
      necessary of, and to receive answers from, representatives of the Company
      concerning the terms and conditions of the offering of the Securities and the
      merits and risks of investing in the Securities; (ii) access to information
      (other than material non-public information) about the Company and the
      Subsidiaries and their respective financial condition, results of operations,
      business, properties, management and prospects sufficient to enable it to
      evaluate its investment; and (iii) the opportunity to obtain such
      additional information that the Company possesses or can acquire without
      unreasonable effort or expense that is necessary to make an informed investment
      decision with respect to the investment. Neither such inquiries nor any other
      investigation conducted by or on behalf of such Investor or its representatives
      or counsel shall modify, amend or affect such Investor’s right to rely on the
      truth, accuracy and completeness of the Disclosure Materials and the Company’s
      representations and warranties contained in the Transaction Documents. Such
      Investor acknowledges receipt of copies of the SEC Reports.

     

    (f)  No
      Governmental Review.
      Such
      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 Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    (g)  No
      Conflicts.
      The
      execution, delivery and performance by such Investor of this Agreement and
      the
      consummation by such Investor of the transactions contemplated hereby will
      not
      (i) result in a violation of the organizational documents of such Investor
      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 such Investor is a party, or
      (iii) result in a violation of any law, rule, regulation, order, judgment
      or decree (including federal and state securities laws) applicable to such
      Investor, except in the case of clauses (ii) and (iii) above, for such that
      are
      not material and do not otherwise affect the ability of such Investor to
      consummate the transactions contemplated hereby.

     

    (h)  Illegal
      Transactions.
      No
      Investor, directly or indirectly, and no Person acting on behalf of or pursuant
      to any understanding with any Investor, has engaged in any transactions in
      the
      securities of the Company (including, without limitation, any Short Sales
      involving any of the Company’s securities) since the time that such Investor was
      first contacted by the Company, the Agent or any other Person regarding an
      investment in the Securities of the Company. Such Investor covenants that,
      except as contemplated by the provisions of Section 4.1 hereof, neither it
      nor
      any Person acting on its behalf or pursuant to any understanding with such
      Investor will engage, directly or indirectly, in any transactions in the
      securities of the Company (including Short Sales) through the Closing Date.
      “Short Sales” include, without limitation, all “short sales” as defined in Rule
      200 promulgated under Regulation SHO under the Exchange Act and all types of
      direct and indirect stock pledges, forward sale contracts, options, puts, calls,
      short sales, swaps, derivatives and similar arrangements (including on a total
      return basis), and sales and other transactions through non-U.S. broker-dealers
      or foreign regulated brokers.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    (i)  Restricted
      Securities.
      The
      Investors understand that the Securities are characterized as “restricted
      securities” under the U.S. federal securities laws inasmuch as they are being
      acquired from the Company in a transaction not involving a public offering
      and
      that under such laws and applicable regulations such securities may be resold
      without registration under the Securities Act only in certain limited
      circumstances.

     

    (j)  Legends.
      It is
      understood that, except as provided in Section 4.1(b) of this Agreement,
      certificates evidencing such Securities may bear the legend set forth in Section
      4.1(b)

     

    (k)  No
      Legal,
      Tax or Investment Advice. 

     

    Such
      Investor understands that nothing in this Agreement or any other materials
      presented by or on behalf of the Company to the Investor in connection with
      the
      purchase of the Securities constitutes legal, tax or investment advice. Such
      Investor has consulted such legal, tax and investment advisors as it, in its
      sole discretion, has deemed necessary or appropriate in connection with its
      purchase of the Securities. Such Investor understands that the Agent has acted
      solely as the agent of the Company in this placement of the Securities, and
      that
      the Agent makes no representation or warranty with regard to the merits of
      this
      transaction or as to the accuracy of any information such Investor may have
      received in connection therewith. Such Investor acknowledges that he has not
      relied on any information or advice furnished by or on behalf of the
      Agent.

     

    ARTICLE
      IV  

     

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1  Transfer
      Restrictions.

     

    (a)  The
      Investors covenant that the Securities will only be disposed of pursuant to
      an
      effective registration statement under, and in compliance with the requirements
      of, the Securities Act or pursuant to an available exemption from the
      registration requirements of the Securities Act, and in compliance with any
      applicable state securities laws. In connection with any transfer of Securities
      other than pursuant to an effective registration statement or to the Company,
      or
      pursuant to Rule 144(k), the Company may require the transferor to provide
      to
      the Company an opinion of counsel reasonably satisfactory to the Company, the
      form and substance of which opinion shall be reasonably satisfactory to the
      Company, to the effect that such transfer does not require registration under
      the Securities Act. Notwithstanding the foregoing, the Company hereby consents
      to and agrees to register on the books of the Company and with its transfer
      agent, without any such legal opinion, except to the extent that the transfer
      agent requests such legal opinion, any transfer of Securities by an Investor
      to
      an Affiliate of such Investor, provided that the transferee certifies to the
      Company that it is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and provided that such Affiliate does not request any removal
      of
      any existing legends on any certificate evidencing the Securities.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    (b)  Each
      Investor, on behalf of itself and any transferee contemplated by the provisions
      of subsection (a), above, agrees to the imprinting, so long as is required
      by
      this Section 4.1(b),
      of the
      following legend on any certificate evidencing any of the Securities:

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      OR
      ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR
      SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
      ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
      TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
      APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. 

     

    Certificates
      evidencing Common Shares shall not be required to contain such legend or any
      other legend (i) while a registration statement (including the Registration
      Statement) covering the resale of the Common Shares is effective under the
      Securities Act, (ii) following any sale of such Common Shares pursuant to Rule
      144 if
      the
      holder provides the Company with a legal opinion (and the documents upon which
      the legal opinion is based) reasonably acceptable to the Company to the effect
      that the Common Shares can be sold under Rule 144, (iii) if the holder provides
      the Company with documentation reasonably acceptable to the Company to the
      effect that the Common Shares are eligible for sale under Rule 144(k), or (iv)
      if the holder provides the Company with a legal opinion (and the documents
      upon
      which the legal opinion is based) reasonably acceptable to the Company to the
      effect that the legend is not required under applicable requirements of the
      Securities Act (including controlling judicial interpretations and
      pronouncements issued by the Staff of the SEC). The Company shall cause its
      counsel to issue the legal opinion included in the Transfer Agent Instructions
      to the Transfer Agent on the Effective Date. Following the Effective Date,
      the
      Company will no later than five
      Trading
      Days following the delivery by an Investor to the Company or the Transfer Agent
      of (i) a legended certificate representing such Common Shares, and (ii) an
      opinion of counsel to the extent required by Section
      4.1(a),
      deliver
      or cause to be delivered to such Investor a certificate representing such Common
      Shares that is free from all restrictive and other legends. The Company may
      not
      make any notation on its records or give instructions to the Transfer Agent
      that
      enlarge the restrictions on transfer set forth in this Section.

     

    If
      within
five
      Trading Days after the Company’s receipt of a legended certificate and the other
      documents as specified in Clauses (ii), (iii) and (iv) of the paragraph
      immediately above, the Company shall fail to issue and deliver to such Investor
      a certificate representing such Common Shares that is free from all restrictive
      and other legends, and if on or after such Trading Day and prior to the
      Company’s delivery of the certificate representing such Common Shares the
      Investor purchases (in an open market transaction) shares of Common Stock to
      deliver in satisfaction of a sale by the Investor of shares of Common Stock
      that
      the Investor anticipated receiving from the Company without any restrictive
      legend (the “Covering
      Shares”),
      then
      the Company shall, within five Trading Days after the Investor’s request, pay
      cash (in lieu of delivering such certificate without any restrictive legend)
      to
      the Investor in an amount equal to the excess (if any) of the Investor’s total
      purchase price (including brokerage commissions, if any) for the Covering
      Shares, over the product of (A) the number of Covering Shares, times (B) the
      Closing Price
      on the
      date of delivery of such certificate and the other documents as specified in
      Clauses (ii), (iii) and (iv) of the paragraph immediately above.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    (c)  So
      long
      as a registration statement (including the Registration Statement) covering
      the
      resale of the Securities is effective under the Securities Act, the Company
      will
      not object to and shall permit (except as prohibited by law) an Investor to
      pledge or grant a security interest in some or all of the Securities in
      connection with a bona fide margin agreement or other loan or financing
      arrangement secured by the Securities, and if required under the terms of such
      agreement, loan or arrangement, the Company will not object to and shall permit
      (except as prohibited by law) such Investor to transfer pledged or secured
      Securities to the pledges or secured parties. Except as required by law, such
      a
      pledge or transfer would not be subject to approval of the Company, no legal
      opinion of the pledgee, secured party or pledgor shall be required in connection
      therewith, and no notice shall be required of such pledge. Each Investor
      acknowledges that the Company shall not be responsible for any pledges relating
      to, or the grant of any security interest in, any of the Securities or for
      any
      agreement, understanding or arrangement between any Investor and its pledgee
      or
      secured party. At the appropriate Investor's expense, the Company will execute
      and deliver such reasonable documentation as a pledgee or secured party of
      Securities may reasonably request in connection with a pledge or transfer of
      the
      Securities, including the preparation and filing of any required prospectus
      supplement under Rule 424(b)(3) of the Securities Act or other applicable
      provision of the Securities Act to appropriately amend the list of Selling
      Stockholders thereunder. Provided that the Company is in compliance with the
      terms of this Section 4.1(c), the Company’s indemnification obligations pursuant
      to Section 6.4 shall not extend to any Proceeding or Losses arising out of
      or
      related to this Section 4.1(c).

     

    4.2  Furnishing
      of Information.

     

    Until
      the
      date that any Investor owning Common Shares or Warrant Shares may
      sell
      all of
      them under Rule 144(k) of the Securities Act (or any successor provision),
      the
      Company covenants to use its Best Efforts to timely file (or obtain extensions
      in respect thereof and file within the applicable grace period) all reports
      required to be filed by the Company after the date hereof pursuant to the
      Exchange Act. 

     

    4.3  Integration.

     

    The
      Company shall not, and shall use its Best Efforts to ensure that no Affiliate
      thereof shall, sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the
      Securities Act) that would be integrated with the offer or sale of the
      Securities in a manner that would require the registration under the Securities
      Act of the sale of the Securities to the Investors. The Company agrees to timely
      file a Form D with respect to the Securities as required under Regulation D
      and
      to provide a copy thereof, promptly upon the written request of any
      Investor.

     

    4.4  Reservation
      of Securities.

     

    The
      Company shall maintain a reserve from its duly authorized shares of Common
      Stock
      for issuance pursuant to the Transaction Documents in such amount as may be
      required to fulfill its obligations to issue such Common Shares under the
      Transaction Documents. In the event that at any time the then authorized shares
      of Common Stock are insufficient for the Company to satisfy its obligations
      to
      issue such Common Shares under the Transaction Documents, the Company shall
      promptly take such actions as may be required to increase the number of
      authorized shares.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    4.5  Securities
      Laws Disclosure; Publicity.

     

    The
      Company shall, on or before 8:30 a.m., New York time, on the first Trading
      Day
      following the Agreement Date, issue a press release reasonably acceptable to
      the
      Investors disclosing all material terms of the transactions contemplated hereby.
      Within four Business Days following the Agreement Date, the Company shall file
      a
      Current Report on Form 8-K with the SEC (the “8-K
      Filing”)
      describing the terms of the transactions contemplated by the Transaction
      Documents and including as exhibits to such Current Report on Form 8-K the
      Transaction Documents (including the schedules and the names, and addresses
      of
      the Investors and the amount(s) of Securities respectively purchased)
      and the form of Warrants,
      in the
      form required by the Exchange Act. Thereafter, the Company shall timely file
      any
      filings and notices required by the SEC or applicable law with respect to the
      transactions contemplated hereby and provide copies thereof. Except as herein
      provided, the Company shall not publicly disclose the name of any Investor,
      or
      include the name of any Investor in any press release without the prior written
      consent of such Investor, unless otherwise required by law. The Company shall
      not, and shall cause each of its Subsidiaries and its and each of their
      respective officers, directors, employees and agents not to, provide any
      Investor with any material nonpublic information regarding the Company or any
      of
      its Subsidiaries from and after the issuance of the above referenced press
      release without the express written consent of such Investor. 

     

    4.6  Use
      of
      Proceeds.

     

    The
      Company intends to use the net proceeds from the sale of the Securities for
      working capital and general corporate purposes. The Company also may use a
      portion of the net proceeds, currently intended for general corporate purposes,
      to acquire or invest in technologies, products or services that complement
      its
      business, although the Company has no present plans or commitments and is not
      currently engaged in any material negotiations with respect to these types
      of
      transactions. Pending these uses, the Company intends to invest the net proceeds
      from this offering in short-term, interest-bearing, investment-grade securities,
      or as otherwise pursuant to the Company's customary investment
      policies.

     

         
      ARTICLE V  

     

    CONDITIONS

     

    5.1  Conditions
      Precedent to the Obligations of the Investors.

     

    The
      obligation of each Investor to acquire Securities at the Closing is subject
      to
      the satisfaction or waiver by such Investor, at or before the Closing, of each
      of the following conditions:

     

    (a)  Representations
      and Warranties.
      The
      representations and warranties of the Company contained herein shall be true
      and
      correct in all material respects as of the date when made and as of the Closing
      as though made on and as of such date;

     

    (b)  Deliveries.The
      Company shall have delivered or caused to be delivered to the Investors the
      Closing deliveries specified in Section 2.2(a); and 

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    (c)  Performance.
      The
      Company and each other Investor shall have performed, satisfied or complied
      in
      all material respects with all covenants, agreements and conditions required
      by
      the Transaction Documents to be performed, satisfied or complied with by it
      at
      or prior to the Closing.

     

    5.2  Conditions
      Precedent to the Obligations of the Company.

     

    The
      obligation of the Company to sell the Securities at the Closing is subject
      to
      the satisfaction or waiver by the Company, at or before the Closing, of each
      of
      the following conditions:

     

    (a)  Representations
      and Warranties.
      The
      representations and warranties of the Investors contained herein shall be true
      and correct in all material respects as of the date when made and as of the
      Closing Date as though made on and as of such date;

     

    (b)  Deliveries.Each
      Investor
      shall deliver or cause to be delivered to the Company the purchase price set
      forth opposite such Investor’s name on Exhibit A
      hereto
      under the heading “Purchase Price” in United States dollars and in immediately
      available funds, by wire transfer to an account designated in writing to such
      Investor by the Company for such purpose; and 

     

    (c)  Performance.
      The
      Investors shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by the Investors at or
      prior to the Closing.

     

    ARTICLE
      VI  

     

    REGISTRATION
      RIGHTS

     

    6.1  Registration
      Statement.

     

    (a)  As
      promptly as possible, and in any event on or prior to the Filing Date, the
      Company shall prepare and file with the SEC a Registration Statement covering
      the resale of all Registrable Securities for an offering to be made on a
      continuous basis pursuant to Rule 415. The Registration Statement shall be
      on
      Form S-3 (except if the Company is not then eligible to register for resale
      the
      Registrable Securities on Form S-3, in which case such registration shall be
      on
      another appropriate form in accordance with the Securities Act and the Exchange
      Act) and shall contain (except if otherwise directed by the Investors or
      requested by the SEC) the “Plan of Distribution” in substantially the form
      attached hereto as Exhibit D.

     

    (b)  The
      Company shall use its commercially reasonable efforts to cause the Registration
      Statement to be declared effective by the SEC as promptly as possible after
      the
      filing thereof, but in any event prior to the Required Effectiveness Date,
      and
      shall use its Best Efforts to keep the Registration Statement continuously
      effective under the Securities Act until the earlier of the date that all Common
      Shares and Warrant Shares covered by such Registration Statement have been
      sold
      or can be sold publicly under Rule 144(k) (the “Effectiveness
      Period”);
      provided that, upon notification by the SEC that a Registration Statement will
      not be reviewed or is no longer subject to further review and comments, the
      Company shall request acceleration of such Registration Statement within
      five (5) Trading Days after receipt of such notice and request that it
      becomes effective on 4:00 p.m. New York City time on the Effective
      Date.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    (c)  The
      Company shall notify the Investors in writing promptly (and in any event within
      two Trading Days) after receiving notification from the SEC that the
      Registration Statement has been declared effective.

     

    (d)  Should
      an
      Event (as defined below) occur, then upon the occurrence of such Event, and
      on
      every monthly anniversary thereof until the applicable Event is cured, or until
      such time as the Common Shares shall have been disposed of by an Investor or
      are
      saleable under Rule 144 in any three-month period, whichever occurs earlier
      (each a “Cure
      Date”)
      the
      Company shall pay to such Investor an amount in cash, as liquidated damages
      and
      not as a penalty, equal to one percent (1.0%) of (i) the number of Common Shares
      held by such Investor as of the date of such Event, multiplied by (ii) the
      purchase price paid by such Investor for such Common Shares then held; provided,
      however, that the total amount of payments pursuant to this Section 6.1(d)
      shall not exceed, when aggregated with all such payments paid to all Investors,
      ten percent (10%) of the aggregate purchase price paid by all Investors. The
      payments to which an Investor shall be entitled pursuant to this Section 6.1(d)
      are
      referred to herein as “Event
      Payments.”
Any
      Event Payments payable pursuant to the terms hereof shall apply on a pro rated
      basis for any portion of a month prior to the applicable Cure Date, and shall
      be
      paid within five (5) Business Days of each monthly anniversary of an Event.
      In
      the event the Company fails to make Event Payments in a timely manner, such
      Event Payments shall bear interest at the rate of one percent (1.0%) per month
      (prorated for partial months) until paid in full. All pro rated calculations
      made pursuant to this paragraph shall be based upon the actual number of days
      in
      such pro rated month. 

     

    For
      such
      purposes, each of the following shall constitute an “Event”:

    

    (i)  the
      Registration Statement is not filed on or prior to the Filing Date or is not
      declared effective on or prior to the Required Effectiveness Date (in each
      instance other than due to the fault of any Investor); 

     

    (ii)  except
      as
      provided for in Section
      6.1(e)
      (the
“Excluded
      Events”),
      after
      the Effective Date, an Investor is not permitted to sell Registrable Securities
      under the Registration Statement (or a subsequent Registration Statement filed
      in replacement thereof) for any reason (other than the fault of such Investor)
      for five or more consecutive Trading Days in any ninety (90) Trading Day
      Period;

     

    (iii)  except
      as
      a result of the Excluded Events, the Common Stock is not listed or quoted,
      or is
      suspended from trading, on an Eligible Market for a period of ten (10)
      consecutive Trading Days during the Effectiveness Period; or

     

    (iv)  during
      the Effectiveness Period, except as a result of the Excluded Events, the Company
      fails to have any Shares listed on an Eligible Market.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    (e)  Notwithstanding
      anything in this Agreement to the contrary, after 60 consecutive Trading Days
      of
      continuous effectiveness of the initial Registration Statement filed and
      declared effective pursuant to this Agreement, the Company may, by written
      notice to the Investors, suspend sales under a Registration Statement after
      the
      Effective Date thereof and/or require that the Investors immediately cease
      the
      sale of shares of Common Stock pursuant thereto and/or defer the filing of
      any
      subsequent Registration Statement if the Company is engaged in a material
      merger, acquisition or sale and the Board of Directors determines in good faith,
      based on the advice of counsel, by appropriate resolutions, that, as a result
      of
      such activity, (A) it would be materially detrimental to the Company to
      maintain a
      Registration Statement at such time or (B) it is in the best interests of
      the Company to suspend sales under such registration at such time. Upon receipt
      of such notice, each Investor shall immediately discontinue any sales of
      Registrable Securities pursuant to such registration until such Investor is
      advised in writing by the Company that the current Prospectus or amended
      Prospectus, as applicable, may be used. In no event, however, shall this right
      be exercised to suspend sales beyond the period during which (in the good faith
      determination of the Company’s Board of Directors) the failure to require such
      suspension would be materially detrimental to the Company. The Company’s rights
      under this Section
      6(e)
      may be
      exercised for a period of no more than 20 Trading Days at a time and not more
      than two times in any twelve-month period, without such suspension being
      considered as part of an Event Payment determination. Immediately after the
      end
      of any suspension period under this Section
      6(e),
      the
      Company shall take all necessary actions (including filing any required
      supplemental prospectus) to restore the effectiveness of the applicable
      Registration Statement and the ability of the Investors to publicly resell
      their
      Registrable Securities pursuant to such effective Registration Statement. Any
      notice delivered to Investors under this Section 6.1(e) shall not contain
      material, non-public information regarding the Company.

     

    (f)  Except
      in
      connection with the registration rights of Abengoa under the Abengoa Securities
      Purchase Agreement, the Company shall not, from the date hereof until the
      Effective Date of the Registration Statement, prepare and file with the SEC
      a
      registration statement relating to an offering for its own account or the
      account of others under the Securities Act of any of its equity securities,
      other
      than any registration statement or post-effective amendment to a registration
      statement (or supplement thereto) relating to the Company’s employee benefit
      plans registered on Form S-8.

     

    6.2  Registration
      Procedures.

     

    In
      connection with the Company’s registration obligations hereunder, the Company
      shall:

     

    (a)  Not
      less
      than three Trading Days prior to the filing of a Registration Statement or
      any
      related Prospectus or any amendment or supplement thereto, furnish via email
      to
      those Investors who have supplied the Company with email addresses copies of
      all
      such documents proposed to be filed, which documents (other than any document
      that is incorporated or deemed to be incorporated by reference therein) will
      be
      subject to the review of such Investors. The Company shall reflect in each
      such
      document when so filed with the SEC such comments regarding the Investors and
      the plan of distribution as the Investors may reasonably and promptly propose
      in
      writing no later than one Trading Day after the Investors have been so furnished
      with copies of such documents as aforesaid.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    (b)  (i) Subject
      to Section
      6.1(e),
      prepare
      and file with the SEC such amendments, including post-effective amendments,
      to
      each Registration Statement and the Prospectus used in connection therewith
      as
      may be necessary to keep the Registration Statement continuously effective,
      as
      to the applicable Registrable Securities for the Effectiveness Period and
      prepare and file with the SEC such additional Registration Statements in order
      to register for resale under the Securities Act all of the Registrable
      Securities; (ii) cause the related Prospectus to be amended or supplemented
      by any required Prospectus supplement, and as so supplemented or amended to
      be
      filed pursuant to Rule 424; (iii) respond as promptly as reasonably
      possible, and in any event within 12 Trading Days (except to the extent that
      the
      Company reasonably requires additional time to respond to accounting comments),
      to any comments received from the SEC with respect to the Registration Statement
      or any amendment thereto; and (iv) comply in all material respects with the
      provisions of the Securities Act and the Exchange Act with respect to the
      disposition of all Registrable Securities covered by the Registration Statement
      during the applicable period in accordance with the intended methods of
      disposition by the Investors thereof set forth in the Registration Statement
      as
      so amended or in such Prospectus as so supplemented.

     

    (c)  Notify
      the Investors as promptly as reasonably possible, and (if requested by the
      Investors in writing confirm such notice in writing no later than two Trading
      Days thereafter, of any of the following events: (i) the SEC notifies the
      Company whether there will be a “review” of any Registration Statement;
      (ii) the SEC comments in writing on any Registration Statement;
      (iii) any Registration Statement or any post-effective amendment is
      declared effective; (iv) the SEC or any other Federal or state governmental
      authority requests any amendment or supplement to any Registration Statement
      or
      Prospectus or requests additional information related thereto; (v) the SEC
      issues any stop order suspending the effectiveness of any Registration Statement
      or initiates any Proceedings for that purpose; (vi) the Company receives
      notice of any suspension of the qualification or exemption from qualification
      of
      any Registrable Securities for sale in any jurisdiction, or the initiation
      or
      threat of any Proceeding for such purpose; or (vii) the financial
      statements included in any Registration Statement become ineligible for
      inclusion therein or any Registration Statement or Prospectus or other document
      contains any untrue statement of a material fact or omits 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.

     

    (d)  Use
      its
      reasonable Best Efforts to avoid the issuance of or, if issued, obtain the
      withdrawal of (i) any order suspending the effectiveness of any
      Registration Statement, or (ii) any suspension of the qualification (or
      exemption from qualification) of any of the Registrable Securities for sale
      in
      any jurisdiction, as soon as possible.

     

    (e)  If
      requested by an Investor, provide such Investor, without charge, at least one
      conformed copy of each Registration Statement and each amendment thereto,
      including financial statements and schedules, and all exhibits to the extent
      so
      requested by such Person in writing (including those previously furnished or
      incorporated by reference) promptly after the filing of such documents with
      the
      SEC.

     

    (f)  Promptly
      deliver to each Investor, without charge, as many copies of the Prospectus
      or
      Prospectuses (including each form of prospectus) and each amendment or
      supplement thereto as such Persons may reasonably request. The Company hereby
      consents to the use of such Prospectus and each amendment or supplement thereto
      by each of the selling Investors in connection with the offering and sale of
      the
      Registrable Securities covered by such Prospectus and any amendment or
      supplement thereto to the extent permitted by federal and state securities
      laws
      and regulations and in accordance with the terms and conditions of this
      Agreement.

     

    
      
         

      

      
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    (g)  (i) In
      the time and manner required by each Trading Market, prepare and file with
      such
      Trading Market an additional shares listing application covering all of the
      Registrable Securities; (ii) take all steps necessary to cause such Common
      Shares to be approved for listing on each Trading Market as soon as possible
      thereafter; (iii) provide to Investors evidence of such listing; and
      (iv) except as a result of the Excluded Events, during the Effectiveness
      Period, maintain the listing of such Common Shares on each such Trading Market
      or another Eligible Market.

     

    (h)  Prior
      to
      any public offering of Registrable Securities, use its reasonable Best Efforts
      to register or qualify or cooperate with the selling Investors in connection
      with the registration or qualification (or exemption from such registration
      or
      qualification) of such Registrable Securities for offer and sale under the
      securities or Blue Sky laws of such jurisdictions within the United States
      as
      any Investor requests in writing, to keep each such registration or
      qualification (or exemption therefrom) effective for so long as required, but
      not to exceed the duration of the Effectiveness Period, and to do any and all
      other acts or things reasonably necessary or advisable to enable the disposition
      in such jurisdictions of the Registrable Securities covered by a Registration
      Statement; provided,
      however,
      that
      the Company shall not be obligated to file any general consent to service of
      process or to qualify as a foreign corporation or as a dealer in securities
      in
      any jurisdiction in which it is not so qualified or to subject itself to
      taxation in respect of doing business in any jurisdiction in which it is not
      otherwise so subject.

     

    (i)  Cooperate
      with the Investors to facilitate the timely preparation and delivery of
      certificates representing Registrable Securities to be delivered to a transferee
      pursuant to a Registration Statement, which certificates shall be free, to
      the
      extent permitted by this Agreement and under law, of all restrictive legends,
      and to enable such Registrable Securities to be in such denominations and
      registered in such names as any such Investors may reasonably
      request.

     

    (j)  Upon
      the
      occurrence of any event described in Section
      6.2(c)(vii),
      as
      promptly as reasonably possible, prepare a supplement or amendment, including
      a
      post-effective amendment, to the Registration Statement or a supplement to
      the
      related Prospectus or any document incorporated or deemed to be incorporated
      therein by reference, and file any other required document so that, as
      thereafter delivered, neither the Registration Statement nor such Prospectus
      will contain an untrue statement of a material fact or omit to state a 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.

     

    (k)  Cooperate
      with any reasonable due diligence investigation undertaken by the Investors
      in
      connection with the sale of Registrable Securities, including, without
      limitation, by making available documents and information; provided that the
      Company will not deliver or make available to any Investor material, nonpublic
      information unless such Investor requests in advance in writing to receive
      material, nonpublic information and agrees to keep such information
      confidential.

     

    
      
         

      

      
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    (l)  Comply
      in
      all material respects with all rules and regulations of the SEC applicable
      to
      the registration of the Securities.

     

    (m)  It
      shall
      be a condition precedent to the obligations of the Company to complete the
      registration pursuant to this Agreement with respect to the Registrable
      Securities of any particular Investor or to make any Event Payments set forth
      in
      Section 6.1(c) to such Investor that such Investor furnish to the Company the
      information specified in Exhibits B-1, B-2 and B-3 hereto and such other
      information regarding itself, the Registrable Securities and other shares of
      Common Stock held by it and the intended method of disposition of the
      Registrable Securities held by it (if different from the Plan of Distribution
      set forth on Exhibit D hereto) as shall be reasonably required to effect the
      registration of such Registrable Securities and shall complete and execute
      such
      documents in connection with such registration as the Company may reasonably
      request.

     

    (n)  The
      Company shall comply with all applicable rules and regulations of the SEC under
      the Securities Act and the Exchange Act, including, without limitation, Rule
      172
      under the Securities Act, file any final Prospectus, including any supplement
      or
      amendment thereof, with the SEC pursuant to Rule 424 under the Securities Act,
      promptly inform the selling Investors in writing if, at any time during the
      Effectiveness Period, the Company does not satisfy the conditions specified
      in
      Rule 172 and, as a result thereof, the selling Investors are required to make
      available a Prospectus in connection with any disposition of Registrable
      Securities and take such other actions as may be reasonably necessary to
      facilitate the registration of the Registrable Securities
      hereunder.

     

    6.3  Registration
      Expenses.

     

    The
      Company shall pay all fees and expenses incident to the performance of or
      compliance with Article VI of this Agreement by the Company, including
      without limitation (a) all registration and filing fees and expenses,
      including without limitation those related to filings with the SEC, any Trading
      Market and in connection with applicable state securities or Blue Sky laws,
      (b) printing expenses (including without limitation expenses of printing
      certificates for Registrable Securities), (c) messenger, telephone and
      delivery expenses, (d) fees and disbursements of counsel for the Company,
      (e) fees and expenses of all other Persons retained by the Company in connection
      with the consummation of the transactions contemplated by this Agreement, and
      (f) all listing fees to be paid by the Company to the Trading
      Market.

     

    6.4  Indemnification.

     

    (a)  Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless each Investor, the officers, directors, partners, members, agents
      and employees of each of them, each Person who controls any such Investor
      (within the meaning of Section 15 of the Securities Act or Section 20
      of the Exchange Act) and the officers, directors, partners, members, agents
      and
      employees of each such controlling Person, to the fullest extent permitted
      by
      applicable law, from and against any and all Losses, as incurred, arising out
      of
      or relating to (i) any misrepresentation or breach of any representation or
      warranty made by the Company in the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby, (ii) any
      breach of any covenant, agreement or obligation of the Company contained in
      the
      Transaction Documents or any other certificate, instrument or document
      contemplated hereby or thereby, (iii) any cause of action, suit or claim brought
      or made against such Indemnified Party (as defined in Section 6.4(c) below)
      by a
      third party (including for these purposes a derivative action brought on behalf
      of the Company), arising out of or resulting from (x) execution, delivery,
      performance or enforcement of the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby or (y) the
      status of Indemnified Party as holder of the Securities or (iv) any untrue
      or
      alleged untrue statement of a material fact contained in the Registration
      Statement, any Prospectus or any form of Company prospectus or in any amendment
      or supplement thereto or in any Company preliminary prospectus, or arising
      out
      of or relating to any omission or alleged omission of a material fact required
      to be stated therein or necessary to make the statements therein (in the case
      of
      any Prospectus or form of prospectus or supplement thereto, in the light of
      the
      circumstances under which they were made) not misleading, except to the extent,
      but only to the extent, that (A) such untrue statements, alleged untrue
      statements, omissions or alleged omissions are based upon information regarding
      such Investor furnished in writing to the Company by or on behalf of such
      Investor for use therein, or to the extent that such information relates to
      such
      Investor or such Investor's proposed method of distribution of Registrable
      Securities and was reviewed and expressly approved by such Investor expressly
      for use in the Registration Statement, or (B) with respect to any prospectus,
      if
      the untrue statement or omission of material fact contained in such prospectus
      was corrected on a timely basis in the prospectus, as then amended or
      supplemented, if such corrected prospectus was timely made available by the
      Company to such Investor, and such Investor seeking indemnity hereunder was
      advised in writing not to use the incorrect prospectus prior to the use giving
      rise to Losses. The preceding to the contrary notwithstanding: (I) the maximum
      liability to the Company under clauses (i) through (iii) of this Section 6.4(a)
      shall in no event exceed the aggregate sum of the purchase prices set forth
      opposite the Investors’
names
      on Exhibit A hereto
      under
      the heading “Purchase Price”; and (II) other than the obligations of the Company
      to the Investors the performance of which is to be made or continue to be made
      by the Company on or after the first anniversary of the Agreement Date, all
      of
      the other obligations of the Company under clauses (i) through (iii) of this
      Section 6.4(a) shall terminate and be without further force and effect on the
      first anniversary of the Closing Date. Each Investor acknowledges and agrees
      the
      Company’s payment of liquidated damages to such Investor under Section 6.1(d)
      hereof shall automatically preclude such Investor and its related indemnified
      parties from seeking indemnity under this Section 6.4(a) for any Losses related
      to the Company’s registration obligations under Section 6.1 hereof and
      automatically relieve the Company of any related indemnification obligations
      hereunder in connection with such Losses.

     

    
      
         

      

      
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    (b)  Indemnification
      by Investors.
      Each
      Investor shall, severally and not jointly, indemnify and hold harmless the
      Company, its directors, officers, agents and employees, each Person who controls
      the Company (within the meaning of Section 15
      of the
      Securities Act and Section 20
      of the
      Exchange Act), and the directors, officers, agents or employees of such
      controlling Persons, to the fullest extent permitted by applicable law, from
      and
      against all Losses arising out of or relating to (i) any misrepresentation
      or
      breach of any representation or warranty made by such Investor in the
      Transaction Documents or any other certificate, instrument or document
      contemplated hereby or thereby, (ii) any breach of any covenant, agreement
      or
      obligation of such Investor contained in the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby, (iii)
      arising out of any untrue statement of a material fact contained in the
      Registration Statement, any Prospectus, or any form of prospectus, or in any
      amendment or supplement thereto, or arising out of or relating to any omission
      of a material fact required to be stated therein or necessary to make the
      statements therein (in the case of any Prospectus or form of prospectus or
      supplement thereto, in the light of the circumstances under which they were
      made) not misleading, but only to the extent that such untrue statement or
      omission is contained in any information so furnished by or on behalf of such
      Investor in writing to the Company specifically for inclusion in such
      Registration Statement or such Prospectus or to the extent that such untrue
      statements or omissions are based upon information regarding such Investor
      furnished to the Company by or on behalf of such Investor in writing expressly
      for use therein, or to the extent that such information relates to such Investor
      or such Investor’s proposed method of distribution of Registrable Securities and
      was reviewed and expressly approved by or on behalf of such Investor expressly
      for use in the Registration Statement (it being understood that the information
      provided by the Investor to the Company in Exhibits B-1, B-2 and B-3 and the
      Plan of Distribution set forth on Exhibit D, as the same may be modified by
      or
      on behalf of such Investor and other information provided by or on behalf of
      the
      Investor to the Company in or pursuant to the Transaction Documents constitutes
      information reviewed and expressly approved by such Investor in writing
      expressly for use in the Registration Statement), such Prospectus or such form
      of Prospectus or in any amendment or supplement thereto. In no event shall
      the
      liability of any selling Investor hereunder be greater in amount than the dollar
      amount of the net proceeds received by such Investor upon the sale of the
      Registrable Securities giving rise to such indemnification obligation. The
      preceding to the contrary notwithstanding: (I) the maximum liability of each
      such Investor under clauses (i) and (ii) of this Section 6.4(b) shall in no
      event exceed the purchase price set forth opposite such Investor’s
      name
      on Exhibit A hereto
      under
      the heading “Purchase Price”; and (II) other than the obligations of each such
      Investor to the Company the performance of which is to be made or continue
      to be
      made by each such Investor on or after the first anniversary of the Agreement
      Date, all of the other obligations of each such Investor under clauses (i)
      and
      (ii) of this Section 6.4(b) shall terminate and be without further force and
      effect on the first anniversary of the Closing Date. 

     

    (c)  Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an “Indemnified
      Party”),
      such
      Indemnified Party shall promptly notify the Person from whom indemnity is sought
      (the “Indemnifying
      Party”)
      in
      writing, and the Indemnifying Party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the Indemnified Party
      and
      the payment of all fees and expenses incurred in connection with defense
      thereof; provided, that the failure of any Indemnified Party to give such notice
      shall not relieve the Indemnifying Party of its obligations or liabilities
      pursuant to this Agreement, except (and only) to the extent that it shall be
      finally determined by a court of competent jurisdiction (which determination
      is
      not subject to appeal or further review) that such failure shall have
      proximately and materially adversely prejudiced the Indemnifying
      Party.

     

    
      
         

      

      
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    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (i) the Indemnifying Party has agreed in writing to pay such fees
      and expenses; or (ii) the Indemnifying Party shall have failed promptly to
      assume the defense of such Proceeding and to employ counsel reasonably
      satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
      named parties to any such Proceeding (including any impleaded parties) include
      both such Indemnified Party and the Indemnifying Party, and such Indemnified
      Party shall have been advised by counsel that a conflict of interest is likely
      to exist if the same counsel were to represent such Indemnified Party and the
      Indemnifying Party (in which case, if such Indemnified Party notifies the
      Indemnifying Party in writing that it elects to employ separate counsel at
      the
      expense of the Indemnifying Party, the Indemnifying Party shall not have the
      right to assume the defense thereof and the reasonable fees and expenses of
      separate counsel shall be at the expense of the Indemnifying Party). It being
      understood, however, that the Indemnifying Party shall not, in connection with
      any one such Proceeding (including separate Proceedings that have been or will
      be consolidated before a single judge) be liable for the fees and expenses
      of
      more than one separate firm of attorneys at any time for all Indemnified
      Parties, which firm shall be appointed by a majority of the Indemnified Parties.
      The Indemnifying Party shall not be liable for any settlement of any such
      Proceeding effected without its written consent, which consent shall not be
      unreasonably withheld. No Indemnifying Party shall, without the prior written
      consent of the Indemnified Party, which consent shall not be unreasonably
      withheld or delayed, effect any settlement of any pending Proceeding in respect
      of which any Indemnified Party is a party, unless such settlement includes
      an
      unconditional release of such Indemnified Party from all liability on claims
      that are or could have been the subject matter of such Proceeding.

     

    All
      reasonable fees and expenses of the Indemnified Party (including reasonable
      fees
      and expenses to the extent incurred in connection with investigating or
      preparing to defend such Proceeding in a manner not inconsistent with this
      Section) shall be paid to the Indemnified Party, as incurred, within 20 Trading
      Days of written notice thereof to the Indemnifying Party, provided that the
      Indemnifying Party may require such Indemnified Party to undertake to reimburse
      all such fees and expenses to the extent it is finally judicially determined
      that such Indemnified Party is not entitled to indemnification
      hereunder). 

     

    (d)  Contribution.
      If a
      claim for indemnification under Section
      6.4(a)
      or  (b)
      is
      unavailable to an Indemnified Party (by reason of public policy or otherwise),
      then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
      shall contribute to the amount paid or payable by such Indemnified Party as
      a
      result of such Losses, in such proportion as is appropriate to reflect the
      relative fault of the Indemnifying Party and Indemnified Party in connection
      with the actions, statements or omissions that resulted in such Losses as well
      as any other relevant equitable considerations. The relative fault of such
      Indemnifying Party and Indemnified Party shall be determined by reference to,
      among other things, whether any action in question, including any untrue or
      alleged untrue statement of a material fact or omission or alleged omission
      of a
      material fact, has been taken or made by, or relates to information supplied
      by
      or on behalf of, such Indemnifying Party or Indemnified Party, and the parties’
relative intent, knowledge, access to information and opportunity to correct
      or
      prevent such action, statement or omission. The amount paid or payable by a
      party as a result of any Losses shall be deemed to include, subject to the
      limitations set forth in Section
      6.4(c),
      any
      reasonable attorneys’ or other reasonable fees or expenses incurred by such
      party in connection with any Proceeding to the extent such party would have
      been
      indemnified for such fees or expenses if the indemnification provided for in
      this Section was available to such party in accordance with its
      terms.

     

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section
      6.4(d)
      were
      determined by pro rata allocation or by any other method of allocation that
      does
      not take into account the equitable considerations referred to in the
      immediately preceding paragraph. Notwithstanding the provisions of this
Section
      6.4(d),
      no
      Investor shall be required to contribute, in the aggregate, any amount in excess
      of the amount by which the proceeds actually received by such Investor from
      the
      sale of the Registrable Securities subject to the Proceeding exceeds the amount
      of any damages that such Investor has 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.

     

    Except
      as
      expressly provided in the last sentence of Section 6.4(a), the indemnity and
      contribution agreements contained in this Section  are in addition to any
      liability that the Indemnifying Parties may have to the Indemnified
      Parties.

     

    
      
         

      

      
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    6.5  Dispositions.

     

    Each
      Investor agrees that it will comply with the prospectus delivery requirements
      of
      the Securities Act as applicable to it in connection with sales of Registrable
      Securities pursuant to the Registration Statement and shall sell its Registrable
      Securities in accordance with the Plan of Distribution set forth in the
      Prospectus. Each Investor further agrees that, upon receipt of a notice from
      the
      Company of the occurrence of any event of the kind described in Sections
      6.2(c)(v), (vi) or (vii), such Investor will discontinue disposition of such
      Registrable Securities under the Registration Statement until such Investor
      is
      advised in writing by the Company that the use of the Prospectus, or amended
      Prospectus, as applicable, may be used. The Company may provide appropriate
      stop
      orders to enforce the provisions of this paragraph.

     

    6.6  No
      Piggyback on Registrations.

     

    Neither
      the Company nor any of its security holders (other than the Investors in such
      capacity pursuant hereto and Abengoa pursuant to the Abengoa Securities Purchase
      Agreement) may include securities of the Company in the Registration Statement
      other than the Registrable Securities and securities held by Abengoa for which
      it has registration rights under the Abengoa Securities Purchase
      Agreement.

     

    6.7  Piggy-Back
      Registrations.

     

    If
      at any
      time during the Effectiveness Period there is not an effective Registration
      Statement covering all of the Registrable Securities and the Company shall
      determine to prepare and file with the SEC a registration statement relating
      to
      an offering for its own account or the account of others under the Securities
      Act of any of its equity securities, other than on Form S-4 or Form S-8 (each
      as
      promulgated under the Securities Act) or their then equivalents relating to
      equity securities to be issued solely in connection with any acquisition of
      any
      entity or business or equity securities issuable in connection with stock option
      or other employee benefit plans, then the Company shall send to each Investor
      not then eligible to sell all of its Registrable Securities under Rule 144
      in a
      three-month period, written notice of such determination and if, within ten
      days
      after receipt of such notice, any such Investor shall so request in writing,
      the
      Company shall include in such registration statement all or any part of such
      Registrable Securities such Investor requests to be registered. Notwithstanding
      the foregoing, in the event that, in connection with any underwritten public
      offering, the managing underwriter(s) thereof shall impose a limitation on
      the
      number of shares of Common Stock which may be included in the Registration
      Statement because, in such underwriter(s)’ judgment, marketing or other factors
      dictate such limitation is necessary to facilitate public distribution, then
      the
      Company shall be obligated to include in such Registration Statement only such
      limited portion of the Registrable Securities with respect to which such
      Investor has requested inclusion hereunder as the underwriter shall permit;
      provided,
      however,
      that
      (i) the Company shall not exclude any Registrable Securities unless the Company
      has first excluded all outstanding securities, the holders of which are not
      contractually entitled to inclusion of such securities in such Registration
      Statement or are not contractually entitled to pro rata inclusion with the
      Registrable Securities and (ii) after giving effect to the immediately preceding
      proviso, any such exclusion of Registrable Securities shall be made pro rata
      among the Investors seeking to include Registrable Securities and the holders
      of
      other securities having the contractual right to inclusion of their securities
      in such Registration Statement by reason of demand registration rights, in
      proportion to the number of Registrable Securities or other securities, as
      applicable, sought to be included by each such Investor or other holder(s).
      If
      an offering in connection with which an Investor is entitled to registration
      under this Section 6.7 is an underwritten offering, then each Investor whose
      Registrable Securities are included in such Registration Statement shall, unless
      otherwise agreed by the Company, offer and sell such Registrable Securities
      in
      an underwritten offering using the same underwriter or underwriters and, subject
      to the provisions of this Agreement, on the same terms and conditions as other
      shares of Common Stock included in such underwritten offering and shall enter
      into an underwriting agreement in a form and substance reasonably satisfactory
      to the Company and the underwriter or underwriters. Upon the effectiveness
      of
      the registration statement for which piggy-back registration has been provided
      in this Section 6.7, any Event Payments payable to an Investor whose Securities
      are included in such registration statement shall terminate.

     

    
      
         

      

      
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      ARTICLE VII  

     

    MISCELLANEOUS

     

    7.1  Termination.

     

    This
      Agreement may be terminated by the Company or any Investor, by written notice
      to
      the other parties, if the Closing has not been consummated by the twentieth
      Business Day following the date of this Agreement; provided that no such
      termination will affect the right of any party to sue for any breach by the
      other party (or parties).

     

    7.2  Fees
      and Expenses.

     

    Except
      as
      expressly set forth in the Transaction Documents to the contrary, each party
      shall pay the fees and expenses of its advisers, counsel, accountants and other
      experts, if any, and all other expenses incurred by such party incident to
      the
      negotiation, preparation, execution, delivery and performance of this Agreement
      and the other Transaction Documents. The Company shall pay all Transfer Agent
      fees, stamp taxes and other taxes and duties levied in connection with the
      sale
      and issuance of their applicable Securities.

     

    7.3  Entire
      Agreement.

     

    The
      Transaction Documents, together with the Exhibits and Schedules thereto, contain
      the entire understanding of the parties with respect to the subject matter
      hereof and supersede all prior agreements and understandings, oral or written,
      with respect to such matters, which the parties acknowledge have been merged
      into such documents, exhibits and schedules. At or after the Closing, and
      without further consideration, each party will execute and deliver to the
      parties such further documents as may be reasonably requested in order to give
      practical effect to the intention of the parties under the Transaction
      Documents.

     

    7.4  Notices.

     

    Any
      and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile or email at the facsimile number or
      email address specified in this Section  prior to 4:00 p.m. (New York City
      time) on a Trading Day, (b) the next Trading Day after the date of
      transmission, if such notice or communication is delivered via facsimile or
      email at the facsimile number or email address specified in this Section on
      a
      day that is not a Trading Day or later than 4:00 p.m. (New York City time)
      on
      any Trading Day, (c) the Trading Day following the date of deposit with a
      nationally recognized overnight courier service, or (d) upon actual receipt
      by the party to whom such notice is required to be given. The addresses,
      facsimile numbers and email addresses for such notices and communications are
      those set forth on the signature pages hereof, or such other address or
      facsimile number as may be designated in writing hereafter, in the same manner,
      by any such Person.

     

    
      
         

      

      
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    7.5  Amendments;
      Waivers.

     

    No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by the Company and each of
      the
      Investors or, in the case of a waiver, by the party against whom enforcement
      of
      any such waiver is sought. No waiver of any default with respect to any
      provision, condition or requirement of this Agreement shall be deemed to be
      a
      continuing waiver in the future or a waiver of any subsequent default or a
      waiver of any other provision, condition or requirement hereof, nor shall any
      delay or omission of either party to exercise any right hereunder in any manner
      impair the exercise of any such right. Notwithstanding the foregoing, a waiver
      or consent to depart from the provisions hereof with respect to a matter that
      relates exclusively to the rights of Investors under Article VI may be
      given by Investors holding at least a majority of the Registrable Securities
      to
      which such waiver or consent relates.

     

    7.6  Construction.

     

    The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. The language used in this Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party.

     

    7.7  Successors
      and Assigns.

     

    This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of the Investors. From and after the Closing Date, any Investor may
      assign its rights under this Agreement to any Person to whom such Investor
      assigns or transfers any Securities, provided (i)
      such
      transferor agrees in writing with the transferee or assignee to assign such
      rights, and a copy of such agreement is furnished to the Company after such
      assignment, (ii) the Company is furnished with written notice of (x) the name
      and address of such transferee or assignee and (y) the Registrable Securities
      with respect to which such registration rights are being transferred or
      assigned, (iii) following such transfer or assignment, the further disposition
      of such Securities by the transferee or assignee is restricted under the
      Securities Act and applicable state securities laws, (iv) such
      transferee agrees in writing to be bound, with respect to the transferred
      Securities, by the provisions hereof that apply to the “Investors” and
(v)
      such
      transfer shall have been made in accordance with the applicable requirements
      of
      this Agreement and with all laws applicable thereto.

     

    7.8  No
      Third-Party Beneficiaries.

     

    This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, except that each Indemnified
      Party is an intended third party beneficiary of Section 6.4 and (in each
      case) may enforce the provisions of such Sections directly against the parties
      with obligations thereunder.

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    7.9  Governing
      Law.

     

    THE
      CORPORATE LAWS OF THE STATE OF DELAWARE
      SHALL
      GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
      STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT
      AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
      ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 

     

    7.10  Survival.

     

    The
      representations and warranties, agreements and covenants contained herein shall
      survive the Closing.

     

    7.11  Execution.

     

    This
      Agreement may be executed in two or more counterparts, all of which when taken
      together 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, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission or email attachment, such signature shall create a valid and
      binding obligation of the party executing (or on whose behalf such signature
      is
      executed) with the same force and effect as if such facsimile or email-attached
      signature page were an original thereof.

     

    7.12  Severability.

     

    If
      any
      provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    7.13  Rescission
      and Withdrawal Right.

     

    Notwithstanding
      anything to the contrary contained in (and without limiting any similar
      provisions of) the Transaction Documents, whenever any Investor exercises a
      right, election, demand or option owed to such Investor by the Company under
      a
      Transaction Document and the Company does not timely perform its related
      obligations within the periods therein provided, then, prior to the performance
      by the Company of the Company's related obligation, such Investor may rescind
      or
      withdraw, in its sole discretion from time to time upon written notice to the
      Company, any relevant notice, demand or election in whole or in part without
      prejudice to its future actions and rights.

     

    7.14  Replacement
      of Securities.

     

    If
      any
      certificate or instrument evidencing any Securities is mutilated, lost, stolen
      or destroyed, the Company shall issue or cause to be issued in exchange and
      substitution for and upon cancellation thereof, or in lieu of and substitution
      therefor, a new certificate or instrument, but only upon receipt of evidence
      reasonably satisfactory to the Company of such loss, theft or destruction and
      the execution by the holder thereof of a customary lost certificate affidavit
      of
      that fact and an agreement to indemnify and hold harmless the Company for any
      losses in connection therewith. The applicants for a new certificate or
      instrument under such circumstances shall also pay any reasonable third-party
      costs associated with the issuance of such replacement Securities.

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    7.15  Remedies.

     

    In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each of the Investors and the Company will
      be entitled to seek specific performance under the Transaction Documents. The
      parties agree that monetary damages may not be adequate compensation for any
      loss incurred by reason of any breach of obligations described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation (other than in connection with any action for temporary
      restraining order) the defense that a remedy at law would be adequate.

     

    7.16  Payment
      Set Aside.

     

    To
      the
      extent that the Company makes a payment or payments to any Investor hereunder
      or
      any Investor enforces or exercises its rights hereunder or thereunder, and
      such
      payment or payments or the proceeds of such enforcement or exercise or any
      part
      thereof are subsequently invalidated, declared to be fraudulent or preferential,
      set aside, recovered from, disgorged by or are required to be refunded, repaid
      or otherwise restored to the Company by a trustee, receiver or any other Person
      under any law (including, without limitation, any bankruptcy law, state or
      federal law, common law or equitable cause of action), then to the extent of
      any
      such restoration the obligation or part thereof originally intended to be
      satisfied shall be revived and continued in full force and effect as if such
      payment had not been made or such enforcement or setoff had not
      occurred.

     

    7.17  Adjustments
      in Share Numbers and Prices.

     

    In
      the
      event of any stock split, subdivision, dividend or distribution affecting the
      Company’s stockholders pro rata and payable in shares of Common Stock (or other
      securities or rights convertible into, or entitling the holder thereof to
      receive directly or indirectly shares of Common Stock), combination or other
      similar recapitalization or event affecting the Company’s stockholders pro rata
      and occurring after the date hereof and prior to the Closing, each reference
      in
      any Transaction Document to a number of shares or a price per share shall be
      amended to appropriately account for such event.

     

    7.18  Independent
      Nature of Investors' Obligations and Rights.

     

    The
      obligations of each Investor under any Transaction Document are several and
      not
      joint with the obligations of any other Investor, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor under any Transaction Document. The decision of each Investor to
      purchase Securities pursuant to this Agreement has been made by such Investor
      independently of any other Investor and independently of any information,
      materials, statements or opinions as to the business, affairs, operations,
      assets, properties, liabilities, results of operations, condition (financial
      or
      otherwise) or prospects of the Company which may have been made or given by
      any
      other Investor or by any agent or employee of any other Investor, and no
      Investor or any of its agents or employees shall have any liability to any
      other
      Investor (or any other person) relating to or arising from any such information,
      materials, statements or opinions. Nothing contained herein or in any
      Transaction Document, and no action taken by any Investor pursuant thereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated by the Transaction Document. Each
      Investor acknowledges that no other Investor has acted as agent for such
      Investor in connection with making its investment hereunder and that no other
      Investor will be acting as agent of such Investor in connection with monitoring
      its investment hereunder. Each Investor shall be entitled to independently
      protect and enforce its rights, including without limitation the rights arising
      out of this Agreement or out of the other Transaction Documents, and it shall
      not be necessary for any other Investor to be joined as an additional party
      in
      any proceeding for such purpose.

     

    [SIGNATURE
      PAGES TO FOLLOW]

    

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    DYADIC
      INTERNATIONAL, INC.

     

     

    By:  /s/
      Mark A. Emalfarb 

    Name:
      Mark A. Emalfarb

    Title:
      Chief Executive Officer

     

    Address
      for Notice:

     

    140
      Intracoastal Pointe Drive,

    Suite
      404, Jupiter, Florida 33477 

     

    Facsimile
      No.: 561-743-8333

    Telephone
      No.: 561-743-8513

    Attn:
      Chief Executive Officer

    

    With
      a
      copy to: 

     

    Greenberg
      Traurig, P.A.

    1221
      Brickell Avenue

    Miami,
      Florida 33131

     

    Facsimile:
      305-961-5642

    Telephone:
      305-579-0642

    Attn:
      Andrew E. Balog, Esq.

    

    Greenberg
      Traurig, LLP

    77
      West
      Wacker Drive, Suite 2500

    Chicago,
      Illinois 60601

     

    Facsimile:
      312-899-0431

    Telephone:
      312-476-5015

    Attn:
      Robert I. Schwimmer, Esq.

     

    COMPANY
      SIGNATURE PAGE

     

    
      
        
           

        

        
        

      

      
        34

        
          

        

      

      
        
        

        
        

      

    

    Investor
      Signature Page

     

    By
      its
      execution and delivery of this signature page, the undersigned Investor hereby
      joins in and agrees to be bound by the terms and conditions of the Securities
      Purchase Agreement dated as of November 17, 2006 (the “Purchase Agreement”)
      by and among Dyadic
      International, Inc.
      and the
      Investors (as defined therein), as to the number of shares of Common Stock
      and
      Warrants set forth below, and authorizes this signature page to be attached
      to
      the Purchase Agreement or counterparts thereof.

     

    Name
      of
      Investor:

    

    T.
      Row
      Price Associates, Inc. Investment Adviser to the Funds and Accounts in
      Attachment A

    

    

    By:  /s/
      Jay S. Markowitz

    Name: Jay
      S.
      Markowitz

    Title: Vice
      President

    

    T.
      Rowe
      Price Associates, Inc.

    Address: 100
      East
      Pratt Street

                     
      Baltimore, MD 21202

    Attention:
      Darrell N. Braman

    Telephone
      No.: 

    Facsimile
      No.: 

    Email
      Address: 

    

    Number
      of
      Shares: 1,200,000
      Aggregate

    Number
      of
      Warrants: 240,000
      Aggregate

    Aggregate
      Purchase Price: $5,616,000.00

    Exhibits:

    

    A Schedule
      of Investors

    B Instruction
      Sheet for Investors

    B-1
       Stock
      Certificate Questionnaire for Investors

    B-2 Registration
      Statement Questionnaire for Investors

    B-3 Certificate
      for Corporation, Partnership, Limited Liability Company,

          
Trust,
      Foundation and Joint Investors

    C Opinion
      of Company Corporate Counsel

    D Plan
      of
      Distribution

    E Company
      Transfer Agent Instructions

    F Form
      of
      Warrant

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    Investor
      Signature Page

     

    By
      its
      execution and delivery of this signature page, the undersigned Investor hereby
      joins in and agrees to be bound by the terms and conditions of the Securities
      Purchase Agreement dated as of November 17, 2006 (the “Purchase Agreement”)
      by and among Dyadic
      International, Inc.
      and the
      Investors (as defined therein), as to the number of shares of Common Stock
      and
      Warrants set forth below, and authorizes this signature page to be attached
      to
      the Purchase Agreement or counterparts thereof.

     

    Name
      of
      Investor:

    

    Fort
      Mason Master, LP

    

    

    By:  /s/
      Dan German

    Name: Dan
      German

    Title: Managing
      Member

             
      Fort Mason Capital, LLC

    

    Address: 4
      Embarcadero Ctr., Ste 2050

                    
      San Francisco, CA 94111

    Attention:
      KC Lynch & Marshall Jensen

    Telephone
      No.: 

    Facsimile
      No.: 

    Email
      Address: 

    

    Number
      of
      Shares: 322,581

    Number
      of
      Warrants: 64,516

    Aggregate
      Purchase Price: $1,509,679.08

    Exhibits:

    

    A Schedule
      of Investors

    B Instruction
      Sheet for Investors

    B-1
       Stock
      Certificate Questionnaire for Investors

    B-2 Registration
      Statement Questionnaire for Investors

    B-3 Certificate
      for Corporation, Partnership, Limited Liability Company,

          
Trust,
      Foundation and Joint Investors

    C Opinion
      of Company Corporate Counsel

    D Plan
      of
      Distribution

    E Company
      Transfer Agent Instructions

    F Form
      of
      Warrant

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

    

     

    Investor
      Signature Page

     

    By
      its
      execution and delivery of this signature page, the undersigned Investor hereby
      joins in and agrees to be bound by the terms and conditions of the Securities
      Purchase Agreement dated as of November 17, 2006 (the “Purchase Agreement”)
      by and among Dyadic
      International, Inc.
      and the
      Investors (as defined therein), as to the number of shares of Common Stock
      and
      Warrants set forth below, and authorizes this signature page to be attached
      to
      the Purchase Agreement or counterparts thereof.

     

    Name
      of
      Investor:

    

    Fort
      Mason Partners, LP

    

    

    By:  /s/
      Dan German

    Name: Dan
      German

    Title: Managing
      Member

              Fort
      Mason Capital, LLC

    

    Address: 4
      Embarcadero Ctr., Ste 2050

                     
      San
      Francisco, CA 94111

    Attention:
      KC Lynch & Marshall Jensen

    Telephone
      No.: 

    Facsimile
      No.: 

    Email
      Address: 

    

    Number
      of
      Shares: 20,919

    Number
      of
      Warrants: 4,184

    Aggregate
      Purchase Price: $97,900.92

    Exhibits:

    

    A Schedule
      of Investors

    B Instruction
      Sheet for Investors

    B-1
       Stock
      Certificate Questionnaire for Investors

    B-2 Registration
      Statement Questionnaire for Investors

    B-3 Certificate
      for Corporation, Partnership, Limited Liability Company,

           Trust,
      Foundation and Joint Investors

    C Opinion
      of Company Corporate Counsel

    D Plan
      of
      Distribution

    E Company
      Transfer Agent Instructions

    F Form
      of
      Warrant

     

    

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    Investor
      Signature Page

     

    By
      its
      execution and delivery of this signature page, the undersigned Investor hereby
      joins in and agrees to be bound by the terms and conditions of the Securities
      Purchase Agreement dated as of November 17, 2006 (the “Purchase Agreement”)
      by and among Dyadic
      International, Inc.
      and the
      Investors (as defined therein), as to the number of shares of Common Stock
      and
      Warrants set forth below, and authorizes this signature page to be attached
      to
      the Purchase Agreement or counterparts thereof.

     

    Name
      of
      Investor:

    

    The
      Pinnacle Fund, L.P.

    

    

    By:  /s/
      Barry M. Kitt

    Name: Barry
      M.
      Kitt

    Title: Sole
      Member, 

    Pinnacle
      Fund Management, L.L.C., the General Partner of Pinnacle Advisers, L.P., the
      General Partner of The Pinnacle Fund, L.P.

    

    Address: 4965
      Preston Park Blvd.

                     
      Suite
      240

                     
      Plano,
      TX
      75093

    Attention:
      

    Telephone
      No.: 

    Facsimile
      No.: 

    Email
      Address: 

    

    Number
      of
      Shares: 343,500

    Number
      of
      Warrants: 68,700

    Aggregate
      Purchase Price: $1,607,580

    Exhibits:

    

    A Schedule
      of Investors

    B Instruction
      Sheet for Investors

    B-1
       Stock
      Certificate Questionnaire for Investors

    B-2 Registration
      Statement Questionnaire for Investors

    B-3 Certificate
      for Corporation, Partnership, Limited Liability Company,

          
Trust,
      Foundation and Joint Investors

    C Opinion
      of Company Corporate Counsel

    D Plan
      of
      Distribution

    E Company
      Transfer Agent Instructions

    F Form
      of
      Warrant

     

    Investor
      Signature Page

     

    By
      its
      execution and delivery of this signature page, the undersigned Investor hereby
      joins in and agrees to be bound by the terms and conditions of the Securities
      Purchase Agreement dated as of November 17, 2006 (the “Purchase Agreement”)
      by and among Dyadic
      International, Inc.
      and the
      Investors (as defined therein), as to the number of shares of Common Stock
      and
      Warrants set forth below, and authorizes this signature page to be attached
      to
      the Purchase Agreement or counterparts thereof.

     

    Name
      of
      Investor:

    

    Emerson
      Partners

    

    

    By:  /s/
      J. Steven Emerson

    Name: J.
      Steven
      Emerson

    Title: 

     

    Address:
       1522
      Ensley Avenue

                      
      Los
      Angeles, CA 90024

    Attention:
      

    Telephone
      No.: 

    Facsimile
      No.: 

    Email
      Address: 

    

    Number
      of
      Shares: 50,000

    Number
      of
      Warrants: 10,000

    Aggregate
      Purchase Price: $234,000

    Exhibits:

    

    A Schedule
      of Investors

    B Instruction
      Sheet for Investors

    B-1
       Stock
      Certificate Questionnaire for Investors

    B-2 Registration
      Statement Questionnaire for Investors

    B-3 Certificate
      for Corporation, Partnership, Limited Liability Company,

          
Trust,
      Foundation and Joint Investors

    C Opinion
      of Company Corporate Counsel

    D Plan
      of
      Distribution

    E Company
      Transfer Agent Instructions

    F Form
      of
      Warrant

     

    

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    Investor
      Signature Page

     

    By
      its
      execution and delivery of this signature page, the undersigned Investor hereby
      joins in and agrees to be bound by the terms and conditions of the Securities
      Purchase Agreement dated as of November 17, 2006 (the “Purchase Agreement”)
      by and among Dyadic
      International, Inc.
      and the
      Investors (as defined therein), as to the number of shares of Common Stock
      and
      Warrants set forth below, and authorizes this signature page to be attached
      to
      the Purchase Agreement or counterparts thereof.

     

    Name
      of
      Investor:

    

    Emerson
      Family Foundation

    

    

    By:  /s/
      J. Steven Emerson

    Name: J.
      Steven
      Emerson

    Title: 

    

    

    

    Address:
       1522
      Ensley Avenue

    Los
      Angeles, CA 90024

    Attention:
      

    Telephone
      No.: 

    Facsimile
      No.: 

    Email
      Address: 

    

    Number
      of
      Shares: 50,000

    Number
      of
      Warrants: 10,000

    Aggregate
      Purchase Price: $234,000

    Exhibits:

    

    A Schedule
      of Investors

    B Instruction
      Sheet for Investors

    B-1
       Stock
      Certificate Questionnaire for Investors

    B-2 Registration
      Statement Questionnaire for Investors

    B-3 Certificate
      for Corporation, Partnership, Limited Liability Company,

          
Trust,
      Foundation and Joint Investors

    C Opinion
      of Company Corporate Counsel

    D Plan
      of
      Distribution

    E Company
      Transfer Agent Instructions

    F Form
      of
      Warrant

     

    

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    Investor
      Signature Page

     

    By
      its
      execution and delivery of this signature page, the undersigned Investor hereby
      joins in and agrees to be bound by the terms and conditions of the Securities
      Purchase Agreement dated as of November 17, 2006 (the “Purchase Agreement”)
      by and among Dyadic
      International, Inc.
      and the
      Investors (as defined therein), as to the number of shares of Common Stock
      and
      Warrants set forth below, and authorizes this signature page to be attached
      to
      the Purchase Agreement or counterparts thereof.

     

    Name
      of
      Investor:

    

    Bear
      Stearns Sec. Corp FBO J. Steven Emerson Roth IRA

    

    

    By:  /s/
      J. Steven Emerson

    Name: J.
      Steven
      Emerson

    Title: 

    

    

    

    Address:
       1522
      Ensley Avenue

                      
      Los
      Angeles, CA 90024

    Attention:
      

    Telephone
      No.: 

    Facsimile
      No.: 

    Email
      Address: 

    

    Number
      of
      Shares: 550,000

    Number
      of
      Warrants: 110,000

    Aggregate
      Purchase Price: $2,574,000

    Exhibits:

    

    A Schedule
      of Investors

    B Instruction
      Sheet for Investors

    B-1
       Stock
      Certificate Questionnaire for Investors

    B-2 Registration
      Statement Questionnaire for Investors

    B-3 Certificate
      for Corporation, Partnership, Limited Liability Company,

          
Trust,
      Foundation and Joint Investors

    C Opinion
      of Company Corporate Counsel

    D Plan
      of
      Distribution

    E Company
      Transfer Agent Instructions

    F Form
      of
      Warrant

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    Investor
      Signature Page

     

    By
      its
      execution and delivery of this signature page, the undersigned Investor hereby
      joins in and agrees to be bound by the terms and conditions of the Securities
      Purchase Agreement dated as of November 17, 2006 (the “Purchase Agreement”)
      by and among Dyadic
      International, Inc.
      and the
      Investors (as defined therein), as to the number of shares of Common Stock
      and
      Warrants set forth below, and authorizes this signature page to be attached
      to
      the Purchase Agreement or counterparts thereof.

     

    Name
      of
      Investor:

    

    Bear
      Stearns Sec. Corp FBO J. Steven Emerson IRA R/O II

    

    

    By:  /s/
      J. Steven Emerson

    Name: J.
      Steven
      Emerson

    Title: 

    

    

    

    Address:
       1522
      Ensley Avenue  

                      
      Los
      Angeles, CA 90024

    Attention:
      

    Telephone
      No.: 

    Facsimile
      No.: 

    Email
      Address: 

    

    Number
      of
      Shares: 250,000

    Number
      of
      Warrants: 50,000

    Aggregate
      Purchase Price: $1,170,000

    Exhibits:

    

    A Schedule
      of Investors

    B Instruction
      Sheet for Investors

    B-1
       Stock
      Certificate Questionnaire for Investors

    B-2 Registration
      Statement Questionnaire for Investors

    B-3 Certificate
      for Corporation, Partnership, Limited Liability Company,

          
Trust,
      Foundation and Joint Investors

    C Opinion
      of Company Corporate Counsel

    D Plan
      of
      Distribution

    E Company
      Transfer Agent Instructions

    F Form
      of
      Warrant

     

    

    
      
        
           

        

        
        

      

      
        41

        
          

        

      

      
        
        

        
        

      

    

    Exhibit A

    Schedule
      of Investors

    

    
      	
              Investor

               

            	
              Common
                Shares

               

            	
              Warrants

               

            	
              Warrant
                Shares

               

            	
              Purchase
                Price

               

            
	
              T.
                Rowe Price Associates, Inc.

            	
              1,200,000

            	
              240,000

            	
              240,000

            	
              $5,616,000.00

            
	 	 	 	 	 
	
              Emerson
                Investment Group

            	
              900,000

            	
              180,000

            	
              180,000

            	
              $4,212,000.00

            
	 	 	 	 	 
	
              Fort
                Mason Capital, L.L.C.

            	
              343,500

            	
              68,700

            	
              68,700

            	
              $1,607,580.00

            
	 	 	 	 	 
	
              The
                Pinnacle Fund, L.P.

            	
              343,500

            	
              68,700

            	
              68,700

            	
              $1,607,580.00

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	
               

            	 	 	 
	
              TOTAL

            	
              2,787,000

            	
              557,400

            	
              557,400

            	
              $13,043,160.00

            

    

    

    

    

    
      
        
          A-1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Exhibit B

    INSTRUCTION
      SHEET FOR INVESTOR

    (to
      be
      read in conjunction with the entire Securities Purchase Agreement)

    

    
      	
              A.

            	
              Complete
                the following items in the Securities Purchase
                Agreement:

            

    

     

    
      	 	
              1.

            	
              Complete
                and execute the Investor Signature Page. The Agreement must be executed
                by
                an individual authorized to bind the
                Investor.

            

    

     

    
      	 	
              2.

            	
              Exhibit B-1
                - Stock Certificate Questionnaire:

            

    

     

    Provide
      the information requested by the Stock Certificate Questionnaire;
      

     

    
      	 	
              3.

            	
              Exhibit B-2
                - Registration Statement
                Questionnaire:

            

    

     

    Provide
      the information requested by the Registration Statement
      Questionnaire.
      

     

    
      	 	
              4.

            	
              Exhibit B-3
                /B-4 - Investor Certificate:

            

    

     

    Provide
      the information requested by the Certificate for Individual Investors (B-3)
      or
      the Certificate for Corporate, Partnership, Trust, Foundation and Joint
      Investors (B-4), as applicable.

     

    
      	 	
              5.

            	
              Return,
                via facsimile, the signed Securities Purchase Agreement including
                the
                properly completed Exhibits B-1 through B-4,
                to:

            

    

     

    Facsimile:
      

    Telephone:
      

    Attn:

     

    
      	 	
              6.

            	
              After
                completing instruction number five (5) above, deliver the original
                signed
                Securities Purchase Agreement including the properly completed Exhibits
                 B-1 through B-4 to:

            

    

     

    Facsimile:
      

    Telephone:
      

    Attn:

     

    
      	
              B.

            	
              Instructions
                regarding the wire transfer of funds for the purchase of the Shares
                will
                be telecopied to the Investor by the Company at a later
                date.

            

    

     

    
      	
              C.

            	
              Upon
                the resale of any Shares by the Investor after the Registration Statement
                covering any Shares is effective, as described in the Securities
                Purchase
                Agreement, the Investor must send a letter in the form of Exhibit D
                to the Company and the Company’s transfer agent so that the Shares may be
                properly transferred.

            

    

     

    

    
      
        
          B-1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Exhibit B-1

    DYADIC
      INTERNATIONAL, INC.

    STOCK
      CERTIFICATE QUESTIONNAIRE

    

    
      	 	
              Please
                provide us with the following information:

               

            	 
	
              1.

               

            	
              The
                exact name that the Securities are to be registered in (this is the
                name
                that will appear on the stock certificate(s)). You may use a nominee
                name
                if appropriate:

               

            	 
	
              2.

               

            	
              The
                relationship between the Investor of the Securities and the Registered
                Holder listed in response to item 1 above:

               

            	 
	
              3.

               

            	
              The
                mailing address, telephone and telecopy number and email address
                of the
                Registered Holder listed in response to item 1 above:

               

            	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	
              4.

               

            	
              The
                Tax Identification Number of the Registered Holder listed in response
                to
                item 1 above:

               

            	 

    

    

    

    

    
      
        
          B-1-1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Exhibit B-2

    DYADIC
      INTERNATIONAL, INC.

    REGISTRATION
      STATEMENT QUESTIONNAIRE

     

    In
      connection with the Registration Statement, please provide us with the following
      information regarding the Investor.

     

    
      	
              1.

            	
              Please
                state your organization’s name exactly as it should appear in the
                Registration Statement: 

            

    

    ______________________________________________________________________

     

    Except
      as
      set forth below, your organization does not hold any equity securities of the
      Company on behalf of another person or entity. 

     

    State
      any
      exceptions here:

     

    ______________________________________________________________________

     

    2. Address
      of your organization:

     

    ______________________________________________________

    ______________________________________________________

    Telephone:
      __________________________

    Fax:
      ________________________________

    Contact
      Person: _______________________

     

    
      	
              3.

            	
              Have
                you or your organization had any position, office or other material
                relationship within the past three years with the Company or its
                affiliates? (Include any relationships involving you or your affiliates,
                officers, directors, or principal equity holders (5% or more) that
                has
                held any position or office or has had any other material relationship
                with the Company (or its predecessors or affiliates) during the past
                three
                years.)

            

    

     

    _______
       Yes   _______
       No

     

    If
      yes,
      please indicate the nature of any such relationship below:

     

    
      	
              4.

            	
              Are
                you the beneficial owner of any other securities of the Company?
                (Include
                any equity securities that you beneficially own or have a right to
                acquire
                within 60 days after the date hereof, and as to which you have sole
                voting
                power, shared voting power, sole investment power or shared investment
                power.)

            

    

     

    _______
       Yes   _______
       No

     

    If
      yes,
      please describe the nature and amount of such ownership as of a recent
      date.

     

    

     

    
      
        
          B-2-1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

     

    
      	
              5.

            	
              Except
                as set forth below, you wish that all the shares of the Company’s common
                stock beneficially owned by you or that you have the right to acquire
                from
                the Company be offered for your account in the Registration
                Statement.

            

    

     

    State
      any
      exceptions here:

     

    

     

    

     

    
      	
              6.

            	
              Have
                you made or are you aware of any arrangements relating to the distribution
                of the shares of the Company pursuant to the Registration
                Statement?

            

    

     

    _______
       Yes   _______
       No

     

    If
      yes,
      please describe the nature and amount of such arrangements.

     

    
      	
              7.

            	
              NASD
                Matters

            

    

     

    (a) State
      below whether (i) you or any associate
      or
affiliate
      of yours
      are a member
      of the
      NASD, a controlling
      shareholder of an NASD member,
      a
person
      associated
      with a member,
      a
      direct or indirect affiliate
      of a
member,
      or an
underwriter
      or related person
      with
      respect to the proposed offering; (ii) you or any associate
      or
affiliate
      of yours
      owns any stock or other securities of any NASD member
      not
      purchased in the open market; or (iii) you or any associate
      or
affiliate
      of yours
      has made any outstanding subordinated loans to any NASD member.
      If you
      are a general or limited partnership, a no answer asserts that no such
      relationship exists for you as well as for each of your general or limited
      partners.

     

    
      	
              Yes:
                __________

            	
              No:
                __________

            

    

    

    If
“yes,”
      please identify the NASD member
      and
      describe your relationship, including, in the case of a general or limited
      partner, the name of the partner:

     

    If
      you
      answer “no” to Question 7(a), you need not respond to Question 7(b).

     

    (b) State
      below whether you or any associate
      or
affiliate
      of yours
      has been an underwriter, or a controlling
      person
      or member of any investment banking or brokerage firm which has been or might
      be
      an underwriter for securities of the Corporation or any affiliate
      thereof
      including, but not limited to, the common stock now being
      registered.

     

    
      	
              Yes:
                __________

            	
              No:
                __________

            
	 	 

    

    If
“yes,”
      please identify the NASD member
      and
      describe your relationship, including, in the case of a general or limited
      partner, the name of the partner.

     

    
      
        
          B-2-2

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ACKNOWLEDGEMENT

     

    The
      undersigned hereby agrees to notify the Company promptly of any changes in
      the
      foregoing information which should be made as a result of any developments,
      including the passage of time. The undersigned also agrees to provide the
      Company and the Company’s counsel any and all such further information regarding
      the undersigned promptly upon request in connection with the preparation,
      filing, amending, and supplementing of the Registration Statement (or any
      prospectus contained therein). The undersigned hereby consents to the use of
      all
      such information in the Registration Statement.

     

    The
      undersigned understands and acknowledges that the Company will rely on the
      information set forth herein for purposes of the preparation and filing of
      the
      Registration Statement.

     

    The
      undersigned understands that the undersigned may be subject to serious civil
      and
      criminal liabilities if the Registration Statement, when it becomes effective,
      either contains an untrue statement of a material fact or omits to state a
      material fact required to be stated in the Registration Statement or necessary
      to make the statements in the Registration Statement not misleading. The
      undersigned represents and warrants that all information it provides to the
      Company and its counsel is currently accurate and complete and will be accurate
      and complete at the time the Registration Statement becomes effective and at
      all
      times subsequent thereto, and agrees during the Effectiveness Period and any
      additional period in which the undersigned is making sales of Shares under
      and
      pursuant to the Registration Statement, and agrees during such periods to notify
      the Company immediately of any misstatement of a material fact in the
      Registration Statement, and of the omission of any material fact necessary
      to
      make the statements contained therein not misleading.

     

    Dated:
      __________

    ______________________________

    Name
      

     

    ______________________________

    Signature

     

    ______________________________

    Name
      and
      Title of Signatory

    

    

    

    
      
        
          B-2-3

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Exhibit B-3

    DYADIC
      INTERNATIONAL, INC.

     

    CERTIFICATE
      FOR CORPORATION, PARTNERSHIP, LIMITED LIABILITY COMPANY, 

    TRUST,
      FOUNDATION AND JOINT INVESTORS

    

    If
      the
      investor is a corporation, partnership, limited liability company, trust,
      pension plan, foundation, joint Investor (other than a married couple) or other
      entity, an authorized officer, partner, or trustee must complete, date and
      sign
      this Certificate.

     

    CERTIFICATE

     

    The
      undersigned certifies that the representations and responses below are true
      and
      accurate:

     

    (a) The
      investor has been duly formed and is validly existing and has full power and
      authority to invest in the Company. The person signing on behalf of the
      undersigned has the authority to execute and deliver the Securities Purchase
      Agreement on behalf of the Investor and to take other actions with respect
      thereto.

     

    (b) Indicate
      the form of entity of the undersigned: 

     

    ____ Limited
      Partnership 

    ____ General
      Partnership 

    ____ Limited
      Liability Company

    ____ Corporation

    ____ Revocable
      Trust (identify each grantor and indicate under what circumstances the trust
      is
      revocable by the grantor): 

     

    (Continue
      on a separate piece of paper, if necessary.)

     

    ____ Other
      type of Trust (indicate type of trust and, for trusts other than pension trusts,
      name the grantors and beneficiaries): 

     

    (Continue
      on a separate piece of paper, if necessary.)

     

    ____ Other
      form of organization (indicate form of organization.)

     

    (c) Indicate
      the approximate date the undersigned entity was formed:  

     

    (d) In
      order
      for the Company to offer and sell the Units in conformance with state and
      federal securities laws, the following information must be obtained regarding
      your investor status. Please initial
      each category
      applicable to you as an investor in the Company.

     

    

     

    
      
        
          B-3-1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    ___ 1. A
      bank as
      defined in Section 3(a)(2) of the Securities Act, or any savings and loan
      association or other institution as defined in Section 3(a)(5)(A) of the
      Securities Act whether acting in its individual or fiduciary
      capacity;

     

    ___ 2. A
      broker
      or dealer registered pursuant to Section 15 of the Securities Exchange Act
      of 1934;

     

    ___ 3. An
      insurance company as defined in Section 2(13) of the Securities
      Act;

     

    ___ 4. An
      investment company registered under the Investment Company Act of 1940 or a
      business development company as defined in Section  2(a)(48) of that
      Act;

     

    ___ 5. A
      Small
      Business Investment Company licensed by the U.S. Small Business Administration
      under Section 301(c) or (d) of the Small Business Investment Act of
      1958;

     

    ___ 6. A
      plan
      established and maintained by a state, its political subdivisions, or any agency
      or instrumentality of a state or its political subdivisions, for the benefit
      of
      its employees, if such plan has total assets in excess of
      $5,000,000;

     

    ___ 7. An
      employee benefit plan within the meaning of the Employee Retirement Income
      Security Act of 1974, if the investment decision is made by a plan fiduciary,
      as
      defined in Section 3(21) of such Act, which is either a bank, savings and
      loan association, insurance company, or registered investment advisor, or if
      the
      employee benefit plan has total assets in excess of $5,000,000 or, if a
      self-directed plan, with investment decisions made solely by persons that are
      accredited investors;

     

    ___ 8. A
      private
      business development company as defined in Section 202(a)(22) of the
      Investment Advisers Act of 1940;

     

    ___ 9. Any
      partnership or corporation or any organization described in
      Section 501(c)(3) of the Internal Revenue Code or similar business trust,
      not formed for the specific purpose of acquiring the Shares, with total assets
      in excess of $5,000,000;

     

    ___ 10. A
      trust,
      with total assets in excess of $5,000,000, not formed for the specific purpose
      of acquiring the Shares, whose purchase is directed by a sophisticated person
      as
      described in Rule  506(b)(2)(ii) of the Exchange Act;

     

    ___ 11. An
      entity
      in which all of the equity owners qualify under any of the above subparagraphs.
      If the undersigned belongs to this investor category only, list the equity
      owners of the undersigned, and the investor category which each such equity
      owner satisfies: 

     

     

    (Continue
      on a separate piece of paper, if necessary.)

     

    

     

    
      
        
          B-3-2

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

     

    Please
      set forth in the space provided below the (i) states, if any, in the U.S.
      in which you maintained your principal office during the past two years and
      the
      dates during which you maintained your office in each state, (ii) state(s),
      if any, in which you are incorporated or otherwise organized and
      (iii) state(s), if any, in which you pay income taxes.

     

     

    Dated:__________________________,
      2006

     

    Print
      Name of Investor

     

    Name:

    Title:

    (Signature
      and title of authorized officer, partner or trustee)

     

    

     

    
      
        
          B-3-3

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    SECURITIES
      DELIVERY INSTRUCTIONS

     

    Please
      instruct us as to where you would like the Securities delivered to at
      Closing:

     

    Name:

     

    Company:

     

    Address:

     

     

     

    Telephone:

     

    Other
      Special Instructions:

     

    

    

    

    
      
        
          B-3-4

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Exhibit C

    OPINION
      OF COMPANY
      CORPORATE COUNSEL

     

    

    November
      ___, 2006

    

    To
      the
      Investors Listed on the “Scedule of Investors”

    to
      the
      Agreement referenced below

     

    Re: Dyadic
      International, Inc.

     

    Ladies
      and Gentlemen:

     

     

    We
      have
      acted as special legal counsel for Dyadic International, Inc., a Delaware
      corporation (the “Company”),
      in
      connection with its execution, delivery and performance of the Securities
      Purchase Agreement, dated as of November ___, 2006 (the “Agreement”),
      by
      and among the Company and the investors listed on the “Schedule of Investors”
attached as Exhibit A to the Agreement (the “Investors”)
      relating to the Company’s offer and sale, and the Investors’ purchase from the
      Company, of the Securities. All capitalized terms used herein but not otherwise
      defined herein shall have the meanings ascribed to them in the Agreement. This
      letter is being furnished to you at the request of the Company pursuant to
      Section 2.2(a) of the Agreement.

     

    A. Basis
      of Opinion.

     

    As
      the
      basis for the opinions expressed in this opinion letter, we have examined,
      considered and relied upon the following:

     

    1. The
      Agreement;

     

    2. The
      form
      of Warrants;

     

    3.
       The
      Transfer Agent Instructions (and together with above items 1 and 2, the
“Transaction
      Documents”); 

     

    4. The
      Amended and Restated Certificate of Incorporation certified by the Secretary
      of
      State of the State of Delaware on November _____, 2006 (the “Certificate”),
      Amended and Restated Bylaws (and together with the Certificate, the
“Organizational
      Documents”),
      and
      corporate minute books of the Company;

     

    5. A
      certificate of good standing with respect to the Company issued by the Secretary
      of State of the State of Delaware, as of a recent date;

     

    6. The
      authorizing resolutions of the Board of Directors of the Company with respect
      to
      the Agreement and the transactions contemplated thereby; 

     

    7. An
      officer’s certificate, dated the date hereof, of the Company confirming that
      that (i) the representations and warranties of the Company contained in the
      Agreement are true and correct in all material respects as of the date when
      made
      and as of the date hereof as though made on and as of such date and (ii) the
      Company has performed or satisfied and complied in all material respects with
      all covenants, agreements and conditions required by the Transaction Documents
      to be performed, satisfied or complied with by it at or prior to the date
      hereof; and

     

    

     

    
      
        
          C-1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    8. Such
      other documents and such matters of law as we have considered necessary or
      appropriate for the expression of the opinions contained herein.

     

    For
      purposes of this opinion letter, the documents and information referred to
      in
      this Section A are collectively referred to as the “Documents.”

     

    B. Assumptions.

     

    In
      rendering the opinions set forth in Section C below, we have assumed without
      investigation (i) the genuineness of all signatures (other than signatures
      of
      officers of the Company), (ii) the authenticity of all Documents submitted
      to us
      as originals, (iii) the conformity to authentic original documents of all
      Documents submitted to us as copies, (iv) the veracity of all Documents, (v)
      the
      power and capacity of each of the parties to the Transaction Documents (other
      than the Company) to enter into and perform their respective obligations
      thereunder; (vi) the due authorization, execution and delivery of the
      Transaction Documents by each of the parties thereto (other than the Company),
      and (vii) that the Transaction Documents constitute or, when so duly executed
      and delivered by the parties thereto, will constitute the valid and binding
      agreement of each party thereto (other than the Company).

     

    With
      respect to our opinions expressed below relating to good standing of the
      Company, we have relied, without independent investigation, upon the certificate
      of good standing referenced in item 5 of Section A, and our opinion is
      rendered as of the date of such certificate. We express no opinion as to the
      tax
      good standing of the Company in any jurisdiction. With respect to our opinion
      expressed below in item 7 of Section C relating to the capitalization of the
      Company, we have relied, without independent investigation, upon the officer’s
      certificate of the Company referenced in item 7 of Section A and Schedule
      3.1(f)
      to the
      Agreement, as certified by such officer’s certificate, and our opinion is
      rendered as of the date of such officer’s certificate. The preceding
      notwithstanding, our opinion expressed in the second sentence of said item
      7 of
      Section C is not rendered upon reliance on the officer’s certificate of the
      Company referenced in item 7 of Section A or Schedule
      3.1(f)
      to the
      Agreement, but is otherwise rendered based on and subject to the other comments,
      assumptions, exceptions, qualifications and limitations set forth in Sections
      B
      and D hereof. 

     

    As
      to
      questions of fact material to the opinions hereinafter expressed, we have relied
      upon the respective representations and warranties of each of the parties made
      in the Documents. We have made no examination or investigation to verify the
      accuracy or completeness of any financial, accounting, statistical, scientific
      or other factual information set forth in the Documents or otherwise furnished
      to the Investors or material to the opinions expressed herein, and we express
      no
      opinion with respect thereto.

     

    C. Opinions.

     

    Based
      solely upon our examination and consideration of the Documents, and in reliance
      thereon, and subject to the comments, assumptions, exceptions, qualifications
      and limitations set forth in Sections B and D hereof, we are of the opinion
      that:

     

    

     

    
      
        
          C-2

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    1. The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation with the requisite
      legal
      authority to own and use its properties and assets and to carry on its business
      as currently conducted. The Company is not in violation of any of the provisions
      of the Organizational Documents. The Company is duly qualified to do business
      and is in good standing as a foreign corporation in each jurisdiction in which
      the nature of the business conducted or property owned by it makes such
      qualification necessary, except where the failure to be so qualified or in
      good
      standing, as the case may be, would not, individually or in the aggregate,
      have
      or reasonably be expected to result in a Material Adverse Effect.

     

    2. The
      Company has the requisite corporate authority to enter into and to consummate
      the transactions contemplated by each of the Transaction Documents to which
      it
      is a party and otherwise to carry out its obligations thereunder. The execution
      and delivery by the Company of each of the Transaction Documents to which the
      Company is a party and the consummation by each of them of the transactions
      contemplated thereby have been duly authorized by all necessary action on the
      part of them and no further consent or action is required by the Company, the
      Company’s Board of Directors or the Company’s stockholders. Each of the
      Transaction Documents to which the Company is a party has been (or upon delivery
      will be) duly executed by it and is, or when delivered in accordance with the
      terms thereof, will constitute, the valid and binding obligation of the Company
      enforceable against it in accordance with its terms. 

     

    3. The
      execution, delivery and performance by the Company of the Transaction Documents
      to which the Company is a party and the consummation by the Company of the
      transactions contemplated thereby do not, and will not, (i) conflict with
      or violate any provision of the Company’s Organizational Documents,
      (ii) conflict with, or constitute a default (or an event that 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 (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing a Company debt or otherwise) listed as an Exhibit on
      the
      Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005,
      except to the extent that such conflict, default, termination, amendment,
      acceleration or cancellation right would not reasonably be expected to have
      a
      Material Adverse Effect, or (iii) result in a violation of any law, rule,
      regulation, order, judgment, injunction, decree or other restriction of any
      court or governmental authority to which the Company is subject (including,
      assuming the accuracy of the representations and warranties of the Investors
      set
      forth in Section 3.2 of the Agreement, federal and state securities laws and
      regulations and the rules and regulations of any self-regulatory organization
      to
      which the Company or its securities are subject, including all applicable
      Trading Markets), or by which any property or asset of the Company is bound
      or
      affected, except to the extent that such violation would not reasonably be
      expected to have a Material Adverse Effect.

     

    

     

    
      
        
          C-3

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    4. The
      Common Shares (including the Warrant Shares issuable upon the exercise of the
      Warrants) are duly authorized and, when issued and paid for in accordance with
      the Transaction Documents, will be duly and validly issued, fully paid and
      nonassessable, free and clear of all Liens except for restrictions on transfer
      imposed by applicable federal and state securities laws, and will not be subject
      to preemptive or similar rights of stockholders (other than those imposed by
      the
      Investors). The Company shall maintain a reserve from its duly authorized shares
      of Common Stock the maximum number of shares of Common Stock issuable upon
      exercise of the Warrants. The offer, issuance and sale to the Investors of
      the
      Common Shares and other Securities are exempt from the registration requirements
      of the Securities Act.

     

    5. Except
      as
      disclosed in the SEC Reports, there is no action, suit, claim, or proceeding,
      or, to our knowledge, inquiry or investigation, before or by any court, public
      board, government agency, self-regulatory organization or body pending or,
      to
      our knowledge, threatened against or affecting the Company that could,
      individually or in the aggregate, have a Material Adverse Effect.

     

    6. There
      is
      no control share acquisition, business combination, poison pill (including
      any
      distribution under a rights agreement) or other similar anti-takeover provision
      under the Company’s Organizational Documents of its state of incorporation that
      is or could become applicable to any of the Investors as a result of the
      Investors and the Company fulfilling their obligations or exercising their
      rights under the Transaction Documents, including, without limitation, as a
      result of the Company’s issuance of the Securities and the Investors’ ownership
      of the Securities.

     

    7. The
      aggregate number of shares issued and outstanding classes of capital stock,
      options and other Securities of the Company (whether or not presently
      convertible into or exercisable or exchangeable for shares of capital stock
      of
      the Company) as of November 16, 2006 is as set forth in Schedule
      3.1(f)
      to the
      Agreement. The aggregate number of shares and the type of all authorized classes
      of capital stock of the Company consists of 105,000,000 shares, of which
      100,000,000 shares are common stock, par value $0.001 per share, and 5,000,000
      shares are preferred stock, par value $0.0001 per share, and all outstanding
      shares of capital stock are duly authorized, validly issued, fully paid and
      nonassessable and have been issued in compliance in all material respects with
      all applicable securities laws. Except as disclosed in Schedule
      3.1(f)
      to the
      Agreement or disclosed in the SEC Reports, the Company did not have outstanding
      at November 16, 2006 any other options, warrants, script rights to subscribe
      to,
      calls or commitments of any character whatsoever relating to, or securities,
      rights or obligations convertible into or exercisable or exchangeable for,
      or
      entered into any agreement giving any Person any right to subscribe for or
      acquire, any shares of Common Stock, or securities or rights convertible or
      exchangeable into shares of Common Stock. Except as set forth on Schedule
      3.1(f)
      to the
      Agreement and the SEC Reports, and except for customary adjustments as a result
      of stock dividends, stock splits, combinations of shares, reorganizations,
      recapitalizations, reclassifications or other similar events, there are no
      anti-dilution or price adjustment provisions contained in any security issued
      by
      the Company (or in any agreement providing rights to security holders) and
      the
      issuance and sale of the Securities will not obligate the Company to issue
      shares of Common Stock or other securities to any Person (other than the
      Investors) and will not result in a right of any holder of securities to adjust
      the exercise, conversion, exchange or reset price under such
      securities.

     

    

     

    
      
        
          C-4

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    8. Based
      on
      our discussions with the Company and the Company’s accountants, no facts have
      come to our attention which lead us to believe that the SEC Reports as of their
      respective dates contained any untrue statement of a material fact or omitted
      to
      state a material fact necessary in order to make the statements therein, in
      the
      light of the circumstances under which they were made, not misleading (it being
      understood that we express no view with respect to the financial statements
      and
      the notes and schedules thereto and other financial, scientific and statistical
      data or information contained or incorporated by reference therein or omitted
      therefrom). 

     

    D. Comments,
      Assumptions, Limitations, Qualifications and Exceptions.

     

    The
      opinions expressed in Section C above are based upon and subject to, the further
      comments, assumptions, limitations, qualifications and exceptions set forth
      below:

     

    1. As
      used
      in the opinions expressed herein, the phrase “to our knowledge” (and phrases of
      similar import) refers only to the actual current knowledge of the attorneys
      within our firm who have given substantive attention to the Company in
      connection with the transactions contemplated by the Agreement and does not
      (a)
      include constructive notice of matters or information, or (b) except for our
      conversations with certain representatives of the Company and our review of
      the
      Documents, imply that we have undertaken any independent investigation (i)
      with
      any persons outside of our firm or (ii) as to the accuracy or completeness
      of
      any factual representation, information or other matter made or furnished in
      connection with the transactions contemplated by the Transaction Documents.
      Furthermore, such reference means only that we do not know of any fact or
      circumstance contradicting the statement that follows, and does not imply that
      we know the statement to be correct or have any basis (other than the Documents
      and such conversations) for that statement.

     

    2. We
      are
      licensed to practice law in the States of Delaware and New York. The Company
      is
      incorporated in Delaware. The Agreement is governed by the laws of the State
      of
      New York. Accordingly, the opinions expressed herein are specifically limited
      to
      the laws of the States of Delaware and New York, and the federal law of the
      United States of America.

     

    3. Our
      opinions above with respect to enforceability of the Company’ obligations under
      the Transaction Documents to which it is a party are limited and qualified
      to
      the extent that enforceability of the rights, obligations, agreements and
      remedies thereunder are subject to, or affected or limited by: (i) applicable
      liquidation, conservatorship, bankruptcy, insolvency, moratorium, fraudulent
      conveyance, reorganization or similar debtor or creditor relief laws from time
      to time in effect under state and/or federal law; (ii) general principles of
      equity (whether considered in a proceeding in equity or at law); (iii) the
      exercise of the discretionary powers of any court or other authority before
      which may be brought any proceeding seeking equitable remedies, including,
      without limitation, specific performance and injunctive relief; (iv) public
      policy or other applicable limitations on indemnification or contribution under
      the federal securities laws; or (v) other applicable laws (including rules
      and
      regulations) and court decisions that may limit or render unenforceable certain
      rights and remedies of the Investors (or any Person entitled to indemnification
      and contribution under Section 6.4(a) of the Agreement or in any of the other
      Transaction Documents) provided in the documents about which we opine but that
      do not, in our judgment, make such documents inadequate for the ultimate
      practical realization of the benefits intended to be 

     

    
      
        
          C-5

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    provided
      thereby, though they may result in delays (and we express no opinion as to
      the
      economic consequences, if any, of such delays). 

     

    4. No
      opinion is expressed as to consents, approvals, authorizations or orders
      required under state securities or blue sky laws or the by-laws and rules of
      the
      American Stock Exchange in connection with the Securities or the other
      transactions contemplated by the Agreement. We also express no opinion herein
      as
      to any provision of the Transaction Documents (a) which may be deemed to or
      construed to waive any right of the Company, (b) to the effect that rights
      and remedies are not exclusive, that every right or remedy is cumulative and
      may
      be exercised in addition to or with any other right or remedy and does not
      preclude recourse to one or more other rights or remedies, (c) relating to
      the effect of invalidity or unenforceability of any provision of any of the
      Transaction Documents on the validity or enforceability of any other provision
      thereof, (d) requiring the payment of penalties, consequential damages or
      liquidated damages, (e) which is in violation of public policy, including,
      without limitation, any provision relating to indemnification and contribution,
      (f) purporting to indemnify any Person against his, her or its own
      negligence or intentional misconduct, (g) which provides that the terms of
      any of the Transaction Documents may not be waived or modified except in writing
      or (h) relating to venue or consent to jurisdiction. 

     

    5. We
      have
      rendered no opinion herein with respect to any: (a) federal or state tax laws
      or
      regulations, (b) any federal or state antitrust and unfair competition laws
      and
      regulations, (c) any federal or state laws or regulations concerning filing
      or
      notice requirements (e.g., Hart-Scott-Rodino and Exon-Florio), or (d) any
      federal or state environmental laws. 

     

    6. Although
      we have acted as counsel to the Company in connection with certain other
      matters, our engagement is limited to certain matters about which we have been
      consulted. Consequently, there may exist matters of a legal nature involving
      the
      Company in connection with which we have not been consulted and have not
      represented them.

     

    7. This
      opinion letter is limited to the matters stated herein and no opinions may
      be
      implied or inferred beyond the matters expressly stated herein.

     

    8. The
      opinions set forth herein are based in part upon the federal and state
      authorities as they are currently compiled and reported on by customary
      reporting services. It is possible that legislation affecting the opinions
      expressed herein might have been enacted into law that are not reflected in
      such
      reporting services. We are not currently aware of the passage of any such
      legislation. However, it is not possible for us to know with certainty as of
      the
      date of this opinion letter whether any such legislation may have been passed
      into law.

     

    9. The
      opinions expressed herein are as of the date hereof, and we assume no obligation
      to update or supplement such opinions to reflect any facts or circumstances
      that
      may hereafter come to our attention or any changes in law that may hereafter
      occur.

     

    

     

    
      
        
          C-6

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    10. This
      opinion letter has been issued solely for the benefit of the Investors and
      no
      other Person shall be entitled to rely hereon without the express written
      consent of this firm. Without our prior written consent, this opinion letter
      may
      not be quoted in whole or in part or otherwise referred to in any document
      or
      report and may not be furnished to any Person.

     

    Respectfully
      submitted,

     

    Greenberg
      Traurig, LLP

    

    

    

    
      
        
          C-7

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Exhibit D

    PLAN
      OF DISTRIBUTION

     

    The
      selling stockholders may, from time to time, sell any or all of their shares
      of
      common stock on any stock exchange, market or trading facility on which the
      shares are traded or in private transactions. These sales may be at fixed or
      negotiated prices. The selling stockholders may use any one or more of the
      following methods when selling shares:

     

    
      	·  	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            

    

     

    
      	·  	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

     

    
      	·  	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            

    

     

    
      	·  	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

     

    
      	·  	
              privately
                negotiated transactions;

            

    

     

    
      	·  	
              short
                sales;

            

    

     

    
      	·  	
              broker-dealers
                may agree with the selling stockholders to sell a specified number
                of such
                shares at a stipulated price per
                share;

            

    

     

    
      	·  	
              a
                combination of any such methods of sale;
                and

            

    

     

    
      	·  	
              any
                other method permitted pursuant to applicable
                law.

            

    

     

    The
      selling stockholders may also sell shares under Rule 144 under the Securities
      Act, if available, rather than under this prospectus.

     

    Broker-dealers
      engaged by the selling stockholders may arrange for other brokers-dealers to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the selling stockholders (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated. The
      selling stockholders do not expect these commissions and discounts to exceed
      what is customary in the types of transactions involved. Any profits on the
      resale of shares of common stock by a broker-dealer acting as principal might
      be
      deemed to be underwriting discounts or commissions under the Securities Act.
      Discounts, concessions, commissions and similar selling expenses, if any,
      attributable to the sale of shares will be borne by a selling stockholder.
      The
      selling stockholders may agree to indemnify any agent, dealer or broker-dealer
      that participates in transactions involving sales of the shares if liabilities
      are imposed on that person under the Securities Act.

     

    

     

    
      
        
          D-1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    The
      selling stockholders may from time to time pledge or grant a security interest
      in some or all of the shares of common stock owned by them and, if they default
      in the performance of their secured obligations, the pledgees or secured parties
      may offer and sell the shares of common stock from time to time under this
      prospectus after we have filed a supplement to this prospectus under Rule
      424(b)(3) or other applicable provision of the Securities Act of 1933
      supplementing or amending the list of selling stockholders to include the
      pledgee, transferee or other successors in interest as selling stockholders
      under this prospectus.

     

    The
      selling stockholders also may transfer the shares of common stock in other
      circumstances, in which case the transferees, pledgees or other successors
      in
      interest will be the selling beneficial owners for purposes of this prospectus
      and may sell the shares of common stock from time to time under this prospectus
      after we have filed a supplement to this prospectus under Rule 424(b)(3) or
      other applicable provision of the Securities Act of 1933 supplementing or
      amending the list of selling stockholders to include the pledgee, transferee
      or
      other successors in interest as selling stockholders under this
      prospectus.

     

    The
      selling stockholders and any broker-dealers or agents that are involved in
      selling the shares of common stock may be deemed to be “underwriters” within the
      meaning of the Securities Act in connection with such sales. In such event,
      any
      commissions received by such broker-dealers or agents and any profit on the
      resale of the shares of common stock purchased by them may be deemed to be
      underwriting commissions or discounts under the Securities Act. 

     

    We
      are
      required to pay all fees and expenses incident to the registration of the shares
      of common stock. We have agreed to indemnify the selling stockholders against
      certain losses, claims, damages and liabilities, including liabilities under
      the
      Securities Act.

     

    The
      selling stockholders have advised us that they have not entered into any
      agreements, understandings or arrangements with any underwriters or
      broker-dealers regarding the sale of their shares of common stock, nor is there
      an underwriter or coordinating broker acting in connection with a proposed
      sale
      of shares of common stock by any selling stockholder. If we are notified by
      any
      selling stockholder that any material arrangement has been entered into with
      a
      broker-dealer for the sale of shares of common stock, if required, we will
      file
      a supplement to this prospectus. If the selling stockholders use this prospectus
      for any sale of the shares of common stock, they will be subject to the
      prospectus delivery requirements of the Securities Act.

     

    The
      anti-manipulation rules of Regulation M under the Securities Exchange Act of
      1934 may apply to sales of our common stock and activities of the selling
      stockholders.

     

    

    
      
        
          D-2

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Exhibit E

    COMPANY
      TRANSFER AGENT INSTRUCTIONS

     

    [TRANSFER
      AGENT NAME AND ADDRESS]

     

    Attention:
      

    Ladies
      and Gentlemen: 

     

    Reference
      is made to that certain Securities Purchase Agreement, dated as of November
      XX,
      2006 (the “Agreement”),
      by and
      among Dyadic International, Inc., a Delaware corporation (the “Company”),
      and
      the investors named on the Schedule of Investors attached thereto (collectively,
      the “Holders”),
      pursuant to which the Company is issuing to the Holders shares (the
“Common
      Shares”)
      of
      Common Stock of the Company, par value $.001 per share (the “Common
      Stock”),
      and
      Warrants (the “Warrants”),
      which
      are exercisable into shares of Common Stock.

     

    This
      letter shall serve as our irrevocable authorization and direction to you
      (provided that you are the transfer agent of the Company at such time):

     

    (i) 
      to issue shares
      of
      Common Stock upon transfer or resale of the Common Shares; and 

     

    (ii) 
      to issue shares of Common Stock upon the exercise of the Warrants (the
“Warrant
      Shares”)
      to or
      upon the order of a Holder from time to time upon delivery to you of a properly
      completed and duly executed Exercise Notice, in the form attached hereto as
      Exhibit I,
      which
      has been acknowledged by the Company as indicated by the signature of a duly
      authorized officer of the Company thereon.

     

    You
      acknowledge and agree that so long as you have previously received
      (a) written confirmation from the Company’s legal counsel that either
      (i) a registration statement covering resales of the Common Shares and the
      Warrant Shares has been declared effective by the Securities and Exchange
      Commission (the “SEC”)
      under
      the Securities Act of 1933, as amended (the “Securities
      Act”)
      and
      that resales of the Common Shares and the Warrant Shares may be made thereunder,
      or (ii) sales of the Common Shares and the Warrant Shares may be made in
      conformity with Rule 144 under the Securities Act (“Rule 144”),
      (b) if applicable, a copy of such registration statement, and
      (c) notice from legal counsel to the Company or any Holder that a transfer
      of Common Shares and/or Warrant Shares has been effected either pursuant to
      the
      registration statement (and a prospectus delivered to the transferee) or
      pursuant to Rule 144, then, unless otherwise required by law, within three
      (3) business days of your receipt of the notice referred to in (c), you shall
      issue the certificates representing the Common Shares and the Warrant Shares
      so
      sold to
      the
      transferees registered in the names of such transferees, and such certificates
      shall not bear any legend restricting transfer of the Common Shares and
      the
      Warrant Shares thereby and should not be subject to any stop-transfer
      restriction. 

     

    A
      form of
      written confirmation (to be used in connection with any sale) from the Company’s
      outside legal counsel that a registration statement covering resales of the
      Common Shares and the Warrant Shares has been declared
      effective by the SEC under the Securities Act is attached hereto as Exhibit II.
      

     

    
      
        
          E-1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

     

    Please
      be
      advised that the Holders are relying upon this letter as an inducement to enter
      into the Agreement and, accordingly, each Holder is a third party beneficiary
      to
      these instructions. 

     

    Please
      execute this letter in the space indicated to acknowledge your agreement to
      act
      in accordance with these instructions. Should you have any questions concerning
      this matter, please contact me at 561-743-8333. 

     

    Very
      truly yours,

    DYADIC
      INTERNATIONAL, INC.

     

    By:

    Name:
      

    Title:
      

    

    THE
      FOREGOING INSTRUCTIONS ARE

    ACKNOWLEDGED
      AND AGREED TO 

    this
      day
      of ___________, 2006

    

    

    [INSERT
      NAME OF TRANSFER AGENT]

     

    By:

    Name:

    Title:

     

    Enclosures

    

    

    
      
        
          E-2

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Exhibit F

    FORM
      OF WARRANT

     

    NEITHER
      THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE
      HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
      SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE
      OF
      THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
      OR
      OTHER LOAN SECURED BY SUCH SECURITIES SO LONG AS A REGISTRATION STATEMENT IS
      EFFECTIVE UNDER THE SECURITIES ACT COVERING THE RESALE OF THESE
      SECURITIES.

     

    DYADIC
      INTERNATIONAL, INC.

    

    FORM
      OF WARRANT

    

    Warrant
      No. [__]Dated:
      November __, 2006

    

    Dyadic
      International, Inc.,
      a
      Delaware corporation (the “Company”),
      hereby certifies that, for value received, ________________[Name
      of
      Holder]
      or its
      registered assigns (the “Holder”),
      is
      entitled to purchase from the Company up to a total of [_____]shares of common
      stock, $0.001 par value per share (the “Common
      Stock”),
      of
      the Company (each such share, a “Warrant
      Share”
and
      all
      such shares issuable under the warrants, the “Warrant
      Shares”)
      at an
      exercise price equal to $[_______] per share (as adjusted from time to time
      as
      provided in Section 9, the “Exercise
      Price”),
      at
      any time after one hundred eighty (180) days from the date hereof (the first
      calendar day following such 180-day period on which this Warrant may be
      exercised is hereinafter referred to as the “Initial
      Exercise Date”)
      and
      through and including the date that is three (3) years from the Initial Exercise
      Date (the “Expiration
      Date”),
      and
      subject to the following terms and conditions. This Warrant (“Warrant”)
      is one
      of a series of similar warrants issued pursuant to that certain Securities
      Purchase Agreement, dated as of the date hereof, by and among the Company and
      the Investors identified therein (the “Purchase
      Agreement”).
      All
      such warrants are referred to herein, collectively, as the “Warrants”
and
      the
      holders thereof along with the Holder named herein, the “Holders.”

     

    1. Definitions.
      In
      addition to the terms defined elsewhere in this Warrant, capitalized terms
      that
      are not otherwise defined herein have the meanings given to such terms in the
      Purchase Agreement.

     

    2. Registration
      of Warrant.
      The
      Company shall register this Warrant, upon records to be maintained by the
      Company for that purpose (the “Warrant
      Register”),
      in
      the name of the record Holder hereof from time to time. The Company may deem
      and
      treat the registered Holder of this Warrant as the absolute owner hereof for
      the
      purpose of any exercise hereof or any distribution to the Holder, and for all
      other purposes, absent actual notice to the contrary.

     

    
      
        F-1

      

      
         

        
          

        

      

      
         

      

    

    3. Registration
      of Transfers.
      The
      Company shall register the transfer of any portion of this Warrant in the
      Warrant Register, upon surrender of this Warrant, with the Form of Assignment
      attached hereto duly completed and signed, to the Transfer Agent or to the
      Company at its address specified herein. Upon any such registration or transfer,
      a new warrant to purchase Common Stock, in substantially the form of this
      Warrant (any such new warrant, a “New
      Warrant”),
      evidencing the portion of this Warrant so transferred shall be issued to the
      transferee and a New Warrant evidencing the remaining portion of this Warrant
      not so transferred, if any, shall be issued to the transferring Holder. The
      acceptance of the New Warrant by the transferee thereof shall be deemed the
      acceptance by such transferee of all of the rights and obligations of a holder
      of a Warrant.

     

    4. Exercise
      and Duration of Warrants.
      

     

    (a) This
      Warrant shall be exercisable by the registered Holder at any time and from
      time
      to time commencing on the Initial Exercise Date to and including the Expiration
      Date. At 6:30 P.M., New York City time on the Expiration Date, the portion
      of
      this Warrant not exercised prior thereto shall be and become void and of no
      value; provided that, if the average of the Closing Prices for the five Trading
      Days immediately prior to (but not including) the Expiration Date exceeds the
      Exercise Price on the Expiration Date, and provided further that, if on the
      Expiration Date, there is no effective Registration Statement and current
      prospectus available covering the resale of the Warrant Shares except as a
      result of the Excluded Events, then this Warrant shall be deemed to have been
      exercised in full (to the extent not previously exercised) on a “cashless
      exercise” basis at 6:30 P.M. New York City time on the Expiration Date. A
“cashless exercise” means that in lieu of paying the aggregate purchase price
      for the shares being purchased upon exercise of the Warrants in cash, the Holder
      will forfeit a number of shares underlying the Warrants pursuant to Section
      10
      below.

     

    (b) The
      Holder may exercise this Warrant by delivering to the Company (i) an exercise
      notice, in the form attached hereto (the “Exercise
      Notice”),
      appropriately completed and duly signed, and (ii) payment of the Exercise Price
      for the number of Warrant Shares as to which this Warrant is being exercised
      (which may take the form of a “cashless exercise” if so indicated in the
      Exercise Notice only if a “cashless exercise” may occur at such time pursuant to
      Section 10 below), and the date such items are delivered to the Company (as
      determined in accordance with the notice provisions hereof) is an “Exercise
      Date.”
The
      Holder shall not be required to deliver the original Warrant in order to effect
      an exercise hereunder. Execution and delivery of the Exercise Notice shall
      have
      the same effect as cancellation of the original Warrant and issuance of a New
      Warrant evidencing the right to purchase the remaining number of Warrant
      Shares.

     

    (c) Exercise
      Disputes.
      In the
      case of any dispute with respect to the number of Warrant Shares to be issued
      upon exercise of this Warrant, the Company shall promptly issue such number
      of
      Warrant Shares that is not disputed and shall submit the disputed determinations
      or arithmetic calculations to the Holder via facsimile within two (2) Business
      Days of receipt of the Holder's election to purchase Warrant Shares. If the
      Holder and the Company are unable to agree as to the determination of the
      Exercise Price within two (2) Business Days of such disputed determination
      or
      arithmetic calculation being submitted to the Holder, then the Company shall
      in
      accordance with this Section, submit via facsimile the disputed determination
      to
      an independent reputable accounting firm of national standing, selected jointly
      by the Company and the Holder. The Company shall cause such accounting firm
      to
      perform the determinations or calculations and notify the Company and the Holder
      of the results within forty-eight (48) hours from the time it receives the
      disputed determinations of calculations. Such accounting firm's determination
      shall be binding upon all parties absent manifest error. The Company shall
      then
      on the next Business Day issue certificate(s) representing the appropriate
      number of Warrant Shares of Common Stock in accordance with such accounting
      firm's determination and this Section. The prevailing party shall be entitled
      to
      reimbursement of all fees and expenses of such determination and
      calculation.

     

    
      
        
          F-2

        

      

      
         

        
          

        

      

      
         

      

    

    5. Delivery
      of Warrant Shares.
      

     

    (a) Upon
      exercise of this Warrant, the Company shall promptly (but in no event later
      than
      three Trading Days after the Exercise Date) issue or cause to be issued and
      cause to be delivered to or upon the written order of the Holder and in such
      name or names as the Holder may designate, a certificate for the Warrant Shares
      issuable upon such exercise, free of restrictive legends unless a registration
      statement covering the resale of the Warrant Shares and naming the Holder as
      a
      selling stockholder thereunder is not then effective and the Warrant Shares
      are
      not freely transferable without volume restrictions pursuant to Rule 144 under
      the Securities Act. The Holder, or any Person so designated by the Holder to
      receive Warrant Shares, shall be deemed to have become holder of record of
      such
      Warrant Shares as of the Exercise Date. Unless the Warrant Shares are required
      to be certificated with restrictive legends in accordance with this paragraph,
      the Company shall, upon request of the Holder, use its Best Efforts to deliver
      Warrant Shares hereunder electronically through the Depository Trust Corporation
      or another established clearing corporation performing similar
      functions.

     

    (b) This
      Warrant is exercisable, either in its entirety or, from time to time, for a
      portion of the number of Warrant Shares. Upon surrender of this Warrant
      following one or more partial exercises, the Company shall issue or cause to
      be
      issued, at its expense, a New Warrant evidencing the right to purchase the
      remaining number of Warrant Shares.

     

    (c) In
      addition to any other rights available to a Holder, if the Company fails to
      deliver to the Holder a certificate representing Warrant Shares by the fifth
      Trading Day after the date on which delivery of such certificate is required
      by
      this Warrant, and if after such fifth Trading Day and prior to the Company’s
      delivery of such certificate representing the Warrant Shares the Holder
      purchases (in an open market transaction) shares of Common Stock to deliver
      in
      satisfaction of a sale by the Holder of the Warrant Shares that the Holder
      anticipated receiving from the Company (a “Buy-In”),
      then
      the Company shall, within five Trading Days after the Holder’s request and in
      the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to
      the Holder’s total purchase price (including brokerage commissions, if any) for
      the shares of Common Stock so purchased (the “Buy-In
      Shares”
and
      the
“Buy-In
      Price,”
      respectively), at which point the Company’s obligation to deliver such
      certificate (and to issue such Warrant Shares) shall terminate, or (ii) promptly
      honor its obligation to deliver to the Holder a certificate or certificates
      representing such Warrant Shares and pay cash to the Holder in an amount equal
      to the excess (if any) of the Buy-In Price over the product of (A) such number
      of Buy-In Shares, times (B) the average of the Closing Prices during the five
      Trading Days after the date on which delivery of such certificate is required
      by
      this Warrant.

     

    (d) The
      Company’s obligations to issue and deliver Warrant Shares in accordance with the
      terms hereof are absolute and unconditional, irrespective of any action or
      inaction by the Holder to enforce the same, any waiver or consent with respect
      to any provision hereof, the recovery of any judgment against any Person or
      any
      action to enforce the same, or any setoff, counterclaim, recoupment, limitation
      or termination, or any breach or alleged breach by the Holder or any other
      Person of any obligation to the Company or any violation or alleged violation
      of
      law by the Holder or any other Person, and irrespective of any other
      circumstance which might otherwise limit such obligation of the Company to
      the
      Holder in connection with the issuance of Warrant Shares. Nothing herein shall
      limit a Holder’s right to pursue any other remedies available to it hereunder,
      at law or in equity including, without limitation, a decree of specific
      performance and/or injunctive relief with respect to the Company’s failure to
      timely deliver certificates representing Warrant Shares upon exercise of the
      Warrant as required pursuant to the terms hereof.

     

    
      
        F-3

      

      
         

        
          

        

      

      
         

      

    

    6. Charges,
      Taxes and Expenses.
      Issuance and delivery of certificates for Warrant Shares upon exercise of this
      Warrant shall be made without charge to the Holder for any issue or transfer
      tax, withholding tax, transfer agent fee or other incidental tax or expense
      in
      respect of the issuance of such certificates, all of which taxes and expenses
      shall be paid by the Company; provided, however, that the Company shall not
      be
      required to pay any tax which may be payable in respect of any transfer involved
      in the registration of any certificates for Warrant Shares or Warrants in a
      name
      other than that of the Holder. The Holder shall be responsible for all other
      tax
      liability that may arise as a result of holding or transferring this Warrant
      or
      receiving Warrant Shares upon exercise hereof.

     

    7. Replacement
      of Warrant.
      If this
      Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or
      cause to be issued in exchange and substitution for and upon cancellation
      hereof, or in lieu of and substitution for this Warrant, a New Warrant, but
      only
      upon receipt of evidence reasonably satisfactory to the Company of such loss,
      theft or destruction and customary and reasonable bond or indemnity, if
      requested. Applicants for a New Warrant under such circumstances shall also
      comply with such other reasonable regulations and procedures and pay such other
      reasonable third-party costs as the Company may prescribe.

     

    8. Reservation
      of Warrant Shares.
      The
      Company covenants that it will at all times reserve and keep available out
      of
      the aggregate of its authorized but unissued and otherwise unreserved Common
      Stock, solely for the purpose of enabling it to issue Warrant Shares upon
      exercise of this Warrant as herein provided, 100% of the Warrant Shares which
      are then issuable and deliverable upon the exercise of this entire Warrant,
      free
      from preemptive rights or any other contingent purchase rights of persons other
      than the Holder (after giving effect to the adjustments and restrictions of
      Section
      9,
      if
      any). The Company covenants that all Warrant Shares so issuable and deliverable
      shall, upon issuance and the payment of the applicable Exercise Price in
      accordance with the terms hereof, be duly and validly authorized, issued and
      fully paid and non-assessable. The Company will take all such action as may
      be
      necessary to assure that such Warrant Shares may be issued as provided herein
      without violation of any applicable law or regulation, or of any requirements
      of
      any securities exchange or automated quotation system upon which the Common
      Stock may be listed.

     

    9. Certain
      Adjustments.
      The
      Exercise Price and number of Warrant Shares issuable upon exercise of this
      Warrant are subject to adjustment from time to time as set forth in this
Section
      9.

     

    (a) Stock
      Dividends and Splits.
      If the
      Company, at any time while this Warrant is outstanding, (i) pays a stock
      dividend on its Common Stock or otherwise makes a distribution on any class
      of
      capital stock that is payable in shares of Common Stock, (ii) subdivides
      outstanding shares of Common Stock into a larger number of shares, or (iii)
      combines outstanding shares of Common Stock into a smaller number of shares,
      then in each such case the Exercise Price shall be multiplied by a fraction
      of
      which the numerator shall be the number of shares of Common Stock outstanding
      immediately before such event and of which the denominator shall be the number
      of shares of Common Stock outstanding immediately after such event. Any
      adjustment made pursuant to clause (i) of this paragraph shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution, and any adjustment pursuant to clause
      (ii) or (iii) of this paragraph shall become effective immediately after the
      effective date of such subdivision or combination.

     

    (b) Distributions
      Made Prior to Exercise.
      If the
      Company, at any time while this Warrant is outstanding, distributes pro rata
      to
      holders of Common Stock (i) evidences of its indebtedness, (ii) any security
      (other than a distribution of Common Stock covered by Section 9(a)), (iii)
      rights or warrants to subscribe for or purchase any security (except pursuant
      to
      a shareholder rights plan duly adopted by the Company’s Board of Directors), or
      (iv) any other asset (in each case, a “Distribution”),
      then,
      if, but only if, the Company fails to provide written notice of any such
      Distribution to the Holder sufficiently in advance thereof to permit the Holder
      to exercise this Warrant and be deemed a holder of Common Stock at the record
      date fixed for the determination of holders of Common Stock entitled to receive
      the Distribution (each a “Distribution
      Notice”),
      in
      each such case any Exercise Price in effect immediately prior to the close
      of
      business on the record date fixed for the determination of holders of Common
      Stock entitled to receive the Distribution shall be reduced, effective as of
      the
      close of business on such record date, to a price determined by multiplying
      such
      Exercise Price by a fraction of which (i) the numerator shall be the Weighted
      Average Price1 
      of the
      Common Stock on the Trading Day immediately preceding such record date minus
      the
      value of the Distribution (as determined in good faith by the Company's Board
      of
      Directors) applicable to one share of Common Stock, and (ii) the denominator
      shall be the Weighted Average Price of the Common Stock on the Trading Day
      immediately preceding such record date.

     

    
      
        F-4

      

      
         

        
          

        

      

      
         

      

    

    (c) Notwithstanding
      the provisions set forth in Section
      9(b)
      above,
      if the Company, at any time while this Warrant is outstanding, makes a
      Distribution to the holders of Common Stock, and the Company fails to provide
      a
      Distribution Notice to the Holder in accordance with Section
      9(b)
      above,
      then in each such case the Holder shall have the option to receive such
      Distribution which would have been made to the Holder had such Holder been
      the
      holder of such Warrant Shares on the record date for the determination of
      stockholders entitled to such Distribution; provided,
      however,
      if the
      Holder elects to receive such Distribution, it will not be entitled to receive
      the adjustment to the Exercise Price specified in clause (b) above.

     

    (d) Fundamental
      Transactions.
      (1) If,
      at any time while this Warrant is outstanding, (i) the Company effects any
      merger or consolidation of the Company with or into (whether or not the Company
      is the surviving corporation) another Person, (ii) the Company effects any
      sale,
      assignment, transfer, conveyance or other disposition of all or substantially
      all of its assets in one or a series of related transactions; provided, however,
      that for avoidance of doubt, the granting of a lien on all or substantially
      all
      of the Company's assets as collateral shall not be deemed a Fundamental
      Transaction (as such term is hereinafter defined) hereunder, (iii) the Company
      allows another Person to make a purchase, tender or exchange offer that is
      not
      contested by the Company and is accepted by the holders of more than the 50%
      of
      either the outstanding shares of Common Stock (not including any shares of
      Common Stock held by the Person or Persons making or party to, or associated
      or
      affiliated with the Persons making or party to, such purchase, tender or
      exchange offer), (iv) the Company consummates a stock purchase agreement or
      other business combination (including, without limitation, a reorganization,
      recapitalization, spin-off or scheme of arrangement) with another Person whereby
      such other Person acquires more than the 50% of the outstanding shares of Common
      Stock (not including any shares of Common Stock held by the other Person or
      other Persons making or party to, or associated or affiliated with the other
      Persons making or party to, such stock purchase agreement or other business
      combination), or (v) the Company effects any reclassification of the Common
      Stock or any compulsory share exchange pursuant to which the Common Stock is
      effectively converted into or exchanged for other securities, cash or property
      (other than as a result of a subdivision or combination of shares of Common
      Stock covered by Section
      9(a)
      above)
      (in any such case, a “Fundamental
      Transaction”),
      then
      the Holder shall have the right thereafter to receive, upon exercise of this
      Warrant, the same amount and kind of securities, cash or property as it would
      have been entitled to receive upon the occurrence of such Fundamental
      Transaction if it had been, immediately prior to such Fundamental Transaction,
      the holder of the number of Warrant Shares then issuable upon exercise in full
      of this Warrant (the “Alternate
      Consideration”).
      The
      aggregate Exercise Price for this Warrant will not be affected by any such
      Fundamental Transaction, but the Company shall apportion such aggregate Exercise
      Price among the Alternate Consideration in a reasonable manner reflecting the
      relative value of any different components of the Alternate Consideration.
      If
      holders of Common Stock are given any choice as to the securities, cash or
      property to be received in a Fundamental Transaction, then the Holder shall
      be
      given the same choice as to the Alternate Consideration it receives upon any
      exercise of this Warrant following such Fundamental Transaction. At the Holder’s
      request, any successor to the Company or surviving entity in such Fundamental
      Transaction shall issue to the Holder a new warrant consistent with the
      foregoing provisions and evidencing the Holder’s right to purchase the Alternate
      Consideration for the aggregate Exercise Price upon exercise thereof. The terms
      of any agreement pursuant to which a Fundamental Transaction is effected shall
      include terms requiring any such successor or surviving entity to comply with
      the provisions of this paragraph (d) and insuring that the Warrant (or any
      such
      replacement security) will be similarly adjusted upon any subsequent transaction
      analogous to a Fundamental Transaction. 

     

    (2) Notwithstanding
      the foregoing and the provisions of Section 9(b) above, in the event of a
      Fundamental Transaction in which (i) the surviving entity in the Fundamental
      Transaction is not a publicly traded company and (ii) the consideration to
      be
      delivered to the holders of Common Stock upon the occurrence of such Fundamental
      Transaction does not consist of publicly traded securities representing at
      least
      eighty percent (80%) of the value of such consideration, if the Holder has
      not
      exercised the Warrant in full prior to the consummation of such Fundamental
      Transaction, then
      the
      Holder shall have the right to require any successor to the Company or surviving
      entity in such Fundamental Transaction to purchase this Warrant from the Holder
      by paying to the Holder, simultaneously with the consummation of such
      Fundamental Transaction and
      in lieu
      of the warrant referred to in Section 9(d)(1), cash in an amount equal to the
      value of the remaining unexercised portion of this Warrant on the date of such
      consummation, which value shall be determined by use of the Black and Scholes
      Option Pricing Model reflecting (i) a risk-free interest rate corresponding
      to
      the U.S. Treasury rate for a period equal to the remaining term of this Warrant
      as of such date of request and (ii) an expected volatility equal to the lesser
      of 60% and the 100 day volatility obtained from the HVT function on
      Bloomberg.

     

    
      
        F-5

      

      
         

        
          

        

      

      
         

      

    

    (e) Adjustment
      Upon Issuance of Shares of Common Stock.
      If and
      whenever on or after the issuance date of this Warrant through the first one
      hundred eighty days (180) thereof, the Company issues or sells, or in accordance
      with this Section 9 is deemed to have issued or sold, any shares of Common
      Stock
      (including the issuance or sale of shares of Common Stock owned or held by
      or
      for the account of the Company) for a consideration per share (the “New
      Issuance Price”)
      less
      than a price (the “Applicable
      Price”)
      equal
      to the Exercise Price in effect immediately prior to such issue or sale or
      deemed issuance or sale (the foregoing a “Dilutive
      Issuance”),
      then
      immediately after such Dilutive Issuance, the Exercise Price then in effect
      shall be reduced to an amount equal to the New Issuance Price.
      If
      and
      whenever after such one hundred eightieth day, the Company issues or sells,
      or
      in accordance with this Section 9 is deemed to have issued or sold, any shares
      of Common Stock (including the issuance or sale of shares of Common Stock owned
      or held by or for the account of the Company) in a Dilutive Issuance, then
      immediately after such Dilutive Issuance, the Exercise Price then in effect
      shall be reduced to an amount equal to the product
      of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance
      and (B) the quotient determined by dividing (1) the sum of (I) the product
      derived by multiplying the Exercise Price in effect immediately prior to such
      Dilutive Issuance and the number of shares of Common Stock Deemed Outstanding
      immediately prior to such Dilutive Issuance plus (II) the consideration, if
      any,
      received by the Company upon such Dilutive Issuance, by (2) the product derived
      by multiplying (I) the Exercise Price in effect immediately prior to such
      Dilutive Issuance by (II) the number of shares of Common Stock Deemed
      Outstanding immediately after such Dilutive Issuance. Upon
      each
      such adjustment of the Exercise Price hereunder, the number of Warrant Shares
      shall be adjusted to the number of shares of Common Stock determined by
      multiplying the Exercise Price in effect immediately prior to such adjustment
      by
      the number of Warrant Shares acquirable upon exercise of this Warrant
      immediately prior to such adjustment and dividing the product thereof by the
      Exercise Price resulting from such adjustment. For purposes of determining
      the
      adjusted Exercise Price under this Section 9(e), the following shall be
      applicable:

     

    (i) Issuance
      of Options.
      If the
      Company in any manner grants any Options and the lowest price per share for
      which one share of Common Stock is issuable upon the exercise of any such Option
      or upon conversion, exercise or exchange of any Convertible Securities issuable
      upon exercise of any such Option is less than the Applicable Price, then such
      share of Common Stock shall be deemed to be outstanding and to have been issued
      and sold by the Company at the time of the granting or sale of such Option
      for
      such price per share. For purposes of this Section 9(e)(i), the “lowest price
      per share for which one share of Common Stock is issuable upon exercise of
      such
      Options or upon conversion, exercise or exchange of such Convertible Securities”
shall be equal to the sum of the lowest amounts of consideration (if any)
      received or receivable by the Company with respect to any one share of Common
      Stock upon the granting or sale of the Option, upon exercise of the Option
      and
      upon conversion, exercise or exchange of any Convertible Security issuable
      upon
      exercise of such Option. No further adjustment of the Exercise Price or number
      of Warrant Shares shall be made upon the actual issuance of such shares of
      Common Stock or of such Convertible Securities upon the exercise of such Options
      or upon the actual issuance of such shares of Common Stock upon conversion,
      exercise or exchange of such Convertible Securities. 

     

    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon the
      conversion, exercise or exchange thereof is less than the Applicable Price,
      then
      such share of Common Stock shall be deemed to be outstanding and to have been
      issued and sold by the Company at the time of the issuance or sale of such
      Convertible Securities for such price per share. For the purposes of this
      Section 9(e)(ii), the “lowest price per share for which one share of Common
      Stock is issuable upon the conversion, exercise or exchange” shall be equal to
      the sum of the lowest amounts of consideration (if any) received or receivable
      by the Company with respect to one share of Common Stock upon the issuance
      or
      sale of the Convertible Security and upon conversion, exercise or exchange
      of
      such Convertible Security. No further adjustment of the Exercise Price or number
      of Warrant Shares shall be made upon the actual issuance of such shares of
      Common Stock upon conversion, exercise or exchange of such Convertible
      Securities, and if any such issue or sale of such Convertible Securities is
      made
      upon exercise of any Options for which adjustment of this Warrant has been
      or is
      to be made pursuant to other provisions of this Section 9(e), no further
      adjustment of the Exercise Price or number of Warrant Shares shall be made
      by
      reason of such issue or sale. 

     

    (iii) Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion, exercise or exchange of any Convertible
      Securities, or the rate at which any Convertible Securities are convertible
      into
      or exercisable or exchangeable for shares of Common Stock increases or decreases
      at any time, the Exercise Price and the number of Warrant Shares in effect
      at
      the time of such increase or decrease shall be adjusted to the Exercise Price
      and the number of Warrant Shares which would have been in effect at such time
      had such Options or Convertible Securities provided for such increased or
      decreased purchase price, additional consideration or increased or decreased
      conversion rate, as the case may be, at the time initially granted, issued
      or
      sold. For purposes of this Section 9(e)(iii), if the terms of any Option or
      Convertible Security that was outstanding as of the date of issuance of this
      Warrant are increased or decreased in the manner described in the immediately
      preceding sentence, then such Option or Convertible Security and the shares
      of
      Common Stock deemed issuable upon exercise, conversion or exchange thereof
      shall
      be deemed to have been issued as of the date of such increase or decrease.
      No
      adjustment pursuant to this Section 9(e) shall be made if such adjustment would
      result in an increase of the Exercise Price then in effect or a decrease in
      the
      number of Warrant Shares.

     

    
      
        F-6

      

      
         

        
          

        

      

      
         

      

    

    (iv) Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for a consideration of $0.01. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold or deemed
      to have been issued or sold for cash, the consideration received therefor will
      be deemed to be the net amount received by the Company therefor. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold for a
      consideration other than cash, the amount of such consideration received by
      the
      Company will be the fair value of such consideration, except where such
      consideration consists of securities which are listed on a securities exchange
      or stock market, in which case the amount of consideration received by the
      Company will be the Closing Sale Price of such security on the date of receipt.
      If any shares of Common Stock, Options or Convertible Securities are issued
      to
      the owners of the non-surviving entity in connection with any merger in which
      the Company is the surviving entity, the amount of consideration therefor will
      be deemed to be the fair value of such portion of the net assets and business
      of
      the non-surviving entity as is attributable to such shares of Common Stock,
      Options or Convertible Securities, as the case may be. The fair value of any
      consideration other than cash or securities will be determined jointly by the
      Board of Directors of the Company and the Required Holders. If such parties
      are
      unable to reach agreement within ten (10) days after the occurrence of an event
      requiring valuation (the “Valuation
      Event”),
      the
      fair value of such consideration will be determined within five (5) Business
      Days after the tenth day following the Valuation Event by an independent,
      reputable appraiser jointly selected by the Company and the Required Holders.
      The determination of such appraiser shall be final and binding upon all parties
      absent manifest error and the fees and expenses of such appraiser shall be
      borne
      by the Company.

     

    (v) Record
      Date.
      If the
      Company takes a record of the holders of shares of Common Stock for the purpose
      of entitling them (A) to receive a dividend or other distribution payable
      in shares of Common Stock, Options or in Convertible Securities or (B) to
      subscribe for or purchase shares of Common Stock, Options or Convertible
      Securities, then such record date will be deemed to be the date of the issue
      or
      sale of the shares of Common Stock deemed to have been issued or sold upon
      the
      declaration of such dividend or the making of such other distribution or the
      date of the granting of such right of subscription or purchase, as the case
      may
      be.

     

    (vi) Notwithstanding
      the foregoing, no adjustment will be made under this Section
      9(e)
      upon the
      issuance of any Common Stock, Convertible Securities and/or Options (a) in
      connection with employee benefit plans or other plans approved by the Board
      of
      Directors of the Company for the benefit of employees, consultants or directors
      of the Company or its subsidiaries, (b) stock dividends or other events to
      which
Section
      9(a)
      applies,
      or in connection with Options or Convertible Securities outstanding immediately
      prior to the Closing; provided that the terms of such Options or Convertible
      Securities are not amended, modified or changed after the date hereof except
      under the terms of the Abengoa Securities Purchase Agreement, (c) issued under
      the Abengoa Securities Purchase Agreement (as such term is hereinafter defined),
      (d) issued under the Purchase Agreement, (e) in connection with a bona fide
      acquisition by the Company or to strategic partners in a transaction the primary
      purpose of which is not to raise equity funds, or (f) pursuant to a firm
      commitment underwritten public offering with a nationally recognized underwriter
      which generates gross proceeds in excess of $25 million. 

     

    (vii) For
      purposes of this Warrant, (A) “Common
      Stock Deemed Outstanding”
means,
      at any given time, the number of shares of Common Stock actually outstanding
      at
      such time, plus the number of shares of Common Stock deemed to be outstanding
      pursuant to Sections 9(e)(i) and 9(e)(ii) hereof regardless of whether the
      Options or Convertible Securities are actually exercisable at such time, but
      excluding any shares of Common Stock owned or held by or for the account of
      the
      Company or issuable upon conversion and exercise, as applicable, of the
      Warrants; (B) “Convertible
      Securities”
means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for shares of Common Stock; (C)
“Options”
means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities; and (D) “Abengoa
      Securities Purchase Agreement”
means
      that certain Securities Purchase Agreement dated as of October 26, 2006 by
      and
      among the Company and Abengoa Bioenergy R&D, Inc.

     

    (f) Number
      of Warrant Shares.
      Simultaneously with any adjustment to the Exercise Price pursuant to paragraph
      (a) of this Section, the number of Warrant Shares that may be purchased upon
      exercise of this Warrant shall be increased or decreased proportionately, as
      applicable, so that after such adjustment the aggregate Exercise Price payable
      hereunder for the increased or decreased, as applicable, number of Warrant
      Shares shall be the same as the aggregate Exercise Price in effect immediately
      prior to such adjustment.

     

    (g) Calculations.
      All
      calculations under this Section
      9
      shall be
      made to the nearest cent or the nearest 1/100th of a share, as applicable.
      The
      number of shares of Common Stock outstanding at any given time shall not include
      shares owned or held by or for the account of the Company, and the disposition
      of any such shares shall be considered an issue or sale of Common
      Stock.

     

    
      
        F-7

      

      
         

        
          

        

      

      
         

      

    

    (h) Notice
      of Adjustments.
      Upon
      the occurrence of each adjustment pursuant to this Section
      9,
      the
      Company at its expense will promptly compute such adjustment in accordance
      with
      the terms of this Warrant and prepare a certificate setting forth such
      adjustment, including a statement of the adjusted Exercise Price and adjusted
      number or type of Warrant Shares or other securities issuable upon exercise
      of
      this Warrant (as applicable), describing the transactions giving rise to such
      adjustments and showing in detail the facts upon which such adjustment is based.
      Upon written request, the Company will promptly deliver a copy of each such
      certificate to the Holder and to the Company’s Transfer Agent.

     

    (i) Notice
      of Corporate Events.
      If the
      Company (i) declares a dividend or any other distribution of cash, securities
      or
      other property in respect of its Common Stock, including without limitation
      any
      granting of rights or warrants to subscribe for or purchase any capital stock of
      the Company or any Subsidiary, (ii) authorizes or approves, enters into any
      agreement contemplating or solicits stockholder approval for any Fundamental
      Transaction or (iii) authorizes the voluntary dissolution, liquidation or
      winding up of the affairs of the Company, then the Company shall deliver to
      the
      Holder a notice describing the material terms and conditions of such
      transaction, at least ten calendar days prior to the applicable record or
      effective date on which a Person would need to hold Common Stock in order to
      participate in or vote with respect to such transaction, and the Company will
      take all steps reasonably necessary in order to insure that the Holder is given
      the practical opportunity to exercise this Warrant prior to such time so as
      to
      participate in or vote with respect to such transaction; provided, however,
      that
      the failure to deliver such notice or any defect therein shall not affect the
      validity of the corporate action required to be described in such notice.

     

    10. Payment
      of Exercise Price.
      The
      Holder shall pay the Exercise Price in immediately available funds (a “cash
      exercise”); provided, however, that if either (i) the provisions of the second
      sentence of Section 4(a) shall apply or (ii) at any time after the date that
      is
      one (1) year after the date of this Warrant (the “Required
      Effective Date”)
      neither a Registration Statement covering the resale of the Warrant Shares
      is
      effective nor a current prospectus is available due to the occurrence of an
      Event, the Holder may satisfy its obligation to pay the Exercise Price through
      a
“cashless exercise” prior to the applicable Cure Date, in which event the
      Company shall issue to the Holder the number of Warrant Shares determined as
      follows:

     

    
      	 	
              X
                =
                Y [(A-B)/A]

            
	
              where:

            	 
	 	
              X
                =
                the number of Warrant Shares to be issued to the
                Holder.

            
	 	 
	 	
              Y
                =
                the number of Warrant Shares with respect to which this Warrant is
                being
                exercised (prior to cashless exercise).

            
	 	 
	 	
              A
                =
                the average of the Closing Prices for the five Trading Days immediately
                prior to (but not including) the Exercise Date.

            
	 	 
	 	
              B
                =
                the Exercise Price.

            

    

    

    For
      purposes of Rule 144 promulgated under the Securities Act, it is intended,
      understood and acknowledged that the Warrant Shares issued in a cashless
      exercise transaction shall be deemed to have been acquired by the Holder, and
      the holding period for the Warrant Shares shall be deemed to have commenced,
      on
      the date this Warrant was originally issued pursuant to the Purchase
      Agreement.

     

    11. Call
      of Warrant.
      At any
      time from time to time after the date of issuance of this Warrant (the
“Effective
      Date”),
      the
      Company shall have the right, upon 15 Trading Days’ prior written notice to the
      Holder (the “Call
      Notice”),
      to
      call all or any portion of this Warrant at a price equal to $.001 per Warrant
      Share (the “Call
      Price”)
      at any
      time, provided that (i) the Warrant Shares are registered for resale pursuant
      to
      the Securities Act and shall have been for at least the 20-trading day period
      preceding the Call Notice, (ii) the prospectus under which such Warrant Shares
      have been registered has not been suspended at any time during the 20-trading
      day period preceding the Call Notice, (iii) the Warrant Shares are currently
      listed (and have not been suspended from trading) on a Trading Market as of
      the
      date the Call Notice is delivered to the Holder through the effective date
      of
      such call and (iv) the average “VWAP”
(as
      defined below) for the Common Stock on a Trading Market for any period of at
      least 10 consecutive Business Days is equal to or greater than 150% of the
      Exercise Price then in effect (the “Threshold
      Price”).
      The
      Company must exercise this right to call the Warrant within 3 Trading Days
      after
      the satisfaction of the last of the conditions in clauses (i) through (iv)
      of
      the immediately foregoing sentence to be satisfied. At any time prior to the
      Effective Date of such call, the Holder shall have the right to exercise this
      Warrant in accordance with its terms. As soon as practicable after the Effective
      Date of such call, the Company shall mail or deliver to the Holder a check
      in
      the amount of the Call Price times the number of Warrant Shares remaining
      available for purchase under this Warrant at the Effective Date. Upon receipt
      of
      such check, the Holder shall surrender, via mail or delivery, this Warrant
      to
      the Company for cancellation. After the Effective Date of such call, this
      Warrant shall no longer be exercisable. For purposes of this Section 11,
“VWAP”
shall
      mean for any date, the price determined by the first of the following clauses
      that applies: (a) if the Common Stock is then listed or quoted on a Trading
      Market, other that the OTC Bulletin Board, the daily volume weighted average
      trading price of the Common Stock for such date on the primary Trading Market
      on
      which the Common Stock is then listed or quoted as reported by Bloomberg
      Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Standard Time
      to
      4:02 p.m. Eastern Standard Time) using the AQR function; (b) if the Common
      Stock
      is not then listed or quoted on a Trading Market other than the OTC Bulletin
      Board and if prices for the Common Stock are then quoted on the OTC Bulletin
      Board, the volume weighted average trading price of the Common Stock for such
      date on the OTC Bulletin Board or if there are no trades on that date, then
      the
      average of the closing bid and ask prices of the Common Stock as reported by
      the
      OTC Bulletin Board for that date; (c) if the Common Stock is not then listed
      or
      quoted on a Trading Market or on the OTC Bulletin Board and if prices for the
      Common Stock are then reported in the “Pink Sheets” published by Pink Sheets,
      LLC (or a similar organization or agency succeeding to its functions of
      reporting prices), the most recent bid price per share of the Common Stock
      so
      reported for that date; or (d) in all other cases, the fair market value of
      a
      share of Common Stock as determined by a nationally recognized-independent
      appraiser selected in good faith by the Board of Directors of the
      Company.

     

    
      
        F-8

      

      
         

        
          

        

      

      
         

      

    

    12. Limitation
      on Exercise.
      

     

    (a) Notwithstanding
      anything to the contrary contained herein, the number of Warrant Shares that
      may
      be acquired by the Holder upon any exercise of this Warrant (or otherwise in
      respect hereof) shall be limited to the extent necessary to insure that,
      following such exercise (or other issuance), the total number of shares of
      Common Stock then beneficially owned by such Holder and its Affiliates and
      any
      other Persons whose beneficial ownership of Common Stock would be aggregated
      with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not
      exceed 9.999% (the “Maximum
      Percentage”)
      of the
      total number of issued and outstanding shares of Common Stock (including for
      such purpose the shares of Common Stock issuable upon such exercise). For such
      purposes, beneficial ownership shall be determined in accordance with Section
      13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
      The Company’s obligation to issue shares of Common Stock in excess of the
      limitation referred to in this Section shall be suspended (and shall not
      terminate or expire notwithstanding any contrary provisions hereof) until such
      time, if any, as such shares of Common Stock may be issued in compliance with
      such limitation, but in no event later than the Expiration Date. By written
      notice to the Company, the Holder may waive the provisions of this Section
      or
      increase or decrease the Maximum Percentage to any other percentage specified
      in
      such notice, but (i) any such waiver or increase will not be effective until
      the
      61st day after such notice is delivered to the Company, and (ii) any such waiver
      or increase or decrease will apply only to the Holder and not to any other
      holder of Warrants.

     

    13. Fractional
      Shares.
      The
      Company shall not be required to issue or cause to be issued fractional Warrant
      Shares on the exercise of this Warrant. If any fraction of a Warrant Share
      would, except for the provisions of this Section, be issuable upon exercise
      of
      this Warrant, the number of Warrant Shares to be issued will be rounded up
      to
      the nearest whole share.

     

    14. Notices.
      Any and
      all notices or other communications or deliveries hereunder (including without
      limitation any Exercise Notice) shall be in writing and shall be deemed given
      and effective on the earliest of (i) the date of transmission, if such notice
      or
      communication is delivered via facsimile at the facsimile number specified
      in
      the Purchase Agreement prior to 6:30 p.m. (New York City time) on a Trading
      Day,
      (ii) the next Trading Day after the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number specified
      in
      the Purchase Agreement on a day that is not a Trading Day or later than 6:30
      p.m. (New York City time) on any Trading Day, (iii) the Trading Day following
      the date of mailing, if sent by nationally recognized overnight courier service,
      or (iv) upon actual receipt by the party to whom such notice is required to
      be
      given. The address for such notices or communications shall be as set forth
      in
      the Purchase Agreement.

     

    15. Warrant
      Agent.
      The
      Company shall serve as warrant agent under this Warrant. Upon 30 days' notice
      to
      the Holder, the Company may appoint a new warrant agent. Any corporation into
      which the Company or any new warrant agent may be merged or any corporation
      resulting from any consolidation to which the Company or any new warrant agent
      shall be a party or any corporation to which the Company or any new warrant
      agent transfers substantially all of its corporate trust or stockholders
      services business shall be a successor warrant agent under this Warrant without
      any further act. Any such successor warrant agent shall promptly cause notice
      of
      its succession as warrant agent to be mailed (by first class mail, postage
      prepaid) to the Holder at the Holder's last address as shown on the Warrant
      Register.

     

    16. Registration
      of Warrant Shares.
      The
      Holder is entitled to the benefits of the Purchase Agreement with respect to
      the
      registration of the Warrant Shares under the Securities Act. 

     

    17. Miscellaneous.

     

    (a) Subject
      to the restrictions on transfer set forth on the first page hereof, this Warrant
      may be assigned by the Holder. This Warrant may not be assigned by the Company,
      except to a successor in the event of a Fundamental Transaction. This Warrant
      shall be binding on and inure to the benefit of the parties hereto and their
      respective successors and assigns. Subject to the preceding sentence, nothing
      in
      this Warrant shall be construed to give to any Person other than the Company
      and
      the Holder any legal or equitable right, remedy or cause of action under this
      Warrant. 

     

    
      
        F-9

      

      
         

        
          

        

      

      
         

      

    

    (b) The
      Company will not, by amendment of its governing documents or through any
      reorganization, transfer of assets, consolidation, merger, dissolution, issue
      or
      sale of securities or any other voluntary action, seek to call or redeem this
      Warrant or avoid or seek to avoid the observance or performance of any of the
      terms of this Warrant, but will at all times in good faith assist in the
      carrying out of all such terms and in the taking of all such action as may
      be
      necessary or appropriate in order to protect the rights of the Holder against
      dilution or other impairment. Without limiting the generality of the foregoing,
      the Company (i) will not increase the par value of any Warrant Shares above
      the
      amount payable therefor on such exercise, (ii) will take all such action as
      may
      be reasonably necessary or appropriate in order that the Company may validly
      and
      legally issue fully paid and non-assessable Warrant Shares, free from all taxes,
      liens, security interests, encumbrances, preemptive or similar rights and
      charges of stockholders (other than those imposed by the Investors), on the
      exercise of the Warrant, and (iii) will not close its stockholder books or
      records in any manner which interferes with the timely exercise of this
      Warrant.

     

    (c) Remedies;
      Specific Performance.
      The
      Company acknowledges and agrees that there would be no adequate remedy at law
      to
      the Holder of this Warrant in the event of any default or threatened default
      by
      the Company in the performance of or compliance with any of the terms of this
      Warrant and accordingly, the Company agrees that, in addition to any other
      remedy to which the Holder may be entitled at law or in equity, the Holder
      shall
      be entitled to seek to compel specific performance of the obligations of the
      Company under this Warrant, without the posting of any bond, in accordance
      with
      the terms and conditions of this Warrant in any court of the United States
      or
      any State thereof having jurisdiction, and if any action should be brought
      in
      equity to enforce any of the provisions of this Warrant, the Company shall
      not
      raise the defense that there is an adequate remedy at law. Except as otherwise
      provided by law, a delay or omission by the Holder hereof in exercising any
      right or remedy accruing upon any such breach shall not impair the right or
      remedy or constitute a waiver of or acquiescence in any such breach. No remedy
      shall be exclusive of any other remedy. All available remedies shall be
      cumulative.

     

    (d) Amendments
      and Waivers.
      The
      Company may, without the consent of the Holders, by supplemental agreement
      or
      otherwise, (i) make any changes or corrections in this Agreement that are
      required to cure any ambiguity or to correct or supplement any provision herein
      which may be defective or inconsistent with any other provision herein or (ii)
      add to the covenants and agreements of the Company for the benefit of the
      Holders (including, without limitation, reduce the Exercise Price or extend
      the
      Expiration Date), or surrender any rights or power reserved to or conferred
      upon
      the Company in this Agreement; provided that, in the case of (i) or (ii), such
      changes or corrections shall not adversely affect the interests of Holders
      of
      then outstanding Warrants in any material respect. This Warrant may also be
      amended or waived with the consent of the Company and the Holder. Further,
      the
      Company may, with the consent, in writing or at a meeting, of the Holders (the
      “Required
      Holders”)
      of the
      then outstanding Warrants exercisable for two-thirds (2/3) or greater of the
      Common Stock eligible under such Warrants, amend in any way, by supplemental
      agreement or otherwise, this Warrant and/or all of the outstanding Warrants;
      provided, however, that (i) no such amendment by its express terms shall
      adversely affect any Holder differently than it affects all other Holders,
      unless such Holder consents thereto, and (ii) no such amendment concerning
      the
      number of Warrant Shares or Exercise Price shall be made unless any Holder
      who
      will be affected by such amendment consents thereto. If a new Warrant Agent
      is
      appointed by the Company, it shall at the request of the Company, and without
      need of independent inquiry as to whether such supplemental agreement is
      permitted by the terms of this Section
      16(d),
      join
      with the Company in the execution and delivery of any such supplemental
      agreements, but shall not be required to join in such execution and delivery
      for
      such supplemental agreement to become effective. 

     

    
      
        F-10

      

      
         

        
          

        

      

      
         

      

    

    (e) GOVERNING
      LAW; VENUE; WAIVER OF JURY TRIAL.
      THE
      CORPORATE LAWS OF THE STATE OF NEW YORK SHALL GOVERN ALL ISSUES CONCERNING
      THE
      RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING
      THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
      SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
      OF
      THE STATE OF NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT
      TO
      THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
      OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT
      BY
      THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
      TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY
      WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY
      THE
      COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
      JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
      IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS
      AND
      CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
      MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
      (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
      TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
      AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
      SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
      PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL
      BY JURY.

     

    (f) The
      headings herein are for convenience only, do not constitute a part of this
      Warrant and shall not be deemed to limit or affect any of the provisions
      hereof.

     

    (g) In
      case
      any one or more of the provisions of this Warrant shall be invalid or
      unenforceable in any respect, the validity and enforceability of the remaining
      terms and provisions of this Warrant shall not in any way be affected or
      impaired thereby and the parties will attempt in good faith to agree upon a
      valid and enforceable provision which shall be a commercially reasonable
      substitute therefor, and upon so agreeing, shall incorporate such substitute
      provision in this Warrant.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK,

    SIGNATURE
      PAGE FOLLOWS]

    

    

      

      
        1“Weighted
          Average Price” means, for any security as of any date, the dollar
          volume-weighted average price for such security on AMEX during the period
          beginning at 9:30:01 a.m., New York Time (or such other time as AMEX publicly
          announces is the official open of trading), and ending at 4:00:00 p.m.,
          New York
          Time (or such other time as AMEX publicly announces is the official close
          of
          trading) as reported by Bloomberg (means Bloomberg Financial Markets) through
          its “Volume at Price” functions, or, if the foregoing does not apply, the dollar
          volume-weighted average price of such security in the over-the-counter
          market on
          the electronic bulletin board for such security during the period beginning
          at
          9:30:01 a.m., New York Time (or such other time as such Principal Market
          publicly announces is the official open of trading), and ending at 4:00:00
          p.m.,
          New York Time (or such other time as such market publicly announces is
          the
          official close of trading) as reported by Bloomberg, if no dollar
          volume-weighted average price is reported for such security by Bloomberg
          for
          such hours, the average of the highest closing bid price and the lowest
          closing
          ask price of any of the market makers for such security as reported in
          the “pink
          sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
          the Weighted Average Price cannot be calculated for a security on a particular
          date on any of the foregoing bases, the Weighted Average Price of such
          security
          on such date shall be the fair market value as determined by the Company
          in good
          faith. All such determinations shall be appropriately adjusted for any
          share
          dividend, share split, share combination or other similar transaction during
          the
          applicable calculation period.

      

    

    
      
        
          F-11

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
      its
      authorized officer as of the date first indicated above.

     

    
      	 
	
              DYADIC
                INTERNATIONAL, INC.

            
	 
	 
	
              By: 

            
	
              Name: 

            
	
              Title: 

            

    

    

    

    

    
      
        F-12

      

      
        
        

        
          

        

      

      
        
        

      

    

    FORM
      OF EXERCISE NOTICE

     

    (To
      be
      executed by the Holder to exercise the right to purchase shares of Common Stock
      under the foregoing Warrant)

     

    To:
      Dyadic
      International, Inc.

     

    The
      undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by
Dyadic
      International, Inc.,
      a
      Delaware corporation (the “Company”). Capitalized terms used herein and not
      otherwise defined have the respective meanings set forth in the
      Warrant.

     

    
      	 	
              (a)

            	
              The
                Warrant is currently exercisable to purchase a total of ______________
                Warrant Shares.

            

    

     

    
      	 	
              (b)

            	
              The
                undersigned Holder hereby exercises its right to purchase
                _________________ Warrant Shares pursuant to the
                Warrant.

            

    

     

    
      	 	
              (c)

            	
              The
                Holder intends that payment of the Exercise Price shall be made as
                (check
                one):

            

    

     

    ____ “Cash
      Exercise” under Section 10

    ____ “Cashless
      Exercise” under Section 10

     

    (d) If
      the
      holder has elected a Cash Exercise, the holder shall pay the sum of
      $____________ to the Company in accordance with the terms of the
      Warrant.

     

    (e) Pursuant
      to this exercise, the Company shall deliver to the holder _______________
      Warrant Shares in accordance with the terms of the Warrant.

     

    (f) Following
      this exercise, the Warrant shall be exercisable to purchase a total of
      ______________ Warrant Shares.

     

    (g) Notwithstanding
      anything to the contrary contained herein, this Exercise Notice shall constitute
      a representation by the Holder that, after giving effect to the exercise
      provided for in this Exercise Notice, the Holder (together with its affiliates)
      will not have beneficial ownership (together with the beneficial ownership
      of
      such Person's affiliates) of a number of shares of Common Stock which exceeds
      the Maximum Percentage of the total outstanding shares of Common Stock as
      determined pursuant to the provisions of Section 11(a) of the
      Warrant.

     

    
      	
              Dated:
                ,
                

            	 	
              Name
                of Holder:

            
	 	 	
              (Print)
                

            
	 	 	
              By:

            
	 	 	
              Name:

            
	 	 	
              Title:

            
	 	 	
              (Signature
                must conform in all respects to name of holder as specified on the
                face of
                the Warrant)

            

    

    

    

    
      
        F-13

      

      
        
        

        
          

        

      

      
        
        

      

    

    FORM
      OF ASSIGNMENT

    

    [To
      be
      completed and signed only upon transfer of Warrant]

    

    FOR
      VALUE
      RECEIVED, the undersigned hereby sells, assigns and transfers unto
      ________________________________ the right represented by the within Warrant
      to
      purchase ____________ shares of Common Stock of Dyadic
      International, Inc. to
      which
      the within Warrant relates and appoints _____________________ attorney to
      transfer said right on the books of Dyadic
      International, Inc. with
      full
      power of substitution in the premises.

     

    
      	 	 
	 	 
	
              Dated:
                ,
                

            	 
	 	 
	 	 
	 	
              (Signature
                must conform in all respects to name of holder as specified on the
                face of
                the Warrant)

            
	 	 
	 	 
	 	
              Address
                of Transferee

            
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	
              In
                the presence of:

            	 
	 	 
	 	 
	 	 

    

    

    

    
      
        
          F-14

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Schedule
      3.1(a)

    SUBSIDIARIES

     

    The
      Company has the following direct or indirect Subsidiaries:

     

    Direct
      Subsidiaries of Company

     

    Dyadic
      Real Estate Holdings Inc. (Florida) 100%

     

    Dyadic
      International (USA), Inc. (Florida) 100%

     

    Indirect
      Subsidiaries of the Company (Subsidiaries of Dyadic International (USA),
      Inc.)

     

    Geneva
      Investment Holdings Limited (British Virgin Islands) 100%

     

    Dyadic
      Nederland BV (The Netherlands) 100%

     

    Dyadic
      International Sp. z o.o. (Poland) 100%

     

    Puridet
      (Asia), Ltd. (Hong Kong) 100%

     

    Dongguan
      Puridet Softner Limited 100%

     

    

     

    

     

    
      
        1

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      3.1(f)

    CAPITALIZATION**

     

    
      	 	
               

              Authorized

            	
               

              Issued
                and Outstanding

            
	
               

              Common
                Stock

            	
               

              100,000,000

            	
               

              26,942,856

            
	
               

              Preferred
                Stock

            	
               

              5,000,000

            	
               

              0

            
	
               

              Common
                Stock Warrants

            	
               

              (5,841,413
                shares of Common Stock are reserved for issuance)

            	
               

              (warrant
                rights exercisable for up to 5,841,413 shares of Common Stock are
                currently outstanding)

            
	
               

              2001
                Equity Compensation Plan (Options to Purchase Common
                Stock)

            	
               

              (4,478,475
                shares of Common Stock are reserved for issuance)

            	
               

              (options
                exercisable for up to 3,045,911 shares of Common Stock are currently
                outstanding) 

            
	
               

              2006
                Stock Option Plan

            	
               

              (2,700,000
                shares of Common Stock are reserved for issuance)

            	
               

              (options
                exercisable for up to 5,000 shares of Common Stock are currently
                outstanding)

            
	
               

              **
                Excludes Common Stock, Convertible Securities and Warrants that may
                be
                issuable to Abengoa under the Abengoa Securities Purchase Agreement
                (as
                disclosed in the Company’s Current Report on Form 8-K dated October 26,
                2006, as filed with the SEC on November 1, 2006)

            	 

    

    

    

    
      
        2

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      3.1(h)

    MATERIAL
      CHANGES

     

    None.

    

    
      
        3

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      3.1(p)

    REGISTRATION
      RIGHTS

     

     

    (1) TNO
      Quality of Life, The Netherlands

     

    

    (2) Robert
      Smeaton

    

    (3) Raymond
      Tsang

    

    (4) To
      those
      Persons (and their successors and assigns) who are identified as “Selling
      Stockholders” in the Company’s Prospectus dated August 12, 2005 included within
      Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 to
      the
      Registration Statement on Form SB-2 (Reg. No. 333-121738), as supplemented
      by
      Prospectus Supplement No. 1 dated July 6, 2006, and deemed to be the owners
      of
      the Common Shares and Common Shares issuable upon the exercise of the Options
      covered by such Registration Statement, which represent in the aggregate on
      an
      as converted basis 28,369,878 Common Shares. The Company has no registration
      obligations to such Persons (including their successors and assigns) beyond
      exerting reasonable best efforts to maintain the foregoing Registration
      Statement effective until the Common Shares covered thereby are saleable under
      Rule 144. 

    

    (5)
      To
      participants in the Company’s 2001 Equity Compensation Plan and 2006 Stock
      Option Plan, of which the aggregate 7,178,475 Common Shares reserved thereunder
      are covered by the Company’s Registration Statements on Form S-8 (Registration
      Nos. 333-122339 and 333-136676). 

     

    (6)
      To
      Abengoa under the Abengoa Securities Purchase Agreement.

     

    
      
        4

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      3.1(aa)

     

    OUTSTANDING
      INDEBTEDNESS

    

    Long
      Term Note Payable

    

    Long
      term
      note payable to stockholder consisted of the following at September 30, 2006:
      

     

    
      	
               

              Loan
                payable with a rate of 8% as of September 30, 2006 to Mark A. Emalfarb
                Trust (Bridge Loan), secured by all assets of the Company, in the
                original
                principal amount of $3,000,000, principal and accrued interest due
                January
                1, 2008. Accrued interest of $239,941 included in principal balance.
                Net
                of unamortized beneficial conversion feature of $57,636. 

            	
               

              $
                2,367,305

            

    

    

    Bridge
      Loan

    

    On
      May
      29, 2003, the Company’s wholly-owned subsidiary, Dyadic International (USA),
      Inc., a Florida corporation (formerly known as Dyadic International, Inc)
      (“Dyadic-Florida), obtained a $3.0 million revolving loan (the “Bridge Loan”)
      from a group of stockholders, including the Chief Executive Officer, who loaned
      $2,185,000, and the rest of whom loaned Dyadic-Florida $815,000, bearing
      interest at 8% per annum, with all unpaid principal and interest originally
      due
      on January 2, 2004, and extended to January 1, 2005 on February 13, 2004.
      Subsequent to a private placement of the Company’s common stock and warrants
      through which the Company raised gross proceeds of approximately $25,405,000
      (the “October 2004 Offering”), approximately $903,000 of the proceeds was used
      to pay off the $815,000 of principal and approximately $88,000 of accrued
      interest for the portion of the Bridge Loan from the group of other
      Dyadic-Florida stockholders. The Bridge Loan is collateralized by a security
      interest in all of the Company's assets. 

    Incident
      to the Bridge Loan, the Mark A. Emalfarb Trust and other lending Dyadic-Florida
      stockholders in the aggregate, were also granted warrants to purchase up to
      1.5
      million shares of the Company's common stock at the lesser of $4.50 per share
      or
      the Series A Preferred conversion price, expiring ten years from the date of
      grant (the “Bridge Loan Warrants”). In August 2004, the exercise price of the
      Bridge Loan Warrants was reduced to $3.33 and the maturity date was extended
      to
      January 1, 2007 in connection with the Merger (as described in Item 2 -
      Management’s Discussion and Analysis or Plan of Operation - History of Dyadic).
      As a result, approximately $343,000, representing the incremental fair value
      of
      the modified Bridge Loan Warrants as compared to the fair value of the original
      Bridge Loan Warrants immediately before the modification, will be amortized
      to
      interest expense through the new maturity date. The remaining unamortized
      portion of $57,636 is reflected as a reduction of notes payable to stockholders
      in the accompanying condensed consolidated balance sheet as of September 30,
      2006. 

    On
      April
      30, 2006, the maturity date of the Bridge Loan was extended from January 1,
      2007
      to January 1, 2008. The remaining unamortized portion of $57,636 of the
      beneficial conversion feature related to the modified Bridge Loan Warrants
      will
      be amortized through the new maturity date.

    

    Capital
      Lease Payable

    

    In
      August
      2006, the Company executed a 36 month capital lease for the purchase of an
      access router. The monthly payments total $5,207.76. The lease began once the
      installation of the router was completed, which occurred on October 2, 2006.
      The
      first and last payments were paid to the lessor in August 2006. At the end
      of
      the lease term, the Company has a bargain purchase option to purchase the
      equipment for $1.00.

    

    Contingent
      Obligation 

     

    Under
      the
      Abengoa Securities Purchase Agreement, the Company has guaranteed to Abengoa
      Dyadic International (USA), Inc.’s punctual payment and performance of its
      obligations to Abengoa under the parties’ R&D Agreement. 

     

    179453467v7

    
      
        6Exhibit 10.1

PURCHASE AGREEMENT

by and between

WSRH AUSTIN, L.P., a Delaware limited partnership (“Austin Seller”)

and

WSRH ATLANTA WAVERLY, L.L.C., a Delaware limited liability company

(“Waverly Seller”),

and

DIAMONDROCK HOSPITALITY LIMITED PARTNERSHIP,

a Delaware limited partnership (“Buyer”)

Dated:  November 13, 2006

TABLE OF CONTENTS

	
  
1.
  	
  
Certain Defined Terms
  	
  
1
  
	
   
 	
   
 	
   
 
	
  
2.
  	
  
Purchase and Sale
  	
  
3
  
	
   
 	
   
 	
   
 
	
  3.
  	
  
Payment of Purchase Price
  	
  
4
  
	
   
 	
  
3.1
  	
  
Escrow Deposit
  	
  
4
  
	
   
 	
  
3.2
  	
  
Closing Payment
  	
  
4
  
	
   
 	
   
 	
   
 
	
  
4.
  	
  
Conditions Precedent
  	
  
4
  
	
   
 	
  
4.1
  	
  
Title Matters
  	
  
5
  
	
   
 	
  
4.2
  	
  
Due Diligence Reviews
  	
  
6
  
	
   
 	
  4.3
  	
  
Performance by Seller
  	
  
8
  
	
   
 	
  
4.4
  	
  
Performance by Buyer
  	
  
8
  
	
   
 	
  
4.5
  	
  
Hotel Management Agreement
  	
  
8
  
	
   
 	
  
4.6
  	
  
Liquor Licenses
  	
  
9
  
	
   
 	
  
4.7
  	
  
Audit
  	
  
9
  
	
   
 	
  
4.8
  	
  
Estoppels.
  	
  
10
  
	
   
 	
   
 	
   
 
	
  5.
  	
  
Closing Procedure
  	
  
10
  
	
   
 	
  
5.1
  	
  
Closing Deliveries
  	
  
10
  
	
   
 	
  
5.2
  	
  
Closing Costs
  	
  
13
  
	
   
 	
  
5.3
  	
  
Prorations
  	
  
13
  
	
   
 	
   
 	
   
 
	
  
6.
  	
  
Condemnation or Destruction of Property
  	
  
19
  
	
   
 	
  
6.1
  	
  
Condemnation
  	
  
19
  
	
   
 	
  6.2
  	
  
Fire or Other Casualty
  	
  
19
  
	
   
 	
   
 	
   
 
	
  
7.
  	
  
Representations, Warranties and Covenants
  	
  
20
  
	
   
 	
  
7.1
  	
  
Representations, Warranties and Covenants of Seller
  	
  
20
  
	
   
 	
  
7.2
  	
  
Representations and Warranties of Buyer
  	
  
24
  
	
   
 	
  
7.3
  	
  
Survival
  	
  
27
  
	
   
 	
  
7.4
  	
  
Interim Covenants of Seller
  	
  
28
  
	
   
 	
  7.5
  	
  
Seller’s Environmental Inquiry
  	
  
28
  
	
   
 	
  
7.6
  	
  
Hotel Management Agreement Indemnity
  	
  
28
  
	
   
 	
  
7.7
  	
  
Reservations and Bookings
  	
  
28
  
	
   
 	
  
7.8
  	
  
Notice of Proceedings
  	
  
29
  
	
   
 	
  
7.9
  	
  
Removal of Property
  	
  
29
  
	
   
 	
  
7.10
  	
  
Existing Loans
  	
  
29
  
	
   
 	
  7.11
  	
  
Insurance
  	
  
29
  
	
   
 	
  
7.12
  	
  
Material Alteration; Additional Renovation
  	
  
29
  
	
   
 	
  
7.13
  	
  
Transfer of Permits
  	
  
29
  
	
   
 	
  
7.14
  	
  
No Further Marketing
  	
  
30
  
	
   
 	
  
7.15
  	
  
Management Agreement Consents
  	
  
30
  
	
   
 	
  
7.16
  	
  
Baggage Inventory
  	
  
30
  
	
   
 	
  7.17
  	
  
Safe Deposit Boxes
  	
  
30
  
	
   
 	
  
7.18
  	
  
No Tax Due Certificate
  	
  
30
  

i

	
  
8.
  	
  
DISCLAIMER, RELEASE AND ASSUMPTION
  	
  
31
  
	
   
 	
  
8.1
  	
  
DISCLAIMER
  	
  
31
  
	
   
 	
  
8.2
  	
  
RELEASE
  	
  
32
  
	
   
 	
  8.3
  	
  
SURVIVAL
  	
  
32
  
	
   
 	
   
 	
   
 
	
  
9.
  	
  
Disposition Of Escrow Deposit
  	
  
33
  
	
   
 	
  
9.1
  	
  
Default by Seller
  	
  
33
  
	
   
 	
  
9.2
  	
  
Default By Buyer
  	
  
33
  
	
   
 	
  
9.3
  	
  
Closing
  	
  
33
  
	
   
 	
   
 	
   
 
	
  
10.
  	
  
Miscellaneous
  	
  
34
  
	
   
 	
  10.1
  	
  
Brokers
  	
  
34
  
	
   
 	
  
10.2
  	
  
Limitation of Liability.
  	
  
34
  
	
   
 	
  
10.3
  	
  
Exhibits; Entire Agreement; Modification
  	
  
35
  
	
   
 	
  
10.4
  	
  
Time of the Essence
  	
  
35
  
	
   
 	
  
10.5
  	
  
Interpretation
  	
  
35
  
	
   
 	
  
10.6
  	
  
Governing Law
  	
  
35
  
	
   
 	
  10.7
  	
  
Successors and Assigns
  	
  
36
  
	
   
 	
  
10.8
  	
  
Notices
  	
  
36
  
	
   
 	
  
10.9
  	
  
Third Parties
  	
  
38
  
	
   
 	
  
10.10
  	
  
ARBITRATION OF DISPUTES
  	
  
38
  
	
   
 	
  
10.11
  	
  
Legal Costs
  	
  
39
  
	
   
 	
  
10.12
  	
  
No Recordation
  	
  
39
  
	
   
 	
  
10.13
  	
  
Counterparts
  	
  
39
  
	
   
 	
  10.14
  	
  
Effectiveness
  	
  
39
  
	
   
 	
  
10.15
  	
  
Press Releases
  	
  
39
  
	
   
 	
  
10.16
  	
  
Indemnities
  	
  
40
  

ii

PURCHASE AGREEMENT

          THIS AGREEMENT (this “Agreement”) is made and entered into as of the 13th day of November, 2006, by and between WSRH AUSTIN, L.P., a Delaware limited partnership (“Austin Seller”), and WSRH ATLANTA WAVERLY, L.L.C., a Delaware limited liability company (“Waverly Seller”), and DIAMONDROCK HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited partnership (“Buyer”).

R E C I T A L S

          A.      Austin Seller is the owner of the “Austin Property” (as hereinafter defined).

          B.      Waverly Seller is the owner of the “Waverly Property” (as hereinafter defined).

          C.      Buyer desires to purchase the Austin Property and the Waverly Property on the terms and conditions hereinafter documented.

          NOW, THEREFORE, in consideration of the mutual undertakings of the parties hereto, it is hereby agreed as follows:

Certain Defined Terms.  As used herein:

                    1.1.          “Purchase Price” shall mean Two Hundred Thirty Seven Million Five Hundred Thousand Dollars ($237,500,000.00).  The Purchase Price shall be allocated One Hundred Seven Million Five Hundred Thousand Dollars ($107,500,000.00) for the Austin Property, and One Hundred Thirty Million Dollars ($130,000,000.00) for the Waverly Property.

                    1.2          “Escrow Deposit” shall mean Eleven Million Eight Hundred Seventy Five Thousand Dollars ($11,875,000.00).

                    1.3          “Austin Property” means Austin Seller’s right, title and interest in (a)  that certain land described in Exhibit “A-1”, together with all easements, licenses, rights-of-way, and appurtenances benefiting such land (the “Austin Land”), (b) all improvements, structures and facilities located upon the Austin Land (the  “Austin Improvements”), (c) all furniture, fixtures, and equipment and items of personal property (other than cash) used in the operation of the Austin Improvements on or attached or appurtenant to the Austin Improvements, including, without limitation, furnishings, artwork, all fabric, textile and flexible plastic products which are used in furnishing the hotel, including
carpeting, drapes, bedspreads, wall and floor coverings, mats, shower curtains and similar items, furniture and furnishings used in the hotel, including, chairs, beds, chests, headboards, desks, lamps, tables, television sets, mirrors, pictures, wall decorations and similar items, signage, audio visual equipment, kitchen appliances, vehicles, carpeting and equipment, including front desk and back of the house computer equipment, manuals, all books and records relating to the Austin Property, phone lists, guest lists and off site and on-site signs (collectively, the “Austin Personal Property”), (d) all food, liquor, wine and other beverages, including such food, liquor and other beverages held for sale in hotel rooms within the Austin Improvements, and all consumable supplies and inventories of every kind and 

nature including “Inventories of Merchandise” and “Inventories of Supplies” as such terms are defined in the current Uniform System of Accounts for Hotels published by the Hotel Association of New York City, Inc. (the “Austin Consumables”), in each case owned by Austin Seller as of the “Closing Date” (as hereinafter defined) (and not by tenants under “Leases” [as hereinafter defined] applicable to the Austin Property (“Austin Leases”)), and located at, and used in connection with the operation of, the Austin Improvements, including, without limitation, cleaning supplies, guest supplies, paper supplies, stationary, bar supplies, robes, slippers, fuel, laundry supplies, engineering supplies, sundry or gift shop inventory and room, food and beverage linen, glassware and silverware, whether in use or held in stock or storage for future use in connection with Austin Seller’s ownership,
operation or maintenance of the Improvements, and (e) the landlord’s interest in all Austin Leases, the rights of Austin Seller, to the extent assignable, in and to all “Austin Service Agreements”, “Austin Renovation Commitments”, the “Austin Management Agreement” (as such terms are hereinafter defined) and Manager’s workforce in place at the Austin Land, goodwill, and, to the extent assignable, all right, title and interest of Austin Seller in and to all copyrights, trademarks, trade names, and any licenses related to the foregoing that relate to the business being conducted on the Austin Land, other than any software licenses used by Austin Seller in the corporate offices of Austin Seller (the matters described in this clause “(e)”collectively called the “Austin Intangible Property”); provided, however, in no event shall the Austin Intangible Property include Marriott or Renaissance brand concepts or the
“Intellectual Property” as defined in the Austin Management Agreement. 

                    1.4          “Waverly Property” means Waverly Seller’s right, title and interest in (a)  that certain land described in Exhibit “A-2”, together with all easements, licenses, rights-of-way, and appurtenances benefiting such land (the “Waverly Land”), (b) all improvements, structures and facilities located upon the Waverly Land (the  “Waverly Improvements”), (c) all furniture, fixtures, equipment and items of personal property (other than cash) used in the operation of the Waverly Improvements on or attached or appurtenant to the Waverly Improvements including, without limitation, furnishings, artwork, all fabric, textile and flexible plastic products which are used in furnishing the hotel,
including carpeting, drapes, bedspreads, wall and floor coverings, mats, shower curtains and similar items, furniture and furnishings used in the hotel, including, chairs, beds, chests, headboards, desks, lamps, tables, television sets, mirrors, pictures, wall decorations and similar items, signage, audio visual equipment, kitchen appliances, vehicles, carpeting and equipment, including front desk and back of the house computer equipment, manuals, all books and records relating to the Waverly Property, phone lists, guest lists and off site and on-site signs (collectively, the “Waverly Personal Property”), (d) all food, liquor, wine and other beverages, including such food, liquor and other beverages held for sale in hotel rooms within the Waverly Improvements, and all consumable supplies and inventories of every kind and nature including “Inventories of Merchandise” and “Inventories of Supplies” as such terms are defined in the current Uniform System of Accounts
for Hotels published by the Hotel Association of New York City, Inc. (the “Waverly Consumables”), in each case owned by Waverly Seller as of the “Closing Date” (as hereinafter defined) (and not by tenants under “Leases” [as hereinafter defined] applicable to the Waverly Property (“Waverly Leases”)), and located at, and used in connection with the operation of, the Improvements, including, without limitation, cleaning supplies, guest supplies, paper supplies, stationary, bar supplies, robes, slippers, fuel, laundry supplies, engineering supplies, sundry or gift shop inventory and room, food and beverage linen, glassware and silverware, whether in use or held in 

2

stock or storage for future use in connection with Waverly Seller’s ownership, operation or maintenance of the Waverly Improvements, and (e) the landlord’s interest in all Waverly Leases, the rights of Waverly Seller, to the extent assignable, in and to all “Waverly Service Agreements”, “Waverly Renovation Commitments”, the “Waverly Management Agreement” (as such terms are hereinafter defined) and Manager’s workforce in place at the Waverly Land, goodwill, and, to the extent assignable, all right, title and interest of Waverly Seller in and to all copyrights, trademarks, trade names (including, without limitation, the word “Waverly” as applied to the Waverly Improvements), and any licenses related to the foregoing that relate to the business being conducted on the Waverly Land, other than any software licenses used by Waverly Seller in the corporate offices of Waverly Seller (the matters described in this
clause “(e)”collectively called the “Waverly Intangible Property”); provided, however, in no event shall the Waverly Intangible Property include Marriott or Renaissance brand concepts or the “Intellectual Property” as defined in the Waverly Management Agreement. 

                    1.5          “Seller” means the Austin Seller and the Waverly Seller, individually.

                    1.6          “Property” means the Austin Property, or the Waverly Property, as applicable.

                    1.7          “Properties” means the Austin Property and the Waverly Property, collectively.

                    1.8          “Hotel” means the hotel operated on the Property.

                    1.9          “Personal Property” means the Austin Personal Property, or the Waverly Personal Property, as applicable.

Purchase and Sale      2.1          Upon the terms and conditions hereinafter set forth, Austin Seller shall sell to Buyer, and Buyer shall purchase from Austin Seller, the Austin Property, and Waverly Seller shall sell to Buyer, and Buyer shall purchase from Waverly Seller, the Waverly Property.  

         2.2      The Austin Property and the Waverly Property do not include (and Buyer shall have no right to) Seller’s Proprietary Materials.  As used herein, the term “Seller’s Proprietary Materials” means any and all property condition reports or any confidential or proprietary materials, including, without limitation, the following: (1) information contained in Seller’s credit reports, credit authorizations, credit for financial analyses or projections, steering committee sheets, account summaries or other internal documents relating to such Seller’s Property, including any valuation documents and the book value of the Property; (2) material which is subject to attorney client privilege or which is attorney work product or may not be disclosed pursuant to any order or agreement in any arbitration, litigation or
other proceeding; (3) appraisal reports or letters; (4) financials or tax returns of Seller or any affiliate of Seller; or (5) material which Seller is legally required not to disclose.  The provisions of Section 2.2 shall survive the Closing or any termination of this Agreement.

3

Payment of Purchase Price.  The Purchase Price shall be paid to Seller by Buyer as follows:

Escrow Deposit .  On or before the date that is one Business Day after the date on which this Agreement is executed and delivered by both Seller and Buyer, Buyer shall deliver the Escrow Deposit to First American Title Insurance Company, at its offices at 1801 K Street, NW, Suite 200K, Washington, D.C. 20006, Attention: Rollie Fuchtenberg (which company, in its capacity as escrow holder hereunder, is called “Escrow Holder”).  The Escrow Deposit shall be delivered to Escrow Holder by wire transfer of immediately available federal funds or by bank or cashier’s check drawn on a national bank reasonably satisfactory to Seller.  The Escrow Deposit shall be held by Escrow Holder as a deposit against the Purchase Price, and shall be invested by Escrow Holder, in accordance with the terms and provisions of this Agreement, and a separate escrow agreement in the form of Exhibit “D” attached hereto and dated the date
hereof by and among Buyer, Seller and Escrow Agent (the “Interim Deposit Agreement”).  At all times that the Escrow Deposit is being held by the Escrow Holder, the Escrow Deposit shall be invested by Escrow Holder in the following investments (“Approved Investments”):  (i) United States Treasury obligations, (ii) United States Treasury backed repurchase agreements issued by a major money center banking institution reasonably acceptable to Seller and Buyer, (iii) the Bank of America money market fund that invests in U.S. Treasury securities known as “Nations Treasury Reserves - Daily Shares (symbol NTRDX)” or (iv) such other manner as may be reasonably agreed to by Seller and Buyer.  The Escrow Deposit shall be disposed of by Escrow Holder only as provided in this Agreement.  All accrued interest on the Escrow Deposit shall become part of the Escrow Deposit.

Closing Payment.  The balance of the Purchase Price, as adjusted by the adjustments, prorations, credits, and allocations of income and expenses provided for in this Agreement (as so adjusted, the “Closing Payment”), shall be paid by Buyer delivering the Closing Payment to Escrow Agent by federal funds wire transfer of immediately available funds on the “Closing Date” (as hereinafter defined). 

Conditions Precedent.  The obligation of Buyer to acquire the Austin Property and the Waverly Property, the obligation of Austin Seller to transfer the Austin Property, and the obligation of Waverly Seller to transfer the Waverly Property, all as contemplated by this Agreement is subject to satisfaction of each of the following conditions precedent (any of which may be waived in writing by the party in whose favor such condition exists) on or before the applicable date specified for satisfaction of the applicable condition.  If any of such conditions is not fulfilled (or waived) pursuant to the terms of this Agreement, then this Agreement shall terminate following the expiration of the applicable cure period under Section 9.1 or 9.2, and, in connection with any such termination made in accordance with this Section 4, the Austin Seller, the Waverly Seller and Buyer shall be released from further obligation or liability hereunder (except for
those obligations and liabilities which, pursuant to the terms of this Agreement, survive such termination), and the Escrow Deposit shall be disposed of in accordance with Section 9.  The “Closing” (as hereinafter defined) shall constitute approval by each party of all matters to which such party has a right of approval and a waiver of all conditions precedent; except that there shall be no waiver for a breach of the representations and warranties contained herein or for any covenants expressly surviving Closing as set forth herein.

4

Title Matters.

Title Report/Survey.  Buyer
has received the title insurance commitments dated July 31, 2006 for the Waverly
land and August 24, 2006 for the Austin land  (the
“Commitments”) from First American Title Insurance Company
(which company, in its capacity as title insurer hereunder, is herein called the
“Title Company”).  In addition, Seller has delivered and
Buyer has received the surveys of the Austin Land and the Waverly Land in
Seller’s possession (the “Surveys”).  If Buyer shall
fail to deliver the “Termination Notice” as hereinafter defined on or
before the end of the “Due Diligence Period” (as hereinafter
defined), Buyer shall be deemed to have approved the exceptions to title shown
on the Commitments and the matters disclosed on the Surveys and such other title
or survey matters as are disclosed to Buyer during the Due Diligence
Period.

Additional Post Due Diligence Title
Matters.  Approval by Buyer of any, in Buyer’s reasonable opinion,
material additional exceptions to title or survey matters disclosed after the
end of the Due Diligence Period (“Additional Title Matters”)
shall be a condition precedent to Buyer’s obligations to purchase the
Properties (Buyer hereby agreeing that its approval of Additional Title Matters
shall not be unreasonably withheld).  Unless Buyer gives written notice
(“Title Disapproval Notice”) that it disapproves any Additional
Title Matters, stating the Additional Title Matters so disapproved, before the
sooner to occur of the Closing or ten (10) days after receipt of written notice
of such Additional Title Matters, Buyer shall be deemed to have approved such
Additional Title Matters.  Seller shall have up to a thirty (30) day period
after its receipt of any Title Disapproval Notice within which to remove the
disapproved Additional Title Matters set forth therein from title or obtain from Title Company a commitment to issue an endorsement affirmatively insuring against such items in a form reasonably acceptable to Buyer at no cost or expense to Buyer (Seller having the right but not the obligation to do so), and the Closing Date shall be extended, at Seller’s option, to allow for such thirty (30) day period.  In the event Seller determines at any time that it is unable or unwilling to remove any one or more of such disapproved Additional Title Matters, Seller may give written notice to Buyer to such effect; in such event, Buyer may, at its option, terminate this Agreement upon written notice to Seller but only if given prior to the sooner to occur of the Closing or ten (10) days after Buyer receives Seller’s notice.  If Buyer fails to give such termination notice by such date, Buyer shall be deemed to have waived its objection to, and approved, the matters set forth in Seller’s
notice.

Seller Mortgage Liens.  Notwithstanding the foregoing provisions of this Section 4.1, Seller shall be obligated to take such actions as may be required by the Title Company so that the Title Company is willing to issue title insurance to Buyer without exception for any  “Seller Mortgage Liens” (which, as used herein, means any mortgage or deed of trust liens, construction or mechanics’ liens, tax liens or other liens or charges in a fixed sum created or arising by, through or under Seller or capable of computation as a fixed sum that encumber the applicable Property).  Such actions shall include obtaining a pay-off letter and leaving a portion of the Purchase Price in escrow to satisfy the Seller Mortgage Liens.

Exceptions to Title.  Buyer shall be obligated to accept title to the Properties, subject to the following exceptions to title (the “Permitted Exceptions”):

                                        (a)          Liens for real estate taxes and assessments not yet due and payable;

5

                                        (b)          The Austin Leases, and the Waverly Leases.

                                        (c)          Actions caused by or through Buyer; 

                                        (d)          the exceptions listed on Exhibit “E” hereto; 

                                        (e)          liens for labor and material with respect to the Renovation Commitments to the extent of monetary amounts not in default under the applicable agreements for such labor and material; and 

                                        (f)          Such other exceptions to title or survey exceptions as may be approved (or deemed approved) by Buyer pursuant to the above provisions of this Section 4.1 or otherwise expressly permitted under this Agreement.

Conclusive evidence of the availability of such title shall be the willingness of Title Company to issue to Buyer on the Closing Date owner’s title insurance policies in the standard form issued in the State of Texas (with respect to the Austin Property) and the State of Georgia (with respect to the Waverly Property) (the “Owner’s Policies”), in the face amount of the Purchase Price, which policy shall show (i) title to the Austin Land and the Waverly Land to be vested of record in Buyer, and (ii) the Permitted Exceptions to be the only exceptions to title.  

Endorsements to Owner’s Policies.  It is understood that Buyer may request a number of endorsements to the Owner’s Policies.  Buyer shall satisfy itself during the Due Diligence Period that the Title Company will issue such additional endorsements in connection with the Owner’s Policies at Closing.  However, the issuance of such endorsements shall not be a condition to Closing and in no event shall Seller be obligated to provide any indemnity or other document in order to issue such endorsements.

Due Diligence Reviews.  Except for title and survey matters (which shall be governed by the provisions of Section 4.1 above), and subject to the provisions hereinafter set forth, Buyer shall have until 5:00 p.m. (Chicago time) Monday, November 20, 2006 (the period beginning on the date hereof and ending on such date being herein called the “Due Diligence Period”) within which to perform and complete all of Buyer’s due diligence examinations, reviews and inspections of all matters pertaining to the purchase of the Properties , including all permits, licenses, management agreements, leases, service contracts, and all physical, environmental and compliance matters and conditions respecting the Properties.  During the Due Diligence Period, Seller shall provide Buyer with reasonable access to the Properties (subject to this Section 4.2) upon reasonable advance notice and shall also make available to Buyer (to the extent in Seller’s

possession or control) and shall instruct its Manager to make available to Buyer such leases, service contracts and other information relating to the operation of the Properties as Buyer shall reasonably request, all upon reasonable advance notice.  In no event, however, shall Seller be obligated to make available any attorney-client work product or privileged documents or documents in breach of confidentiality agreements or any internal memoranda, correspondence, analyses, documents or reports prepared by or for Seller for its internal use in connection with this Agreement, the transaction contemplated by this Agreement, the acquisition of the Properties by Seller (other than any property condition, compliance, engineering, third party inspection or environmental reports pertaining to the Properties), and appraisals or other valuations of the Properties in the possession or control of Seller.  Buyer shall promptly commence, and shall diligently and in good faith pursue, its due diligence
review hereunder.

6

Review Standards.  Buyer shall at all times conduct its review, inspections and examinations in a manner so as to not cause liability, damage, lien, loss, cost or expense to Seller or the Properties and so as to not unreasonably interfere with or disturb the Manager, any guest or any tenant at the Properties, and Buyer will indemnify, defend, and hold Seller and the Properties harmless from and against any such liability, damage, lien, loss, cost or expense (the foregoing obligation surviving any termination of this Agreement).  Prior to entry upon a Property, Buyer shall provide Seller with copies of certificates of insurance evidencing comprehensive general liability insurance policies (naming Seller as an additional insured) which shall be maintained by Buyer in connection with its investigations upon the Properties prior to the date of entry upon the Properties, with limits, coverages and insurers under such policies reasonably satisfactory to
Seller which insurance policies must have limits for bodily injury and death of not less than Five Million Dollars ($5,000,000) for any one occurrence and not less than Five Million Dollars ($5,000,000) for property damage liability for any one occurrence.  Without limitation on the foregoing, in no event shall Buyer:  (a) make any intrusive physical testing (environmental, structural or otherwise) at the Properties (such as soil borings, water samplings or the like) without Seller’s express written consent which shall not be unreasonably withheld or delayed (and Buyer shall in all events promptly return the Properties to their prior condition and repair thereafter) and which may be further conditioned upon, among other things, Seller’s reasonable approval of the following:  (i) the insurance coverage of the contractor who will be conducting such testing; and (ii) the scope and nature of such testing to be performed by such contractor; (b) contact the Manager or
any tenant of a Property without Seller’s express written consent (which shall not be unreasonably withheld or delayed); (c) contact any governmental authority having jurisdiction over a Property without Seller’s express written consent (which shall not be unreasonably withheld or delayed); provided, Buyer may in the course of its due diligence contact governmental authorities with respect to determining Seller’s and the Hotel’s compliance with applicable zoning or building code requirements and regulations and other applicable laws and regulations, and to cause the transfer or issuance of all applicable licenses and permits (including liquor licenses) necessary for the continued normal operation of the Hotel following the Closing.  Seller shall have the right, at its option, to cause a representative of Seller to be present at all inspections, reviews and examinations conducted hereunder.  At Seller’s written request, at no expense to and without representation,
warranty by or liability to Buyer, and provided Buyer has the right to do so, Buyer shall promptly deliver to Seller true and complete copies of any written reports relating to a Property prepared for or on behalf of Buyer by any third party.  In the event of any termination of this Agreement, Buyer shall return all documents and other materials furnished by Seller.  Prior to Closing and subject to Section 10.15 hereof, Buyer shall keep all non-public information or data received or discovered in connection with any of Buyer’s inspections, reviews or examinations strictly confidential, except for disclosures required to comply with applicable law and disclosures to representatives, investors, lenders, counsel and agents, provided such disclosures are on an as needed basis for Buyer’s acquisition of the Properties, and such persons are instructed to keep the information strictly confidential.  The provisions of this Section 4.2.1 shall survive any termination of this
Agreement.

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Termination Right.  If, on or before the expiration of the Due Diligence Period, Buyer shall determine in its sole discretion that it no longer intends to acquire the Properties, then Buyer shall promptly (but in all events prior to the expiration of the Due Diligence Period) notify Seller of such determination in writing (such notice being herein called the “Termination Notice”), whereupon this Agreement, and the obligations of the parties hereunder, shall terminate (and no party hereto shall have any further obligation in connection herewith except under those provisions that expressly survive a termination of this Agreement).  In such event, Escrow Holder shall deliver One Hundred Dollars ($100) of the Escrow Deposit to Seller as consideration for entering into this Agreement, and the remainder of the Escrow Deposit shall be released to Buyer by Escrow Holder.  In the event that Buyer shall fail to have delivered the Termination

Notice to Seller before the expiration of the Due Diligence Period, Buyer shall have no further right to terminate this Agreement pursuant to this Section 4.2, and the Escrow Deposit shall not be refundable to Buyer for any reason whatsoever, except as otherwise set forth in this Agreement.  

Performance by Seller.  The accuracy of Seller’s representations and warranties in all material respects and the performance and observance, in all material respects, by Seller of all covenants and agreements of this Agreement to be performed or observed by Seller prior to or on the Closing Date shall be a condition precedent to Buyer’s obligation to purchase the Properties.  Without limitation on the foregoing, in the event that the “Seller Closing Certificate” (as hereinafter defined) shall disclose any material inaccuracies or material adverse changes in the representations and warranties of Seller which are not otherwise permitted or contemplated by the terms of this Agreement or known to Buyer (as defined in Section 7.2.5 hereof) during the Due Diligence Period, then Buyer shall have the right to terminate this Agreement.

Performance by Buyer.  The accuracy of Buyer’s representations and warranties in all material respects and the performance and observance, in all material respects, by Buyer of all covenants and agreements of this Agreement to be performed or observed by it prior to or on the Closing Date shall be a condition precedent to Seller’s obligation to sell the Properties.  Without limitation on the foregoing, in the event that the “Buyer Closing Certificate” (as hereinafter defined) shall disclose any material inaccuracies or material adverse changes in the representations and warranties of Buyer contained in Section 7.2 which are not permitted or contemplated by the terms of this Agreement, then Seller shall have the right to terminate this Agreement.

Hotel Management Agreement.  Austin Property is subject to a hotel management dated June 23, 2005, by and between Austin Seller and Renaissance Hotel Operating Company,  a Delaware corporation (“Manager”), as amended by that certain first amendment between Manager and Austin Seller dated September 26, 2006 , and as further amended the “Multi-Hotel Letter Agreement” (said agreement as so amended are herein called the “Austin Management Agreement”).  Waverly Property is subject to a hotel management dated June 23, 2005, by and between Waverly Seller and Manager, as amended by that certain first amendment between Manager and Waverly Seller dated September 26, 2006, and as further amended the “Multi-Hotel Letter Agreement” (said agreement as so amended are herein called the “Austin Management Agreement”). The “Multi-Hotel Letter Agreement” means certain letter agreement

dated September 26, 2006, from Manager and Renaissance Hotel Management Company, LLC and Renaissance Hotel Operating Company, addressed to WSRH Holdings, L.L.C., and executed by Austin Seller, Waverly Seller and various other hotel owners, said letter agreement providing in Section 9 thereof that, “This letter agreement and the provisions hereof shall terminate with 

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respect to any Hotel on the earlier to occur of (i) a Sale of the Hotel pursuant to Section 10.02 of the applicable Management Agreement, or (ii) the Termination of the Applicable Management Agreement.” “Hotel Management Agreements” means the Austin Management Agreement and the Waverly Management Agreement.  The obligations of Seller to close the sale contemplated hereby shall be conditioned upon Buyer satisfying all of the requirements set forth in the Management Agreements, including, without limitation, the requirements set forth in Section 10.2 thereof.  Buyer represents and warrants that Buyer has reviewed the Management Agreements and will be able to satisfy the requirements of Section 10.2 of the Management Agreements.  If Manager will not permit an assignment of the Management Agreements to Buyer solely as a result of Buyer’s failure to satisfy the requirements of Section 10.2 of the Management Agreement, then Buyer will

be deemed to be in default hereunder and Seller may terminate this Agreement and retain the Escrow Deposit as liquidated damages.

Liquor Licenses.  Buyer acknowledges that there may be various liquor licenses associated with the operation of the Hotels.  As soon as is reasonably practicable after the full execution and delivery of this Agreement, Buyer shall file an application with the required state and local agencies for the issuance of such licenses (the “Required Liquor Licenses”) as are necessary for the continued service of alcoholic beverages at Austin Property and at the Waverly Property.  Buyer shall diligently pursue the obtaining of the Required Liquor Licenses at Buyer’s sole cost and expense.  Seller shall cooperate and instruct Manager to cooperate reasonably with Buyer in its efforts to obtain the Required Liquor Licenses and shall cause any violation of liquor laws or regulations which would affect the ability of Buyer to obtain the Required Liquor Licenses by Closing to be cured to the satisfaction of the liquor license
authorities and any fines to be paid, all prior to the Closing Date and at Seller’s sole cost and expense.  The issuance of the Required Liquor Licenses shall not be a condition to Buyer’s obligations to close the sale contemplated hereby.  However, if applicable and as permitted by applicable law, Seller shall enter into a customary post-closing interim agreement for use of Seller’s liquor licenses with customary indemnities whereby such alcoholic beverage operations are continued or managed by the existing holder of the liquor licenses until the Required Liquor Licenses can be obtained by Buyer following the Closing.

                    Audit.  Buyer shall have the right to obtain from a third-party certified public accountant (at Buyer’s sole cost and expense) audits with respect to the Austin Property and the Waverly Property providing all disclosures required by generally accepted accounting principles and Securities and Exchange Commission regulations, specifically in accordance with Section 3.05 of Regulation S-X and all related rules and regulations thereof.  Seller, at no cost or expense to Seller, shall, and shall use reasonable efforts to cause its Manager and the predecessor owner(s) and manager(s) of the Properties to, cooperate in a commercially reasonable manner in connection with the performance of such audits and to provide information reasonably requested by such accountants.  In connection with such audits, Seller, at no cost or expense to
Seller, shall and shall use reasonable efforts to cause Manager and the predecessor owner(s) and manager(s) to provide the accountants performing such audits with representation letters conforming to American Institute of Certified Public Accountants professional standards.  Buyer completing the preparation of any such audited financial statements shall not be a condition to Closing and the failure to obtain same will not permit Buyer to terminate this Agreement.

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                    Estoppels.  Seller shall have obtained and delivered to Buyer (and Seller agrees to use commercial reasonable efforts to so obtain) estoppel letters addressed to Buyer dated within forty-five (45) days of the Closing with respect to the Hotel Management Agreements, substantially in the form required under each such agreement, which estoppels shall, among other things, certify that to the knowledge of the Manager there are no material defaults under any such agreement.  Seller shall not be in default under this Agreement or have any liability to Buyer if Seller is unable to obtain any of the foregoing estoppel letters, provided Seller uses commercially reasonable efforts to do so.  If required by the Title Company, Seller shall also have obtained (and Seller shall use commercially reasonable efforts to obtain) and deliver to the
Title Company such lien waiver from Manager with respect to the period prior to Closing sufficient to cause the Title Company not to make an exception in the Owner’s Policy for any lien of right to a lien in favor of Manager.

Closing Procedure.  The closing (the “Closing”) of the sale and purchase herein provided shall occur on the Closing Date.  As used herein, “Closing Date” means December 21, 2006, or such other date as may be agreed upon by Buyer and Seller.  The Closing Date is subject to extension under Section 4.1.2.  Buyer shall deliver its funds to the Escrow Holder no later than 11:00 a.m. central time on the Closing Date.  The Closing shall be accomplished pursuant to escrow instructions (the “Escrow Instructions”) to be executed by and among Buyer, Seller and the Escrow Holder in the form of Exhibit “F” hereto.

Closing Deliveries.  Prior to the Closing Date, the parties shall deliver to the Escrow Holder the following:

Seller Deliveries.  Seller shall deliver to Escrow Holder the following:

                                        (g)          Duly executed and acknowledged original special warranty deeds to the Austin Property and to the Waverly Property (the “Deeds”) in the forms of Exhibits “G-1” and “G-2” respectively;

                                        (h)          A duly executed and acknowledged original assignment and assumption of Hotel Management Agreement (the “Hotel Management Agreement Assignment and Assumption”) in the form of Exhibit “H” for each of the Austin Property and the Waverly Property;

                                        (i)          The other assignment documents (collectively, “Other Assignment and Assumption Agreements”) attached hereto as Exhibit “I”, duly executed by Seller;

                                        (j)          A duly executed Bill of Sale, Assignment and Assumption Agreement (“Bill of Sale”) in the form of Exhibit “J” with respect to the Austin Property and with respect to the Waverly Property;

                                        (k)          A duly executed original certificate of Seller (the “Seller Closing Certificate”) in the form of Exhibit “K” updating the representations and warranties contained in Section 7.1 to the Closing Date and noting any changes thereto;

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                                        (l)          A duly executed original certificate of “non-foreign” status in the form of Exhibit “L-1” executed by WSRH Holdings, LLC with respect to transfer of the Austin Property, a duly executed original certificate of “non-foreign” status in the form of Exhibit “L-2” executed by WSRH Holdings, LLC with respect to the transfer of the Waverly Property, a duly executed original Affidavit of Seller’s Residence in the form of Exhibit “L-3” with respect to the Waverly Property, and any required state certificate that is sufficient to exempt Seller from any state withholding requirement with respect to the
sale contemplated by this Agreement;

                                        (m)         Evidence
reasonably satisfactory to Buyer and Title Company respecting the due
organization, good standing and qualification to do business of Seller and the
due authorization and execution of this Agreement and the documents required to
be delivered hereunder;

                                        (n)          To the extent they are then in Seller’s possession, and have not theretofore been delivered to Buyer:  (i) any plans and specifications for the Improvements; (ii) all unexpired warranties and guarantees which Seller has received in connection with any work or services performed with respect to, or equipment installed in, the Improvements; (iii) all keys for the Improvements; (iv) originals of all Leases, all correspondence to or from any tenants, relating to the Leases; (v) originals of all Service Agreements that will remain in effect after the Closing; (vi) a set of guest registration cards; (vii) a list of advance room reservations and functions; (viii)
a list of Seller’s outstanding accounts receivable as of midnight on the date prior to the Closing; (ix) all permits and licenses for either Property; and (x) all books and records relating solely to the operation of the Properties (which materials under this clause (h) may be either delivered at Closing or left at the management office at applicable Property); 

                                        (o)          Tenant Notices to each of (i) the tenants under the Austin Tenant Leases, duly executed by the Austin Seller, addressed to each of such tenants, in the form of Exhibit “U-1” and (ii) the tenants under the Waverly Tenant Leases, duly executed by the Waverly Seller, addressed to each of such tenants, in the form of Exhibit “U-2”; 

                                        (p)          Notices of the sale to Buyer to each of the vendors under the Service Agreements duly executed by the Seller, addressed to each of such vendors;

                                        (q)          Duly executed and acknowledged resale certificates or other exemption certificates which are applicable to sales taxes on the transfer of personal property;  and 

                                        (r)          Such additional documents as may be reasonably required by Buyer and Title Company in order to consummate the transactions hereunder (provided the same do not increase in any material respect the costs to, or liability or obligations of, Seller in a manner not otherwise provided for herein).  However, in no event shall Seller be obligated to provide any indemnity or other document to the Title Company with respect to the issuance of the Title Policies other than the certificate in the form of Exhibit “M” (the “Seller’s Title Certificate”), and the standard title indemnity (sometimes called a “gap indemnity”)
against matters created by the Seller on the day prior to the Closing, on the day of the Closing, and on the day following the Closing up to the time on such day following the Closing that the Deeds are recorded.

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Buyer Deliveries.  Buyer shall deliver to the Escrow Holder the following:

                                        (s)          The Closing Payment in immediately available federal funds;

                                        (t)          An original Hotel Management Agreement Assignment and Assumption for each of the Austin Property and the Waverly Property;

                                        (u)          An original of each Other Assignment and Assumption Agreement for each of the Austin Property and the Waverly Property.

                                        (v)          A duly executed original Bill of Sale with respect to each of the Austin Property and the Waverly Property.

                                        (w)          A duly executed original certificate of Buyer (“Buyer Closing Certificate”) in the form of Exhibit “N” updating the representations and warranties contained in Section 7.2 to the Closing Date and noting any changes thereto;

                                        (x)          Evidence reasonably satisfactory to Seller and Title Company respecting the due organization of Buyer and the due authorization and execution of this Agreement and the documents required to be delivered hereunder; and

                                        (y)          Such additional documents as may be reasonably required by Seller and Title Company in or to consummate the transactions hereunder (provided the same do not increase in any material respect the costs to, or liability or obligations of, Buyer in a manner not otherwise provided for herein).

Mutual Deliveries.  Buyer and Seller shall mutually execute and deliver to the Escrow Holder, the following:

                                        (z)          A Closing Statement reflecting the Purchase Price, and the adjustments and prorations required hereunder and the allocation of income and expenses required hereby; and

                                        (aa)        Such transfer tax forms as required by state and local authorities.

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Closing Costs.  With reference
to Closing, Seller shall pay (1) 50% of all escrow charges, (2) the brokerage
commission payable at Closing to Hodges Ward Elliot, Inc. (the
“Broker”), under separate agreement between Broker and Seller,
(3) the premium for standard coverage title insurance with respect to the
Owner’s Policy on the Austin Land and Austin Improvements, and (4) all
state, county and city excise taxes and transfer fees payable in connection with
the transfer of the Waverly Land and the Waverly Improvements.  Buyer shall
pay (1) all state, county and city excise taxes and transfer fees payable in
connection with the transfer of the Austin Property, and all state, county and
city excise taxes and transfer fees payable in connection with any part of the
Waverly Property other than the Waverly Land and the Waverly Improvements, (2)
all recording charges, if any, in connection with the transfers contemplated
hereby, (3) the premiums and costs of obtaining the Owner’s Policies, other than the limited portion thereof described above in this Section 5.2 for which Seller is responsible, (4) Buyer’s due diligence costs and property inspection fees, including the cost of any additional environmental, asbestos, structural and physical audits it deems necessary, (5) the costs, if any, to update the Existing Surveys, (6) any personal property sales tax, (7) all fees, costs or expenses in connection with any financing obtained by Buyer in connection with the transaction contemplated hereby, and (8) 50% of all escrow charges.   Seller shall pay all costs associated with the payoff of its existing loans with respect to the Properties (including any exit or prepayment fees).

Prorations Items to be Prorated.  The following provisions shall govern the adjustments and prorations that shall be made at Closing and the allocation of income and expenses from the Properties between Seller and Buyer.  Except as expressly provided in this Section 5.3.1, all items of operating revenue and operating expense of the Properties, with respect to the period prior to 12:00:01 a.m. (the “Cut-Off Time”) local time at the Hotel on the Closing Date, shall be for the account of and paid by Seller and all items of operating revenue and operating expense of the Properties with respect to the period after the Cut-Off Time, shall be for the account of and paid by Buyer.

                                        (bb)        Taxes.  (i)  All unpaid real estate taxes, personal property taxes and other assessments on each Property shall be prorated at Closing.  Seller shall be responsible for all real property taxes and personal property taxes and other assessments for the tax periods prior to the Closing Date, and Buyer shall be responsible for all real property taxes and personal property taxes and other assessments for the tax periods from and after the Closing Date; however if any special improvement assessments on any Property are payable in installments, then the installments (including the current installment) shall be prorated as of the Cut-Off Time (with Buyer assuming
the obligation to pay any installments payable after the Closing).  If the real property tax rate, personal property tax rate or any assessment has not been set for the tax year in which the Closing occurs, then the proration of such real property tax, personal property tax or assessment shall be based on the previous tax bill for the preceding tax year for such tax or assessment which has not been set for the tax year in which the Closing occurs, and such proration shall be adjusted between Seller and Buyer upon presentation of written evidence that the actual taxes or assessment paid (determined as of the date such taxes or assessment are actually paid) for the tax year in which the Closing occurs differ from the amounts used at Closing and in accordance with Section 5.3.2.  Seller shall consult with Buyer regarding any assessment for real property taxes for the 2006 tax year.  Seller and Buyer acknowledge that Seller has retained counsel to seek a reduction in real estate taxes for
the fiscal period in which the Closing occurs and the parties shall reasonably cooperate with each other in connection with any such proceedings so as to maximize the benefits of such proceedings for both.  The amount of any tax refunds (net of attorneys’ fees and other costs incurred by Seller in seeking such a reduction) with respect to any portion of the Properties for all tax years prior to the tax year in which the Cut-Off Time occurs shall be allocated entirely to Seller.  The amount of any tax refunds (net of attorneys’ fees and other costs incurred by Seller in seeking such a reduction) with respect to any portion of the Properties for the tax year in which the Cut-Off Time occurs shall be apportioned between Seller and Buyer in the same manner as unpaid real estate taxes, personal property taxes and other assessments on the Properties.

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          (ii)  The parties acknowledge that certain taxes accrue and are payable to the various local governments by any business entity operating a hotel and its related facilities.  Included in those taxes may be business and occupation taxes, retail sales and use taxes, gross receipts taxes, and other special lodging or hotel taxes.  For purpose of this Agreement, all of such taxes (expressly excluding taxes and assessments covered by Section 5.3.1(a)(i) above, corporate franchise taxes, and federal, state, and local income taxes) (hereinafter referred to as “Operational Taxes”) shall be allocated between Seller and Buyer such that those attributable to the period prior to the Cut-Off Time shall be allocable to Seller and those attributable to the period from and after the Cut-Off Time shall be to Buyer (with the attribution of such taxes hereunder to be done in a manner
consistent with the attribution under this Agreement of the applicable revenues on which such taxes may be based).  Buyer shall receive a credit for any Operational Taxes attributable to the period prior to the Cut-Off Time which Seller has not paid.  Except for the Operational Taxes for which (and in the amount for which) Buyer has received a credit under this Section 5.3(a)(ii), Seller shall be solely responsible for payment of the Operational Taxes with respect to the period prior to the Cut-Off Time, and Buyer shall be solely responsible for payment of such Operational Taxes with respect to the period after the Cut-Off Time (and those for which and in the amount for which it receives a credit).

                                        (cc)        Lease and Rental Expenses.  Collected rents and other payments from the tenants under the Leases (the “Tenants”), shall be prorated between Seller and Buyer as of 11:59 P.M. on the day prior to the Closing Date.  If on the Closing Date there are past due rents or charges owed by Tenants, collection of such amounts shall be prorated when received.  If any payments of rent or other fixed charges received by Seller or Buyer on or after the Closing Date are payable to the other party by reason of this allocation, the appropriate sum shall be promptly paid to the other party.  Seller is responsible, at its cost, to direct Manager to collect all
past due amounts prior to Closing.  If any Lease contains obligations on the part of the Tenant for tax, escalation, percentage, or overage payments (“additional rent”) and such additional rent is not yet payable as of the Closing Date, then if Seller’s portion of such additional rent is collected by Buyer from the Tenant, Buyer shall remit such amounts to Seller.  Buyer will make reasonable efforts to collect all past due rents, if any, for Seller’s account, but Buyer shall not be obligated to commence dispossession or other legal proceedings.  

                                        (dd)        Adjustment on Account of Future Renovation Costs and Applicable Reserves.

                                                      (i)          Certain Definitions.  As used herein, the following terms  mean as follows:

                                                                    (1)          “Closing Date Remaining PIP Amount” means the amount by which (aa) the aggregate of the amount shown on Schedule 1 to each of the First Amendments to Management Agreements as “Total Capital Expenditures” (i.e., the sum of $4,173,065 as to the Austin Property, and $7,552,589 as to the Waverly Property), exceeds (bb) the aggregate of the actual dollars expended prior to the Closing Date by each Seller or Manager on behalf of each Seller as to the matters (the “PIP
Work”) referred to on said Schedule 1 (including, but not limited to, matters therein referred to as “work”, “fees”, “taxes”, “freight” and “other”). 

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                                                                     (2)          “Closing Date Project Sources”  means the aggregate of the sum of (aa) the balance as of the Closing Date of  the “FF&E Reserve” (as defined in the each of Management Agreements), and any other reserve account with respect to the Austin Property or the Waverly Property held by Manager, (bb) any sums to be funded into the FF&E Reserve for “Accounting Period 13” for 2006 (said Accounting Period 13 being the “Accounting Period” (as defined
in each of the Management Agreements) ending December 29, 2006), which amount for such Accounting Period is 4% of Gross Revenues (as defined in the Management Agreements) for such Accounting Period, and (cc) the $300,000 reserve to be established in 2007 as shown on Schedule 1 to the First Amendment to Waverly Management Agreement.

                                                        (ii)        Adjustment Calculation.  If the Closing Date Remaining PIP Amount exceeds the Closing Date Project Sources, then, on the Closing Date,  Buyer shall receive a credit for the amount by which the Closing Date Remaining PIP Amount exceeds the Closing Date Project Sources.  Conversely, if the Closing Date Project Sources exceeds the Closing Date Remaining PIP Amount,  then, on the Closing Date, Seller shall receive a credit for the amount by which the Closing Date Project Sources exceeds the Closing Date Remaining PIP Amount. 

                                        (ee)          Hotel Reservations and Revenues.

                                                        (i)          Reservations.  On the Closing Date, Seller shall request that Manager provide Buyer with its schedule of confirmed reservations for dates subsequent to the Closing Date, which schedule shall list the party for whose benefit the reservation was made, the amount of deposit thereunder, the amount of any room rental deposits, and the amount of any other deposits made for advance reservations, banquets or future services to be provided after the Closing Date.  Buyer will honor (or cause its manager to honor), for its account, all pre-Closing Date reservations
as so confirmed by Seller for dates subsequent to the Closing Date at the rate
or price previously agreed to by Seller (so long as such rates conform to
customary rates charged by Seller).  Seller shall pay or credit to Buyer
the amount of all prepayments or deposits disclosed in such schedule.

                                                        (ii)          Guest Revenues.  Seller shall receive a credit for, and Buyer shall purchase from Seller, the Guest Ledger.  Such credit shall equal the amount of the accounts receivable (or 50% thereof in the case of the final night’s room revenue, including any sales taxes, room taxes and other taxes charged to guests in such rooms, all parking charges, sales from mini-bars, in-room food and beverage, telephone, facsimile and data communications, in-room movie, laundry, and other service charges allocated to such rooms with respect to the night), less credit
card charges, travel company charges and similar commissions.  Revenues
from guest rooms in the Hotel occupied on the night containing the Cut-Off Time,
including any sales taxes, room taxes and other taxes charged to guests in such
rooms, all parking charges, sales from mini bars, in room food and beverage,
telephone, facsimile and data communications, in room movie, laundry, and other
service charges allocated to such rooms with respect to the night containing the
Cut-Off Time shall be divided equally between Seller and Buyer; provided,
however, that to the extent the times at which food and beverage sales,
telephone, facsimile or data communication, in room movie, laundry, and other
services are ordered by guests can be determined, the same shall be allocated
between Seller and Buyer based on when orders for the same were received, with
orders originating prior to Cut-Off Time being allocable to Seller, and orders
originating from and after the Cut-Off Time being allocable to Buyer.  All
other revenues from restaurants, lounges, and other service operations conducted at the Properties shall be allocated based on whether the same accrued before or from and after the Cut-Off Time as described in the preceding sentence, and Seller shall instruct the Manager, and Buyer shall instruct its manager, to separately record sales occurring before and from and after the Cut-Off Time.  The foregoing amounts are referred to collectively as “Guest Revenues”.

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                                                        (iii)          Banquet and Meeting Room Revenues.  Revenues from conferences, receptions, meetings, and other functions occurring in any conference, banquet or meeting rooms in the Hotel, including usage charges and related taxes, food and beverage sales, valet parking charges, equipment rentals, and telecommunications charges, shall be allocated between Seller and Buyer, based on when the function therein commenced, with (i) one-day functions commencing prior to the Cut-Off Time being allocable to Seller; (ii) one day functions commencing from and after the Cut-Off Time
being allocable to Buyer; and (iii) multi day functions that include periods both before and after the Cut-Off Time being prorated between Seller and Buyer according to the period of time before and from and after the Cut-Off Time.  The foregoing amounts are referred to collectively as “Conference Revenues”.

                                                        (iv)          Unredeemed Gift Certificates and Vouchers.  Buyer shall receive a credit against the Purchase Price at Closing the face value of all paid for vouchers, gift certificates and other promotional materials (together, the “Vouchers”) which may be used as full or partial payment for any Hotel service including, room rentals, food and beverage service, or any other item either borne directly by the owner of the Hotel or which is reimbursable by the owner of the Hotel (i.e., if a gift certificate can be used to pay for items in the Hotel gift shop). 
The parties also agree that no credit shall be given for any complimentary Vouchers. Seller shall request that Manager deliver to Buyer one (1) business day prior to the Closing Date a list of all such Vouchers.  

                                        (ff)          Utilities and Insurance.  Buyer shall be responsible for all dealings with utility service providers with respect to any actions to change over accounts to Buyer as of the Closing Date.  All charges for utilities shall be prorated as of the Closing Date.  In the event the actual amounts for such charges for utilities or telephone calls are not known as of the Closing Date or cannot be billed separately to the responsible party, such charges shall be prorated between the parties as of the Closing Date once the actual amounts thereof become known.  If necessary, at the request of Buyer, Seller shall complete the customary forms required
by any telephone company or telephone company service provider to assign the Properties’ existing telephone numbers to Buyer.  Any fees payable by the owner of the Hotel in respect of the insurance policies maintained by Manager for a Property shall be prorated as of the Closing Date.  The parties shall request that Manager add Buyer as an additional named insured on any such insurance policies as of the Closing Date.

                                        (gg)          Permits.  Permit and license fees of assignable permits and licenses, if any, shall be prorated as of the Closing Date.

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                                        (hh)          Service Agreements.  Fees and other amounts, including accrued employee expenses, payable and/or accrued under the Hotel Management Agreements and payments due under the other Service Agreements in the name of Seller shall be prorated as of the Closing Date.  Seller shall be required to pay or cause to be paid (or reimbursed to Manager) or credit to Buyer at the Closing any accrued or earned wages, vacation pay, sick pay, bonuses, pension, profit-sharing and welfare benefits and other compensation and fringe benefits of all persons employed at any Property on or before the Closing Date, including any employment taxes or other fees or assessments
attributable thereto; it being understood, however, that Seller shall not be required to pay any withdrawal liability with respect to any union employees.  The parties further agree that with respect to sick pay, at the end of the calendar year in which the Closing occurs, Buyer shall reimburse Seller for all unused sick pay credited to Buyer at Closing which did not carry over to the following calendar year.

Calculation.  The Seller shall prepare and deliver to Buyer a preliminary closing statement (the “Preliminary Closing Statement”) which shall show the net amount due either to Seller or Buyer as a result thereof, and such net amount will be added to, or subtracted from the payment of the Purchase Price to be paid to Seller pursuant to Section 5.1.2 hereof.  If any of the prorations or credits cannot be calculated based on actual figures, then they shall be calculated based on Seller’s good faith estimates thereof.  Within one hundred and twenty (120) days following the Closing Date, Buyer shall prepare and submit to Seller a recalculation of the prorations and credits, reflecting actual figures and not estimates.  Such recalculation shall be binding on Buyer and Seller unless Seller delivers to Buyer, within thirty (30) days after Seller has received such recalculation, a notice (“Audit Notice”)
stating Seller does not agree with such calculations, and, if such notice is given, a nationally recognized accounting firm selected by Seller and reasonably approved by Buyer shall be engaged to make the final determination of such prorations and credits (the accounting firm engaged to make such determination herein called the “Accounting  Firm”).  Within thirty (30) days after the delivery of an Audit Notice, Seller shall provide notice to Buyer of the accounting firm selected by Seller; if Buyer reasonably objects to the accounting firm so selected by Seller, Buyer shall give notice of disapproval within fifteen (15) days after the delivery of the notice from Seller of Seller’s selection (and if Buyer fails to give a notice of such disapproval within such fifteen (15) day period, Buyer will be deemed to have approved Seller’s selection).  If Buyer reasonably objects to the firm so selected by Seller within such fifteen (15) day period, Seller shall nominate
another accounting firm, which shall be subject to Buyer’s reasonable approval using the same procedure as provided in the preceding sentence.  The fees and costs of the Accounting Firm in making such determination shall be borne as follows:  if the net amount of the prorations and credits determined by the Accounting Firm is within 2% of the net amount as determined by Buyer, Seller shall bear the entire fees and costs of the Accounting Firm in making such determination; and if the net amount of the prorations and credits determined by the Accounting Firm is greater than 2% of the net amount as determined by Buyer, Buyer shall bear the entire fees and costs of the Accounting Firm in making such determination.  Each of Seller and Buyer shall cooperate in good faith and act reasonably after Closing to assist Manager and  Accounting Firm in their determinations.

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Accounts Receivable.  Accounts Receivable shall be identified as of the Cut-Off Time.  Seller shall receive a credit for, and Buyer shall purchase from Seller, all accounts receivable (other than the Guest Ledger) that are less than ninety (90) days past due.  Such credit shall equal the amount of the accounts receivable, less (i) credit card charges, travel company charges and similar commissions and (ii) on all accounts receivable other than credit card receivables, a 3% discount for uncollectible amounts for receivables that are less than ninety (90) days past due.  Subject to the following sentence, all accounts receivable and credit card claims for goods and services furnished prior to the Cut-Off Time that are not so purchased by Buyer shall remain the property of Seller and, to the extent Buyer receives any payments on account thereof after Closing (A) if the applicable account debtor who makes such payment then owes payment on one of

 Seller’s accounts receivable and no accounts receivable of Buyer, then Buyer shall immediately remit such amount (net of travel agent commissions or credit card company charges for payment of such claims) to Seller, and (B) if the applicable account debtor who makes such payment then owes payment on accounts receivable owing to Buyer and to Seller, such payments (net of travel agent commissions or credit card company charges for payment of such claims) shall be applied to pay accounts
receivable in order of priority from the least-aged to the most-aged.  The foregoing shall apply to past due or accruing room rents and other customary Hotel charges including the guest and city ledgers.

Bank Accounts, Inventory and Seller’s Deposits.  Buyer and Seller shall mutually agree upon the aggregate amount of cash in the house bank accounts, house banks and cash on hand as of the Closing Date (the “Aggregate Cash Amount”).  At the Closing, Seller shall be credited with the Aggregate Cash Amount, including without limitation any management account (excluding the FF&E reserve account which will be treated in accordance with the provision of Section 5.3.1(c) hereof), to the Cut-Off Time.  All transferable deposits of Seller made for utilities, maintenance or service contracts, licenses, or otherwise, shall be credited to Seller at Closing.  In this regard, the parties shall arrange to have all such accounts and deposits transferred to Buyer at Closing.

Health Club and Other Dues.  Prepaid health club and other revenues shall be prorated between Buyer and Seller as of the Cut-Off Time, with Buyer receiving a credit for the unearned health club and other revenue as of the Cut-Off Time.

Prepaids.  Seller shall receive a credit for prepaid expenses as of the Cut-Off Time, including prepaid expenses under contracts, advertising expenses, trade association dues and trade subscriptions, and fees for permits.  Prepaid advertising expenses shall only include advertising which has not been published, mailed or aired as of the Cut-Off Time.

Payables.    Seller shall use reasonable commercial efforts to pay off all trade accounts payable as of the Cut-Off Time.  To the extent unpaid, Buyer shall receive a credit for all accounts payable and accrued liabilities owing for goods and services furnished prior to the Cut-Off Time.  Buyer shall pay all accounts payable relating to goods and services for which orders have been placed but, as of the Cut-off Time, such goods and services have not yet been delivered or provided.  All fees, reimbursements and other amounts payable to the Manager under the Hotel Management Agreement shall be apportioned between Seller and Buyer as of the Cut-off Time.

Surviving Obligations.  The provisions of this Section 5.3 shall survive the Closing and shall not be subject to the limitations set forth in Section 10.2.1 hereof.

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Condemnation or Destruction of Property.

                    Condemnation. 
Seller agrees to give Buyer prompt notice of any notice it receives of any
taking by condemnation (actual, pending or threatened) of any part of or rights
appurtenant to the Austin Property or the Waverly Property. Buyer shall have the
right to terminate this Agreement in the event of an actual, pending or
threatened condemnation or temporary condemnation of longer than six (6) months
that has or reasonably would be expected to have a material adverse impact on
the operations of the Austin Property or the Waverly Property, in which event
Escrow Deposit shall be returned to Buyer.  If Buyer does not so elect to
terminate this Agreement, then the Closing shall take place as provided herein,
and Seller shall assign to Seller at the Closing all of Seller’s interest
in any condemnation award which may be payable to Buyer on account of any such
condemnation and, at Closing, Seller shall credit to the amount of the Purchase
Price payable by Buyer the amount, if any, of condemnation proceeds received by
Seller between the Date of this Agreement and Closing less any amounts which are
reasonably allocated to lost earnings reasonably allocated or attributed to the
period of time prior to Closing or which are used to repair or restore the
applicable property prior to Closing.  Provided Buyer has not exercised its
right to terminate this Agreement, Seller shall notify Buyer in advance
regarding any proceeding or negotiation with respect to the condemnation and
Buyer shall have the right, at its own cost and expense, to appear and
participate in any such proceeding or negotiation.

                    Fire or Other Casualty.  Seller shall give Buyer prompt notice of any fire or other casualty to either Property costing more than $100,000.00 to repair and occurring between the Date of this Agreement and the Closing.  If, prior to Closing, either Property is damaged by fire or other casualty which is insured (without regard to deductibles) to an extent as would not cost (as to the damaged property) more than $5,750,000.00 and would not take longer than six (6) months to repair, and if the holders of the existing loans to Seller permit insurance proceeds to be used to repair and restore such Property, then the Closing shall take place without abatement of the purchase price, but Seller shall assign to Buyer at Closing all of Seller’s interest in any insurance proceeds (except only, rent loss and business interruption insurance,
and any similar insurance attributable to the period preceding the Closing Date) that may be payable to Seller on account of any such fire or other casualty, plus Seller shall credit the amount of any deductibles under any policies related to such proceeds to the purchase price, to the extent such deductibles or insurance proceeds have not been previously expended or are otherwise required to reimburse Owner for actual expenditures of restoration.  If any such damage due to fire or other casualty is insured and is to such an extent as would cost more than $5,750,000.00 or would take longer than six (6) months to repair, or if such holders will not permit insurance proceeds to be used to repair and restore such Property then, at Buyer’s option, Buyer may terminate this Agreement and the Escrow Deposit shall be returned to Buyer.  Should Buyer nevertheless elect to proceed to Closing, the Closing shall take place without abatement of the Purchase Price and at Closing Seller shall assign
to Buyer all of Seller’s interest in any insurance proceeds (except only, rent loss and business interruption insurance, and any similar insurance, in each case, attributable to the period preceding the Closing Date) that may be payable to Seller on account of any such fire or other casualty, and Seller shall grant to Buyer a credit against the Purchase Price equal to the amount of the applicable deductible, to the extent such deductibles or insurance proceeds have not been previously expended or are otherwise required to reimburse Owner for actual expenditures of restoration.  If, prior to Closing, either Property is damaged by fire or other casualty which is uninsured and would cost more than $5,750,000.00 to repair or would take longer than six (6) months to repair, then, at Buyer’s option, Buyer may terminate this Agreement and the Escrow Deposit shall be returned to Buyer.  If Buyer does not elect to terminate this Agreement with respect to an uninsured casualty as aforesaid,
or if any uninsured casualty would not cost more than $5,750,000.00 to repair and would not take longer than six (6) months to repair, then the Closing shall take place as provided herein, and the Purchase Price shall be reduced by the estimated amount to repair casualty not to exceed such $5,750,000.00.  If Buyer does not or is not entitled to terminate this Agreement with respect to a casualty or condemnation, Seller shall diligently commence and pursue restoration of the Property so as to minimize the loss of business and good will of the Property.

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Representations, Warranties and Covenants.

Representations, Warranties and Covenants of Seller.

General Disclaimer.  Except as specifically set forth in Section 7.1.2 below or elsewhere in this Agreement or in the applicable Deed or other closing documents, the sale of the Properties hereunder is and will be made on an “as is” basis, without representations and warranties of any kind or nature, express, implied or otherwise, including any representation or warranty concerning title to the Properties, the physical condition of the Properties (including the condition of the soil or the Austin Improvements or the Waverly Improvements), the environmental condition of the Properties (including the presence or absence of hazardous substances on or respecting the Properties), the compliance of the Properties with applicable laws and regulations (including zoning and building codes or the status of development or use rights respecting the Properties), the financial condition of the Properties or any other representation or warranty respecting
any income, expenses, charges, liens or encumbrances, rights or claims on, affecting or pertaining to the Properties or any part thereof.  Buyer acknowledges that, during the Due Diligence Period, Buyer will examine, review and inspect all matters which in Buyer’s judgment bear upon the Properties and their respective values and suitability for Buyer’s purposes.  Except as to matters specifically set forth in Section 7.1.2 below or elsewhere in this Agreement or in the Deed or other closing documents, Buyer will acquire the Properties solely on the basis of its own physical and financial examinations, reviews and inspections and the title insurance protection afforded by the Owner’s Policy.

Limited Representations and Warranties of Seller. Seller hereby represents and warrants to Buyer as set forth in this Section 7.1.2, each only as to the Property owned by it.  For the purposes of this Agreement and the documents to be delivered pursuant hereto, references to “To Seller’s knowledge” or “Seller’s actual knowledge” or “Seller has no knowledge” shall mean the actual, present, conscious knowledge of Semi Salmi and Tom Bennett, such individuals being the executives, other than persons working on behalf of the Manager, working on behalf of Seller who have the most knowledge regarding the Austin Property and the Waverly Property (collectively, the “Seller Knowledge Individuals”) on the date of this Agreement without any investigation or inquiry, but such individuals shall not have any individual liability in connection herewith.  Without limiting the foregoing, Buyer acknowledges
that the Seller Knowledge Individuals have not performed and are not obligated to perform any investigation or review of any files or other information in the possession of Seller, or to make any inquiry of any persons, or to take any other actions in connection with the representations and warranties of Seller set forth in this Agreement.  Neither the actual, present, conscious knowledge of any other individual or entity, nor the constructive knowledge of the Seller Knowledge Individuals or of any other individual or entity, shall be imputed to the Seller Knowledge Individuals:

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                                        (ii)          Leases.  There are no leases of or licenses or concessions for space in any Property which will be in force after the Closing and under which Seller is the landlord (whether by it or its agent entering into the leases or acquiring the Properties subject to the leases) other than the Leases.  As used herein, “Austin Leases” means, collectively, (a) the leases, licenses and concessions agreements listed on Exhibit “O-1” and (b) the leases, licenses and concessions agreements entered with respect to the Austin Property into in accordance with this Agreement.  As used herein, “Waverly
Leases” means, collectively, (a) the leases, licenses and concessions agreements listed on Exhibit “O-2”  and (b) the leases, licenses and concessions agreements entered with respect to the Waverly Property into in accordance with this Agreement.  “Leases” means the Austin Leases and the Waverly Leases. All of the Leases are in full force and effect and none of them has been amended except as set forth in Exhibits “O-1” and “O-2”.  Except as set forth on Exhibit “P”, there are no security deposits under the Leases.  There are no construction allowances, brokerage commissions, or fees or similar inducements due now or payable in the future in connection with the Leases.  To Seller’s knowledge, Seller has performed all material work required to be performed by Seller under the Leases.  To Seller’s knowledge Seller has delivered to Buyer true, correct and complete copies of
the Leases.  To Seller’s knowledge, Seller is not in default in any material respect under the Leases and there is no existing condition that, with notice or passage of time or both, would constitute a material default by Seller under any of the Leases.  To Seller’s knowledge, no other party to a Lease is in default in any material respect under such lease and there is not existing condition that, with notice or passage of time or both, would constitute a material default by such party under any Lease.

                                        (jj)          Litigation.  Except as set forth in Exhibit “Q”, there is no pending (nor has Seller or to Seller’s knowledge, its Manager, received any written notice of any threatened) action, litigation, condemnation or other proceeding against any Property or against Seller or to Seller’s knowledge Manager with respect to any Property, other than personal injury matters covered by Seller’s insurance and routine workers compensation claims.

                                       (kk)         Service
Agreements.  Austin Seller has not entered into and, to Seller’s
knowledge, there are not, any service, supply, maintenance, capital improvement,
equipment leasing, employment, collective bargaining, union or similar contracts
relating to the Austin Property which will be in force after the Closing, except
for the Austin Service Agreements, Austin Renovation Commitments and
“Excluded Contracts” (as hereinafter defined).  Waverly
Seller has not entered into and, to Seller’s knowledge, there are not, any
service, supply, maintenance, capital improvement, equipment leasing,
employment, collective bargaining, union or

similar contracts relating to the Waverly Property which will be in force after the Closing, except for the Waverly Service Agreements, Waverly Renovation Commitments and Excluded Contracts.  As used herein, the “Austin Service Agreements” means, collectively, (a) the contracts described in Exhibit “R-1”, (b) contracts (other than Excluded Contracts and Austin Renovation Commitments) with which are cancelable on thirty (30) days’ or less notice, without penalty, and (c) contracts with respect to the Austin Property entered into in accordance with this Agreement.  As used herein, the “Waverly Service Agreements” means, collectively, (a) the contracts described in Exhibit “R-2”, (b) contracts (other than Excluded Contracts and Waverly Renovation Commitments) which are cancelable on thirty (30) days’ or less notice, without penalty, and (c) contracts with respect to the Austin Property entered into in accordance with
this Agreement.  As used herein, “Austin Renovation 

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Commitments” means the contracts and commitments described in Exhibit “R-3”, and, to the extent Buyer consents to the same, any additional contracts entered into by Austin Seller prior to the Closing Date with respect to the renovation of the Austin Property. As used herein, “Waverly Renovation Commitments” means the contracts and commitments described in Exhibit “R-4”, and, to the extent Buyer consents to the same, any additional contracts entered into by Waverly Seller prior to the Closing Date with respect to the renovation of the Waverly Property. As used herein, “Excluded Contracts” means Seller’s contracts for (i) insurance and (ii) the engagement of attorneys, accountants and consultants.  The Excluded Contracts are not being assigned to or assumed by Buyer hereunder. Buyer shall assume (and execute such documentation as Seller may reasonably request to reflect its

assumption of) the brokerage commission obligations identified in Section 7.4.3.  As used herein, “Service Agreements” means the Austin Service Agreements and the Waverly Service Agreements.  As used herein, “Renovation Commitments” means the Austin Renovation Commitments and the Waverly Renovation Commitments.  To Seller’s knowledge, Seller has provided Buyer with access to true, correct and complete copies of the Service Agreements and Renovation Commitments.  To Seller’s knowledge, all of the Service Agreements and Renovation Commitments are in full force and effect, Seller is not in default in any material respect under the Service Agreements and Renovation Commitments and there is no existing condition that, with notice or the passage of time would constitute a material default by Seller under any Service Agreement or Renovation Commitment.  To Seller’s knowledge, no other party to a Service Agreement or Renovation
Commitment is in default in any material respect under any of the Service Agreements or Renovation Commitments.  

                                        (ll)          Due
Authority.  This Agreement and all agreements, instruments and
documents herein provided to be executed or to be caused to be executed by
Seller are and on the Closing Date will be duly authorized, executed and
delivered by and are binding upon Seller.  Seller is a limited liability
company, duly organized and validly existing and in good standing under the laws
of the State of Delaware, and is duly authorized and qualified to do all things
required of it under this Agreement.  Seller has the capacity and authority
to enter into this Agreement and consummate the transactions herein provided
without the consent or joinder of any other party (except as otherwise may be
set forth in this Agreement).  Waverly Seller is, or is deemed to be, a
Georgia resident pursuant to Official Code of George Annotated Sections
48-7-128.  The foregoing statement shall not be subject to the
“knowledge qualification” set forth above.

                                     (mm)         
Environmental Matters.  The reports described in Exhibit
“S” (the “Environmental Reports”) represent
all of the environmental reports with respect to the Properties in the
possession or control of Seller.  Except for any and all matters that are
disclosed in the Environmental Reports, Seller has not received written notice
of and to Seller’s knowledge there are no violations of environmental laws,
ordinances or regulations with respect to any Property.  To Seller’s
knowledge, there is no presence of any hazardous materials, hazardous
substances, toxic substances or wastes (as defined in or regulated by any
federal, state or local laws, ordinances or regulations) on, under, in, at or
emanating from any Property except in compliance with such laws, ordinances and
regulations.

                                       (nn)          Condemnations and Assessments.  There is no condemnation either instituted or, to Seller’s knowledge, threatened, which would affect the Properties, and neither Seller nor, to Seller’s knowledge, Manager has received written notice of any special assessment affecting any of the Properties.

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                                        (oo)          Insurance.  Neither Seller nor, to Seller’s knowledge, Manager has received written notice from any insurance company of any defects or inadequacies in any Property that would affect adversely its insurability or increase the cost of insurance.  

                                        (pp)          Anti-Terrorism Laws.  Neither Seller nor to Seller’s knowledge, any of its respective constituent owners or affiliates are in violation of any laws relating to terrorism or money laundering (collectively, the “Anti-Terrorism Laws”), including without limitation Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”) and/or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001 (Public Law 107-56) (the “USA Patriot Act”).

                                        (qq)          Solvency.  Seller is not the subject debtor under any federal, state or local bankruptcy or insolvency proceeding, or any other proceeding for dissolution, liquidation or winding up of its assets.  Seller is not insolvent, and the consummation of the transactions contemplated by this Agreement shall not render Seller insolvent.

                                        (rr)          Legal Requirements.  Seller and, to Seller’s knowledge, Manager, have not received written notice from any governmental authority alleging a violation of any legal requirement or absence, suspension, revocation or non-renewal of any license or permit that has not been corrected, cured or otherwise resolved or seeking to audit or investigate compliance of the Hotel with any applicable legal requirement, which audit or investigation has not been completed or otherwise resolved and, to Seller’s knowledge, all material permits and licenses necessary for the normal operation of the Properties are in full force and effect.

                                        (ss)          Financial Information.  To Seller’s knowledge, Seller’s financial information provided to Buyer set forth on Exhibit “T” hereto (“Financial Information”) is correct and complete in all material respects and presents accurately the results of the operations of the Properties for the periods indicated.

                                        (tt)           No Options.  Seller has not granted any option, right of first offer or refusal or similar right in favor of any person to purchase or otherwise acquire the Hotel, any portion thereof or any interest therein.

                                        (uu)         Audits.  Seller and, to Seller’s knowledge, Manager, has not received any written notice of any audit of any taxes payable or tax delinquency with respect to any Property which has not been resolved or completed.

                                        (vv)         Unrecorded Commitments.  Seller has not entered into any unrecorded commitment or agreement with any governmental authority affecting any Property which could reasonably be expected to have a material adverse effect on the ownership, value or operation of any Property.  Neither Seller, nor to Seller’s knowledge, Manager, has entered into any unrecorded commitment or agreement with any governmental authority, association or other organization or group affecting all or any portion of the Properties which would impose any obligation to make any contribution or dedication of money or land or to construct, install or maintain any improvements of a
public or private nature on or off any Property.

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                                        (ww)         Personal Property.  Seller has good and marketable title to or a valid leasehold interest in its interest in all its Personal Property and, subject to any equipment leases listed in the schedule of Service Agreements, all such Personal Property shall be free and clear of all encumbrances at Closing. Seller has not transferred any Personal Property (including the Personal Property it acquired when Seller first acquired the Properties), except in the ordinary course of Seller’s business.  

                                        (xx)          Employees.  Seller has no employees working at any Property, and all employees working at any Property on behalf of Seller are employees of Manager.  Seller has not itself established any retirement, health insurance, vacation, pension, profit sharing or other benefit plans relating to the operation or maintenance of any Property.  To Seller’s knowledge as of the date of this Agreement, Seller has not received any written notice nor has Manager informed Seller of any actual or threatened union strikes, work stoppages or slow downs or any other labor disputes concerning individuals employed at any Property.  To Seller’s knowledge,
no benefit plans maintained by Manager for Manager’s employees working at any Property are in violation of applicable laws or the terms of such plans.

                    7.2          Representations and Warranties of Buyer.  Buyer hereby represents and warrants to Seller that:

                                   7.2.1          This Agreement and all agreements, instruments and documents herein provided to be executed or to be caused to be executed by Buyer are and on the Closing Date will be duly authorized, executed and delivered by and are binding upon Buyer; Buyer is a limited partnership, duly organized and validly existing and in good standing under the laws of the State of Delaware, and is duly authorized and qualified to do all things required of it under this Agreement; and Buyer has the capacity and authority to enter into this Agreement and consummate the transactions herein provided without the consent or joinder of any other party (except as otherwise may be set forth in this Agreement).

                                   7.2.2          Buyer and, to Buyer’s knowledge, its beneficial, controlling constituent owners and affiliates, are in compliance with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001)  (the “Order”) and other similar requirements contained in the rules and regulations of the Office of Foreign Asset Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “Orders”).  

                                   7.2.3          Neither Buyer nor, to Buyer’s knowledge, its beneficial, controlling constituent owners and affiliates:

                                                     (a)          is listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “Lists”);

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                                                     (b)          has been arrested for money laundering or for predicate crimes to money laundering, convicted or pled nolo contendere to charges involving money laundering or predicate crimes to money laundering;

                                                     (c)          has been determined by competent authority to be subject to the prohibitions contained in the Orders;

                                                     (d)          is owned or controlled by, nor acts for or on behalf of, any Person on the Lists or any other Person who has been determined by competent authority to be subject to the prohibitions contained in the Orders;

                                                     (e)          shall transfer any interest in Buyer or such parties to any Person who is, or whose beneficial owners are, listed on the Lists; or

                                                     (f)          shall assign this Agreement or any interest herein, to any Person who is listed on the Lists or who is engaged in illegal money laundering.

If Buyer or any constituent owner or affiliate of Buyer becomes listed on the Lists or is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, Buyer shall immediately notify Seller upon Buyer’s obtaining knowledge thereof.  Buyer shall have ten (10) business days to remove such party from any interest in Buyer or Seller may terminate this Agreement upon written notice to Buyer, whereupon the Escrow Deposit shall be returned to Buyer and neither party shall have any further obligation hereunder except for those obligations which expressly survive a termination of this Agreement.

                                   7.2.4          Buyer understands that, among the requirements of the states in which the Austin Property and the Waverly Property are located, that govern the issuance of the liquor licenses with which it will be required to comply, are the following:  Buyer will be required to submit personal background information, including social security numbers and driving records, on Buyer’s managers and Buyer will further be required to submit such information on the owners and managers of any company which directly or indirectly controls Buyer.  Buyer shall comply with these requirements.  Buyer has no reason to believe that it will not be able to obtain the issuance of the required liquor
licenses in accordance with the timing contemplated by this Agreement.

                                   7.2.5          No Bankruptcy/Dissolution Event.  No Bankruptcy/Dissolution Event has occurred with respect to Buyer or any of its partners or members, as applicable.

                                   7.2.6          Satisfaction of Management Agreement Requirements.  Buyer complies with all of the requirements set forth in Section 10.2A of the Management Agreement.  Without limitation on the generality of the foregoing, (a) Buyer has sufficient financial resources and liquidity to fulfill the obligations of the “Owner” under the Management Agreements (including a net worth of at least 10% of the “Invested Capital”, as such dollar amount is adjusted from the “Effective Date” until the date of the “Notice of Proposed Sale” by the greater of the “GDP Deflator” or 3.2% (as such terms are defined in the Management Agreements)); (b) neither
Buyer nor any of its “Affiliates” (as defined in the Management Agreements) is known in the community as being of bad moral character, or has been convicted of a felony in any state or federal court, and is in control of or controlled by persons who have been convicted of felonies in any state or federal court;  (c) neither Buyer nor any of its Affiliates, directly or indirectly, is the owner, manager or franchisor of a nationally recognized brand with at least five thousand (5000) guest rooms that is competitive with the “Renaissance Hotel System” (such as Hyatt, Sheraton or Hilton), and (d) neither Buyer nor any of its Affiliates is a “Specially Designated National” or “Blocked Person” (as such terms are defined in the Management Agreements).

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                                   7.2.7          Condition of Property.  The Purchase Price reflects Buyer’s underwriting of the costs of any capital improvements or repairs that may be required with respect to the Austin Property and the Waverly Property, Buyer hereby acknowledging that Buyer shall assume responsibility for payment with respect to capital improvements or repairs that have either been included in the budget for 2006 for the Austin Property or for the Waverly Property, or for which Seller has otherwise committed to fund.  However, the foregoing does not waive the prorations set  forth in Section 5.3.1(c).

                                   7.2.8          ERISA.  Neither (i) any assets of Buyer, nor (ii) any funds to be used by Buyer with respect to the transactions contemplated pursuant to this Agreement, are, or at Closing will be, pursuant to “ERISA” (as hereinafter defined) or the “Code” (as hereinafter defined) considered for any purpose of ERISA or Section 4975 of the Code to be assets of a “Plan” (as hereinafter defined).  Buyer is not executing this Agreement and will not be performing its obligations or exercising its rights or remedies under the Agreement on behalf of or for the benefit of any Plan.  Neither the execution or delivery of this Agreement by Seller, nor the
performance by Seller of its obligations or the exercise of its rights or remedies under this Agreement, nor any transaction contemplated under this Agreement, is or will be a “prohibited transaction” within the meaning of Section 406 of ERISA or Section 4975 of the Code.  For the purposes hereof the following terms shall have the following meanings:  “Code” shall mean the Internal Revenue Code of 1986, as amended; “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended (and any successor statute and any applicable regulations or guidance promulgated thereunder); and “Plan” shall mean a “plan” as that term is defined in Section 3(3) of ERISA or Section 4975 of the Code.

                                   7.2.9          No Reliance on Seller’s Warranties.  BUYER ACKNOWLEDGES AND AGREES THAT ITS OBLIGATIONS UNDER THIS AGREEMENT SHALL NOT BE SUBJECT TO ANY FINANCING CONTINGENCY. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND ANY DOCUMENTS EXECUTED BY THE AUSTIN SELLER AND THE WAVERLY SELLER AT CLOSING, THE SALE AND TRANSFER OF THE AUSTIN PROPERTY AND THE WAVERLY PROPERTY HEREUNDER IS AND WILL BE MADE ON AN “AS IS” BASIS, WITHOUT REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE, EXPRESS, IMPLIED OR OTHERWISE, INCLUDING ANY REPRESENTATION OR WARRANTY CONCERNING TITLE TO THE AUSTIN PROPERTY OR THE WAVERLY PROPERTY, THE PHYSICAL CONDITION OF THE AUSTIN PROPERTY OR THE WAVERLY
PROPERTY (INCLUDING THE CONDITION OF THE SOIL OR THE IMPROVEMENTS), THE ENVIRONMENTAL CONDITION OF THE AUSTIN PROPERTY OR THE WAVERLY PROPERTY (INCLUDING THE PRESENCE OR ABSENCE OF HAZARDOUS SUBSTANCES ON OR RESPECTING THE AUSTIN PROPERTY OR THE WAVERLY PROPERTY), THE COMPLIANCE OF THE AUSTIN PROPERTY OR THE WAVERLY PROPERTY WITH APPLICABLE LAWS, ENCUMBRANCES AND REGULATIONS (INCLUDING ZONING, SIGNAGE, PARKING 

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AND BUILDING CODES OR THE STATUS OF DEVELOPMENT, SIGNAGE AND USE RIGHTS RESPECTING THE AUSTIN PROPERTY OR THE WAVERLY PROPERTY), THE FINANCIAL CONDITION OF THE AUSTIN PROPERTY OR THE WAVERLY PROPERTY, OR ANY OTHER REPRESENTATION OR WARRANTY RESPECTING ANY INCOME, EXPENSES, CHARGES, LIENS OR ENCUMBRANCES, RIGHTS OR CLAIMS ON, AFFECTING OR PERTAINING TO THE AUSTIN PROPERTY OR THE WAVERLY PROPERTY OR ANY PART THEREOF.  BUYER ACKNOWLEDGES THAT DURING THE DUE DILIGENCE PERIOD, BUYER SHALL EXAMINE, REVIEW AND INSPECT ALL MATTERS WHICH IN BUYER’S JUDGMENT BEAR UPON THE AUSTIN PROPERTY AND THE WAVERLY PROPERTY AND THEIR VALUE AND SUITABILITY FOR BUYER’S PURPOSES.  EXCEPT AS TO MATTERS EXPRESSLY SET FORTH IN THIS AGREEMENT ANY DOCUMENTS EXECUTED BY THE AUSTIN SELLER AND THE WAVERLY SELLER AT CLOSING, BUYER WILL ACQUIRE THE AUSTIN PROPERTY AND THE WAVERLY PROPERTY SOLELY ON THE BASIS OF ITS OWN PHYSICAL AND FINANCIAL EXAMINATIONS, REVIEWS AND INSPECTIONS
AND THE TITLE INSURANCE PROTECTION AFFORDED BY THE OWNER’S POLICIES.

	
 
 	
   
 	
  
 	
   
 
	
  
Seller’s Initials
  	
   
 	
  
Buyer’s Initials
  	
   
 

                                   7.2.10          “Buyer’s knowledge” (or any similar phrase used in this Agreement) shall mean the present actual knowledge, without taking into account any constructive or imputed knowledge of Michael D. Schecter, John Williams and Mark Brugger, but such individuals shall not have any individual liability in connection herewith.  Buyer represents that such persons are familiar with the business and affairs of Buyer and the transactions contemplated under this Agreement and are the executive officers responsible for Buyer and its operations in the best position to have knowledge concerning the scope of the representations made by Buyer in this Agreement and to have knowledge of the
results of Buyer’s diligence investigations of the Austin Property and the Waverly Property.

Survival.  The foregoing representations and warranties (including any cause of action by reason of a breach thereof), except those pertaining to a party’s authority or to Seller’s title, which shall survive indefinitely, shall survive until the date that is nine (9) months after the Closing Date (the period beginning on the date hereof and ending on such date being herein called the “Survival Period”), at which time such representations and warranties (and any cause of action for a breach thereof not then in litigation) shall terminate.  Notwithstanding the foregoing, Seller shall have no liability and Buyer shall make no claim against Seller, for (and Buyer shall be deemed to have waived any failure of a condition hereunder by reason of) a breach of any representation or warranty of Seller under this Agreement or any document executed by Seller in connection with this Agreement (including for this purpose any matter that
would have constituted a breach of Seller’s representations and warranties had they been made on the Closing Date) (a) if the breach in question was known to Buyer prior to the end of the Due Diligence Period, or (b) the breach in question was known to Buyer prior to Closing and Buyer proceeds with the Closing.

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Interim Covenants of Seller.  Until the Closing Date or the sooner termination of this Agreement:

Maintenance/Operation.  Seller shall cause the Properties to be maintained, repaired and operated in the same manner as prior hereto pursuant to its normal course of business (including making capital expenditures and expenditures of FF&E reserves in such normal course of business).  Such continuing operation shall include delivering Properties to Buyer at Closing with such levels of inventories and supplies as Seller has found sufficient in its operation of its business at the Properties.

Service Contracts.  Seller shall not enter into any additional Service Agreements or other similar agreements without the prior consent of Buyer, which shall not be unreasonably withheld, except for (1) those deemed reasonably necessary by Seller which are cancelable on thirty (30) days’ notice without penalty and (2) those entered into by Manager which do not require Seller’s consent.

Leases.  Except to the extent required under the Management Agreement without Seller’s consent, Seller shall not enter into any new Leases or material modifications of Leases or terminate any Leases without Buyer’s express written consent which shall not be unreasonably withheld or delayed and shall be deemed given if Buyer, within seven (7) business days after Seller requests Buyer’s approval to a proposed new lease or material modification or termination of a Lease and provides Buyer with such information as is reasonable and appropriate for Buyer to determine whether to grant or withhold approval, fails to give Seller written notice of its disapproval thereof and the reasons therefor.  Notwithstanding anything herein to the contrary, if the Closing occurs, Buyer shall bear all costs and expenses related to any new Leases or modifications, extensions, expansions, options or renewals of existing Leases entered into after the
date hereof pursuant to this subsection (including tenant improvement costs and leasing commissions, but excluding free rent allocable to any period prior to the Closing Date) and, without limitation on the foregoing, the prorations at Closing shall include an appropriate credit to Seller consistent with the foregoing.  

Seller’s Environmental Inquiry.  Buyer acknowledges and agrees that the sole inquiry and investigation Seller has conducted in connection with the environmental condition of the Properties is to obtain the Environmental Reports, and that, for purposes of this Agreement, Seller has acted reasonably in solely relying upon said inquiry and investigation.

Hotel Management Agreement Indemnity.  Buyer shall indemnify, defend and hold harmless Seller from and against any claim by Manager (and all obligations, claims, liabilities, damages, losses, cost or expenses, including reasonable attorneys’ fees and court costs, resulting therefrom) by reason of a default by the owner under the Hotel Management Agreement occurring and attributable to the period on or after the Closing Date.  Seller shall indemnify, defend and hold harmless Buyer from and against any claim by Manager (and all obligations, claims, liabilities, damages, losses, cost or expenses, including reasonable attorneys’ fees and court costs, resulting therefrom) by reason of a default by the owner under the Hotel Management Agreement occurring or attributable to the period prior to the Closing Date.  The indemnity obligations set forth in this Section 7.6 shall survive the Closing.

                    Reservations and Bookings.  Seller shall cause Manager to continue to take guest room reservations and to book functions and meetings and otherwise to market and promote the business of the Hotel in generally the same manner as it did prior to the execution of this Agreement; and all advance room bookings and reservations and all meetings and function bookings shall be booked at rates, prices and charges charged by Seller and Manager for such purposes in the ordinary course of business consistent with Seller’s past practices.

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                    Notice of Proceedings.  Seller shall promptly advise Buyer of any litigation, arbitration or administrative hearing, or any written threat to commence any of the foregoing, concerning or relating to any Property or the operation thereof, of which Seller obtains knowledge.

                    Removal of Property.  Seller shall refrain and cause Manager to refrain from removing any portion of the Properties without the prior written consent of Buyer, except in the normal course of business as to personal property that is no longer needed or useful or is replaced, prior to Closing, with similar items of at least equal suitability, quality and value, free and clear of any liens or security interests.

                    Existing Loans.  Seller shall make all payments of principal, interest and other sums under the existing mortgage loans, mezzanine loans and Management Agreements, and perform all of its respective obligations thereunder which accrue to the period prior to the Closing.  Seller shall make not enter into any new loan documents or modify any existing loan documents or any other of the aforementioned agreements which would be binding on Buyer or any Property which would materially increase Buyer or its affiliates’ liabilities or obligations or materially decrease Buyer’s or its affiliates’ rights thereunder.

                    Insurance.  Seller shall not affirmatively cancel any existing insurance carried on the Properties, shall use commercially reasonable efforts to maintain or, to the extent Manager maintains the insurance, cause Manager to maintain, all existing insurance carried on the Properties by Seller or Manager, and shall use commercially reasonable efforts to renew any such insurance which comes up for renewal prior to the Closing.

                    Material Alteration; Additional Renovation.  Without Buyer’s consent, which shall not be unreasonably withheld, delayed or conditioned, (i) Seller shall not make or obligate itself to make, and Seller shall request Manager not to make, or obligate itself to make any material alterations or modifications to any Property except in the case of emergencies and except those contemplated in the capital expenditure and FF&E budgets provided to Buyer during the Due Diligence Period, and (ii) Seller shall not enter into, and Seller shall cause Manager not to enter into, any agreement for renovation of the Properties which is not set forth on Exhibits “R-3” and “R-4”.  From the date hereof through the Closing Date, Seller shall continue to use commercially reasonable efforts to cause the performance of the work under
the Renovation Commitments (with Buyer assuming Seller’s rights and obligations under the Renovation Commitments from and after the Closing Date).

                    Transfer of Permits.  Seller shall cooperate with Buyer (with no out-of-pocket cost to Seller) in all reasonable respects in connection with the transfer (if any) of any permits, licenses, certificates and approvals issued with respect to any Property to Buyer or the issuance of any new permits, licenses, certificates or approvals (if any) to Buyer, each to be effective no earlier than Closing, and Seller shall and shall cause Manager to use commercially reasonable efforts to (i) preserve and keep in force existing permits, licenses, certificates and approvals issued with respect to any Property, and (ii) cause all those expiring during the period between the date of this Agreement and the Closing to be renewed prior to the Closing Date.

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                    No Further Marketing.  Following the expiration of the Due Diligence Period without a cancellation of this Agreement by Buyer, Seller shall not market, sell, convey or offer to sell any portion of the Properties (nor permit Manager to do any of the same), except for items of Personal Property sold or consumed in the ordinary course of business.

                    Management Agreement Consents.  Seller shall not grant any material consent requested by Manager pursuant to the Management Agreement without first consulting with Buyer and obtaining Buyer’s consent, which shall not be unreasonably withheld, delayed or conditioned.

                    Baggage Inventory.  The representatives of Seller and Buyer shall prepare the inventory as of the day immediately preceding the Closing Date (which inventory shall be binding on all parties thereto) of (a) all luggage, valises and trunks checked or left in the care of the Hotel by guests then or formerly in the Hotel, (b) parcels, laundry, valet packages and other property of guests checked or left in the care of the Hotel by guests then or formerly in the Hotel (excluding, however, property in the Hotel safe deposit boxes), (c) all luggage or other property of guests retained by Buyer, and (d) all items contained in the Hotel lost and found.  Buyer shall be responsible from and after the Closing Date for all baggage, and other items listed in such inventory.  Seller hereby agrees to indemnify and hold Buyer harmless from and
against any and all liability for claims arising prior to the Closing Date relating to such items not listed on the inventory.  The provisions of this Section 7.16 shall survive the Closing. 

                    1.3          Safe Deposit Boxes.  Prior to the Closing Date, Seller shall endeavor to send written notice to guests or tenants or other persons who to Seller’s or its Manager’s knowledge have possessions locked in safe-deposit boxes at the Hotel advising them of the sale of the Hotel (excluding in-room safes) to Buyer and requesting removal of the contents thereof or the removal thereof and concurrent re-deposit of such contents pursuant to new safe deposit agreements with Buyer.  Seller and Buyer shall have representatives present when the boxes are opened and the contents thereof shall be inventoried.  If the guest does not timely respond to Seller’s notice, the safe deposit box may, if Seller, in its sole discretion, so agrees, be broken open in the presence of
Seller and Buyer and the contents inventoried and re-deposited in a new “safe deposit” box.  Buyer shall be solely responsible for all items in the Hotel’s safe deposit boxes which had been so inventoried, removed and re-deposited and Buyer hereby agrees to indemnify, defend and hold Seller harmless from and against any and all liability therefor.  Seller hereby agrees to indemnify and hold Buyer harmless from and against any and all liability for claims arising prior to the Closing Date relating to such items not listed on the inventory.  The provisions of this Section 7.17 shall survive the Closing.

                    1.4          No Tax Due Certificate.  With respect to any and all sales taxes, occupancy taxes, room taxes, gross receipts taxes and similar excises imposed by any governmental authority upon the sale of rooms, food, beverages and other goods and services in, at or from the Austin Property or on the gross revenues of the Austin Property including, but not limited to, Texas franchise taxes and Texas sales taxes and use taxes and other taxes under Title 2 of the Texas Tax Code (collectively, the “Excise Taxes”) for which, under applicable
laws, Buyer would otherwise after Closing have successor liability for amounts
accrued prior to Closing, Austin Seller shall comply with any procedures
specified in such laws to obtain and deliver to Buyer on or before the Closing
Date, (i) one or more Certificates of No Tax Due (under Section 111.020 of the
Texas Tax Code) from the Comptroller or Public Accounts of the State of Texas;
and (ii) to the extent available, certificates from the City of Austin
indicating that all Excise Taxes assessed by the City of Austin (including
specifically, without limitation, any hotel or occupancy taxes) in respect of
Austin Seller or the Austin Property have been paid.  Without limiting the
generality of the foregoing, Austin Seller shall timely make all filings or
application for such certificates or confirmations and, if a condition to the
issuance of such certificates or confirmations, shall authorize Escrow Holder at
Closing to withhold from the proceeds to be distributed to Austin Seller under
and in accordance with the Agreement and retain in escrow any amount required by
applicable governmental authority, pursuant to such laws as security for the
payment of the accrued Excise Taxes in question.

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DISCLAIMER, RELEASE AND ASSUMPTION.  AS AN ESSENTIAL INDUCEMENT TO SELLER TO ENTER INTO THIS AGREEMENT, AND AS PART OF THE DETERMINATION OF THE PURCHASE PRICE, BUYER ACKNOWLEDGES, UNDERSTANDS AND AGREES AS OF THE DATE HEREOF AND AS OF THE CLOSING DATE AS FOLLOWS:

DISCLAIMER.
 AS-IS, WHERE-IS.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 7.1 OR ELSEWHERE IN THIS AGREEMENT OR IN THE DEED OR OTHER CLOSING DOCUMENTS, THE SALE OF THE PROPERTIES HEREUNDER IS AND WILL BE MADE ON AN “AS IS, WHERE IS” BASIS AND SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS,  WARRANTIES OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE OF, AS TO, CONCERNING OR WITH RESPECT TO THE PROPERTIES OR ANY OTHER MATTER WHATSOEVER.

SOPHISTICATION OF BUYER.  BUYER IS A SOPHISTICATED BUYER WHO IS FAMILIAR WITH THE OWNERSHIP AND OPERATION OF REAL ESTATE PROJECTS SIMILAR TO THE PROPERTIES AND THAT BUYER HAS OR WILL HAVE ADEQUATE OPPORTUNITY TO COMPLETE ALL PHYSICAL AND FINANCIAL EXAMINATIONS (INCLUDING ALL OF THE EXAMINATIONS, REVIEWS AND INVESTIGATIONS REFERRED TO IN SECTION 4) RELATING TO THE ACQUISITION OF THE PROPERTIES HEREUNDER IT DEEMS NECESSARY, AND WILL ACQUIRE THE SAME SOLELY ON THE BASIS OF AND IN RELIANCE UPON SUCH EXAMINATIONS AND THE TITLE INSURANCE PROTECTION AFFORDED BY THE OWNER’S POLICY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER (OTHER THAN AS EXPRESSLY PROVIDED IN SECTION 7.1 OR ELSEWHERE IN THIS AGREEMENT OR IN THE DEED OR OTHER CLOSING DOCUMENTS).

PASSIVE OWNER.  SELLER (A) DID NOT DEVELOP OR CONSTRUCT THE PROPERTIES; AND (B) HAS DELEGATED THE DAY-TO-DAY MANAGEMENT OF THE PROPERTIES TO A THIRD PARTY MANAGER.

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DUE DILIGENCE MATERIALS.  ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTIES IS SOLELY FOR BUYER’S CONVENIENCE AND WAS OR WILL BE OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO (AND EXPRESSLY DISCLAIMS ALL) REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION (EXCEPT TO THE EXTENT PROVIDED IN SECTION 7.1 OR ELSEWHERE IN THIS AGREEMENT AND IN THE DEED OR OTHER CLOSING DOCUMENTS).  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 7.1 OR ELSEWHERE IN THIS AGREEMENT OR IN THE DEED OR OTHER CLOSING DOCUMENTS, SELLER SHALL NOT BE LIABLE FOR ANY MISTAKES, OMISSIONS, MISREPRESENTATION OR ANY FAILURE TO INVESTIGATE THE PROPERTIES NOR EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 7.1 OR ELSEWHERE IN THIS AGREEMENT OR IN THE DEED OR OTHER CLOSING DOCUMENTS SHALL SELLER BE BOUND IN ANY MANNER BY ANY VERBAL OR
WRITTEN STATEMENTS, REPRESENTATIONS, APPRAISALS, ENVIRONMENTAL ASSESSMENT REPORTS, OR OTHER INFORMATION PERTAINING TO THE PROPERTIES OR THE OPERATION THEREOF, FURNISHED BY SELLER, ITS MANAGER, OR BY ANY REAL ESTATE BROKER, AGENT, REPRESENTATIVE, AFFILIATE, DIRECTOR, OFFICER, SHAREHOLDER, EMPLOYEE, SERVANT OR OTHER PERSON OR ENTITY ACTING ON SELLER’S BEHALF (COLLECTIVELY, “SELLER RELATED PARTIES”).

RELEASE.  BUYER RELEASES SELLER AND ALL SELLER RELATED PARTIES FROM ALL CLAIMS WHICH ANY BUYER OR ANY PARTY RELATED TO OR AFFILIATED WITH BUYER (A “BUYER RELATED PARTY”) HAS OR MAY HAVE ARISING FROM OR RELATED TO ANY MATTER OR THING RELATED TO OR IN CONNECTION WITH THE PROPERTIES INCLUDING THE DOCUMENTS AND INFORMATION REFERRED TO HEREIN, THE HOTEL MANAGEMENT AGREEMENT, THE TENANT LEASES AND THE TENANTS THEREUNDER, ANY CONSTRUCTION DEFECTS, ERRORS OR OMISSIONS IN THE DESIGN OR CONSTRUCTION AND ANY ENVIRONMENTAL CONDITIONS, AND BUYER SHALL NOT LOOK TO ANY SELLER RELATED PARTIES IN CONNECTION WITH THE FOREGOING FOR ANY REDRESS OR RELIEF.  THIS RELEASE SHALL BE GIVEN FULL FORCE AND EFFECT ACCORDING TO EACH OF ITS EXPRESSED TERMS AND PROVISIONS, INCLUDING THOSE RELATING TO UNKNOWN AND UNSUSPECTED CLAIMS, DAMAGES AND CAUSES OF ACTION.  HOWEVER, THE FOREGOING PROVISIONS OF THIS SECTION 8.2 SHALL NOT AFFECT, APPLY OR LIMIT SELLER’S

EXPRESS OBLIGATIONS UNDER THIS AGREEMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH.

SURVIVAL.  THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND THE CLOSING.

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Disposition Of Escrow Deposit.

Default by Seller.  If the transaction herein provided shall not be closed by reason of Seller’s default under this Agreement in a material respect or the failure of satisfaction of conditions benefiting Buyer under Section 4, which is not cured or satisfied on or before the sooner to occur of December 28, 2006 or ten (10) days after written notice thereof by Buyer to Seller or the termination of this Agreement in accordance with Section 6, then the Escrow Deposit shall be returned to Buyer, and neither party shall have any further obligation or liability to the other (other than those obligations that expressly survive a termination of this Agreement); provided, however, if the transactions hereunder shall fail to close solely by reason of Seller’s default, in a material respect, and Buyer is not in default in any material respect, then Buyer shall be entitled to (i) specifically enforce this Agreement as its sole and exclusive remedy (and
Buyer shall not be entitled to bring any other action, for damages or otherwise, by reason of a default by Seller prior to Closing except as provided in (iii) below), but specific performance may not be granted or awarded except pursuant to an arbitration proceeding commenced under Section 10.10, within ninety (90) days after the Closing Date, or (ii) terminate this Agreement, in which event the Escrow Deposit shall be returned to Buyer and neither party shall have any further rights or obligations hereunder. Notwithstanding the foregoing, if Buyer elects to terminate this Agreement as a result of Seller’s default in a material respect or as a result of a representation and warranty that was not true in a material respect as of the date when made and was not known by Buyer prior to the expiration of the Due Diligence Period to be untrue in a material respect, or which became materially untrue after the date when made as a result of Seller’s actions or omissions, Seller shall reimburse Buyer
up to Three Hundred Thousand Dollars ($300,000.00) of Buyer’s documented, reasonable out-of-pocket expenses incurred by Buyer in connection with this transaction.

Default By Buyer.  In the event the transaction herein provided shall not close solely by reason of Buyer’s default under this Agreement in a material respect which is not cured on or before the sooner to occur of December 28, 2006 (with respect to Austin Property only) or ten (10) days after written notice thereof by Seller to Buyer, then the Escrow Deposit shall be delivered to Seller as its sole remedy and as full compensation and liquidated damages under this Agreement for such failure to close.  In connection with the foregoing, the parties recognize that Seller will incur expense in connection with the transaction contemplated by this Agreement and that the Properties will be removed from the market; further, that it is extremely difficult and impracticable to ascertain the extent of detriment to Seller caused by the breach by Buyer under this Agreement and the failure of the consummation of the transaction contemplated by this
Agreement or the amount of compensation Seller should receive as a result of Buyer’s breach or default.  In the event the sale of the Properties shall not be consummated on account of Buyer’s default, then the retention of the Escrow Deposit shall be Seller’s sole and exclusive remedy under this Agreement by reason of such default, subject to the provisions of this Agreement that expressly survive a termination of this Agreement.  

Closing.  In the event the transaction herein provided shall close, the Escrow Deposit shall be applied as a partial payment of the Purchase Price.

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Miscellaneous.

Brokers.

                                   1.4.1          Except as provided in Section 10.1.2 below, Seller represents and warrants to Buyer, and Buyer represents and warrants to Seller, that no broker or finder has been engaged by it, respectively, in connection with the sale contemplated by this Agreement.  In the event of a claim for broker’s or finder’s fee or commissions in connection with the sale contemplated by this Agreement, then Seller shall indemnify, defend and hold harmless Buyer from the same if it shall be based upon any statement or agreement alleged to have been made by Seller, and Buyer shall indemnify, defend and hold harmless Seller from the same if it shall be based upon any statement or agreement alleged to have
been made by Buyer.  The provisions of this Section 10.1 shall survive the Closing and shall not be subject to the limitations on survival in Section 7.3 or the limitations on liability in Section 10.2.

                                   1.4.2          If and only if the sale contemplated herein closes, Seller has agreed to pay a brokerage commission to Hodges Ward Elliott (“Broker”) pursuant to a separate written agreement between Seller and Broker.  

                    1.5          Limitation of Liability.

                                   1.5.1          Notwithstanding anything to the contrary contained herein, if the Closing of the transactions hereunder shall have occurred:  (1) Seller shall have no liability (and Buyer shall make no claim against Seller) for a breach of any representation or warranty under this Agreement unless the valid claims for all such breaches collectively aggregate to more than $115,000 as to the Properties, (2) the liability of the Seller under this Agreement for all breaches of representations and warranties under this Agreement (including with respect to itself, the Austin Property and the Waverly Property) shall not exceed, in the aggregate, to the extent not covered by insurance, an amount (the
“Maximum Liability Amount”) equal to $4,750,000, and (3) in no event shall Seller be liable for any consequential or punitive damages for breach of such representations and warranties except in the case of knowing and intentional fraud.

                                   1.5.2          No constituent member or partner in or agent of Seller, nor any advisor, trustee, director, officer, employee, beneficiary, shareholder, member, partner, participant, representative or agent of any partnership, limited liability company, corporation, trust or other entity that has or acquires a direct or indirect interest in Seller, shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and Buyer and its successors and assigns and, without limitation,
all other persons and entities, shall look solely to Seller’s assets for the payment of any claim or for any performance, and Buyer, on behalf of itself and its successors and assigns, hereby waives any and all such personal liability.  Notwithstanding anything to the contrary contained in this Agreement, neither the negative capital account of any constituent member or partner in Seller (or in any other constituent member or partner of Seller), nor any obligation of any constituent member or partner in Seller (or in any other constituent member or partner of Seller) to restore a negative capital account or to contribute capital to Seller (or to any other constituent member or partner of Seller), shall at any time be deemed to be the property or an asset of Seller or any such other constituent member or partner (and neither Buyer nor any of its successors or assigns shall have any right to collect, enforce or proceed against or with respect to any such negative capital account or a
member’s or partner’s obligation to restore or contribute).

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                                   1.5.3          The foregoing shall be in addition to, and not in limitation of, any further limitation of liability that might otherwise apply (whether by reason of Buyer’s waiver, relinquishment or release of any applicable rights or otherwise).

                                   1.5.4          Notwithstanding anything herein to the contrary, except in the case of knowing and intentional fraud by either party (but except as otherwise provided in Section 10.2.1), the liability of each party hereto resulting from the breach or default by either party shall be limited to actual damages incurred by the injured party and except in the case of knowing and intentional fraud by either party, the parties hereto hereby waive their rights to recover from the other party consequential, punitive, exemplary, and speculative damages.  

                                   1.5.5          The provisions of this Section 10.2 shall survive the Closing.

Exhibits; Entire Agreement; Modification.  All exhibits attached and referred to in this Agreement are hereby incorporated herein as if fully set forth in (and shall be deemed to be a part of) this Agreement.  This Agreement contains the entire agreement between the parties respecting the matters herein set forth and supersedes all prior agreements between the parties hereto respecting such matters.  This Agreement may not be modified or amended except by written agreement signed by both parties.

Time of the Essence.  Time is of the essence of this Agreement.  However, whenever action must be taken (including the giving of notice or the delivery of documents) under this Agreement during a certain period of time (or by a particular date) that ends (or occurs) on a non business day, then such period (or date) shall be extended until the immediately following business day.  As used herein, “business day” means any day other than a Saturday, Sunday, a federal holiday, or, as to any state wherein a Property is located, a state holiday in such state.

Interpretation.  Section headings shall not be used in construing this Agreement.  Each party acknowledges that such party and its counsel, after negotiation and consultation, have reviewed and revised this Agreement.  As such, the terms of this Agreement shall be fairly construed and the usual rule of construction, to the effect that any ambiguities herein should be resolved against the drafting party, shall not be employed in the interpretation of this Agreement or any amendments, modifications or exhibits hereto or thereto.  The words “herein”, “hereof”, “hereunder”, “hereby”, “this Agreement” and other similar references shall be construed to mean and include this Agreement and all amendments and supplements hereto unless the context shall clearly indicate or require otherwise.  Whenever the words “including”, “include” or “includes” are used in this
Agreement, they shall be interpreted in a non-exclusive manner.  Except as otherwise indicated, all Exhibit and Section references in this Agreement shall be deemed to refer to the Exhibits and Sections in this Agreement.  

Governing Law.  This Agreement shall be construed and enforced in accordance with the laws of the State of Illinois without regard to Illinois’ conflicts of law principles.  The parties agree that the sole venue for all actions or proceedings arising out of or in connection with this Agreement shall be in the state and federal courts located in Chicago, Illinois.  Each party waives its right to a jury trial in connection with any such action or proceeding.

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Successors and Assigns.  Buyer may not assign or transfer its rights or obligations under this Agreement without the prior written consent of Seller either directly or indirectly (whether by outright transfer, transfer of ownership interests or otherwise); provided, however, Buyer may assign its interest in this Agreement on or before the Closing Date to an entity in which Buyer has direct or indirect control and has more than a 50% direct or indirect ownership interest so long as (a) Buyer gives Seller at least three (3) business days advance written notice thereof and (b) Buyer and the assignee execute and deliver an assignment and assumption agreement in form reasonably satisfactory to Seller.  In the event of a transfer, the transferee shall assume in writing all of the transferor’s obligations hereunder, but such transferor shall not be released from its obligations hereunder unless and until the Closing occurs.  No consent given by
Seller to any transfer or assignment of Buyer’s rights or obligations hereunder shall be construed as a consent to any other transfer or assignment of Buyer’s rights or obligations hereunder.  No transfer or assignment in violation of the provisions hereof shall be valid or enforceable.  Subject to the foregoing, this Agreement and the terms and provisions hereof shall inure to the benefit of and be binding upon the successors and assigns of the parties.  Seller acknowledges that certain items of tangible and/or intangible personal property may need to be assigned to Buyer’s operating lessee and the applicable closing documents shall be modified accordingly as requested by Buyer including through the use of separate bills of sale and assignments or otherwise as reasonably requested by Buyer.

Notices.  Any notice which a party is required or may desire to give the other shall be in writing and may be sent by personal delivery, by mail (either [i] by United States registered or certified mail, return receipt requested, postage prepaid, or [ii] by Federal Express or similar generally recognized overnight carrier regularly providing proof of delivery or by telecopy (with a copy by mail), addressed as follows (subject to the right of a party to designate a different address for itself by notice similarly given):

	
   
 	
  To Seller:
  
	
   
 	
   
 
	
   
 	
  
c/o Walton Street Capital, L.L.C .
  
	
   
 	
  
900 North Michigan Avenue
  
	
   
 	
  
Suite 1900
  
	
   
 	
  
Chicago, Illinois  60611
  
	
   
 	
  
Attention:          Ira   Schulman and Luke Massar
  
	
   
 	
  
Telecopier:        (312)   915-2881
  
	
   
 	
  
Telephone:        (312)   915-2890
  
	
   
 	
   
 
	
   
 	
  
With Copies To:
  
	
   
 	
  
 
  
	
   
 	
  
Pircher, Nichols & Meeks
  
	
   
 	
  1925 Century Park East, Suite 1700
  
	
   
 	
  
Los Angeles, California  90067
  
	
   
 	
  
Attention:          Real   Estate Notices (PGN and STS)
  
	
   
 	
  
Telecopier:        (310)   201-8922
  
	
   
 	
  
Telephone:        (310)   201-8900
  

36

	
   
 	
  
and to:
  
	
   
 	
   
 
	
   
 	
  
SCS Advisors
  
	
   
 	
  
1101 Fifth Ave., Suite 330
  
	
   
 	
  
San Rafael, California  94901
  
	
   
 	
  Attention:          Semi   Salmi
  
	
   
 	
  
Telecopier:        (415)   458 2328
  
	
   
 	
  
Telephone:        (415)   458 2320
  
	
   
 	
   
 
	
   
 	
  
and to:
  
	
   
 	
   
 
	
   
 	
  
Rockpoint Group, L.L.C.
  
	
   
 	
  
222 Berkeley Street, Suite 2250
  
	
   
 	
  
Boston, Massachusetts 02116
  
	
   
 	
  
Attention: Thomas F. Gilbane
  
	
   
 	
  
Telecopier:          (617)   437 7011
  
	
   
 	
   
 
	
   
 	
  
and to:
  
	
   
 	
   
 
	
   
 	
  Rockpoint Group, L.L.C.
  
	
   
 	
  
13155 Noel Road, Suite 700
  
	
   
 	
  
Dallas, Texas  75240
  
	
   
 	
  
Attention: Pat Fox/Asset Management
  
	
   
 	
  
Telecopier:          (972)   934 8333
  
	
   
 	
   
 
	
   
 	
  
To Buyer:
  
	
   
 	
   
 
	
   
 	
  
DiamondRock Hospitality Limited Partnership
  
	
   
 	
  
6903 Rockledge Drive
  
	
   
 	
  
Suite 800
  
	
   
 	
  
Bethesda, Maryland  20817
  
	
   
 	
  Attention:  Michael Schecter
  
	
   
 	
  
Telecopier:          (240)   744-1199
  
	
   
 	
  
Telephone:          (240)   744-1170
  
	
   
 	
   
 
	
   
 	
  
With a copy to:
  
	
   
 	
  
Willkie Farr & Gallagher
  
	
   
 	
  
787 Seventh Avenue
  
	
   
 	
  
New York, New York 10019
  
	
   
 	
  
Attention:  Steven D. Klein
  
	
   
 	
  
Telecopier:          (212)   728 9221
  
	
   
 	
  
Telephone:          (212)   728 8221
  

Any notice so given by mail shall be deemed to have been given as of the date of delivery (whether accepted or refused) established by U.S. Post Office return receipt or the overnight carrier’s proof of delivery, as the case may be.  Any such notice not so given shall be deemed given upon receipt of the same by the party to whom the same is to be given.

37

Third Parties.  Nothing in this Agreement, whether expressed or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any person other than the parties hereto and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third parties any right of subrogation or action over or against any party to this Agreement.  This Agreement is not intended to and does not create any third party beneficiary rights whatsoever.

ARBITRATION OF DISPUTES.  ANY CONTROVERSY OR CLAIM ARISING UNDER OR RELATING TO THE TERMS OF THIS AGREEMENT OR ANY OF THE EXHIBITS ATTACHED TO IT, AND ANY PROCEEDINGS TO ENFORCE THIS AGREEMENT OR RIGHTS UNDER THIS AGREEMENT AND ITS EXHIBITS OTHER THAN THE “EXCLUDED MATTERS” (AS HEREINAFTER DEFINED) SHALL BE SETTLED BY ARBITRATION IN THE CITY OF CHICAGO, ILLINOIS, IN ACCORDANCE WITH THE THEN EXISTING RULES (“RULES”) OF PRACTICE AND PROCEDURE OF THE JUDICIAL ARBITRATION & MEDIATION SERVICES (“JAMS”).  ARBITRATION SHALL BE INITIATED BY A WRITTEN DEMAND FOR ARBITRATION BY EITHER PARTY.  THE PARTIES SHALL USE GOOD FAITH EFFORTS TO SELECT A SINGLE ARBITRATOR WITHIN TEN (10) DAYS OF SUCH REQUEST.  IF THE PARTIES FAIL TO AGREE ON A SINGLE ARBITRATOR DURING SUCH 10-DAY PERIOD, THEN EITHER PARTY MAY REQUEST THAT JAMS APPOINT AN ARBITRATOR.  AT THE TIME OF HIS OR HER APPOINTMENT, THE ARBITRATOR WILL BE

REQUESTED TO HOLD AN ARBITRATION HEARING WITHIN THIRTY (30) DAYS.  AS SOON AS PRACTICABLE AFTER SELECTION OF THE ARBITRATOR, THE ARBITRATOR SHALL DETERMINE A REASONABLE ESTIMATE OF THE ANTICIPATED FEES AND COSTS OF THE ARBITRATOR, AND SHALL RENDER A STATEMENT TO EACH PARTY SETTING FORTH SAID FEES AND COSTS.  THEREAFTER EACH PARTY SHALL, WITHIN TEN (10) DAYS OF RECEIPT OF SAID STATEMENT, DEPOSIT ONE HALF OF SAID SUM WITH THE ARBITRATOR(S) TO BE APPLIED AGAINST SUCH FEES AND COSTS (SUBJECT TO THE PROVISIONS OF THIS AGREEMENT). THE ARBITRATOR SHALL HAVE THE RIGHT TO DETERMINE THE SCOPE OF HIS OR HER JURISDICTION (PROVIDED THE ARBITRATOR IS BOUND TO THE PROVISIONS OF THIS AGREEMENT), THE EXTENT OF DISCOVERY AND TO GRANT EQUITABLE RELIEF, INCLUDING, THE RIGHT TO INCLUDE IN ANY AWARD AN ORDER TO A PARTY TO EXPUNGE ANY LIS PENDENS WHICH THE ARBITRATOR DEEMS IMPROPER OR TO MAKE ANY CHANGES AS ARE NECESSARY TO AN IMPROPER LIS PENDENS FILING.  THE PREVAILING PARTY SHALL BE ENTITLED TO REASONABLE
ATTORNEYS’ FEES AND OTHER REASONABLE COSTS INCURRED IN CONNECTION WITH THE ARBITRATION OR ANY OTHER LITIGATION PLUS INTEREST ON THE AMOUNT OF ANY AWARD.  JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF.  AS USED HEREIN, “EXCLUDED MATTERS” MEANS ANY CONTROVERSY, CLAIM OR PROCEEDING WHICH ARISES OR IS MADE OR FILED AFTER THE CLOSING OCCURS.  

38

Legal Costs.  The parties hereto agree that they shall pay directly any and all legal costs which they have incurred on their own behalf in the preparation of this Agreement, all deeds and other agreements pertaining to this transaction and that such legal costs shall not be part of the Closing costs.  In addition, if either Buyer or Seller brings any suit or other proceeding, including an arbitration proceeding, with respect to the subject matter or the enforcement of this Agreement, the prevailing party (as determined by the court, agency, arbitrator or other authority before which such suit or proceeding is commenced), in addition to such other relief as may be awarded, shall be entitled to recover reasonable attorneys’ fees, expenses and costs of investigation actually incurred.  The foregoing includes attorneys’ fees, expenses and costs of investigation (including those incurred in appellate proceedings), costs incurred in
establishing the right to indemnification, or in any action or participation in, or in connection with, any case or proceeding under Chapter 7, 11 or 13 of the Bankruptcy Code (11 United States Code Sections 101 et seq.), or any successor statutes.  The provisions of this Section 10.11 shall survive the Closing and any termination of this Agreement.

No Recordation.  In no event shall this Agreement or any document or other memorandum related to the subject matter of this Agreement (other than a lis pendens giving notice of an arbitration or legal proceeding to specifically enforce Seller’s obligations under this Agreement) be recorded without the consent of Seller.

Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.  Delivery by facsimile, or e-mail of a PDF copy, of a counterpart of this Agreement executed by a party shall constitute delivery by such party of such party’s executed counterpart of this Agreement.

Effectiveness.  In no event shall any draft of this Agreement create any obligation or liability, it being understood that this Agreement shall be effective and binding only when a counterpart hereof has been executed and delivered by each party hereto.

Press Releases.  Except for any disclosures required by law or the Securities and Exchange Commission, including, without limitation, Regulation FD, Seller and Buyer agree not to disclose or make any public announcements with respect to the subject matter of this Agreement or the existence of this Agreement without the consent of the other party.  If either party desires to issue a press release or other public announcement regarding this Agreement or the transaction set forth herein, subject to the immediately preceding sentence, such party shall obtain the approval of the other party, which approval shall not be unreasonably withheld or delayed.  The provisions of this Section 10.15 shall survive the closing and any termination of this Agreement. 

39

                    Indemnities. 

                              Agreement
to Indemnify.  (i) Seller shall indemnify and hold harmless Buyer and
any partner, member, manager officer, director, trustee, beneficiary, employee
or agent of Buyer (collectively, the “Buyer Indemnitees”) from
and against any and all obligations, claims, losses, damages, liabilities, and
expenses (including, without limitation, reasonable attorneys’ and
accountants’ fees and disbursements (collectively,
“Damages”) to the extent arising out of (A) any loss or
damage to property or injury to or death of any person occurring on or about or
in connection with the Properties or any portion thereof at any time or times
prior to the Closing Date (other than as to and excluding Damages of or to a
Governmental Authority arising out of the physical or environmental condition of
the Properties prior to the Closing Date and other than as to Damages for
remediation pertaining to the physical or environmental condition of the
Properties prior to the Closing Date), or (B) subject to the limitations
set forth herein, a breach of any representation or warranty made by Seller
hereunder or in any certificate delivered by Seller hereunder, and
(ii) Buyer shall indemnify and hold harmless Seller and any partner,
member, manager, officer, director, trustee, beneficiary, employee or agent of
Seller (collectively, the “Seller Indemnities”) from and
against any and all Damages to the extent arising out of (A) any loss or
damage to property or injury to or death of any person occurring on or about the
Properties or any portion thereof on or at any time or times after the Closing
Date (other than as to and excluding Damages of or to a Governmental Authority
arising out of or resulting from or relating to the physical or environmental
condition of the Properties prior to the Closing Date and other than as to
Damages for remediation pertaining to the physical or environmental condition of
the Properties prior to the Closing Date), or (B) subject to the
limitations set forth herein, a breach of any representation or warranty made by
Buyer hereunder or in any certificate delivered by Buyer hereunder.  The
provisions of this Section 10.16.1 shall survive the Closing and the termination
of this Agreement.  Seller’s liabilities under this Section 10.16
shall not extend the Survival Period stated in Section 7.3 hereof or exceed the
Maximum Liability Amount provided in Section 10.2.1 hereof, to the extent not
covered by insurance.  

                              Indemnification
Procedure for Third Party Claims.  In the case of any claim asserted by a
third party which claim is subject to indemnification by either party hereunder,
( a “Third-Party Claim”), the party seeking indemnification
(the “Indemnitee”) shall notify the other party (the
“Indemnitor”) promptly after has actual knowledge of any such
Third-Party Claim as to which indemnity may be sought (provided that failure to
so notify shall not affect the Indemnitor’s obligations hereunder except to
the extent materially prejudiced by such failure), and Indemnitee shall permit
the Indemnitor, at its sole expense, to assume the defense of any such
Third-Party Claim, provided that Indemnitee may participate in such
defense or administration at Indemnitee’s sole expense (provided, however,
that if a conflict of interest exists such that separate counsel must be engaged
by Indemnitee and the Indemnitor, the Indemnitor shall be responsible for the
reasonable fees and costs for such counsel for Indemnitee bug only for one
separate counsel for all Indemnitees).  The Indemnitor, in the defense of
any such Third-Party Claim, shall not, except with the consent of Indemnitee,
which Indemnitee agrees will not be unreasonably withheld, conditioned or
delayed with respect to a monetary settlement, judgment or relief,
(a) consent to entry of any judgment or enter into any settlement that
provides for injunctive or other non-monetary relief against Indemnitee or
(b) pursue any course of defense of any such Third-Party Claim subject to
indemnification hereunder if Indemnitee shall reasonably and in good faith
determine that the conduct of such defense could be expected to adversely affect
in any material respect Indemnitee, its direct or indirect owners, the use of
the Properties to which the Third-Party Claim relates.  In addition, if the
Indemnitor obtains and desires to accept from a party to any such Third-Party
Claim an offer to settle the Third-Party Claim solely for an amount certain,
then Indemnitee agrees that if requested by the Indemnitor, Indemnitee will, at
its sole expense, assume defense of such Third-Party Claim and thereafter the
Indemnitor’s obligation with respect to such Third-Party Claim shall not
exceed the costs of defense then incurred and the dollar amount of the
settlement the Indemnitor proposed to accept immediately prior to such
assumption by Indemnitee, it being agreed between Indemnitee and the Indemnitor
that Indemnitee will pay any greater amounts owing and bear any other
impositions in excess of those contemplated in the proposed settlement
arrangement. In the event that the Indemnitor does not accept the defense of any
matter as above provided, Indemnitee shall have the full right to defend against
any such Third-Party Claim or demand and shall be entitled to settle or agree to
pay in full such Third-Party Claim or demand, in its sole discretion.  In
any event, the Indemnitor and Indemnitee shall cooperate in the defense of any
action or claim subject to this Agreement and each agrees to make its records
available to the other with respect to such defense as reasonably requested and
to the extent doing so does not compromise any claim of privilege or any other
defense available to it.  Acceptance of the defense of any Third-Party
Claim or of the administration of any Third-Party Claim by the Indemnitor shall
be without prejudice to the Indemnitor’s right to assert at any time before
or after accepting such defense or administration that it is not obligated to
provide an indemnity, either in whole or in part, with respect to such
Third-Party Claim.  In the event that the Indemnitor asserts that it is not
obligated to provide an indemnity to Indemnitee with respect to a Third-Party
Claim, Indemnitee shall have the right to defend such Third-Party Claim, and if
the Indemnitor is adjudicated liable for indemnifying Indemnitee, the Indemnitor
shall reimburse Indemnitee for its out-of-pocket expenses in defending such
Third-Party Claim and all settlements and judgments reasonably incurred as a
result of such Third-Party Claim.

40

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

SELLER:

	
   
 	
  
WSRH AUSTIN, L.P.,
  
	
   
 	
  a Delaware limited partnership
  
	
   
 	
   
 	
   
 
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
WSRH Austin GP, L.L.C.,
  
	
   
 	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
  
Its General Partner
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
WSRH Austin Mezz, L.P.,
  
	
   
 	
   
 	
  
a Delaware limited partnership
  
	
   
 	
   
 	
  
Its Sole Member
  
	
   
 	
   
 	
   
 
	
   
 	
  By:
  	
  
WSRH Austin Mezz GP, L.L.C.,
  
	
   
 	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
  
Its General Partner
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
WSRH Holdings, LLC,
  
	
   
 	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
  
Its Sole Member
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
Walton Acquisition REOC Holdings IV, LLC,
  
	
   
 	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
  Member
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
Walton Street Real Estate Fund IV, L.P.,
  
	
   
 	
   
 	
  
a Delaware limited partnership
  
	
   
 	
   
 	
  
Its Managing Member
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
Walton Street Managers IV, L.P.,
  
	
   
 	
   
 	
  
a Delaware limited partnership
  
	
   
 	
   
 	
  
Its General Partner
  
	
   
 	
   
 	
   
 
	
   
 	
  By:
  	
  
WSC Managers IV, Inc.,
  
	
   
 	
   
 	
  
a Delaware corporation
  
	
   
 	
   
 	
  
Its General Partner
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
   
 
	
   
 	
   
 	
 

	
   
 	
  
Name:
  	
   
 
	
   
 	
   
 	
  
 
	
   
 	
  
Title:
  	
   
 
	
   
 	
   
 	
 
 

41

SELLER:

	
   
 	
  WSRH ATLANTA WAVERLY, L.L.C.,
  
	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
   
 
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
WSRH Atlanta Waverly Mezz, L.L.C.,
  
	
   
 	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
  
Its Sole Member
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
WSRH Holdings, LLC,
  
	
   
 	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
  Its Sole Member
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
Walton Acquisition REOC Holdings IV, LLC
  
	
   
 	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
  
Member
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
Walton Street Real Estate Fund IV, L.P.,
  
	
   
 	
   
 	
  
a Delaware limited partnership
  
	
   
 	
   
 	
  
Its Managing Member
  
	
   
 	
   
 	
   
 
	
   
 	
  By:
  	
  
Walton Street Managers IV, L.P.,
  
	
   
 	
   
 	
  
a Delaware limited partnership
  
	
   
 	
   
 	
  
Its General Partner
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
WSC Managers IV, Inc.,
  
	
   
 	
   
 	
  
a Delaware corporation
  
	
   
 	
   
 	
  
Its General Partner
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
   
 
	
   
 	
   
 	
  

	
   
 	
  
Name:
  	
   
 
	
   
 	
   
 	
 

	
   
 	
  Title:
  	
   
 
	
   
 	
   
 	
  

42

BUYER:

	
   
 	
  
DIAMONDROCK HOSPITALITY LIMITED PARTNERSHIP,
  
	
   
 	
  
a Delaware limited partnership
  
	
   
 	
   
 	
   
 
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
DIAMONDROCK HOSPITALITY COMPANY,
  
	
   
 	
   
 	
  
a Maryland corporation
  
	
   
 	
   
 	
  
its sole General Partner
  
	
   
 	
   
 	
   
 
	
   
 	
  By:
  	
   
 
	
   
 	
   
 	
  
 
	
   
 	
  
Name:
  	
   
 
	
   
 	
   
 	
  
 
	
   
 	
  
Title:
  	
   
 
	
   
 	
   
 	
  

43

JOINDER

          Provided that the Closing of the transaction under the Agreement to which this Joinder is attached shall occur, WSRH Holdings, LLC, a Delaware limited liability company (“Holdings”), (which by its execution of this Joinder acknowledges to Buyer that it has a material, economic interest in Waverly Seller and Austin Seller) agrees to and does hereby absolutely and unconditionally guarantee the obligations of each Seller under this Agreement, if any, to pay adjudicated damages to Buyer (the “Obligations”), subject to and not to exceed the Maximum Liability Amount set forth in Section 10.2.1 of the Agreement, and subject to any floor and minimum amounts set forth in Section 10.2.1 of the Agreement, all other limitations set forth in Section 10.2 of the Agreement, the limitations on survival set forth in Section 7.3 of the Agreement or otherwise, and all other limitations
expressly contained in the Agreement.  

          Holdings represents that its net worth as of the Closing Date, without taking into account the Properties or any contingent liability, will be greater than $20,000,000.

          Holdings covenants and agrees that, during the Survival Period (and, if a claim is made by Buyer under the Agreement during the Survival Period, then until such claim is resolved), Holdings will retain sufficient reserves to pay its obligations as they come due.

          Holdings hereby waives any right to require Buyer to (i) proceed against either Seller or pursue any rights or remedies with respect to the Agreement, or (ii) pursue any other remedy whatsoever in Buyer’s power.  Buyer shall have the right, subject to the limitations set forth in the Agreement, to enforce this Joinder regardless of the release or discharge of either Seller by operation of law.

          The liability of Holdings under this Joinder shall not be deemed to have been waived, released, discharged, impaired or affected by reason of the release or discharge of either Seller in any receivership, bankruptcy, winding-up or other creditors’ proceedings or the rejection, disaffirmance or disclaimer of the Agreement by any party in any such action or proceeding.

          Holdings authorizes Seller, without notice or consent and without affecting, impairing or discharging Holdings’ liability hereunder, to from time to time (a) renew, modify, amend, extend or discharge the provisions of the Obligations, or of any other term contained within the Agreement, and (b) exercise or refrain from exercising any of its rights or obligations under the Agreement, at law or in equity.   Holdings liability hereunder shall not be impaired by  Buyer’s  release in whole or in part Seller or any member in Seller (other than Holdings) from liability.  Holdings may not assign its obligations under the Joinder.

          Holdings agrees to pay (unless Holdings prevails in the enforcement action in question), upon demand therefor, reasonable attorneys’ fees and all other costs and expenses that may be incurred by Buyer in the enforcement of this Joinder and/or the Agreement and agrees that all attorneys’ fees and other costs and expenses incurred by Buyer in pursuing or enforcing rights under this Joinder, whether in litigation, or with respect to the Obligations or this Joinder, or in administrative, bankruptcy or reorganization proceedings shall constitute obligations which are guaranteed hereunder.

44

          Holdings represents and warrants to Buyer that (i) it is a Delaware limited liability company, duly organized, validly existing and in good standing under the laws of the state in which it was formed, (ii) it has the power, right, authority and legal capacity to execute and deliver this Joinder and to fully perform and observe the terms hereof, (iii) the execution, delivery and performance by it of this Joinder has been duly authorized by all necessary action on behalf of Holdings, (iv) all of the persons who execute and deliver this Joinder on behalf of Holdings have been duly authorized and empowered on behalf of Holdings so to do, (v) this Joinder is the valid and binding obligation of Holdings enforceable against it in accordance with its terms, (vi) the execution, delivery and performance by it of this Joinder will not (A) violate any provision of any of its organizational documents, (B) require it
to obtain any consent, approval or action of, or make any filing with or give any notice to, any person, (C) violate, conflict with or result in the breach of any of the terms of, result in a material modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default (by way of substitution, novation or otherwise) under, any agreement to which it or any of its affiliates (whether now or formerly existing) is or was a party or by or to which any of them or any of their properties may be (or have been) bound or subject, (D) violate any order, judgment, injunction, award, decree or writ of any governmental body, entity or authority against, or binding upon, it or any of its affiliates or upon any of its or their properties or the business of Holdings or (E) violate any law, statute, code, ordinance, regulation or other requirement of any governmental body, entity or authority, and (vii) there is no
provision in the organizational documents of Holdings that would prevent or limit, or is otherwise inconsistent with, Holdings’ execution and delivery of, and performance under, this Joinder.

[Signature on following page]

45

	
   
 	
  
WSRH HOLDINGS, LLC,
  
	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
   
 
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
Walton Acquisition REOC Holdings IV, LLC,
  
	
   
 	
   
 	
  
a Delaware limited liability company
  
	
   
 	
   
 	
  
Member
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
Walton Street Real Estate Fund IV, L.P.,
  
	
   
 	
   
 	
  a Delaware limited partnership
  
	
   
 	
   
 	
  
Its Managing Member
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
Walton Street Managers IV, L.P.,
  
	
   
 	
   
 	
  
a Delaware limited partnership
  
	
   
 	
   
 	
  
Its General Partner
  
	
   
 	
   
 	
   
 
	
   
 	
  
By:
  	
  
WSC Managers IV, Inc.,
  
	
   
 	
   
 	
  
a Delaware corporation
  
	
   
 	
   
 	
  
Its General Partner
  
	
   
 	
   
 	
   
 
	
   
 	
  By:
  	
   
 
	
   
 	
   
 	
  
 
	
   
 	
  
Name:
  	
   
 
	
   
 	
   
 	
 
 
	
   
 	
  
Title:
  	
   
 
	
   
 	
   
 	
  
 

46

EXHIBIT LIST

	
  
“A-1”
  	
  
-
  	
  
Legal Description of Austin Land
  
	
  
“A-2”
  	
  
-
  	
  
Legal Description of Waverly Land
  
	
  “B”
  	
  
-
  	
  
There is no Exhibit B
  
	
  
“C”
  	
  
-
  	
  
There is no Exhibit C
  
	
  
“D”
  	
  
-
  	
  
Interim Deposit Agreement
  
	
  
“E”
  	
  
-
  	
  
Permitted Exceptions.
  
	
  
“F”
  	
  
-
  	
  
Escrow Instructions
  
	
  
“G-1”
  	
  
-
  	
  
Austin Deed
  
	
  
“G-2”
  	
  
-
  	
  
Waverly Deed
  
	
  
“H”
  	
  
-
  	
  
Hotel Management Agreement Assignment and Assumption
  
	
  “I”
  	
  
-
  	
  
Other Assignment and Assumption Agreements
  
	
  
“J”
  	
  
-
  	
  
Bill of Sale
  
	
  
“K”
  	
  
-
  	
  
Seller Closing Certificate
  
	
  
“L-1”
  	
  
-
  	
  
Certificate of Non-Foreign Status Regarding Austin Property
  
	
  
“L-2”
  	
  
-
  	
  
Certificate of Non-Foreign Status Regarding Waverly Property
  
	
  
“L-3”
  	
  
-
  	
  
Affidavit of Seller’s Residence (Waverly Seller)
  
	
  
“M”
  	
  
-
  	
  
Seller’s Title Certificate
  
	
  “N”
  	
  
-
  	
  
Buyer Closing Certificate
  
	
  
“O-1”
  	
  
-
  	
  
Austin Leases
  
	
  
“O-2”
  	
  
-
  	
  
Waverly Leases
  
	
  
“P”
  	
  
-
  	
  
Security Deposits
  
	
  
“Q”
  	
  
-
  	
  
Litigation, Proceedings
  
	
  
“R-1”
  	
  
-
  	
  
Austin Service Agreements
  
	
  
“R-2”
  	
  
-
  	
  
Waverly Service Agreements
  
	
  “R-3”
  	
  -
  	
  Austin Renovation Commitments
  
	
  “R-4”
  	
  -
  	
  Waverly Renovation Commitments
  
	
  “S”
  	
  -
  	
  Environmental Reports
  
	
  “T”
  	
  -
  	
  Financial Information
  
	
  “U-1”
  	
  -
  	
  Form of Notice to Tenants (Austin Property)
  
	
  “U-2”
  	
  -
  	
  Form of Notice to Tenants (Waverly Property)
  

47

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