of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Company.

(b)                                  “Board of Directors” means the board of directors (or similar governing body) of the Company.

(c)                                   “Business Day” means any day, other than a Saturday or Sunday or a national or California state holiday or a day on which banking institutions in the States of California and New York are authorized or obligated by law, regulation or executive order to close.

(d)                                  “Common Stock” means the Common Stock of the Company, $.01 par value.

(e)                                   “Convertible Securities” means any securities or other instruments that are convertible into or exercisable or exchangeable for Common Stock, including the Notes.

(f)                                     “Family Group” means (a) the parents, spouse and descendants (by birth or adoption) of a Shareholder, (b) any custodian of a custodianship for and on behalf of a Stockholder or his or her parents, spouse or descendants (by birth or adoption), (c) any trustee of a trust solely for the benefit of a Shareholder or his or her parents, spouse or descendants (by birth or adoption) or (d) any limited partnership solely for the benefit of a Shareholder or his or her parents, spouse or descendants (by birth or adoption).

(g)                                  “Fully-Diluted Basis” shall mean the number of shares of Common Stock which would be outstanding, as of the date of computation, if all vested and outstanding Purchase Rights and Convertible Securities had been converted, exercised or exchanged; provided , however , that any Purchase Rights and Convertible. Securities which are subject to vesting but have not vested as of the date of computation will be disregarded for purposes of determining Fully-Diluted Basis.

(h)                                  “McMorrow” means William J. McMorrow.

(i)                                      “Permitted Transfer” means a Transfer of Securities:

(i)                                      between any Shareholder who is a natural person and such Shareholder’s Family Group (whether inter vivos or upon death); provided , however , that, prior to any such Transfer, the Shareholder must demonstrate to the reasonable satisfaction of the Company and Guardian that the Shareholder will retain, until his death, all rights to vote and Transfer the Securities that are proposed to be Transferred to such Shareholder’s Family Group;

(ii)                                   by a Shareholder who is a natural person and who is deceased or adjudicated incompetent to the personal representative of such Shareholder;

(iii)                                by the personal representative of a Shareholder who is a natural person and who is deceased or adjudicated incompetent to such Shareholder’s Family Group; and

(iv)                               by a Shareholder that is not a natural person to Affiliates of such Shareholder; provided , however, that, prior to any such Transfer, the Shareholder must demonstrate to the reasonable satisfaction of the Company and Guardian that the Shareholder

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will retain all rights to vote and Transfer the Securities that are proposed to be Transferred to such Shareholder’s Affiliates.

Notwithstanding the foregoing, no Permitted Transfer shall be effective unless and until the transferee of the Securities so Transferred, if such transferee is not a party to this Shareholders Agreement, executes and delivers to the Company a Joinder Agreement in substantially the form attached hereto as Exhibit A .

(j)                                      “Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, business entity or governmental authority.

(k)                                   “Preferred Stock” means shares of the Company which shall be entitled to preference or priority over any other shares of the Company in respect of either the payment of dividends or the distribution of assets upon liquidation.

(l)                                      “Purchase Rights” means options, warrants or other rights to purchase or subscribe for Common Stock or Convertible Securities.

(m)                                “Purchaser Securities” means the Notes and the shares of Common Stock issuable upon the conversion of the Notes in accordance with the terms of the Notes.

(n)                                  “Securities” or “Security” means Common Stock, Preferred Stock, Convertible Securities, Purchase Rights and any other shares of capital stock or equity interests of the Company, whether or not issued or outstanding on the date of this Shareholders Agreement.

(o)                                  “Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

(p)                                  “Spousal Consent” means a consent by a spouse of a Shareholder or prospective holder of Securities in the form set forth in Exhibit B .

(q)                                  “Subsidiary” or “Subsidiaries” means, as to any Person, any other Person in which such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such second Person, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company.

(r)                                     “Transfer” means any direct or indirect transfer, donation, sale, assignment, pledge, encumbrance, hypothecation, gift, creation of a security interest in or lien on, or other disposition, irrespective of whether any of the foregoing are effected with or without consideration, voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise, inter vivos or upon death.

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(s)                                   “Voting Stock” means capital stock (or other equity interests) of any class or classes of the Company, the holders of which are ordinarily, in the absence of contingencies, entitled to vote in the election of corporate directors (or individuals performing similar functions) of the Company or which permit the holders thereof to control the management of the Company.

2.                                        REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to each of the Shareholders and Guardian as follows:

(a)                                   The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

(b)                                  The Company has full corporate power and corporate authority to make, execute, deliver and perform this Shareholders Agreement and to carry out all of the transactions provided for herein without the need for the consent of any other Person.

(c)                                   This Shareholders Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with the terms hereof, except as such enforcement may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally.

(d)                                  Schedule I hereto sets forth a true, accurate and complete list of the shares of capital stock (on a Fully-Diluted Basis) held by each Shareholder as of the date hereof and the percentage of the total capital stock of the Company held by such Shareholder (determined on a Fully-Diluted Basis).

3.                                        REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH SHAREHOLDER

Each of the Shareholders severally (but not jointly) represents and warrants to, and covenants and agrees with, the Company and Guardian that:

(a)                                   Such Shareholder has full legal right, power and authority to enter into this Shareholders Agreement and to perform such Shareholder’s obligations hereunder without the need for the consent of any other Person.

(b)                                  This Shareholders Agreement has been duly authorized, executed and delivered by, and constitutes the legal, valid and binding obligation of, such Shareholder enforceable against such Shareholder in accordance with the terms hereof, except as such enforcement may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally.

(c)                                   Such Shareholder is the record and beneficial owner of the Securities set forth opposite such Shareholder’s name on Schedule 1 , free and clear from any purchase, sale or other right or restriction of any third party, other than as provided in this Shareholders Agreement.

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(d)                                  Except as set forth in this Shareholders Agreement, such Shareholder (i) has not granted or entered into, and will not grant or enter into, any proxy, and (ii) has not entered into or agreed to be bound by, and will not enter into or agree to be bound by, (A) any voting trust or other voting arrangement with respect to the Securities, or (B) any stockholders agreements or arrangements of any kind with any Person with respect to the Securities on terms which conflict with or violate any provision of this Shareholders Agreement, including but not limited to, agreements or arrangements with respect to the acquisition, disposition, Transfer or voting of Securities inconsistent with this Shareholders Agreement.

(e)                                   The execution, delivery and performance of this Shareholders Agreement by such Shareholder does not and will not conflict with, violate or cause a breach of any document, agreement, contract or instrument to which such Shareholder is a party or any judgment, order or decree to which such Shareholder is subject.

(f)                                     If such Shareholder is at any time a married individual, then the spouse of such Shareholder, acting with legal capacity to do so, will execute and deliver to the Company a Spousal Consent.

4.                                        STOCK DIVIDENDS, SPLITS, RECLASSIFICATIONS, MERGERS, ETC.

Each Shareholder acknowledges and agrees that Securities issued by the Company pursuant to a stock dividend, stock split, reclassification or like action, or pursuant to the exercise of a right granted by the Company to all holders of Securities to purchase Securities on a proportionate basis, will be treated for all purposes in the same manner as, and be subject to the same options and have the same rights and limitations on Transfer as, the Securities which were split or reclassified or with respect to which a stock dividend was paid or rights to purchase stock on a proportionate basis were granted. In the event of a merger of or exchange involving the Company where this Shareholders Agreement does not terminate, partnership units, membership units, shares of common stock or similar equity interests (and/or securities convertible into such units, shares or similar equity interests) which are issued in exchange for Securities will thereafter be deemed to be Securities subject to the t