Document:

Exhibit 10-31

Exhibit 10-31

 

 

 

 

 

 

AMENDMENT NO. 2

 

to

 

NEW YORK STATE ELECTRIC & GAS CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

EFFECTIVE 

AS OF AUGUST 1, 2001

 

 

          The New York State Electric & Gas Corporation Supplemental Executive Retirement Plan, (the "Plan") amended and restated effective August 1, 2001, as heretofore amended, is hereby further amended as follows:

1.        Effective August 1, 2001, the Plan is hereby amended to delete Exhibit "A" thereto and replace it with Exhibit "A" attached hereto and made a part hereof. 

          IN WITNESS WHEREOF OF THE ADOPTION OF THIS AMENDMENT No. 2, New York State Electric & Gas Corporation has set its hand and seal to this Amendment No. 2 on January 18, 2002.
NEW YORK STATE ELECTRIC & GAS 

CORPORATION

 

By:   /s/Sherwood J. Rafferty            

            Sherwood J. Rafferty

            Senior Vice President and 

            Chief Financial Officer

Attest:   /s/Elaine DuBrava          

                  Elaine DuBrava

                  Secretary

STATE OF NEW YORK         )

                                                  )  SS.:

COUNTY OF TOMPKINS     )

          On this    18    day of  January  , in the year of 2002, before me, the undersigned, personally appeared SHERWOOD J. RAFFERTY, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. 

  /s/Darlene E. Beach                    

          Notary Public

 

EXHIBIT "A"

Participating Employees

	
Robert D. Badertscher
	
Robert E. Martin

	
Richard H. Cerchiara
	
William G. McCann

	
William J. Cooney, Jr.
	
Sherwood J. Rafferty

	
Francis DiTommaso
	
James W. Rettberg

	
Thomas F. Dorazio
	
R. David Saunders

	
Michael D. Eastman
	
Susan T. Schattschneider

	
Brian J. Eldridge
	
Jeffrey K. Smith

	
Joseph C. Fleury
	
Teresa M. Turner

	
Raymond E. Jensen
	
Dennis R. Urgento

	
Arthur E. Kruppenbacher
	
Michael C.Y. Van

	
Robert L. Malecki
	
William K. Von IdersteinEXHIBIT 10.3

                       OPTION AGREEMENT TO PURCHASE STOCK

         THIS OPTION  AGREEMENT  TO  PURCHASE  STOCK  ("Agreement")  is made and
entered  into by and  among  NATIONAL  FINANCIAL,  INC.,  a  Nevada  corporation
(hereinafter referred to as "National Financial"),  AMERICAN INFLATABLES INC., a
California corporation (hereinafter referred to as "American Inflatables"),  and
GREGORY MULHOLLAND,  an individual (hereinafter referred to as "Optionor").  The
Agreement is as follows:

                                    RECITALS

         A. Optionor is the owner of more than One Million Five Hundred Thousand
(1,500,000) shares of no par value common stock (the "Stock") issued by American
Inflatables.

         B. Optionor  desires to sell,  grant and convey to National  Financial,
and National  Financial  desires to purchase and acquire,  an option to purchase
the Stock from Optionor in accordance with the provisions of the Agreement.

         NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which is hereby  acknowledged,  Optionor,  American  Inflatables and National
Financial agree as follows:

         1.       INCORPORATION OF RECITALS

         1.1 The  RECITALS  are hereby  incorporated  in this  Paragraph  1.1 as
though fully set forth herein,  and the parties each  acknowledge and agree that
such  party is bound by the same as though  set forth in full in this  Paragraph
1.1.

         2.       GRANT OF OPTION

         2.1 Optionor hereby sells, grants and conveys to National Financial the
right and option (the  "Option")  to purchase  one million  shares of Stock from
Optionor for the price of One Dollar  ($1.00 U.S.) per share,  and an additional
Five  Hundred  Thousand  (500,000)  shares of Stock for the price of Two Dollars
($2.00  U.S.)  per  share  for the total  consideration  of  $2,000,000.00  (the
"Purchase Price").  If and to the extent that National  Financial  exercises the
Option,  the  first  One  Million  (1,000,000)  shares  of Stock  shall be sold,
assigned,  transferred  and conveyed at the price of One Dollar ($1.00 U.S.) per
share;  thereafter,  shares of Stock shall be sold,  assigned,  transferred  and
conveyed at the price of Two Dollars  ($2.00 U.S.) per share.  The Option may be
exercised  by  National  Financial  at any time and from time to time until such
time as all of the Stock is purchased by National  Financial.  Provided Optionor
is then not in default under the terms of this Agreement, Optionor has the right
to  satisfy  his  obligations  under this  Agreement  by  substituting  American
Inflatables  as the grantor of either  options or warrants (on terms  reasonably
acceptable   to  National   Financial)   to  purchase  up  to  One  Million  Two
Hundred-Fifty  Thousand  (1,250,000)  shares of common stock,  no par value,  of

                                       1
<PAGE>

American  Inflatables  on the same terms and  conditions  as Optionor has hereby
granted to National  Financial  under this  Agreement.  For each share of common
stock, no par value, for which American Inflatables issues either an option or a
warrant directly to National Financial on such terms, Optionor shall be relieved
of the  obligation  to sell,  assign,  transfer  and convey one (1) share of the
Stock.

         2.2 As full and  complete  consideration  for the grant of the  Option,
Optionor  acknowledges  receipt of the sum of Two Hundred Fifty Thousand Dollars
($250,000.00)  (the  "Option  Consideration"),  in the form of a deposit made on
February 7, 2000 at the  request  and  direction  of  Optionor,  into Escrow No.
10-39211  at  Investors  Title  Company - Escrow  Division,  in  Newport  Beach,
California,  to be applied  against  the  purchase  price of that  certain  real
property known as 5672 Ocean Vista Drive, Huntington Beach, CA 92648.

         2.3 The Option  Consideration  shall be applied to the Purchase  Price,
but shall be refundable if Optionor breaches any provision of this Agreement.

         2.4 On the  "Closing  Date"  (as  defined  in  Paragraph  2.5,  below),
National Financial shall deliver to Optionor the remainder of the Purchase Price
for the Stock to be purchased.

         2.5 "Closing  Date" means the first  business day following the date or
dates on which National  Financial notifies Optionor of its election to purchase
some or all of the Stock, but not later than February 7, 2003.

         2.6 On the Closing Date, Optionor shall assign,  convey and transfer to
National Financial all right, title and interest of Optionor in and to the Stock
which National Financial elects then to purchase.

         3.       ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS

         3.1 Optionor  and American  Inflatables  hereby  jointly and  severally
represent and warrant that:

                  A. Optionor is the sole owner of and has the full right, power
and authority to sell, assign,  convey and transfer full ownership in and to the
Stock to National Financial and has the full right, power and authority to carry
out his obligations hereunder

                  B. All information previously, herein or hereafter supplied to
National  Financial by or on behalf of Optionor and  American  Inflatables  with
respect to the Stock is and shall be true and correct.

                  C. No person other than Optionor has any right,  title,  claim
or interest (by way of security  interest or other lien or charge or  otherwise)
in, against or to the Stock.

                                       2
<PAGE>

                  D.  American  Inflatables  is a  corporation  duly  organized,
validly  existing,  and  in  good  standing  under  the  laws  of the  State  of
California,  has  all  necessary  corporate  powers  to  own  and/or  lease  its
properties  and to carry on its business as now owned and operated by it, and is
duly  qualified to do  intrastate  business and is in good standing in any other
jurisdictions in which the it does business.

                  E.  All of the  Stock  is  validly  issued,  fully  paid,  and
non-assessable.  There  are  no  outstanding  subscriptions,   options,  rights,
warrants,  convertible securities, or other agreements or commitments obligating
American Inflatables to issue or to transfer from treasury any additional shares
of its capital stock of any class.

                  F.  Optionor  has or will have on the  date(s)  that  National
Financial  exercises  its right to purchase the Stock full power to transfer the
Stock to National  Financial  without  obtaining  the consent or approval of any
other person or governmental authority.

                  G. Optionor and American  Inflatables  have carefully read and
reviewed  this  Agreement,  understand  this  Agreement  fully,  and have had an
opportunity to review this Agreement with an attorney of his or its choice prior
to executing this Agreement.

                  H.  Optionor  and  American  Inflatables  do not rely upon any
statement,  representation, legal opinion, accounting opinion, or promise of any
other party in executing this Agreement.

                  I. This  Agreement is the result of protracted,  arms'  length
negotiation  between  the parties.

                  J.  Optionor and American  Inflatables  are not involved in or
aware of any pending,  threatened or proposed  litigation,  action or proceeding
affecting American Inflatables.

                  K.  Neither  Optionor nor  American  Inflatables  has made any
commitments  to or agreements  with any person that could  adversely  affect the
operation of American Inflatables.

                  L. Neither Optionor nor American  Inflatables has not received
any  notice to the effect  that  American  Inflatables  is in  violation  of any
applicable statute,  law, regulation or ordinance applicable to or affecting the
same.

                  M.  Except as  reflected  in its books and  records,  American
Inflatables  does not own,  directly or  indirectly,  any interest or investment
(whether equity or debt) in any corporation,  partnership,  business,  trust, or
other entity.

                  N.  Optionor has not executed any prior  assignment  of any of
their rights under the Stock.

                  O. Optionor has not done anything which might prevent National
Financial from or limit  National  Financial in exercising its right to purchase
the Stock.

                                       3
<PAGE>

                  P. There   is  no present  default  by  Optionor  or  American
Inflatables  with regard to the Stock.

                  Q. There has been no declaration, setting aside, or payment of
a  dividend  in respect to the  Stock,  or any  direct or  indirect  redemption,
purchase,  or other acquisition by American  Inflatables of any of its shares of
capital  stock,  and there has been no  declaration,  payment,  or commitment or
obligation of any kind for the payment, by American  Inflatables,  of a bonus or
other additional  salary or compensation to any of its officers,  directors,  or
employees.

                  R. Until such time,  if any, as National  Financial  exercises
its right to purchase the Stock, there will be no declaration, setting aside, or
payment of a  dividend  in  respect  to the  Stock,  or any  direct or  indirect
redemption, purchase, or other acquisition by American Inflatables of any of its
shares  of  capital  stock,  and  there  will  be no  declaration,  payment,  or
commitment or obligation of any kind for the payment,  by American  Inflatables,
of a bonus or other  additional  salary or  compensation to any of its officers,
directors, or employees.

                  S. There has been no sale or transfer of any asset of American
Inflatables,  except in the ordinary  course of business,  and there has been no
amendment  or  termination  of any  contract,  agreement,  or  license  to which
American Inflatables is a party, except in the ordinary course of business.

                  T. Until such time,  if any, as National  Financial  exercises
its right to purchase the Stock,  there will be no sale or transfer of any asset
of American  Inflatables,  except in the ordinary course of business,  and there
will be no amendment or  termination of any contract,  agreement,  or license to
which  American  Inflatables  is a  party,  except  in the  ordinary  course  of
business.

                  U. Except as  otherwise  reflected in the books and records of
American Inflatables, there has been no loan by or to American Inflatables which
remains  outstanding,  there has been no guaranty by American Inflatables of any
loan which has not been repaid, and there has been no mortgage, pledge, or other
encumbrance of any asset now owned by American Inflatables.

                  W. Until such time,  if any, as National  Financial  exercises
its right to purchase the Stock, there will be no waiver or release of any right
or claim of American Inflatables, except in the ordinary course of business.

                  X. Until such time,  if any, as National  Financial  exercises
its right to purchase  the Stock,  there will be no  destruction,  damage to, or
loss of any asset of American  Inflatables  not covered by  insurance  and which
materially or adversely affects the financial condition of American Inflatables.

                                       4
<PAGE>

                  Y.  Except as  reflected  in the books and records of American
Inflatables,  American  Inflatables has no debt,  liability or obligation of any
nature, whether accrued,  absolute,  contingent, or otherwise, or whether due or
to become due.

                  Z.  American  Inflatables  has  within the time and the manner
prescribed  by law filed all tax  returns,  including  without  limitation,  all
federal and state income and  employment  tax  returns,  required by law and has
paid all  taxes,  assessments,  and  penalties  due and  payable  in  connection
therewith.  There are no disputes as to taxes of any nature  payable by American
Inflatables.

                  AA.      American Inflatables  has  good and  marketable title
to its assets and interests  therein,  whether  real,  personal,  tangible,  and
intangible.

                  BB.      The  consummation  of  the  transactions contemplated
hereby will not result in or constitute any of the following:

                           (i) A   breach  of  any  term  or  provision  of  any
agreement to which American Inflatables is a party or bound.

                           (ii) A  default  or an event  that,  with or  without
notice  or lapse of time,  would be a  default  or  violation  of any  document,
instrument or arrangement  to which American  Inflatables is a party or by which
American Inflatables is bound.

                           (iii)  An  event  that  would  permit  any  party  to
terminate  any agreement or to accelerate  the maturity of any  indebtedness  or
other obligation of Optionor or American Inflatables.

                           (iv)  The creation or imposition of any lien,  charge
or encumbrance on any of the properties of Optionor or American Inflatables.

                  CC.      None of the  representations  and warranties  made by
Optionor and American  Inflatables  contains any untrue  statement of a material
fact or omits any material fact, the omission of which would be misleading.

                  DD.  Each  and  every  representation  and  warranty  made  by
Optionor and American  Inflatables  and set forth in this Agreement was material
to the  decision  of National  Financial  to enter into this  Agreement  and was
relied  upon by  National  Financial  in  doing  so.  Such  representations  and
warranties shall survive the  consummation of the  transactions  contemplated by
the  Agreement   notwithstanding   any   investigations   or   opportunities  to
investigate, nor any covenant or agreement set forth in this Agreement.

                                       5
<PAGE>

         3.2 Optionor  and  American  Inflatables  shall  jointly and  severally
indemnify  National  Financial  against  and hold it  harmless  from any and all
liability,  loss, or damage (including  reasonable attorneys' fees) which it may
incur under this Agreement or by reason of this Agreement,  and from any and all
claims and demands  whatsoever which may be asserted against it by reason of any
alleged obligation or undertaking on its part to perform or discharge any of the
terms of this Agreement,  and for any breach by Optionor or American Inflatables
of any covenant, warranty, duty or obligation under this Agreement.

         4.  COVENANTS OF OPTIONOR AND AMERICAN INFLATABLES

         4.1 In  addition  to all  covenants  and  agreements  of  Optionor  and
American  Inflatables  set  forth  in  this  Agreement,  Optionor  and  American
Inflatables hereby jointly and severally agree:

                  A. To do all acts that may be  necessary to maintain, preserve
and protect the value of the Stock

                  B.  Not  to  use or  permit  any  capital  stock  of  American
Inflatables to be issued,  bought, sold or used in violation of any provision of
this Agreement or any applicable law, statute, rule, regulation or ordinance.

                  C. To pay, or cause to be paid  promptly  when due, all taxes,
assessments,  charges,  encumbrances and liens now or hereafter  imposed upon or
affecting American Inflatables.

                  D. To notify  National  Financial  promptly  of any  change in
American Inflatables' name or place of business, or, if American Inflatables has
more than one place of business, its head office, or office in which its records
are kept.

                  E. To  procure,  execute  and  deliver  from  time to time any
endorsements, assignments, and other writings deemed necessary or appropriate by
National Financial to perfect, maintain and protect the Option.

                  F. To appear in and defend any action or proceeding  which may
affect National Financial's interest in the Option.

                  G. To keep  accurate  and  complete  records  of its and their
respective  business affairs and to provide National Financial with such records
and such other reports and  information  relating to their  respective  business
affairs as National Financial may reasonably request from time to time

                                       6
<PAGE>

                  H. To not (i) amend the Articles of Incorporation or Bylaws of
American  Inflatables  in a manner which would impair,  decrease or diminish the
value of the Option or the Stock,  (ii) issue any shares of its capital stock to
third  parties  for cash,  (iii)  issue or  create  any  warrants,  obligations,
subscriptions, options, convertible securities, or other commitments under which
any  additional  shares of its  capital  stock of any class might be directly or
indirectly authorized,  issued or transferred to third parties from treasury for
cash,  or (iv) agree to do any of the acts  listed  above.  Notwithstanding  the
foregoing,  American  Inflatables  may  issue  shares  of its  capital  stock in
exchange for assets or equity of other  entities of greater or equal value which
are to be acquired by or merged into American Inflatables.

                  I. Other than as contemplated  by this  Agreement,  to take no
action and make no statement,  admission or  representation  regarding  National
Financial without its prior written consent.

                  J.  American  Inflatables  shall use its best  efforts to file
with the Securities and Exchange Commission, and every other governmental agency
with  jurisdiction  over the  issuance  of shares of  common  stock,  as soon as
practicable   all  documents  and   instruments   necessary  to  allow  American
Inflatables  to issue to members of the general public  unrestricted  and freely
tradeable common stock, no par value, the number of such freely traded shares to
be not less than One Million Five Hundred Thousand (1,500,000).

         5. DISCLOSURE OF CONFIDENTIAL INFORMATION AND TRADE SECRETS

         5.1 Prior to and after the effective date of this  Agreement,  Optionor
may  have  had and  may  have  access  to and  become  acquainted  with  certain
confidential  information regarding American  Inflatables,  namely, its business
plans, written records used in its business, and other confidential concepts and
ideas in and  related to its  business,  whether  the same were  made,  devised,
conceived,  developed or perfected by Optionor,  either alone or in  conjunction
with other person or persons (collectively, the "Trade Secrets").

         5.2 Optionor acknowledges,  agrees,  represents and warrants to and for
the benefit of American  Inflatables  and National  Financial  that prior to and
after the effective date of this Agreement,  all of the entire right,  title and
interest in and to the Trade Secrets, and the totality of the same are and shall
henceforth be the exclusive property of American Inflatables.

         5.3 Optionor  shall not disclose any Trade Secrets to any other person,
firm,  or entity,  at any time,  nor utilize any Trade Secret or any  derivative
thereof.

         5.4 Optionor shall not announce,  publish, release, deliver, relinquish
or distribute in any manner any Trade Secret or any information relating to this
Agreement.

         6.       MISCELLANEOUS PROVISIONS

         6.1 In the event of any litigation  arising out of this Agreement,  the
prevailing party shall be entitled to reasonable attorneys' fees and costs.

                                       7
<PAGE>

         6.2 This Agreement  contains the entire  agreement  between the parties
regarding  the option to purchase the Stock,  and all prior and  contemporaneous
agreements,  understandings,  representations  and statements,  oral or written,
concerning the same are merged herein.

         6.3 No  amendment,  modification,  waiver,  discharge or change of this
Agreement  shall be valid  unless the same is in writing and signed by the party
against which the enforcement of such amendment, modification, waiver, discharge
or change is or may be sought.

         6.4 Wherever  applicable,  time is of the essence of this Agreement and
each of its provisions.

         6.5 All rights of National  Financial  under this Agreement shall inure
to the benefit of its  successors and assigns,  and all  obligations of Optionor
shall  bind  its  heirs,  executors,  administrators,  successors  and  assigns;
provided,  however,  that Optionor shall not assign its obligations  without the
prior written consent of National Financial.  Notwithstanding the foregoing,  on
the effective  date that American  Inflatables  may offer sell to members of the
general public  unrestricted  and freely  tradeable  common stock, no par value,
Optionor shall have the right, duty and obligation to cause American Inflatables
to  either  issue  directly,  or to grant an  option to  National  Financial  to
purchase,  up to  One  Million  Five  Hundred  Thousand  (1,500,000)  shares  of
unrestricted and freely tradeable common stock, no par value, for the same price
and  otherwise  on the same  terms  herein  above  described.  For each share of
unrestricted and freely tradeable common stock, no par value, issued directly by
American  Inflatables  to National  Financial on such terms,  Optionor  shall be
relieved of the obligation to sell, assign, transfer and convey one (1) share of
the Stock.

         6.6  All  representations,   warranties,   covenants,  obligations  and
agreements  contained in this agreement shall survive the execution and delivery
hereof.

         6.7 Unless  otherwise  specifically  provided  in this  Agreement,  all
notices,  demands, or other  communications  given hereunder shall be in writing
and shall be deemed to have been duly given upon personal  delivery or as of the
third (3rd) business day after mailing by United States certified mail,  postage
prepaid, addressed as follows:

As to National Financial:           National Financial, Inc
                                    C/o John G. Cruz, Esq.
                                    4 Park Plaza
                                    Suite 1230
                                    Irvine, CA 92614

As to American Inflatables
and Optionor:                        -------------------------
                                     -------------------------
                                     -------------------------

                                       8
<PAGE>

or to such other  address  or other  person as either of the above  persons  may
notify  the other in the  manner set forth  above;  provided  that any notice of
change of  address  or person to be  notified  shall be deemed  given  only when
actually received.

         6.8 This  Agreement  shall be governed by and construed and enforced in
accordance with the laws of the State of California.

         6.9 The section and paragraph  headings contained in this Agreement are
for reference  purposes only and shall not affect the meaning or  interpretation
of this Agreement.

         6.10 This  Agreement  may be executed in two (2) or more  counterparts,
each of which when so executed and  delivered  shall be deemed an original,  but
all of which taken together shall constitute one and the same instrument.

         6.11 It is the desire and intent of the parties that the  provisions of
this  Agreement  shall be enforced to the fullest extent  permissible  under the
laws and public policies  applied in each  jurisdiction in which  enforcement is
sought.  If any particular  portion of this Agreement shall be adjudicated to be
invalid  or  unenforceable,  this  Agreement  shall be deemed  amended to delete
therefrom the portion thus  adjudicated to be invalid or  unenforceable  and the
rights and obligations of the parties hereto shall continue unabated.

         6.12 The rights,  powers and remedies of National  Financial under this
Agreement shall in addition to all rights, powers and remedies given to National
Financial by virtue of any statute or rule of law, or any other  agreement,  all
of which rights,  powers and remedies  shall be cumulative  and may be exercised
concurrently  without  impairing  National  Financial  s rights  under any other
documents  or  instruments  that  may  be  delivered  in  connection  with  this
Agreement.

         6.13 Any forbearance, failure or delay after the date of this Agreement
by National  Financial in exercising  any right,  power or remedy this Agreement
shall not  preclude the further  exercise  thereof,  and every  right,  power or
remedy of National  Financial shall continue in full force and effect until such
right, power or remedy is specifically  waived in a writing executed by National
Financial.

         THIS AGREEMENT IS EFFECTIVE AS OF THIS 7th DAY OF FEBRUARY 2000.

"National Financial"                                 "Optionor"

NATIONAL FINANCIAL, INC.,
a Nevada corporation

By:                                           By:
      -------------------                          -----------------------
      Yvonne M. Hines,                             Gregory Mulholland,
      Its President                                An individual

                                       9
<PAGE>

"American Inflatables"

AMERICAN INFLATABLES INC.,
a California corporation

By:
         ---------------------
         Gregory Mulholland,
         Its President

                                       10

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