Exhibit 10.08
 

EXECUTION COPY
 

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$25,000,000
 
CREDIT AGREEMENT
 
between
 
SANDERS MORRIS HARRIS GROUP INC.,
 
as Borrower
 
and
 
PROSPERITY BANK,
 
as Lender
 
Dated as of May 11, 2009
 

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TABLE OF CONTENTS
 

   
Page
     
ARTICLE I
DEFINITIONS
1
     
Section 1.01.
Defined Terms
1
Section 1.02.
Other Definitional Provisions
22
     
ARTICLE II
AMOUNT AND TERMS OF COMMITMENT
23
     
Section 2.01.
Commitment
23
Section 2.02.
Procedure for Loan Borrowing
23
Section 2.03.
Repayment of Loan
24
Section 2.04.
Optional Prepayments
24
Section 2.05.
Mandatory Prepayments and Commitment Reductions
24
Section 2.06.
Interest Rates and Payment Dates
25
Section 2.07.
Computation of Interest and Fees
26
Section 2.08.
Pro Rata Treatment and Payments
26
Section 2.09.
Increased Costs
26
Section 2.10.
Taxes
28
Section 2.11.
Use of Proceeds
30
Section 2.12.
Evidence of Debt
30
Section 2.13.
Mitigation Obligations
30
     
ARTICLE III
CONDITIONS PRECEDENT
31
     
Section 3.01.
Conditions to Making the Loan
31
     
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
35
     
Section 4.01.
Financial Condition
35
Section 4.02.
No Change
36
Section 4.03.
Corporate Existence; Compliance with Law
36
Section 4.04.
Corporate Power; Authorization; Enforceable Obligations
36
Section 4.05.
No Legal Bar
37
Section 4.06.
Litigation
37
Section 4.07.
No Default
37
Section 4.08.
Ownership of Property; Liens
37
Section 4.09.
Intellectual Property
37
Section 4.10.
Taxes
37
Section 4.11.
Labor Matters
38
Section 4.12.
ERISA
38
Section 4.13.
Investment Company Act; Investment Advisers Act; Other Regulations
38
Section 4.14.
Federal Reserve Regulations
39
Section 4.15.
Subsidiaries
39
Section 4.16.
Environmental Matters
39
Section 4.17.
Accuracy of Information, Etc
40
Section 4.18.
Security Documents
40

 
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TABLE OF CONTENTS
(continued)
 

   
Page
     
Section 4.19.
Solvency
41
Section 4.20.
Certain Documents
41
Section 4.21.
Material Contracts
41
Section 4.22.
Insurance
41
Section 4.23.
Foreign Assets Control Regulations, Etc
41
Section 4.24.
Net Capital
41
Section 4.25.
Loan Party Accounts
42
     
ARTICLE V
AFFIRMATIVE COVENANTS
42
     
Section 5.01.
Financial Statements
42
Section 5.02.
Certificates; Other Information
43
Section 5.03.
Payment of Obligations
45
Section 5.04.
Maintenance of Existence; Compliance
45
Section 5.05.
Maintenance of Property; Insurance
46
Section 5.06.
Inspection of Property; Books and Records; Discussions
46
Section 5.07.
Notices
46
Section 5.08.
Environmental Laws
47
Section 5.09.
Additional Collateral
48
Section 5.10.
Further Assurances
49
Section 5.11.
Compliance with Leases
49
Section 5.12.
Material Contracts
49
Section 5.13.
Valuation and Appraisals
50
Section 5.14.
Board Visitation
50
Section 5.15.
Operating Accounts and Other Business
50
Section 5.16.
Net Capital
50
Section 5.17.
Capital Markets Division Disposition
50
Section 5.18.
Concept Capital Division Disposition and Indemnification
51
     
ARTICLE VI
NEGATIVE COVENANTS
51
     
Section 6.01.
Financial Covenants
51
Section 6.02.
Indebtedness
51
Section 6.03.
Liens
52
Section 6.04.
Fundamental Changes
53
Section 6.05.
Disposition of Property
54
Section 6.06.
Restricted Payments
54
Section 6.07.
Capital Expenditures
55
Section 6.08.
Investments
55
Section 6.09.
Transactions with Affiliates
56
Section 6.10.
Sales and Leasebacks
56
Section 6.11.
Changes in Fiscal Periods
56
Section 6.12.
Negative Pledge Clauses
56
Section 6.13.
Clauses Restricting Subsidiary Distributions
57

 
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TABLE OF CONTENTS
(continued)
 

   
Page
     
Section 6.14.
Lines of Business
57
Section 6.15.
Amendments to Acquisition Documents
57
Section 6.16.
Amendments to Organizational Documents
57
Section 6.17.
Material Contracts
57
Section 6.18.
Terrorism Sanctions Regulations
58
Section 6.19.
Management and Director Compensation
58
Section 6.20.
Swap Contracts
58
Section 6.21.
Margin Stock
58
Section 6.22.
Loan Party Accounts
58
Section 6.23.
Subordinated Note
59
Section 6.24.
SMHG - Salient Intercreditor Agreement
59
     
ARTICLE VII
EVENTS OF DEFAULT
59
     
Section 7.01.
Events of Default
59
     
ARTICLE VIII
MISCELLANEOUS
62
     
Section 8.01.
Amendments and Waivers
62
Section 8.02.
Notices; Electronic Communication
63
Section 8.03.
No Waiver; Cumulative Remedies; Enforcement
64
Section 8.04.
Survival
64
Section 8.05.
Expenses; Indemnity; Damage Waiver
64
Section 8.06.
Successors and Assigns; Participations and Assignments
65
Section 8.07.
Setoff
67
Section 8.08.
Counterparts; Integration; Effectiveness; Electronic Execution
67
Section 8.09.
Severability
68
Section 8.10.
GOVERNING LAW; JURISDICTION, ETC
68
Section 8.11.
Acknowledgments
69
Section 8.12.
Treatment of Certain Information; Confidentiality
69
Section 8.13.
Interest Rate Limitation
70
Section 8.14.
Headings
70
Section 8.15.
Time of the Essence
70
Section 8.16.
WAIVER OF JURY TRIAL
70
Section 8.17.
Electronic Execution of Assignments and Certain Other Documents
70
Section 8.18.
USA PATRIOT Act Notice
71
Section 8.19.
Press Releases and Related Matters
71
Section 8.20.
No Advisory or Fiduciary Responsibility
71
Section 8.21.
Independence of Covenants
72
Section 8.22.
ENTIRE AGREEMENT
72

 
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SCHEDULES:
 
1.01
Existing Letters of Credit
4.04
Consents, Authorizations, Filings and Notices
4.13
Investment Advisers
4.15
Subsidiaries
4.18
UCC Filing Jurisdictions
4.21
Material Contracts
4.22
Insurance
4.25
Existing Accounts
6.02(d)
Existing Indebtedness
6.03(f)
Existing Liens
6.06
Contractually Obligated Restricted Payments
6.08(a)
Existing Investments

 
EXHIBITS:
 
A
Form of Guarantee and Security Agreement
B
Form of Closing Certificate
C
Form of Mortgage
D
Form of Term Note
E
Form of Legal Opinion
F
Form of Solvency Certificate
G
Form of Notice of Borrowing
H
Form of Compliance Certificate
I
Form of Edelman Subordination Agreement

 
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CREDIT AGREEMENT
 
CREDIT AGREEMENT, dated as of May 11, 2009, between SANDERS MORRIS HARRIS GROUP
INC., a Texas corporation (the "Borrower") and PROSPERITY BANK, as lender (the
"Lender").
 
WHEREAS, the Borrower has requested that the Lender extend to the Borrower a
term loan; and
 
WHEREAS, the Lender has agreed to extend a term loan to the Borrower on the
terms and subject to the conditions set forth in this Agreement.
 
ARTICLE I
 
DEFINITIONS
 
Section 1.01.   Defined Terms.  As used in this Agreement, the terms listed in
this Section 1.01 shall have the respective meanings set forth in this Section
1.01.
 
"Account Debtor" means any person obligated on an Account.
 
"Accounts" has the meaning specified in the UCC.
 
"Acquisition" has the meaning specified in Section 3.01(b)(i).
 
"Acquisition Agreement" means that certain letter agreement, dated as of January
1, 2009, among Fredric M. Edelman, an individual, Edward Moore, an individual,
and the Borrower, which sets forth agreements between the parties thereto
regarding transactions contemplated by the Reorganization and Purchase
Agreement.
 
"Acquisition Documents" means the collective reference to the Acquisition
Agreement, the Subordinated Note, the Reorganization and Purchase Agreement and
all schedules, exhibits and annexes thereto and all other agreements,
instruments and documents governing, evidencing or affecting the terms thereof
or entered into in connection therewith.
 
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person.  For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 5% or more of the Equity
Interests having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Equity Interests, by contract or otherwise.
 
"Aggregate Indebtedness" means, at any time, "aggregate indebtedness" as defined
in and as computed in accordance with Rule 15c3-1.
 
"Agreement" means this Credit Agreement.

 
 

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"Anti-Terrorism Order" means Executive Order No. 13,224 of September 24, 2001,
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as amended.
 
"Approved Fund" means any Fund that is administered or managed by (a) the
Lender, or (b) an Affiliate of the Lender, or (c) an entity or Affiliate of an
entity that administers or manages the Lender.
 
"Asset Sale" means (a) any Disposition or series of related Dispositions of any
Equity Interests in a Subsidiary of the Borrower, all or substantially all of
the assets of a Subsidiary of the Borrower, or all or substantially all of the
assets of a business unit of the Borrower or any Subsidiary of the Borrower,
excluding the Capital Markets Division Disposition and the Concept Capital
Division Disposition or (b) any Disposition or series of related Dispositions
(excluding any such Disposition permitted by clause (a), (b), (c) or (d) of
Section 6.05) that yields gross proceeds to any Group Member (valued at the
initial principal amount thereof in the case of non-cash proceeds consisting of
notes or other debt securities and valued at fair market value in the case of
other non-cash proceeds) in excess of $500,000.
 
"Assigned Agreement Payment" means any payment made by any Person to the
Borrower and/or to SMH SPEADV under any Assigned Agreement.
 
"Assigned Agreement Payment Account" means that certain deposit account
maintained by the Borrower and/or SMH SPEADV with the Lender into which the
Borrower and/or SMH SPEADV transfers or deposits Assigned Agreement Payments.
 
"Assigned Agreement Payment Escrow Account" means that certain deposit account
maintained by the Lender into which the Lender transfers or deposits and holds
Assigned Agreement Payment Escrow Amounts in escrow until applied in accordance
with this Agreement.
 
"Assigned Agreement Payment Escrow Amount" has the meaning specified in Section
2.06(d).
 
"Assigned Agreements" means the collective reference to the Redemption
Agreement, the Purchase and Sale Agreement, the Salient Note, the Servicing
Agreement, the SMH SPEADV Assignments, and all schedules, exhibits and annexes
thereto, and all side letters and agreements affecting the terms thereof or
entered into in connection therewith.
 
"Attributable Indebtedness" means, on any date, (a) in respect of any Capital
Lease Obligation of any Person, the capitalized amount thereof that would appear
on a balance sheet of such Person prepared as of such date in accordance with
GAAP, (b) in respect of any Synthetic Lease Obligation, the capitalized amount
of the remaining lease or similar payments under the relevant lease or other
applicable agreement or instrument that would appear on a balance sheet of such
Person prepared as of such date in accordance with GAAP if such lease or other
agreement or instrument were accounted for as a Capital Lease Obligation, and
(c) all Synthetic Debt of such Person.

 
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"Available Cash" means, at any time, (a) the aggregate amount of all
unrestricted and unencumbered cash and Cash Equivalents of the Borrower and its
Subsidiaries at such time minus (b) the aggregate amount of taxes that would
then be payable if the cash or Cash Equivalents of the Foreign Subsidiaries were
paid as a dividend to the Borrower or any of its Domestic Subsidiaries as a
result of the payment of any such dividend.
 
"Board" means the Board of Governors of the Federal Reserve System of the United
States (or any successor).
 
"Borrower" has the meaning specified in the preamble hereto.
 
"Borrowing Date" means the Business Day specified by the Borrower as the date on
which the Borrower requests the Lender to make the Loan hereunder.
 
"Business" has the meaning specified in Section 4.16(b).
 
"Business Day" means a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.
 
"Capital Expenditures" means for any period, with respect to any Person, the
aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
 
"Capital Lease Obligations" means, as to any Person, the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP and, for the purposes of
this Agreement, the amount of such obligations at any time shall be the
capitalized amount thereof at such time determined in accordance with GAAP.
 
"Capital Markets Division Disposition" means the sale of certain assets of SMH
Capital Inc. pursuant to that certain Contribution Agreement, dated as of
January 1, 2009, by and among the Borrower, SMH Capital Inc., Pan Asia China
Commerce Corp., Siwanoy Capital, LLC and Siwanoy Securities, LLC.
 
"Cash" or "cash" means money, currency or a credit balance in a deposit account.
 
"Cash Equivalents" means any of the following:
 
(a)           marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case maturing
within one year from the date of acquisition;
 
(b)          certificates of deposit, time deposits, Eurodollar time deposits or
overnight bank deposits having maturities of six months or less from the date of
acquisition issued by the Lender or by any commercial bank organized under the
laws of the United States or any state thereof having combined capital and
surplus of not less than $500,000,000;

 
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(c)           commercial paper of an issuer rated at least A-1 by Standard &
Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc.
("Moody's"), or carrying an equivalent rating by a nationally recognized rating
agency, if both of the two named rating agencies cease publishing ratings of
commercial paper issuers generally, and maturing within six months from the date
of acquisition;
 
(d)           fully collateralized repurchase obligations of the Lender or of
any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than thirty (30) days, with respect to
securities issued or fully guaranteed or insured by the United States
government;
 
(e)           securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, or by any political subdivision or taxing authority of any
such state, commonwealth or territory the securities of which state,
commonwealth, territory, political subdivision, or taxing authority (as the case
may be) are rated at least A by S&P or A by Moody's;
 
(f)            securities with maturities of six months or less from the date of
acquisition backed by standby letters of credit issued by the Lender or any
commercial bank satisfying the requirements of clause (b) of this definition;
 
(g)           shares of money market mutual or similar funds that invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition; or
 
(h)           shares of money market mutual funds that (i) comply with the
criteria set forth in Securities and Exchange Rule 2a-7 under the Investment
Company Act of 1940, (ii) are rated AAA by S&P or Aaa by Moody's, and (iii) have
portfolio assets of at least $5,000,000,000.
 
"Cash Management Agreement" means any agreement to provide cash management
services, including treasury, depository, overdraft, credit or debit card,
electronic funds transfer and other cash management arrangements.
 
"Change in Law" means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority.
 
"CFTC" means the Commodity Futures Trading Commission and any successor entity.
 
"Clearing Account" means any deposit account, securities account or commodity
account established and maintained by any Loan Party with any other Person
pursuant to a Clearing Agreement.

 
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"Clearing Agreement" means any agreement, contract or other arrangement between
or among the Borrower or any other Loan Party and any broker, dealer, clearing
firm, clearing organization, or other Person governing, evidencing or relating
to the purchase, sale, brokering, trading, clearing and/or settlement of or the
provision of margin or other collateral for any securities transactions by, for,
in the name of or on behalf of any customer or other third party.

"Closing Date" means the date on which the conditions precedent set forth in
Section 3.01 shall have been satisfied, which date is May 11, 2009.
 
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
 
"Collateral" means all property of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.
 
"Collateral Account" has the meaning specified in the Guarantee and Security
Agreement.
 
"Commitment" means the obligation of the Lender, if any, to make the Loan to the
Borrower hereunder in the original principal amount of $25,000,000.
 
"Commitment Letter" means the letter agreement dated February 13, 2009 between
the Borrower and the Lender.
 
"Commonly Controlled Entity" means an entity, whether or not incorporated, that
is under common control with the Borrower within the meaning of Section 4001 of
ERISA or is part of a group that includes the Borrower and that is treated as a
single employer under Section 414 of the Code.
 
"Compliance Certificate" means a certificate duly executed and properly
completed by a Responsible Officer of the Borrower substantially in the form of
Exhibit H, or in such other form as may be required by the Lender.
 
"Concept Capital Division" means the division of SMH Capital Inc. known as the
Concept Capital Division based in New York, New York.
 
"Concept Capital Division Disposition" means the sale of the assets of SMH
Capital Inc. comprising the Concept Capital Division to NewCo LLC pursuant to
the terms of that certain Term Sheet dated as of January 1, 2009 by and among
the Borrower, SMH Capital Inc., Michael S. Rosen, and Jack D. Seibald and other
agreements, instruments and documents.
 
"Concept Capital Obligations" means any damages, costs, expenses, claims,
liabilities, obligations and other amounts which may be or have been paid or
incurred from time to time by the Borrower or any other Group Member directly or
indirectly from, as a result of or in connection with any Concept Capital Short
Sales Exposure or any other liability, obligation, transaction or matter, in
each case whether now existing or hereafter arising, with respect to NewCo LLC
or the Concept Capital Division from, under, with respect to or in connection
with any Clearing Agreement or other agreement, contract or arrangement,
applicable law or otherwise.

 
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"Concept Capital Short Sales Exposure" means, at any date, an aggregate amount
equal to the absolute value of the difference of (a) all amounts that NewCo LLC
has received from selling securities that NewCo LLC either does not own (or owns
but has not delivered to any other Person (which securities have been borrowed
by NewCo LLC from one or more third parties) to any Person on or prior to such
date minus (b) all amounts that NewCo LLC has paid (or would be required to pay)
on such date as a result of purchasing such securities in the open market on
such date and returning such securities to such third party lenders.
 
"Consent and Agreement" means, individually and collectively, (a) the Consent
and Agreement among the Borrower, SMH Capital Inc., the Lender, Endowment
Advisers, L.P., The Endowment Fund Management, LLC, and The Endowment Fund, GP,
L.P., dated as of May 11, 2009 and (b) the Consent and Agreement among the
Borrower, SMH Capital Inc., the Lender, Salient Partners, L.P., and Salient
Capital Management, LLC, dated as of May 11, 2009.
 
"Consolidated Client Assets" means, at any date, the aggregate fair market value
of all financial assets of all Persons that are invested in any account
maintained with, or that are under the management of or held and maintained by,
the Borrower or any of its Subsidiaries on behalf of such Persons at such date,
in any case on account of which the Borrower or any of its Subsidiaries receive
management fees or commission income in exchange for the ongoing management of
such financial assets or such accounts.
 
"Consolidated Current Assets" means, at any date, all amounts (other than cash
and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite
the caption "total current assets" (or any like caption) on a consolidated
balance sheet of the Borrower and its Subsidiaries at such date.
 
"Consolidated Current Liabilities" means, at any date, all amounts that would,
in conformity with GAAP, be set forth opposite the caption "total current
liabilities" (or any like caption) on a consolidated balance sheet of the
Borrower and its Subsidiaries at such date.
 
"Consolidated Leverage Ratio" means, as at the last day of any period, the ratio
of (a) Consolidated Total Debt on such date to (b) Consolidated Tangible Net
Worth on such date.
 
"Consolidated Liquid Assets" means, at any date, (a) Available Cash and all Cash
Equivalents at such date, (b) all Marketable Equity Securities at such date, (c)
all fee and commission income earned but not yet received under investment
advisory and brokerage accounts managed by the Borrower and its Subsidiaries
which are due and payable to the Borrower within ninety (90) days of such date,
and (d) all amounts under the Redemption Agreement which are due and payable to
the Borrower within ninety (90) days of such date, in each case that would, in
conformity with GAAP, be included as an asset on a consolidated balance sheet of
the Borrower and its Subsidiaries at such date.

 
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"Consolidated Net Income" means, for any period, the consolidated net income (or
loss) of the Borrower and its Subsidiaries, determined on a consolidated basis
in accordance with GAAP; provided that there shall be excluded (a) the income
(or loss) of any Person accrued prior to the date it becomes a Subsidiary of the
Borrower or is merged into or consolidated with the Borrower or any of its
Subsidiaries, (b) the income (or loss) of any Person (other than a Subsidiary of
the Borrower) in which the Borrower or any of its Subsidiaries has an ownership
interest, except to the extent that any such income is actually received by the
Borrower or such Subsidiary in the form of cash dividends or similar cash
distributions, (c) the undistributed earnings of any Subsidiary of the Borrower
(other than a Subsidiary Guarantor) to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary is not at the
time permitted by the terms of any Contractual Obligation (other than under any
Loan Document) or Requirement of Law applicable to such Subsidiary, (d)
unrealized appreciation or depreciation in the value of any Investment owned by
the Borrower or its Subsidiaries, and (e) any charge to or write-down of
goodwill recorded by the Borrower in accordance with Statement of Financial
Accounting Standards No. 142 as in effect on the date hereof (i) for the fiscal
Quarter ended as at December 31, 2008, (ii) for the fiscal Quarter ended as at
March 31, 2009, or (iii) for the fiscal Quarter ended as at June 30, 2009 solely
as a result of an impairment of goodwill arising directly as a result of the
Acquisition.
 
"Consolidated Short Sales Amount" means, at any date, an aggregate amount equal
to all amounts that the Borrower or any Group Member has received from selling
securities that such Person does not own (or owns but does not deliver to any
other Person (which securities have been borrowed by the Borrower or such other
Group Member from one or more third parties)) to any other Person on or prior to
such date which securities have neither been purchased or repurchased in the
open market prior to such date nor returned to such third party lender on or
prior to such date.
 
"Consolidated Short Sales Exposure" means, at any date, an aggregate amount
equal to the absolute value of the difference of (a) all amounts that the
Borrower or any such Subsidiary has received from selling securities that the
Borrower or any such Subsidiary does not own (or owns but has not delivered to
any other Person (which securities have been borrowed by the Borrower or any
such other Group Member from one or more third parties) to any other Person on
or prior to such date, minus (b) all amounts that the Borrower or any such other
Group Member has paid (or would be required to pay) on such date as a result of
purchasing such securities in the open market on such date and returning such
securities to such third party lenders; provided, however, that if such
difference (prior to taking the absolute value thereof) on any date is a
positive number, then the absolute value of such difference shall be deemed to
be zero on such date.
 
"Consolidated Tangible Net Worth" means, at any date, (a) all amounts that
would, in conformity with GAAP, be included on a consolidated balance sheet of
the Borrower and its Subsidiaries under stockholders' equity at such date, minus
(b) the net amount of all goodwill and all other intangible assets of the
Borrower and its Subsidiaries, determined on a consolidated basis in conformity
with GAAP at such date.
 
"Consolidated Total Debt" means, at any date, the aggregate principal amount of
all Indebtedness for Borrowed Money of the Borrower and its Subsidiaries at such
date, determined on a consolidated basis in accordance with GAAP.
 
"Continuing Directors" means the directors of the Borrower on the Closing Date,
after giving effect to the Acquisition and the other transactions contemplated
hereby, and each other director, if, in each case, such other director's
nomination for election to the board of directors of the Borrower is recommended
by at least 66-2/3% of the then Continuing Directors.

 
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"Contractual Obligation" means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
 
"Cumulative Consolidated Net Income" means, on any date, the sum of Consolidated
Net Income for the Fiscal Quarter commencing on January 1, 2008 and for each
Fiscal Quarter thereafter up to and including the Fiscal Quarter most recently
ended on such date.
 
"Cumulative Dividend Amount" means, on any date, the sum of all cash dividends
made by the Borrower on its issued and outstanding shares of common stock from
the Closing Date and through and including such date.
 
"Customer Security" has the meaning specified in Rule 15c3-3.
 
"Default" means any of the events specified in Section 7.01, whether or not any
requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
 
"Default Rate" means a rate per annum equal to the Highest Lawful Rate.
 
"Disposition" means with respect to any property, any sale, lease, license, sale
and leaseback, assignment, conveyance, transfer or other disposition
thereof.  The terms "Dispose" and "Disposed of" shall have correlative meanings.
 
"Dollars" and "$" means dollars in lawful currency of the United States.
 
"Domestic Subsidiary" means any Subsidiary of the Borrower organized under the
laws of any jurisdiction within the United States.
 
"Edelman Subordination Agreement" means the Subordination Agreement to be
executed by the Lender, the Borrower, Fredric M. Edelman, an individual, and any
other Person which from time to time is a permitted holder of all or any part of
the Subordinated Note, substantially in the form of Exhibit I.
 
"EFA LLC Interests" has the meaning specified in Section 3.01(b)(iv).
 
"EFC LLC Interests" has the meaning specified in Section 3.01(b)(iv).
 
"Eligible Assignee" means (a) an Affiliate of the Lender, (b) an Approved Fund
and (c) any other Person (other than a natural person) approved by the Borrower
(such approval not to be unreasonably withheld or delayed); provided that no
such approval shall be required if a Default or an Event of Default has occurred
and is continuing.
 
"Environmental Laws" means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.

 
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"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
 
"Equity Interests" means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrant, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest.
 
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
 
"Event of Default" means any of the events specified in Section 7.01, provided
that any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
 
"Excess Payment" means, for any Fiscal Quarter, the aggregate amount of cash,
securities or other property received by the Borrower under or in respect of the
Redemption Agreement which is in excess of $3,000,000 during such Fiscal
Quarter.
 
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
 
"Excluded Foreign Subsidiary" means any Foreign Subsidiary in respect of which
either (a) the pledge of all of the Equity Interests of such Subsidiary as
Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, would,
in the good faith judgment of the Borrower, result in adverse tax consequences
to the Borrower.
 
"Excluded Taxes" means, with respect to the Lender, the Lender (a) taxes imposed
on or measured by its overall net income (however denominated), and franchise
taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or in which its applicable
Lending Office is located, (b) any branch profits taxes imposed by the United
States or any similar tax imposed by any other jurisdiction in which the
Borrower is located, and (c) any backup withholding tax that is required by the
Code to be withheld from amounts payable to the Lender because the Lender has
failed to comply with clause (A) of Section 2.10(e)(i).
 
"Existing Accounts" has the meaning specified in Section 4.25.
 
"Existing Credit Facility" means the Credit Agreement, dated as of May 9, 2005,
between JPMorgan Chase Bank, National Association, as lender, and Sanders Morris
Harris Group Inc., as borrower, as amended, restated, supplemented or otherwise
modified prior to the date hereof.

 
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"Extraordinary Receipts" means any and all cash received by or paid to or for
the account of any Group Member not in the ordinary course of business (and not
consisting of proceeds from an Asset Sale or Recovery Event), including, without
limitation, (a) foreign, United States, state or local tax refunds, (b) pension
plan reversions, (c) proceeds of insurance (other than proceeds of business
interruption insurance to the extent such proceeds constitute compensation for
lost earnings) or casualty claims, (d) judgments, proceeds of settlements or
other consideration of any kind in connection with any claim or cause of action,
(e) indemnity payments, and (f) any purchase price adjustments.
 
"FINRA" means Financial Institution Regulatory Authority, Inc., and any
successor entity.
 
"Fiscal Quarter" means any of the four quarters of any Fiscal Year.
 
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries ending
on December 31 in any calendar year.
 
"FOCUS Report" means, for any Person, the Financial and Operational Combined
Uniform Single Report required to be filed on a monthly or quarterly basis, as
the case may be, with the SEC or the NYSE, or any report that is required in
lieu of such report.
 
"Foreign Subsidiary" means any Subsidiary of the Borrower that is not a Domestic
Subsidiary.
 
"Fund" means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.
 
"Funding Office" means the office of the Lender specified in Section 8.02 or
such other office as may be specified from time to time by the Lender as its
funding office by written notice to the Borrower.
 
"GAAP" means generally accepted accounting principles in the United States as in
effect from time to time, except that for purposes of Section 6.01, GAAP shall
be determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the most recent audited
financial statements referred to in Section 5.01(b).  In the event that any
"Accounting Change" (as defined below) shall occur and such change results in a
change in the method of calculation of financial covenants, standards or terms
in this Agreement, then the Borrower and the Lender agree to enter into
negotiations in order to amend such provisions of this Agreement so as to
reflect equitably such Accounting Changes with the desired result that the
criteria for evaluating the Borrower's financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been
made.  Until such time as such an amendment shall have been executed and
delivered by the Borrower and the Lender, all financial covenants, standards and
terms in this Agreement shall continue to be calculated or construed as if such
Accounting Changes had not occurred.  "Accounting Changes" refers to changes in
accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants or, if applicable, the SEC.

 
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"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any Self-Regulatory
Organization.
 
"Group Members" means the collective reference to the Borrower and its
Subsidiaries.
 
"Guarantee and Security Agreement" means the Guarantee and Security Agreement to
be executed and delivered by the Borrower and each Guarantor, substantially in
the form of Exhibit A.
 
"Guarantee Obligation" means, as to any Person (the "Guaranteeing Person"), any
obligation of (a) the Guaranteeing Person or (b) another Person (including any
bank under any letter of credit) to induce the creation of which the
Guaranteeing Person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "Primary Obligations")
of any other third Person (the "Primary Obligor") in any manner, whether
directly or indirectly, including any obligation of the Guaranteeing Person,
whether or not contingent, (i) to purchase any such Primary Obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such Primary Obligation or
(2) to maintain working capital or equity capital of the Primary Obligor or
otherwise to maintain the net worth or solvency of the Primary Obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such Primary Obligation of the ability of the Primary Obligor
to make payment of such Primary Obligation or (iv) otherwise to assure or hold
harmless the owner of any such Primary Obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business.  The amount of any Guarantee Obligation of any Guaranteeing Person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the Primary Obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such Guaranteeing Person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such Primary Obligation and the maximum amount for which such
Guaranteeing Person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such Guaranteeing Person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
 
"Guarantors" means the collective reference to each Material Subsidiary of the
Borrower.
 
"Hazardous Materials" means (a) petroleum or petroleum products, by-products or
breakdown products, radioactive materials, asbestos-containing materials,
polychlorinated biphenyls and radon gas and (b) any other chemicals, materials
or substances designated, classified or regulated as hazardous or toxic or as a
pollutant or contaminant under any Environmental Law.

 
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"Highest Lawful Rate" means the maximum nonusurious interest rate, if any, that
at any time or from time to time may be contracted for, taken, reserved, charged
or received on the Obligations under laws applicable to the Lender which are
currently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher maximum nonusurious
interest rate than applicable laws now allow.  On each day, if any, that Texas
law establishes the Highest Lawful Rate, the Highest Lawful Rate shall be the
"weekly ceiling" (as defined in Section 303 of the Texas Finance Code) for that
day.
 
"Indebtedness" means, with respect to any Person, without duplication:
 
(a)           all indebtedness of such Person for borrowed money;
 
(b)           all obligations of such Person for the deferred purchase price of
property or services (other than trade payables incurred in the ordinary course
of such Person's business that are not past due by more than sixty (60) days
after the respective dates on which such trade payables were created);
 
(c)           all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments;
 
(d)           all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property);
 
(e)           all Attributable Indebtedness in respect of Capital Lease
Obligations (but not operating leases) and Synthetic Lease Obligations of such
Person and all Synthetic Debt of such Person;
 
(f)           the maximum amount of all obligations of such Person, contingent
or otherwise, with respect to bankers' acceptances, letters of credit (except to
the extent such letters of credit are secured by cash collateral), letters of
guaranty, surety bonds, performance bonds and similar obligations;
 
(g)           all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any Equity Interests in such
Person or any other Person, valued, in the case of redeemable Preferred
Interests, at the greater of its voluntary or involuntary liquidation preference
plus all accrued and unpaid dividends;
 
(h)           all Guarantee Obligations of such Person in respect of obligations
of the kind referred to in clauses (a) through (g) above;
 
(i)           all obligations of the kind referred to in clauses (a) through (h)
above secured by (or for which the holder of such obligation has an existing
right, contingent or otherwise, to be secured by) any Lien on property
(including accounts and contract rights) owned by such Person, whether or not
such Person has assumed or become liable for the payment of such obligation; and
 
(j)           all obligations of such Person in respect of Swap Contracts,
valued at the Swap Termination Value thereof.

 
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The Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness expressly provide that such Person is not liable
therefor.
 
"Indebtedness for Borrowed Money" means, with respect to any Person, without
duplication, all Indebtedness of such Person, except for obligations
constituting Indebtedness under clauses (b), (d) or (g) of the definition of
Indebtedness in this Agreement.
 
"Indemnified Taxes" means Taxes other than Excluded Taxes.
 
"Indemnitee" has the meaning specified in Section 8.05(b).
 
"Insolvency" means, with respect to any Multiemployer Plan, the condition that
such Plan is insolvent within the meaning of Section 4245 of ERISA.
 
"Insolvent" means pertaining to a condition of Insolvency.
 
"Intellectual Property" means the collective reference to all rights, priorities
and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including copyrights,
copyright licenses, patents, patent licenses, trademarks, trademark licenses,
technology, know-how and processes, and all rights to sue at law or in equity
for any infringement or other impairment thereof, including the right to receive
all proceeds and damages therefrom.
 
"Investment" means, with respect to any Person, any direct or indirect
acquisition or investment by such Person, whether by means of (a) the purchase
or other acquisition of any Equity Interest of another Person, (b) the purchase
or other acquisition (in one transaction or a series of transactions) of assets
of another Person that constitute a business unit or all or a substantial part
of the business of such Person, (c) any loan, advance, extension of credit or
capital contribution to, assumption of debt of, or purchase or other acquisition
of any other debt or interest in, another Person, (d) any Guarantee Obligation
incurred by that Person in respect of Indebtedness of any other Person, and (e)
any other investment by that Person in any other Person.  For purposes of
covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value
of such Investment.
 
"L/C Collateral Account" means a deposit account established and maintained by
the Borrower at JPMorgan Chase Bank, N.A. containing cash collateral permitted
under Section 6.03(i)(i).
 
"Lender" has the meaning specified in the preamble hereto.
 
"Lending Office" means the office or offices of the Lender as the Lender may
from time to time notify the Borrower.

 
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"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any capital lease having substantially the same
economic effect as any of the foregoing, and any easement, right of way or other
encumbrance on title to real property).
 
"Loan" means the term loan made by the Lender to the Borrower pursuant to this
Agreement in the original principal amount of $25,000,000.
 
"Loan Documents" means this Agreement, the Term Note, each Secured Cash
Management Agreement, each Consent and Agreement, the Commitment Letter, the
Security Documents, and the Edelman Subordination Agreement.
 
"Loan Parties" means each Group Member that is or hereafter becomes a party to a
Loan Document.
 
"Margin Stock" has the meaning assigned to that term under Regulation U.
 
"Marketable Debt Securities" means, at any time, any debt securities for which
an active trading market exists, and price quotations are available from dealers
of such securities and third-party pricing sources acceptable to the Lender at
such time.
 
"Marketable Equity Securities" means, at any time, any equity securities listed
on a national securities exchange located in the United States or quoted on the
Nasdaq Stock Market, Inc. quotation system for which valuations are available on
such exchange or from such quotation system at such time.
 
"Material Adverse Change" means any material adverse change in the business,
property, assets, liabilities, operations, condition (financial or otherwise) or
prospects of the Loan Parties and their respective Subsidiaries taken as a
whole.
 
"Material Adverse Effect" means a material adverse effect on (a) the
Acquisition, (b) the business, property, assets, liabilities, operations,
condition (financial or otherwise) or prospects of the Loan Parties and their
respective Subsidiaries taken as a whole, (c) the validity or enforceability of
this Agreement or any of the other Loan Documents or the rights or remedies of
the Lender under any Loan Document, (d) the validity, perfection or priority of
any Lien granted pursuant to the Security Documents, (e) the timing or amount of
any payment made (or to be made) by any Person to any Loan Party under any
Assigned Agreement, (f) the value of the Collateral taken as a whole, or (g) the
ability of any Loan Party to perform its obligations under any Loan Document to
which it is or is to be a party.
 
"Material Contract" means any agreement or contract of any Group Member which
(a) involves consideration to any Group Member of $500,000 or more in any year,
(b) involves consideration by any Group Member of $500,000 or more in any year,
(c) imposes financial obligations on any Group Member of $500,000 or more in any
year, (d) is an Acquisition Document, an Assigned Agreement, a Swap Contract, or
a Clearing Agreement or (e) is otherwise material (or together with related
agreements and contracts, is material) to the business, operations, financial
condition, performance or properties of the Group Members, taken as a whole.

 
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"Material Subsidiary" means, on any date, (a) each Wholly-Owned Subsidiary of
the Borrower and each other Subsidiary of the Borrower which accounts for at
least 10% of the Consolidated Tangible Net Worth of the Borrower and its
Subsidiaries on such date and (b) SMH SPEADV.
 
"Maturity Date" means October 31, 2012; provided, however, that if such date is
not a Business Day, the Maturity Date shall be the next preceding Business Day.
 
"Minority Owner" means, with respect to any Subsidiary of the Borrower, any
Person (other than a Group Member) who or which directly owns on the Closing
Date any Equity Interests in such Subsidiary.
 
"Mortgages" means the collective reference to the fee mortgages, deeds of trust
and similar documents made by any Loan Party in favor of, or for the benefit of,
the Lender substantially in the form of Exhibit C (with such changes thereto as
shall be advisable under the law of the jurisdiction in which such mortgage or
deed of trust is to be recorded).
 
"MSRB" means the Municipal Securities Rulemaking Board and any successor entity.
 
"Multiemployer Plan" means a Plan that is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
 
"Net Capital" means, at any time, "net capital" computed in accordance with Rule
15c3-1.
 
"Net Cash Proceeds" means:
 
(a)           in connection with any Asset Sale, any Recovery Event or any
Extraordinary Receipt received or paid to the account of any Group Member, the
proceeds thereof in the form of cash and Cash Equivalents (including any such
proceeds received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received) received in connection with such transaction, net of
attorneys' fees, accountants' fees, investment banking fees, amounts required to
be applied to the repayment of Indebtedness secured by a Lien expressly
permitted hereunder on any asset that is the subject of any such Asset Sale or
Recovery Event (other than any Lien pursuant to a Security Document) and other
customary fees and expenses actually incurred in connection therewith and net of
taxes paid or reasonably estimated to be payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements); and
 
(b)           in connection with any issuance or sale of Equity Interests or any
incurrence of Indebtedness, the cash proceeds received from such issuance or
incurrence, net of attorneys' fees, investment banking fees, accountants' fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred in connection therewith.
 
"NewCo LLC" means Concept Capital Advisors, LLC.

 
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"Notice of Borrowing" means a Notice of Borrowing, substantially in the form of
Exhibit G, duly executed by a Responsible Officer of the Borrower.
 
"Obligations" means the unpaid principal of and interest on (including interest
accruing after the maturity of the Loan and interest accruing after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
the Loan and all other obligations, indebtedness liabilities of the Loan Parties
to the Lender and each of them, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, any other Loan
Document, or any other document, instrument or agreement made, delivered or
given in connection herewith or therewith, whether on account of principal,
interest, reimbursement obligations, guarantee obligations, fees, indemnities,
costs, expenses (including all fees, charges and disbursements of counsel to the
Lender that are required to be paid by the Loan Parties pursuant to any Loan
Document) or otherwise.
 
"Organizational Documents" means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.
 
"Other Taxes" means all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.
 
"Participant" has the meaning specified in Section 8.06(c).
 
"Payment Date" means the last day of each calendar month to occur while the Loan
is outstanding and the Maturity Date.
 
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA (or any successor).
 
"Permitted Letters of Credit" means each letter of credit described on Schedule
1.01.
 
"Person" means a natural person, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
 
"Plan" means at a particular time, any employee benefit plan that is covered by
ERISA and in respect of which the Borrower or a Commonly Controlled Entity is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

 
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"Pledged Equity Interests" has the meaning specified in the Guarantee and
Security Agreement.
 
"Pledged Notes" has the meaning specified in the Guarantee and Security
Agreement.
 
"Preferred Interests" means, with respect to any Person, Equity Interests issued
by such Person that are entitled to a preference or priority over any other
Equity Interests issued by such Person upon any distribution of such Person's
property and assets, whether by dividend or upon liquidation.
 
"Prime Rate" means, for any date, the greater of (a) the prime rate published by
The Wall Street Journal on such date, or (b) 5.00%.  If at any time The Wall
Street Journal does not publish such prime rate, the Lender in its sole
discretion shall determine such prime rate using another source of information.
 
"Pro Forma Balance Sheet" has the meaning specified in Section 4.01(a).
 
"Projections" has the meaning specified in Section 5.02(c).
 
"Properties" has the meaning specified in Section 4.16(a).
 
"Purchase and Sale Agreement" means that certain Purchase and Sale Agreement
dated as of August 29, 2008 by and among Sanders Morris Harris Group Inc.,
Salient Partners, L.P. and Salient Capital Management, LLC and their respective
partners and members.
 
"Recovery Event" means any settlement of or payment in respect of any property
or casualty insurance claim or any condemnation proceeding relating to any asset
of any Group Member.
 
"Redemption Agreement" means that certain Agreement to Retire Partnership
Interest and Second Amendment to the Limited Partnership Agreement of Endowment
Advisors, L.P., dated as of August 29, 2008, among the Borrower, Endowment
Advisors, L.P., The Endowment Fund, GP, L.P., and The Endowment Fund Management,
LLC and their respective partners and members.
 
"Regulation T" has the meaning specified in Regulation T of the Board as in
effect from time to time.
 
"Regulation U" has the meaning specified in Regulation U of the Board as in
effect from time to time.
 
"Regulation X" has the meaning specified in Regulation X of the Board as in
effect from time to time.

 
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"Reinvestment Deferred Amount" means, with respect to any Reinvestment Event,
the aggregate Net Cash Proceeds received by any Group Member in connection
therewith that are not applied to prepay the Loan or reduce the Revolving
Commitments pursuant to Section 2.05(b) as a result of the delivery of a
Reinvestment Notice.
 
"Reinvestment Event" means any Asset Sale, Recovery Event or Extraordinary
Receipt in respect of which the Borrower has delivered a Reinvestment Notice.
 
"Reinvestment Notice" means a written notice executed by a Responsible Officer
stating that no Default or Event of Default has occurred and is continuing and
that the Borrower (directly or indirectly through a Subsidiary) intends and
expects to use all or a specified portion of the Net Cash Proceeds of an Asset
Sale, Recovery Event or Extraordinary Receipt to acquire or repair fixed or
capital assets useful in its business.
 
"Reinvestment Prepayment Amount" means, with respect to any Reinvestment Event,
the Reinvestment Deferred Amount relating thereto less any amount expended prior
to the relevant Reinvestment Prepayment Date to acquire assets useful in the
Borrower's business.
 
"Reinvestment Prepayment Date" means, with respect to any Reinvestment Event,
the earlier of (a) the date occurring six (6) months after such Reinvestment
Event and (b) the date on which the Borrower shall have determined not to, or
shall have otherwise ceased to, acquire assets useful in the Borrower's business
with all or any portion of the relevant Reinvestment Deferred Amount.
 
"Related Parties" means, with respect to any Person, such Person's Affiliates
and the partners, directors, officers, employees, agents, trustees and advisors
of such Person and of such Person's Affiliates.
 
"Reorganization" means, with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
 
"Reorganization and Purchase Agreement" means that certain Reorganization and
Purchase Agreement, dated as of May 10, 2005, among the Borrower, the Edelman
Financial Center, Inc., The Edelman Financial Center, LLC and Fredric M.
Edelman, an individual.
 
"Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. §
4043.
 
"Requirement of Law" means, as to any Person, the Organizational Documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
 
"Responsible Officer" means the chief executive officer, president or chief
financial officer, treasurer, assistant treasurer or controller of a Loan Party
and any other officer or employee of the applicable Loan Party so designated by
any of the foregoing officers in a notice to the Lender, but, in any event with
respect to financial matters, the chief financial officer of the applicable Loan
Party.  Any document delivered hereunder that is signed by a Responsible Officer
of a Loan Party shall be conclusively presumed to have been authorized by all
necessary corporate, partnership and/or other action on the part of such Loan
Party and such Responsible Officer shall be conclusively presumed to have acted
on behalf of such Loan Party.

 
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"Restricted Payment" means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity
Interest of any Person or any of its Subsidiaries, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, defeasance,
acquisition, cancellation or termination of any such capital stock or other
Equity Interest, or on account of any return of capital to any Person's
stockholders, partners or members (or the equivalent of any thereof), or any
option, warrant or other right to acquire any such dividend or other
distribution or payment.
 
"Rule 8c1" means Rule 8c1 of the General Rules and Regulations as promulgated by
the SEC under the Exchange Act, as such rule may be amended from time to time,
or any rule or regulation of the SEC which replaces Rule 8c1.
 
"Rule 15c2-1" means Rule 15c2-1 of the General Rules and Regulations as
promulgated by the SEC under the Exchange Act, as such rule may be amended from
time to time, or any rule or regulation of the SEC which replaces Rule 15c2-1.
 
"Rule 15c3-1" means Rule 15c3-1 of the General Rules and Regulations as
promulgated by the SEC under the Exchange Act, as such rule may be amended from
time to time, or any rule or regulation of the SEC which replaces Rule 15c3-1.
 
"Rule 15c3-3" means Rule 15c3-3 of the General Rules and Regulations as
promulgated by the SEC under the Exchange Act, as such rule may be amended from
time to time, or any rule or regulation of the SEC which replaces Rule 15c3-3.
 
"Salient Note" means that certain Unsecured Subordinated Promissory Note, dated
as of August 29, 2008, in the original principal amount of $9,349,340 made by
Salient Partners, L.P. and payable to the order of the Borrower.
 
"SEC" means the Securities and Exchange Commission, any successor thereto and
any analogous Governmental Authority.
 
"Secured Cash Management Agreement" means any Cash Management Agreement that is
entered into by and between any Loan Party and the Lender.
 
"Security Documents" means the collective reference to the Guarantee and
Security Agreement, each Consent and Agreement and all other security and
collateral agreements and documents hereafter delivered to the Lender that
create or purport to create a Lien in favor of the Lender.
 
"Servicing Agreement" means the Servicing Agreement, dated effective as of
September 5, 2006, between Endowment Advisers, L.P. and the Borrower.

 
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"Single Employer Plan" means any Plan that is subject to Title IV of ERISA, but
that is not a Multiemployer Plan.
 
"SMHG Operating Account" has the meaning specified in Section 3.01(q).
 
"SMHG - Salient Intercreditor Agreement" means any intercreditor agreement,
subordination agreement or other similar agreement between or among any of
Salient Partners, L.P., as borrower, the Borrower, as junior lender, and a
to-be-specified entity, as senior lender, in form and substance satisfactory to
the Borrower and the Lender.
 
"SMHG - Salient Intercreditor Agreement Form" means a proposed execution copy of
an Intercreditor Agreement among Salient Partners, L.P., as borrower, the
Borrower, as junior lender, and a to-be-specified entity, as senior lender,
relating to the Salient Note, in form and substance satisfactory to the Borrower
and the Lender.
 
"SMH SPEADV" means SMH SPEADV, LLC, a Delaware limited liability company.
 
"SMH SPEADV Assignments" means the collective reference to (a) the Assignment
and Assumption Agreement, dated as of May 1, 2009 between the Borrower and SMH
SPEADV, pursuant to which the Borrower transfers all of its right, title and
interest in the Redemption Agreement to SMH SPEADV and (b) the Assignment and
Assumption Agreement, dated as of May 1, 2009 between the Borrower and SMH
SPEADV, pursuant to which the Borrower transfers all of its right, title and
interest in the Salient Documents to SMH SPEADV.
 
"SMH SPEADV LLC Interests" means 100% of the limited liability company
membership interests of SMH SPEADV.
 
"Solvent" means, with respect to any Person as of any date of determination,
that on such date (a) the amount of the "present fair saleable value" of the
assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise," as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they
mature.  For purposes of this definition, (i) "debt" means liability on a
"claim," and (ii) "claim" means any (x) right to payment, whether or not such a
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
or (y) right to an equitable remedy for breach of performance if such breach
gives rise to a right to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured or unmatured,
disputed, undisputed, secured or unsecured.
 
"Specified FOCUS Reports" has the meaning specified in Section 4.01(b).
 
"Subordinated Note" means that certain Unsecured Subordinated Promissory Note
dated May 7, 2009, issued by the Borrower and payable to the order of Fredric M.
Edelman, an individual, in the principal amount of $10,000,000 as consideration
under the Acquisition Agreement.

 
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"Subsidiary" means as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency)
representing a majority of such shares of stock or such other ownership
interests or to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person; provided, however, that the
term Subsidiary shall not include any limited partnership, limited liability
company, trust, or other special purpose investment entity managed by a Group
Member solely because any of the partners, members, or other beneficial owners
is a customer of such Group Member.  Unless otherwise qualified, all references
to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a direct
or indirect Subsidiary or Subsidiaries of the Borrower.
 
"Swap Contract" means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a "Master Agreement"), including
any such obligations or liabilities under any Master Agreement.
 
"Swap Termination Value" means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include the Lender or any Affiliate of
the Lender).
 
"Synthetic Debt" means, with respect to any Person as of any date of
determination thereof, all obligations of such Person in respect of transactions
entered into by such Person that are intended to function primarily as a
borrowing of funds (including any minority interest transactions that function
primarily as a borrowing) but are not otherwise included in the definition of
"Indebtedness" or as a liability on the consolidated balance sheet of such
Person and its Subsidiaries in accordance with GAAP.

 
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"Synthetic Lease" means, at any time, any lease (including leases that may be
terminated by the lessee at any time) of any property (a) that is accounted for
as an operating lease under GAAP and (b) in respect of which the lessee retains
or obtains ownership of the property so leased for income tax purposes, other
than any such lease under which such Person is the lessor.
 
"Synthetic Lease Obligations" means, with respect to any Synthetic Lease, at any
time, an amount of equal to the higher of (a) the aggregate termination value or
purchase price or similar payments in the nature of principal payable thereunder
and (b) the then aggregate outstanding principal amount of the notes or other
instruments issued by, and the amount of the equity investment, if any, in, the
lessor under such Synthetic Lease.
 
"Taxes" means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.
 
"Term Note" has the meaning specified in Section 2.12(c).
 
"UCC" means the Uniform Commercial Code as in effect in the State of Texas;
provided that if perfection or the effect of perfection or non-perfection is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of Texas, "UCC" means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions
hereof relating to such perfection, effect of perfection or non-perfection or
priority.
 
"United States" and "U.S." mean the United States of America.
 
"USA PATRIOT Act" means United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.
 
"Wholly Owned Subsidiary" means, as to any Person, any other Person all of the
Equity Interests of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
 
Section 1.02.   Other Definitional Provisions.
 
(a)           Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the other Loan Documents
or any certificate or other document made or delivered pursuant hereto or
thereto.
 
(b)           As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.01 and accounting terms partly defined in Section 1.01, to the extent
not defined, shall have the respective meanings given to them under GAAP.

 
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(c)           The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation."  The word "will" shall be
construed to have the same meaning and effect as the word "shall."  Unless the
context requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended, amended
and restated, supplemented or otherwise modified from time to time (subject to
any restrictions on such amendments, amendments and restatements, supplements or
modifications set forth herein), (ii) any reference herein to any Person shall
be construed to include such Person's successors and assigns, (iii) the words
"herein," "hereof" and "hereunder," and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (iv) the word "incur" shall be construed to mean incur,
create, issue, assume, become liable in respect of or suffer to exist (and the
words "incurred" and "incurrence" shall have correlative meanings), (v) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement, (vi) any reference to any law or regulation herein shall, unless
otherwise specified, refer to such law or regulation as amended, modified or
supplemented from time to time and (vii) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, Equity Interests,
securities, accounts and contract rights.
 
(d)           No inference in favor of, or against, any party to this Agreement
shall be drawn from the fact that such party has drafted any portion of this
Agreement.
 
(e)           All obligations of the Borrower and each other Loan Party under
this Agreement and the other Loan Documents shall be performed and satisfied by
or on behalf of the Borrower or such other Loan Party, as applicable, at its
sole cost and expense.
 
ARTICLE II
 
AMOUNT AND TERMS OF COMMITMENT
 
Section 2.01.   Commitment.  Subject to the terms and conditions hereof, the
Lender agrees to make the Loan to the Borrower on the Closing Date in an amount
not to exceed the amount of the Commitment.
 
Section 2.02.   Procedure for Loan Borrowing.  The Borrower shall give the
Lender irrevocable notice in the form of a Notice of Borrowing (which notice
must be received by the Lender prior to 10:00 A.M., Houston, Texas time, one (1)
Business Day prior to the anticipated Closing Date) requesting that the Lender
make the Loan to the Borrower on the Closing Date and specifying the amount to
be borrowed.

 
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Section 2.03.   Repayment of Loan.  The Borrower unconditionally promises to
repay the Loan in forty-two (42) consecutive amortizing equal monthly
installments, due on each Payment Date, commencing on May 29, 2009, subject to
adjustment as provided in Section 2.04 and Section 2.05; provided, however, that
the final principal repayment installment of the Loan shall be repaid on the
Maturity Date and in any event shall be in an amount equal to the unpaid
principal amount of the Loan outstanding on such date.
 
Section 2.04.   Optional Prepayments.  The Borrower may at any time and from
time to time prepay the Loan, in whole or in part, without premium or penalty,
upon irrevocable notice delivered to the Lender at least one Business Day prior
thereto, which notice shall specify the date and amount of prepayment.  If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with accrued interest to such
date on the amount prepaid.  Partial prepayments of the Loan shall be in an
aggregate principal amount of $500,000 or a whole multiple thereof.  Each
prepayment of the Loan pursuant to this Section 2.04 shall be applied to the
principal repayment installments thereof in inverse order of maturity.
 
Section 2.05.   Mandatory Prepayments and Commitment Reductions.
 
(a)           If any Indebtedness shall be incurred by any Group Member
(excluding any Indebtedness incurred in accordance with Section 6.02), an amount
equal to 100% of the Net Cash Proceeds thereof shall be applied on the date of
such issuance or incurrence toward the prepayment of the Loan as set forth in
Section 2.05(d).
 
(b)           If on any date any Group Member shall receive Net Cash Proceeds
from any Asset Sale (other than the Capital Markets Division Disposition and the
Concept Capital Markets Division Disposition), Recovery Event or Extraordinary
Receipt then, unless a Reinvestment Notice shall be delivered in respect
thereof, such Net Cash Proceeds shall be applied on such date toward the
prepayment of the Loan as set forth in Section 2.05(d); provided, that (i) the
aggregate Net Cash Proceeds of Asset Sales, Recovery Events and Extraordinary
Receipts that may be excluded from the foregoing requirement pursuant to a
Reinvestment Notice shall not exceed $1,000,000 in any Fiscal Year and (ii) on
each Reinvestment Prepayment Date, an amount equal to the Reinvestment
Prepayment Amount with respect to the relevant Reinvestment Event shall be
applied toward the prepayment of the Loan as set forth in Section 2.05(d).
 
(c)           If, at any time during any Fiscal Quarter, the Borrower receives
Excess Payments under the Redemption Agreement, an amount equal to 100% of such
Excess Payments shall be applied on the Payment Date immediately succeeding the
last day of such Fiscal Quarter toward the prepayment of the Loan as set forth
in Section 2.05(d).
 
(d)           All amounts to be applied in connection with prepayments of the
Loan made pursuant to this Section 2.05 shall be applied to the Loan and to the
principal repayment installments thereof in inverse order of maturity.  Each
prepayment of the Loan under Section 2.05 shall be accompanied by accrued
interest to the date of such prepayment on the amount so prepaid.

 
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Section 2.06.   Interest Rates and Payment Dates.
 
(a)           The Loan shall bear interest for each day at a rate per annum
equal to the Prime Rate.
 
(b)           (i)           If any amount of principal of the Loan is not paid
when due (without regard to any applicable grace periods), whether at stated
maturity, by acceleration or otherwise, such amount shall thereafter bear
interest at a rate per annum at all times equal to the Default Rate to the
fullest extent permitted by applicable Requirements of Law.
 
(ii)           If any amount (other than principal of the Loan) payable by the
Borrower under any Loan Document is not paid when due (without regard to any
applicable grace periods), whether at stated maturity, by acceleration or
otherwise, then such amount shall thereafter bear interest at a rate per annum
at all times equal to the Default Rate to the fullest extent permitted by
applicable Requirements of Law.
 
(iii)           While any Event of Default exists, the Borrower shall pay
interest on the principal amount of all outstanding Obligations hereunder at a
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Requirements of Law.
 
(iv)           Accrued and unpaid interest on past due amounts (including
interest on past due interest) shall be due and payable upon demand.
 
(c)           Principal and interest on the Loan shall be due and payable on
each Payment Date applicable thereto and at such other times as may be specified
herein.  Interest hereunder shall be due and payable in accordance with the
terms hereof before and after judgment, and before and after the commencement of
any proceeding under any bankruptcy, insolvency, reorganization or similar law.
 
(d)           The Borrower covenants and agrees that (i) each Assigned Agreement
Payment made (or to be made) by any Person to the Borrower and/or to SMH SPEADV
shall be made, transferred or deposited directly into the Assigned Agreement
Payment Account, (ii) on or at any time after any Assigned Agreement Payment is
made, transferred or deposited into the Assigned Agreement Payment Account, the
Lender will, without notice to or consent of or other action by any other
Person, automatically debit and transfer from the Assigned Agreement Payment
Account into the Assigned Agreement Payment Escrow Account all or a portion of
such Assigned Agreement Payment such that the balance in the Assigned Agreement
Payment Escrow Account shall be equal to the next three (3) principal and
interest payments scheduled to be made on the Loan (as determined by the Lender)
(each such amount, an "Assigned Agreement Payment Escrow Amount"), and then on
the next scheduled principal and interest payment date on the Loan, apply a
portion of such Assigned Agreement Payment Escrow Amount to the payment and
satisfaction of the next scheduled principal and interest payment on the Loan
and hold the remaining portion of such Assigned Agreement Payment Escrow Amount
in the Assigned Agreement Payment Escrow Account and apply such amounts to the
next two (2) scheduled principal and interest payments on the Loan as and when
due under this Agreement, and (iii) neither the Borrower nor SMH SPEADV shall
use, withdraw or transfer any funds from the Assigned Agreement Payment Account
with respect to any Assigned Agreement Payment until the Lender has confirmed to
the Borrower that the Lender has debited and transferred the Assigned Agreement
Payment Escrow Amount pertaining to such Assigned Agreement Payment to the
Assigned Agreement Payment Escrow Account; provided that if at any time an Event
of Default has occurred and is continuing, the Lender may immediately apply any
funds on deposit in the Assigned Agreement Payment Account and/or the Assigned
Agreement Payment Escrow Account to the payment and performance of the
Obligations in such order and manner as the Lender may from time to time
determine in its sole discretion.

 
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Section 2.07.   Computation of Interest and Fees.
 
(a)           Interest and fees payable pursuant hereto shall be calculated on
the basis of a 360-day year for the actual days elapsed.  Any change in the
interest rate on the Loan resulting from a change in the Prime Rate shall become
effective as of the opening of business on the day on which such change becomes
effective.  The Lender shall as soon as practicable notify the Borrower of the
effective date and the amount of each such change in interest rate.
 
(b)           Each determination of an interest rate by the Lender pursuant to
any provision of this Agreement shall be conclusive and binding on the Borrower
in the absence of manifest error.
 
Section 2.08.   Pro Rata Treatment and Payments.
 
(a)           All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without any condition or deduction for any counterclaim, defense,
recoupment or setoff and shall be made prior to 12:00 Noon, Houston, Texas time,
on the due date thereof to the Lender at the Funding Office, in Dollars and in
immediately available funds.  If any payment hereunder becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day.
 
(b)           The Borrower hereby authorizes the Lender and the Lender's
Affiliates, if and to the extent any payment owed to the Lender is not made when
due hereunder or any other Loan Document, to charge from time to time, to the
fullest extent permitted by applicable law, against any or all of the Borrower's
accounts with the Lender or such Affiliate any amount so due.
 
(c)           Nothing herein shall be deemed to obligate the Lender to obtain
the funds for the Loan in any particular place or manner or to constitute a
representation by the Lender that it has obtained or will obtain funds for the
Loan in any particular place or manner.
 
Section 2.09.   Increased Costs.
 
(a)           Increased Costs Generally.  If any Change in Law shall:
 
(i)           impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in by,
the Lender;
 
(ii)           subject the Lender to any tax of any kind whatsoever with respect
to this Agreement, or change the basis of taxation of payments to the Lender in
respect thereof (except for Indemnified Taxes or Other Taxes covered by Section
2.10) and the imposition of, or any change in the rate of, any Excluded Tax
payable by the Lender; or

 
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(iii)           impose on the Lender any other condition, cost or expense
affecting this Agreement made by the Lender; and
 
the result of any of the foregoing shall be to reduce the amount of any sum
received or receivable by the Lender hereunder (whether of principal, interest
or any other amount) then, upon request of the Lender, the Borrower will pay to
the Lender such additional amount or amounts as will compensate the Lender for
such additional costs incurred or reduction suffered.
 
(b)           Capital Requirements.  If the Lender determines that any Change in
Law affecting the Lender or any Lending Office of the Lender or the Lender's
holding company, if any, regarding capital requirements has or would have the
effect of reducing the rate of return on the Lender's capital or on the capital
of the Lender's holding company, if any, as a consequence of this Agreement or
the Loan, to a level below that which the Lender or the Lender's holding company
could have achieved but for such Change in Law (taking into consideration the
Lender's policies and the policies of the Lender's holding company with respect
to capital adequacy), then from time to time the Borrower will pay to the Lender
such additional amount or amounts as will compensate the Lender or the Lender's
holding company for any such reduction suffered.
 
(c)           Certificates for Reimbursement.  A certificate of the Lender
setting forth in reasonable detail the amount or amounts necessary to compensate
the Lender or its holding company, as the case may be, and how such amount or
amounts were determined as specified in paragraph (a) or (b) of this Section and
delivered to the Borrower shall be conclusive absent manifest error.  The
Borrower shall pay the Lender the amount shown as due on any such certificate
within ten (10) days after receipt thereof.
 
(d)           Requests.  Failure or delay on the part of the Lender to demand
compensation pursuant to this Section shall not constitute a waiver of the
Lender's right to demand such compensation, provided that the Borrower shall not
be required to compensate the Lender pursuant to this Section for any increased
costs incurred or reductions suffered more than nine (9) months prior to the
date that the Lender notifies the Borrower of the Change in Law giving rise to
such increased costs or reductions and of the Lender's intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect
thereof).
 
(e)           Survival.  The obligations of the Borrower pursuant to this
Section shall survive the termination of this Agreement and the payment of the
Loan and all other amounts payable hereunder.

 
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Section 2.10.   Taxes.
 
(a)           Payments Free of Taxes; Obligation to Withhold; Payments on
Account of Taxes.
 
(i)           Any and all payments by or on account of any obligation of the
Borrower hereunder or under any other Loan Document shall to the extent
permitted by applicable laws be made free and clear of and without reduction or
withholding for any Taxes.  If, however, applicable laws require the Borrower or
the Lender to withhold or deduct any Tax, such Tax shall be withheld or deducted
in accordance with such laws as determined by the Borrower or the Lender, as the
case may be, upon the basis of the information and documentation to be delivered
pursuant to subsection (e) below.
 
(ii)           If the Borrower or the Lender shall be required by the Code to
withhold or deduct any Taxes, including both United States Federal backup
withholding and withholding taxes, from any payment, then (A) the Lender shall
withhold or make such deductions as are determined by the Lender to be required
based upon the information and documentation it has received pursuant to
subsection (e) below, (B) the Lender shall timely pay the full amount withheld
or deducted to the relevant Governmental Authority in accordance with the Code,
and (C) to the extent that the withholding or deduction is made on account of
Indemnified Taxes or Other Taxes, the sum payable by the Borrower shall be
increased as necessary so that after any required withholding or the making of
all required deductions (including deductions applicable to additional sums
payable under this Section) the Lender receives an amount equal to the sum it
would have received had no such withholding or deduction been made.
 
(b)           Payment of Other Taxes by the Borrower.  Without limiting the
provisions of subsection (a) above, the Borrower shall timely pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.
 
(c)           Tax Indemnifications.
 
(i)           Without limiting the provisions of subsection (a) or (b) above,
the Borrower shall, and does hereby indemnify the Lender and shall make payment
in respect thereof within 10 days after demand therefor, for the full amount of
any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
withheld or deducted by the Borrower or the Lender and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority.  A certificate as to the amount
of any such payment or liability delivered to the Borrower by the Lender shall
be conclusive absent manifest error.
 
(ii)           Without limiting the provisions of subsection (a) or (b) above,
the Lender shall, and does hereby, indemnify the Borrower and shall make payment
in respect thereof within 10 days after demand therefor, against any and all
Taxes and any and all related losses, claims, liabilities, penalties, interest
and expenses (including the fees, charges and disbursements of any counsel for
the Borrower incurred by or asserted against the Borrower by any Governmental
Authority as a result of the failure by the Lender to deliver, or as a result of
the inaccuracy, inadequacy or deficiency of, any documentation required to be
delivered by the Lender to the Borrower to subsection (e).  The agreements in
this clause (ii) shall survive the termination of the Commitments and the
repayment, satisfaction or discharge of all other Obligations.

 
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(d)           Evidence of Payments.  Upon request by the Borrower or the Lender,
as the case may be, after any payment of Taxes by the Borrower or the Lender to
a Governmental Authority as provided in this Section 2.10, the Borrower shall
deliver to the Lender or the Lender shall deliver to the Borrower the original
or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of any return required by applicable law to
report such payment or other evidence of such payment reasonably satisfactory to
the Borrower or the Lender, as the case may be.
 
(e)           Status of Lender; Tax Documentation.
 
(i)           The Lender shall deliver to the Borrower at the time or times
prescribed by applicable laws or when reasonably requested by the Borrower such
properly completed and executed documentation prescribed by applicable laws or
by the taxing authorities of any jurisdiction and such other reasonably
requested information as will permit the Borrower, as the case may be, to
determine (A) whether or not payments made hereunder or under any other Loan
Document are subject to Taxes, (B) if applicable, the required rate of
withholding or deduction, and (C) the Lender's entitlement to any available
exemption from, or reduction of, applicable Taxes in respect of all payments to
be made to the Lender by the Borrower pursuant to this Agreement or otherwise to
establish the Lender's status for withholding tax purposes in the applicable
jurisdiction.
 
(ii)           Without limiting the generality of the foregoing, if the Borrower
is resident for tax purposes in the United States, Lender shall deliver to the
Borrower executed originals of Internal Revenue Service Form W-9 or such other
documentation or information prescribed by applicable laws or reasonably
requested by the Borrower as will enable the Borrower, as the case may be, to
determine whether or not the Lender is subject to backup withholding or
information reporting requirements; and
 
(iii)           The Lender shall promptly (A) notify the Borrower of any change
in circumstances which would modify or render invalid any claimed exemption or
reduction, and (B) take such steps as shall not be materially disadvantageous to
it, in the reasonable judgment of the Lender, and as may be reasonably necessary
(including the re-designation of its Lending Office) to avoid any requirement of
applicable laws of any jurisdiction that the Borrower make any withholding or
deduction for taxes from amounts payable to the Lender.
 
(f)           Treatment of Certain Refunds.  If the Lender determines, in its
sole discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrower or with respect to which the
Borrower has paid additional amounts pursuant to this Section, it shall pay to
the Borrower an amount equal to such refund (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrower under this Section
with respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses incurred by the Lender and without interest (other than
any interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Borrower, upon the request of the Lender, agrees to
repay the amount paid over to the Borrower (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the Lender in
the event the Lender is required to repay such refund to such Governmental
Authority.  This subsection shall not be construed to require the Lender to make
available its tax returns (or any other information relating to its taxes that
it deems confidential) to the Borrower or any other Person.

 
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(g)           Survival.  The agreements in this Section 2.10 shall survive the
termination of this Agreement and the payment of the Loan and all other amounts
payable hereunder.
 
Section 2.11.   Use of Proceeds.  The proceeds of the Loan shall be used to
finance a portion of the Acquisition, to repay certain Indebtedness of the
Borrower outstanding on the Closing Date, to pay related transaction fees and
expenses, and for other general corporate purposes.
 
Section 2.12.   Evidence of Debt.
 
(a)           The Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Borrower to the Lender
resulting from the Loan from time to time, including the amounts of principal
and interest payable and paid to the Lender from time to time under this
Agreement.
 
(b)           The entries made in the account of the Lender maintained pursuant
hereto shall, to the extent permitted by applicable law, be prima facie evidence
of the existence and amounts of the obligations of the Borrower therein
recorded, provided, however, that the failure of the Lender to maintain such
account, or any error therein, shall not in any manner affect the obligation of
the Borrower to repay (with applicable interest) the Loan in accordance with the
terms of this Agreement.
 
(c)           The Borrower agrees that, upon the request by the Lender, the
Borrower will execute and deliver to the Lender, a promissory note of the
Borrower evidencing the Loan substantially in the form of Exhibit D with
appropriate insertions as to date and principal amount (the "Term Note").  The
Lender is hereby authorized to record the Borrowing Date, the amount of the Loan
and the date and amount of each payment or prepayment of principal thereof, on
the schedule annexed to and constituting a part of the Term Note and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded, provided that the failure by the Lender to make any
such recordation (or any error therein) shall not affect any of the obligations
of the Borrower under the Term Note or this Agreement.
 
Section 2.13.   Mitigation Obligations.  If the Lender requests compensation
under Section 2.09, or requires the Borrower to pay any additional amount to the
Lender or any Governmental Authority for the account of the Lender pursuant to
Section 2.10, then the Lender shall use reasonable efforts to designate a
different Lending Office for funding or booking the Loan hereunder or to assign
its rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of the Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 2.09 or 2.10,
as the case may be, in the future and (ii) would not subject the Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to the
Lender.  The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by the Lender in connection with any such designation or assignment.

 
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ARTICLE III

CONDITIONS PRECEDENT
 
Section 3.01.   Conditions to Making the Loan.  The agreement of the Lender to
make the Loan is subject to the satisfaction, prior to or concurrently with the
making of the Loan on the Closing Date, of the following conditions precedent:
 
(a)           Credit Agreement; Other Loan Documents.  The Lender shall have
received the following, each of which shall be originals or, at the discretion
of the Lender, telecopies (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer of the signing Loan
Party, and each in form and substance satisfactory to the Lender:
 
(i)           this Agreement, duly executed and delivered by the Lender and the
Borrower;
 
(ii)          the Term Note, duly executed and delivered by a duly authorized
officer of the Borrower;
 
(iii)         the Guarantee and Security Agreement, duly executed and delivered
by each Loan Party;
 
(iv)         each Control Agreement required by Section 5.01 of the Guarantee
and Security Agreement, duly executed by the Lender, the applicable Loan
Parties, and the applicable depository institutions, commodity intermediaries
and securities intermediaries, which is required to be delivered by any Loan
Party on or prior to the Closing Date pursuant to the Guarantee and Security
Agreement;
 
(v)          each Acknowledgment and Consent, in the form attached to the
Guarantee and Security Agreement, duly executed and delivered by each Issuer (as
defined therein), if any, that is not a Loan Party, which is required to be
delivered by any Loan Party on or prior to the Closing Date pursuant to the
Guarantee and Security Agreement;
 
(vi)         executed copies of the Assigned Agreements referred to in the
Guarantee and Security Agreement, together with each Consent and Agreement
relating thereto and the SMH SPEADV Assignments, duly executed and delivered by
each party thereto; and
 
(vii)        the Edelman Subordination Agreement, duly executed and delivered by
the Borrower and Fredric M. Edelman, an individual; and
 
(viii)       the SMHG - Salient Intercreditor Agreement Form.
 
(b)           Acquisition, Etc.  The Lender shall be satisfied that the
following transactions shall have been consummated, in each case on terms and
conditions satisfactory to the Lender:

 
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(i)           The Borrower shall have purchased (A) from Fredric M. Edelman, an
individual, 58% of the limited liability company membership interests of Edelman
Financial Advisors, LLC, and (B) from Edward Moore, an individual, 8% of the
limited liability company membership interests of Edelman Financial Advisors,
LLC pursuant to the Acquisition Documents (such purchase transactions,
collectively, the "Acquisition");
 
(ii)          the aggregate purchase price for the limited liability company
membership interests of Edelman Financial Advisors, LLC to be purchased by the
Borrower pursuant to the Acquisition shall not exceed $35,500,000;
 
(iii)         the aggregate Indebtedness for Borrowed Money of the Borrower and
its Subsidiaries on the Closing Date, after giving effect to the Acquisition,
shall not exceed $37,000,000;
 
(iv)         immediately following the consummation of the Acquisition, the
Borrower shall own 76% of the limited liability company membership interests of
each of (A) The Edelman Financial Center, LLC (the "EFC LLC Interests") and (B)
Edelman Financial Advisors, LLC (the "EFA LLC Interests"); and
 
(v)          the Lender shall (A) have received satisfactory evidence that the
Existing Credit Facility shall have been terminated and all amounts thereunder
shall have been paid in full and (B) be satisfied that acceptable satisfactory
arrangements shall have been made for the termination of all letters of credit
issued by any Person for the account of the Borrower or any of its Subsidiaries
(other than the Permitted Letters of Credit) and the termination of all Liens
granted in connection with the Existing Credit Facility and any such letters of
credit (other than Liens securing reimbursement obligations arising from
Permitted Letters of Credit).
 
(c)           Closing Certificates, Etc.  The Lender shall have received from
each Loan Party, as applicable, (i) a copy of a long form good standing
certificate, dated a date reasonably close to the Closing Date, for each such
Person and (ii) a Closing Certificate for each such Person substantially in the
form of Exhibit B, with appropriate insertions and attachments, dated the
Closing Date duly executed and delivered by such Person's Secretary or Assistant
Secretary, other Responsible Officer, managing member or general partner, as
applicable, as to:
 
(i)           resolutions of each such Person's Board of Directors (or general
partner, manager or managers, other managing body, in the case of an entity
other than a corporation) then in full force and effect authorizing, to the
extent relevant, all aspects of the Acquisition applicable to such Person and
the execution, delivery and performance of each Loan Document to be executed by
such Person and the transactions contemplated hereby and thereby;
 
(ii)          the incumbency and signatures of such Person's officers, managing
member or general partner, as applicable, authorized to act with respect to each
Loan Document to be executed by such Person;
 
(iii)         the full force and validity of each Organizational Document of
such Person and copies thereof; and
 
(iv)         the other matters specified therein;

 
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upon which certificates the Lender may conclusively rely until they shall have
received a further certificate of the Secretary, Assistant Secretary, other
Responsible Officer, managing member or general partner, as applicable, of any
such Person canceling or amending the prior certificate of such Person.
 
(d)           Pro Forma Balance Sheet; Financial Statements.  The Lender shall
have received (i) if requested by the Lender, the Pro Forma Balance Sheet, (ii)
audited consolidated and consolidating financial statements of the Borrower and
its Subsidiaries for the 2006, 2007 and 2008 Fiscal Years and unaudited interim
consolidated and consolidating financial statements of the Borrower and its
Subsidiaries for each fiscal month and quarterly period ended subsequent to the
date of the latest applicable financial statements delivered pursuant to clause
(ii) of this paragraph as to which such financial statements are available, and
such financial statements shall not, in the reasonable judgment of the Lender,
reflect any material adverse change in the consolidated financial condition of
the Borrower and its Subsidiaries.
 
(e)           Approvals.  All governmental and third-party approvals (including
landlords' and other consents) necessary in connection with the Acquisition, the
continuing operations of the Borrower and its Subsidiaries and the transactions
contemplated hereby shall have been obtained and be in full force and effect,
and all applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority that would restrain, prevent or
otherwise impose adverse conditions on the Acquisition or the Loan contemplated
hereby.  There shall not exist any order, decree, judgment, ruling or injunction
which restrains the consummation of the transactions contemplated by the Loan
Documents or the Acquisition Documents.
 
(f)           Lien Searches.  The Lender shall have received the results of
recent Lien searches by a Person satisfactory to the Lender, of the Uniform
Commercial Code, Intellectual Property, judgment and tax lien filings that may
have been filed with respect to personal property of the Loan Parties, and the
results of such searches shall be satisfactory in form and substance to the
Lender.
 
(g)           Fees and Expenses.  The Lender shall have received payment in full
of the Commitment Fee (as defined in the Commitment Letter), and all fees, costs
and expenses for which invoices have been presented (including, without
limitation, all fees, costs and expenses of legal counsel to the Lender), on or
before the Closing Date.  All such amounts will be paid with proceeds of the
Loan made on the Closing Date and will be reflected in the funding instructions
given by the Borrower to the Lender on or before the Closing Date.
 
(h)           Legal Opinion.  The Lender shall have received the legal opinion
of John T. Unger, general counsel of the Borrower and its Subsidiaries,
substantially in the form of Exhibit E.
 
(i)           Pledged Equity Interests; Pledged Notes.  The Lender shall have
received (i) the certificates representing each of the EFC LLC Interests, the
EFA LLC Interests, the SMH SPEADV LLC Interests, and each of the other Pledged
Equity Interests required to be delivered by a Loan Party to the Lender on or
prior to the Closing Date pursuant to the Guarantee and Security Agreement, in
each case together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the pledgor thereof, and (ii)
the original executed Salient Note and each of the other Pledged Notes required
to be delivered by any Loan Party to the Lender on or prior to the Closing Date
pursuant to the Guarantee and Security Agreement, in each case endorsed (without
recourse to the Lender) in blank (or accompanied by an executed transfer form in
blank) by the pledgor thereof.

 
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(j)           Actions to Perfect Liens.  The Lender shall have received evidence
satisfactory to it that all filings, recordings, registrations, and other
actions necessary, or in the opinion of the Lender, desirable to perfect and
protect the Liens created by the Security Documents shall have been completed
(including, without limitation, the filing of financing statements on form
UCC-1, and receipt by the Lender of duly executed payoff letters, UCC-3
termination statements (or authorizations to terminate financing statements).
 
(k)           Solvency Certificate.  The Lender shall have received a Solvency
Certificate, in substantially the form of Exhibit F, executed by the chief
financial officer of the Borrower.
 
(l)           Insurance.  The Lender shall have received insurance certificates
and endorsements satisfying the requirements of Section 5.02(b) of the Guarantee
and Security Agreement.
 
(m)           Related Agreements.  The Lender shall have received true and
correct executed copies, certified as to authenticity by the Borrower, of the
Acquisition Documents, the Assigned Agreements, each Material Contract then in
effect and such other documents or instruments as may be requested by the
Lender, including a copy of each employment agreement, non-competition agreement
and other agreement with each officer of any Loan Party.
 
(n)           Capitalization; Legal Structure.  The Lender shall be satisfied
with the corporate (or other organizational) and legal structure and
capitalization of each Loan Party and each of its Subsidiaries, including the
terms and conditions of their Organizational Documents and each class of Equity
Interests in each Loan Party and each such Subsidiary and of each agreement or
instrument relating to such structure or capitalization.
 
(o)           FOCUS Reports.  The Lender shall have received copies of the FOCUS
Reports referred to in Section 4.01.
 
(p)           Business Plan.  If Lender has so requested, the Lender shall have
received a business plan for the Borrower and its Subsidiaries for the Fiscal
Year ending on December 31, 2009, which business plan shall be satisfactory in
form and substance to the Lender.
 
(q)           Operating Accounts.  The Borrower shall have established its
primary operating accounts with the Lender pursuant to one or more Cash
Management Agreements (each, an "SMHG Operating Account").
 
(r)           Representations and Warranties.  Each of the representations and
warranties of the Loan Parties contained in the Loan Documents shall be true and
correct on and as of such date, before and after giving effect to the Loan and
application of the proceeds therefrom, as if made on and as of such date (except
to the extent that such representations and warranties specifically refer to an
earlier date, in which case, they shall be true and correct as of such earlier
date).

 
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(s)           No Default.  No Default or Event of Default shall have occurred
and be continuing on such date or would result from the Loan or the application
of the proceeds therefrom.
 
(t)           Additional Matters.  All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, the other Loan Documents, the
Assigned Agreements, the Clearing Agreements and the Acquisition Documents shall
be satisfactory in form and substance to the Lender, and the Lender shall have
received such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES
 
To induce the Lender to enter into this Agreement and to make the Loan, the
Borrower hereby represents and warrants to the Lender that:
 
Section 4.01.   Financial Condition.
 
(a)           If required by the Lender, the unaudited pro forma consolidated
and consolidating balance sheets of the Borrower and its consolidated
Subsidiaries as at the Closing Date (including the notes thereto) (the
"Pro Forma Balance Sheet") has been prepared giving effect (as if such events
had occurred on such date) to (i) the consummation of the Acquisition, (ii) the
Loan to be made and the Subordinated Note to be issued on the Closing Date and
the use of proceeds thereof and (iii) the payment of fees and expenses in
connection with the foregoing.  If furnished to the Lender, the Pro Forma
Balance Sheet has been prepared based on the best information available to the
Borrower as of the date of delivery thereof, and presents fairly on a pro forma
basis the estimated financial position of Borrower and its consolidated
Subsidiaries as at the Closing Date, assuming that the events specified in the
preceding sentence had actually occurred at such date.
 
(b)           The audited consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at December 31, 2006, December 31, 2007 and
December 31, 2008, and the related consolidated and consolidating statements of
income, changes in shareholders' equity, and of cash flows for the Fiscal Years
ended on such dates, reported on by and accompanied by an unqualified report
from KPMG LLP (or, with the written approval of the Lender, other independent
certified public accountants of nationally recognized standing), present fairly
on a consolidated and consolidating basis the financial condition of the
Borrower as at such date, and on a consolidated and consolidating basis the
results of its operations and its cash flows for the respective Fiscal Years
then ended.  All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned firm
of accountants and disclosed therein).  No Group Member has any material
Guarantee Obligations, contingent liabilities or liabilities for taxes, or any
long-term leases or unusual forward or long-term commitments, or any Swap
Contracts or other similar obligations, in each case that are not reflected in
the most recent financial statements referred to in this paragraph.  During the
period from December 31, 2008 to and including the date hereof, other than the
Capital Markets Division Disposition and the Concept Capital Division
Disposition, there has been no Disposition by any Group Member of any material
part of its business or property.  The Borrower has also provided the Lender the
quarterly FOCUS Reports provided by SMH Capital Inc. to the SEC during 2008 (the
"Specified FOCUS Reports").  The Specified FOCUS Reports are correct and
complete in all material respects and conform in all material respects to
Exchange Act requirements and applicable SEC rules and regulations.

 
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Section 4.02.   No Change.  Since December 31, 2008 there has been no
development or event that has had or could reasonably be expected to have a
Material Adverse Effect.
 
Section 4.03.   Corporate Existence; Compliance with Law.  Each Group Member (a)
is duly incorporated or organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or other organization, (b) has
the corporate or other organizational power and authority, and the legal right,
to own and operate its property, to lease the property it operates as lessee and
to conduct the business in which it is currently engaged, (c) is duly qualified
as a foreign corporation or other entity and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification, (d) possesses all licenses,
registrations and authorizations from and with any Governmental Authority
necessary or material to the conduct of its business as now or presently
proposed to be conducted, (e) is in compliance, and after entering into this
Agreement will be in compliance, with all Requirements of Law except to the
extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect, (f) is not in arrears
in regard to any assessment made upon it by the SIPC or any other applicable
Governmental Authority, and (g) has not received any notice from the SEC, FINRA,
MSRB, CFTC or any other Governmental Authority of any alleged rule violation or
other circumstance which could reasonably be expected to have a Material Adverse
Effect.
 
Section 4.04.   Corporate Power; Authorization; Enforceable Obligations.  Each
Loan Party has the corporate or other organizational power and authority, and
the legal right, to make, deliver and perform the Loan Documents to which it is
a party and, in the case of the Borrower, to obtain the Loan hereunder.  Each
Loan Party has taken all necessary organizational action to authorize the
execution, delivery and performance of the Loan Documents and the Acquisition
Documents to which it is a party and, in the case of the Borrower, to authorize
the Loan on the terms and conditions of this Agreement and to authorize the
transactions and payments contemplated for the Acquisition.  No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
Acquisition or the Loan or with the execution, delivery, performance, validity
or enforceability of this Agreement or any of the Loan Documents, except (i)
consents, authorizations, filings and notices described in Schedule 4.04, which
consents, authorizations, filings and notices have been obtained or made and are
in full force and effect and (ii) the filings referred to in Section 4.18.  Each
Loan Document has been duly executed and delivered on behalf of each Loan Party
thereto.  This Agreement constitutes, and each other Loan Document upon
execution will constitute, a legal, valid and binding obligation of each Loan
Party thereto, enforceable against each such Loan Party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

 
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Section 4.05.   No Legal Bar.  The execution, delivery and performance of this
Agreement and the other Loan Documents, the making of the Loan hereunder and the
use of the proceeds thereof will not violate, conflict with or create a default
under any Requirement of Law or any Contractual Obligation of any Group Member
and will not result in, or require, the creation or imposition of any Lien on
any of their respective properties or revenues pursuant to any Requirement of
Law or any such Contractual Obligation (other than the Liens created by the
Security Documents).  No Requirement of Law or Contractual Obligation applicable
to the Borrower or any of its Subsidiaries could reasonably be expected to have
a Material Adverse Effect.  The Acquisition and the Acquisition Documents comply
with all applicable Requirements of Law.
 
Section 4.06.   Litigation.  No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the knowledge
of the Borrower, threatened by or against any Group Member or against any of
their respective properties or revenues (a) with respect to any of the Loan
Documents, the Acquisition Documents or the Assigned Agreements or any of the
transactions contemplated hereby or thereby, or (b) that could reasonably be
expected to have a Material Adverse Effect.
 
Section 4.07.   No Default.  No Group Member is in default under or with respect
to any of its Contractual Obligations in any respect that could reasonably be
expected to have a Material Adverse Effect.  No Default or Event of Default has
occurred and is continuing.
 
Section 4.08.   Ownership of Property; Liens.  Each Group Member has title in
fee simple to, or a valid leasehold interest in, all its real property, and good
title to, or a valid leasehold interest in, all its other property, and none of
such property is subject to any Lien except as permitted by Section 6.03.
 
Section 4.09.   Intellectual Property.  Each Group Member owns, or is licensed
to use, all Intellectual Property necessary for the conduct of its business as
currently conducted.  No claim has been asserted and is pending by any Person
challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any Intellectual Property, nor does the Borrower know of any
valid basis for any such claim.  The use of Intellectual Property by each Group
Member does not infringe on the rights of any Person in any material respect.
 
Section 4.10.   Taxes.  Each Group Member has filed or caused to be filed all
Federal, state and other Tax returns that are required to be filed and has paid
all Taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other Taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any the amount or validity of which are currently being contested in good faith
by appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the relevant Group Member).  No Tax Lien
has been filed, and, to the knowledge of the Borrower, no claim is being
asserted, with respect to any such Tax, fee or other charge.  No Group Member is
a party to any Tax sharing or Tax allocation agreement.

 
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Section 4.11.   Labor Matters.  Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect:  (a) there are no
strikes or other labor disputes against any Group Member  pending or, to the
knowledge of the Borrower, threatened; (b) hours worked by and payment made to
employees of each Group Member have not been in violation of the Fair Labor
Standards Act or any other applicable Requirement of Law dealing with such
matters; and (c) all payments due from any Group Member on account of employee
health and welfare insurance have been paid or accrued as a liability on the
books of the relevant Group Member.
 
Section 4.12.   ERISA.
 
(a)           Neither a Reportable Event nor an "accumulated funding deficiency"
(within the meaning of Section 412 of the Code or Section 302 of ERISA) has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code.
 
(b)           No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period.
 
(c)           The present value of all accrued benefits under each Single
Employer Plan (based on those assumptions used to fund such Plans) did not, as
of the last annual valuation date prior to the date on which this representation
is made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits by more than $250,000 in the aggregate as to all such
Plans.
 
(d)           Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan that has resulted or
could reasonably be expected to result in a material liability under ERISA, and
neither the Borrower nor any Commonly Controlled Entity would become subject to
any material liability under ERISA if the Borrower or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation
is made or deemed made.  No such Multiemployer Plan is in Reorganization or
Insolvent.
 
Section 4.13.   Investment Company Act; Investment Advisers Act; Other
Regulations.
 
(a)           No Loan Party is an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940.
 
(b)           No Loan Party is an "investment adviser" under the Investment
Advisers Act of 1940, except as set forth in Schedule 4.13.  Each Loan Party set
forth on Schedule 4.13 is duly registered as an "investment adviser" under the
Investment Advisers Act of 1940.
 
(c)           No Loan Party is subject to regulation under any Requirement of
Law (other than Regulation X of the Board) that limits its ability to incur
Indebtedness.

 
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Section 4.14.   Federal Reserve Regulations.  Neither the making of the Loan
hereunder nor the use of any of the proceeds thereof will violate or be
inconsistent with the provisions of Regulation T, Regulation U, or
Regulation X.  Following the application of the proceeds of the Loan, less than
25% of the value of the assets of the Borrower and its Subsidiaries which are
subject to any limitation on sale, pledge or other restriction hereunder taken
as a whole have been, and will continue to be, represented by Margin Stock.  If
requested by the Lender, the Borrower will furnish to the Lender a statement to
the foregoing effect in conformity with the requirements of FR Form G-3 or FR
Form U-1, as applicable, referred to in Regulation U.
 
Section 4.15.   Subsidiaries.  Except as disclosed to the Lender by the Borrower
in writing from time to time after the Closing Date, (a) Schedule 4.15 sets
forth the name and jurisdiction of incorporation of each Subsidiary and, as to
each such Subsidiary, the percentage of each class of Equity Interests owned by
any Loan Party and (b) there are no outstanding subscriptions, options,
warrants, calls, rights or other agreements or commitments (other than stock or
similar options granted to employees or directors and directors' qualifying
shares) of any nature relating to any Equity Interests of the Borrower or any
Subsidiary.  All of the outstanding shares of capital stock and other Equity
Interests of each Subsidiary are validly issued and outstanding and fully paid
and nonassessable, and all such shares and other Equity Interests owned by the
Borrower or a Subsidiary are owned, beneficially and of record, by the Borrower
or such Subsidiary free and clear of all Liens.
 
Section 4.16.   Environmental Matters.  Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect:
 
(a)           the facilities and properties owned, leased or operated by any
Group Member (the "Properties") do not contain, and have not previously
contained, any Hazardous Materials in amounts or concentrations or under
circumstances that constitute or constituted a violation of any Environmental
Law or could give rise to any Environmental Liability;
 
(b)           no Group Member has received or is aware of any notice of
violation, alleged violation, non-compliance, Environmental Liability or
potential Environmental Liability or compliance with Environmental Laws with
regard to any of the Properties or the business operated by any Group Member
(the "Business"), nor does the Borrower have knowledge or reason to believe that
any such notice will be received or is being threatened;
 
(c)           Hazardous Materials have not been transported or disposed of from
the Properties in violation of any Environmental Law, or in a manner or to a
location that could give rise to any Environmental Liability, nor have any
Hazardous Materials been generated, treated, stored or disposed of at, on or
under any of the Properties in violation of, or in a manner that could give rise
to any Environmental Liability;
 
(d)           no judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which any Group Member is or will be named as a party with
respect to the Properties or the Business, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to the Properties or the Business;

 
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(e)           there has been no release or threat of release of Hazardous
Materials at or from the Properties, or arising from or related to the
operations of any Group Member in connection with the Properties or otherwise in
connection with the Business, in violation of or in amounts or in a manner that
could give rise to any Environmental Liability;
 
(f)           the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with all
applicable Environmental Laws, and there is no contamination at, under or about
the Properties or violation of any Environmental Law with respect to the
Properties or the Business; and
 
(g)           no Group Member has assumed any Environmental Liability of any
other Person.
 
Section 4.17.   Accuracy of Information, Etc.  No statement or information
contained in this Agreement, any other Loan Document, any Assigned Agreement, or
any Acquisition Document or any other document, report, certificate or statement
furnished by or on behalf of the Borrower or any Subsidiary to the Lender, or
any of them, in connection with the transactions contemplated by this Agreement,
any other Loan Document, any Assigned Agreement, or any Acquisition Document
contained as of the date such statement, information, document or certificate
was so furnished, any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements contained herein or therein not
misleading.  The projections and pro forma financial information contained in
the materials referenced above are based upon good faith estimates and
assumptions believed by management of the Borrower to be reasonable at the time
made, it being recognized by the Lender that such financial information as it
relates to future events is not to be viewed as fact and that actual results
during the period or periods covered by such financial information may differ
from the projected results set forth therein by a material amount.  As of the
date hereof, all of the representations and warranties of the Borrower or any
Subsidiary contained in the Acquisition Documents and the Assigned Agreements
are true and correct in all material respects.  There is no fact known to the
Borrower or any Subsidiary that could reasonably be expected to have a Material
Adverse Effect that has not been expressly disclosed herein, in any other Loan
Document, in any Assigned Agreement, in any Acquisition Document or in any other
documents, certificates and statements furnished to the Lender for use in
connection with the transactions contemplated hereby and by the other Loan
Documents.
 
Section 4.18.   Security Documents.  The Guarantee and Security Agreement is
effective to create in favor of the Lender a legal, valid and enforceable
security interest in all of the Collateral described therein and proceeds
thereof.  In the case of the Pledged Equity Interests and the Pledged Notes
described in the Guarantee and Security Agreement, when certificates
representing such Pledged Equity Interests and when such Pledged Notes are
delivered to the Lender, and in the case of the other Collateral described in
the Guarantee and Security Agreement, when financing statements and other
filings specified on Schedule 4.18 in appropriate form are filed in the offices
specified on Schedule 4.18, the Guarantee and Security Agreement shall
constitute a fully perfected Lien on, and security interest in, all right, title
and interest of the Loan Parties in and to all such Collateral and the proceeds
thereof, as security for the Obligations, in each case prior and superior in
right to any other Person (except, in the case of Collateral other than Pledged
Equity Interests and Pledged Notes, Liens permitted by Section 6.03).

 
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Section 4.19.   Solvency.  Each Loan Party is, and after giving effect to the
Acquisition and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
 
Section 4.20.   Certain Documents.  The Borrower has delivered to the Lender
complete and correct copies of the Acquisition Documents and the Assigned
Agreements, including any amendments, supplements or modifications with respect
to any of the foregoing.
 
Section 4.21.   Material Contracts.  Schedule 4.21 sets forth as of the Closing
Date a complete and accurate list of all Material Contracts of each Group
Member, showing the parties, subject matter and term thereof.  Each such
Material Contract has been duly authorized, executed and delivered by all of the
parties thereto, has not been amended, supplemented or otherwise modified, is in
full force and effect and is binding upon and enforceable against all parties
thereto in accordance with its terms, and there exists no default under any
Material Contract by any party thereto.
 
Section 4.22.   Insurance.  Schedule 4.22 sets forth as of the Closing Date a
complete and accurate list of all policies of insurance maintained by each Group
Member, showing with respect to each such policy the type of insurance, the
coverage amount, the carrier, and the duration of coverage.  All premiums with
respect to such policies of insurance have been fully paid.
 
Section 4.23.   Foreign Assets Control Regulations, Etc.
 
(a)           Neither the making of the Loan hereunder nor the use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
 
(b)           No Group Member (i) is a Person described or designated in the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in Section 1 of the Anti-Terrorism Order or (ii) engages in
any dealings or transactions with any such Person.  Each Group Member is in
compliance with the USA PATRIOT Act.
 
(c)           No part of the proceeds from the Loan will be used, directly or
indirectly, for any payments to any governmental official or employee, political
party, official of a political party, candidate for political office, or anyone
else acting in an official capacity, in order to obtain, retain or direct
business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that
such Act applies to the Borrower.
 
Section 4.24.   Net Capital.
 
(a)           SMH Capital Inc. is operating pursuant to the Aggregate
Indebtedness requirements provided in paragraph (a)(1) of Rule 15c3-1;

 
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(b)           SMH Capital Inc. is not in arrears with respect to any assessment
made upon it by the SIPC, except for any such assessment being contested in good
faith and by appropriate proceedings; and
 
(c)           No Loan Party is subject to regulation under Rule 8c-1, Rule
15c2-1, Rule 15c3-1 or Rule 15c3-3, other than SMH Capital Inc.
 
Section 4.25.   Loan Party Accounts.  No Loan Party has established or is
maintaining, for its own account, any deposit account, securities account or
commodity account with any other Person, other than (i) the SMHG Operating
Accounts, (ii) the Clearing Accounts in effect on the date hereof, (iii) the L/C
Collateral Account in effect on the date hereof, and (iv) the deposit accounts
described on Schedule 4.25 as in effect on the date hereof (such scheduled
accounts being referred to herein collectively as the "Existing Accounts").
 
ARTICLE V
 
AFFIRMATIVE COVENANTS
 
The Borrower hereby agrees that, so long as any of the Obligations remain
outstanding or any Loan Document remains in effect, the Borrower shall and shall
cause each of its Subsidiaries to:
 
Section 5.01.   Financial Statements.  Furnish to the Lender:
 
(a)           as soon as available, but in any event within ninety (90) days
after the end of each Fiscal Year of the Borrower, a copy of the audited
consolidated and consolidating balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such year and the related audited
consolidated and consolidating statements of income, changes in shareholders'
equity, and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification arising out of the
scope of the audit, by KPMG LLP or other independent certified public
accountants of nationally recognized standing; and
 
(b)           as soon as available, but in any event not later than fifty (50)
days after the end of each of the first three quarterly periods of each Fiscal
Year of the Borrower, the unaudited consolidated and consolidating balance sheet
of the Borrower and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated and consolidating statements of income,
changes in shareholders' equity, and of cash flows for such quarter and the
portion of the Fiscal Year through the end of such quarter, setting forth in
each case in comparative form the figures for the previous year, certified by a
Responsible Officer of the Borrower as being fairly stated in all material
respects (subject to normal year-end audit adjustments and the absence of
footnotes).
 
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied (except as approved by such accountants or officer, as the case may be,
and disclosed in reasonable detail therein) consistently throughout the periods
reflected therein and with prior periods.

 
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Section 5.02.   Certificates; Other Information.  Furnish to the Lender:
 
(a)           concurrently with the delivery of the financial statements
referred to in Section 5.01(a), (i) a certificate of the independent certified
public accountants reporting on such financial statements stating that (A) in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate, and (B)
the Compliance Certificate delivered concurrently with such financial statements
is true and correct in all respects, (ii) a certificate, executed by an
authorized officer of an independent third party reasonably acceptable to the
Lender, stating the assets under management of each of The Edelman Financial
Center, LLC, and Edelman Financial Advisors, LLC, and (iii) either a
certificate, executed by an authorized officer of an independent third party
reasonably acceptable to the Lender, stating the assets under management of The
Endowment Master Fund, L.P. or a copy of the form N-CSR Certified Shareholder
Report filed by the Endowment Master Fund, L.P. with the SEC;
 
(b)           concurrently with the delivery of any financial statements
pursuant to Section 5.01, a Compliance Certificate executed by a Responsible
Officer of the Borrower (x) stating that, to the best of such Responsible
Officer's knowledge, each Loan Party during such period has observed or
performed all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to which it
is a party to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate, and (y) containing all information and
calculations necessary for determining compliance with the financial covenants
and other provisions of this Agreement specified by the Lender referred to
therein as of the last day of the Fiscal Quarter or Fiscal Year of the Borrower,
as the case may be;
 
(c)           as soon as available, and in any event no later than forty-five
(45) days after the end of each Fiscal Year of the Borrower, a detailed
consolidated budget for the following Fiscal Year (including the projected
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the end of the following Fiscal Year, the related
consolidated and consolidating statements of projected cash flow, projected
changes in financial position and projected income and a description of the
underlying assumptions applicable thereto), and, as soon as available,
significant revisions, if any, of such budget and projections with respect to
such Fiscal Year (collectively, the "Projections"), which Projections shall in
each case be accompanied by a certificate of a Responsible Officer stating that
such Projections are based on reasonable estimates, information and assumptions
and that such Responsible Officer has no reason to believe that such Projections
are incorrect or misleading in any material respect;
 
(d)           within forty-five (45) days after the end of each of the first
three Fiscal Quarters of each Fiscal Year and ninety (90) days after the end of
the fourth Fiscal Quarter of each Fiscal Year of the Borrower, a narrative
discussion and analysis of the financial condition and results of operations of
the Borrower and its Subsidiaries for such Fiscal Quarter and for the period
from the beginning of the then current Fiscal Year to the end of such Fiscal
Quarter, as compared to the portion of the Projections covering such periods and
to the comparable periods of the previous year;

 
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(e)           no later than ten (10) Business Days prior to the effectiveness
thereof, copies of substantially final drafts of any proposed amendment,
supplement, waiver or other modification under or pursuant to any Acquisition
Document or any Assigned Agreement;
 
(f)           within five (5) days after the same are sent, copies of all
financial statements and reports that any Group Member sends to any holder of
any of its debt securities or public equity securities and, within five days
after the same are filed, copies of all financial statements and reports that
the Borrower or any other Loan Party may make to, or file with, the SEC;
 
(g)           no later than twenty (20) days prior to the closing of any Asset
Sale, a notice (i) describing such Asset Sale and the material terms thereof,
and (ii) stating the estimated Net Cash Proceeds anticipated to be received by
the Group Members from such Asset Sale;
 
(h)           promptly, copies of all federal, state, local and foreign Tax
returns and reports filed by each Group Member in respect of Taxes measured by
income (excluding sales, use and like Taxes);
 
(i)           as soon as available and in any event within ninety (90) days
after the end of each Fiscal Year of the Borrower, (i) a report in form and
substance satisfactory to the Lender outlining all insurance coverage maintained
as of the date of such report by the Group Members (specifying the type, amount,
deductibles and carrier) and the duration of such coverage, and (ii) an
insurance broker's statement that all premiums then due and payable with respect
to such coverage have been paid and confirming compliance by the Group Members
with Section 5.02(a) of the Guarantee and Security Agreement;
 
(j)           as soon as available and in any event within five (5) Business
Days after the receipt thereof, copies of any "management letter" or similar
letter or report received by the Borrower from its independent public
accountants;
 
(k)           as soon as available and in any event within twenty-five (25) days
after the end of each Fiscal Quarter of the Borrower, the FOCUS Reports for such
Fiscal Quarter filed by each applicable Loan Party with the SEC;
 
(l)           as soon as available and in any event within forty-five (45) days
after the end of each Fiscal Quarter of the Borrower, a report from the
Borrower's general counsel showing all litigation to which the Borrower or any
of its Subsidiaries is a party;
 
(m)           as soon as available and in any event within five (5) Business
Days after the end of each calendar month, (i) a report describing the
Consolidated Short Sales Exposure, the Concept Capital Short Sales Exposure, the
Consolidated Short Sales Amount, and Available Cash and Cash Equivalents in each
case as of the last Business Day of such calendar month, and all Clearing
Agreements in effect as of the last Business Day of such calendar month, (ii) a
report describing any claims made or reasonably expected to be made by any
Person, directly or indirectly, against the Borrower or any other Group Member
from, as a result of or in connection with (A) any short sale transaction or (B)
any other claim, liability or obligation under any Clearing Agreement (including
any Concept Capital Obligation), (iii) a report describing in reasonable detail
all outstanding Swap Contracts and securities repurchase (and reverse
repurchase) agreements to which any Loan Party is a party and the estimated Swap
Termination Value or other liability of such Loan Parties thereunder, (iv) to
the extent not previously disclosed to the Lender in writing, a description of
any change in the jurisdiction of organization or name of any Loan Party and a
list of all Intellectual Property and real property (including any leasehold
interests) acquired by any Loan Party since the date of the most recent list
delivered pursuant to this subsection (m) (or, in the case of the first such
list so delivered, since the Closing Date), (v) a list of all Investments that
have been made or are held by any Loan Party and permitted under Section 6.08,
and (vi) updated versions of each Schedule to the Guarantee and Security
Agreement containing information to the effect that such Schedule is true,
correct and complete in all respects as of the last Business Day of such
calendar month; and

 
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(n)           promptly, such additional financial and other information as the
Lender may from time to time reasonably request.
 
Documents required to be delivered pursuant to Section 5.01(a) or (b) or Section
5.02(f) (to the extent any such documents are included in materials otherwise
filed with the SEC) may be delivered electronically and if so delivered, shall
be deemed to have been delivered on the date (i) on which the Borrower posts
such documents, or provides a link thereto on the Borrower's website on the
Internet at www.smhgroup.com; or (ii) on which such documents are posted on the
Borrower's behalf on an Internet or intranet website, if any, to which the
Lender has access (whether a commercial, third-party website or whether
sponsored by the Lender); provided that:  (x) if requested by the Lender, the
Borrower shall deliver paper copies of such documents to the Lender and (y) the
Borrower shall notify the Lender (by telecopier or electronic mail) of the
posting of any such documents and provide to the Lender by electronic mail
electronic versions (i.e., soft copies) of such documents.  Notwithstanding
anything contained herein, in every instance the Borrower shall be required to
provide paper copies of the Compliance Certificates required by Section 5.02(b)
to the Lender.
 
Section 5.03.   Payment of Obligations.  Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the relevant Group Member.
 
Section 5.04.   Maintenance of Existence; Compliance.
 
(a)           (i) Preserve, renew and keep in full force and effect its
organizational existence and (ii) maintain all registrations, consents,
approvals, authorizations, rights, permits, licenses, privileges and franchises
from any Governmental Authority, Self-Regulatory Organization or securities
exchange necessary or desirable in the normal conduct of its business, except,
in each case, as otherwise permitted by Section 6.04 and except, in the case of
clause (ii) above, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; and
 
(b)           comply with all Contractual Obligations and Requirements of Law,
except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 
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Section 5.05.   Maintenance of Property; Insurance.
 
(a)           Keep all property useful and necessary in its business in good
working order and condition, ordinary wear and tear excepted; and
 
(b)           maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and against at least such
risks (but including in any event public liability, product liability and
business interruption) as are usually insured against in the same general area
by companies engaged in the same or a similar business.
 
Section 5.06.   Inspection of Property; Books and Records; Discussions.
 
(a)           Keep proper books of records and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and
 
(b)           at the sole cost and expense of the Borrower, representatives of
the Lender to visit and inspect any of its properties and examine and make
abstracts from any of its books and records at any reasonable time and as often
as may reasonably be desired and to discuss the business, operations, properties
and financial and other condition of any Group Member with officers and
employees of any Group Member and with its independent certified public
accountants.
 
Section 5.07.   Notices.  Promptly give notice to the Lender of:
 
(a)           the occurrence of any Default or Event of Default;
 
(b)           any (i) default, event of default, termination event or other
similar event or circumstance under any Contractual Obligation of any Group
Member or (ii) litigation, investigation or proceeding that may exist at any
time between any Group Member and any Governmental Authority, that in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
 
(c)           any litigation, proceeding or other claim against or affecting any
Group Member (i) in which the amount involved is $250,000 or more and not
covered by insurance, (ii) in which injunctive or similar relief is sought or
(iii) which relates to any Loan Document;
 
(d)           as soon as possible, and in any event within ten (10) days after
any Responsible Officer of the Borrower learns thereof, notice of the assertion
or commencement of any claim, action, litigation, suit or proceeding against or
affecting any Group Member, commenced by any Governmental Authority, which could
reasonably be expected to have a Material Adverse Effect;
 
(e)           any assertion of any Environmental Liability or any other claim
under any Environmental Law against, or with respect to any activities or
properties of, any Group Member in which the amount of the Environmental
Liability or claim is $250,000 or more;

 
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(f)           the following events, as soon as possible and in any event within
thirty (30) days after any Group Member knows or has reason to know
thereof:  (i) the occurrence of any Reportable Event with respect to any Plan, a
failure to make any required contribution to a Plan, the creation of any Lien in
favor of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution
of proceedings or the taking of any other action by the PBGC or the Borrower or
any Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the termination, Reorganization or Insolvency of, any Plan;
 
(g)           any material change in accounting policies or financial reporting
practices by any Group Member;
 
(h)           the occurrence of any Asset Sale, Recovery Event, incurrence or
issuance of Indebtedness or receipt of any Extraordinary Receipt for which the
Borrower is required to make a mandatory prepayment pursuant to Section 2.05;
 
(i)           as soon as possible, and in any event, within two (2) Business
Days, any information or notice provided to the Borrower by (A) any Person under
or in connection with any Consent and Agreement or any Assigned Agreement, (B)
The Edelman Financial Center, LLC or Edelman Financial Advisors, LLC, (C)
Fredric M. Edelman or any other Person under or in connection with the Edelman
Subordination Agreement, (D) any Person under or in connection with any SMHG -
Salient Intercreditor Agreement or (E) The Endowment Master Fund, L.P. or any of
its Affiliates;
 
(j)           any default, event of default or similar occurrence by any party
to any of the Acquisition Documents or any of the Assigned Agreements;
 
(k)           prior to its occurrence, any change in the management of the
Borrower; and
 
(l)           any development or event that has had or could reasonably be
expected to have a Material Adverse Effect.
 
Each notice delivered to the Lender pursuant to this Section 5.07 shall be
accompanied by a statement of a Responsible Officer setting forth details of the
occurrence referred to therein and stating what action the relevant Group Member
proposes to take with respect thereto.
 
Section 5.08.   Environmental Laws.
 
(a)           Comply with, and ensure compliance by all tenants and subtenants,
if any, with, all applicable Environmental Laws, and obtain and comply with and
maintain, and ensure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws; and
 
(b)           Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.

 
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Section 5.09.   Additional Collateral.
 
(a)           With respect to any property acquired after the Closing Date by
any Group Member (other than any property described in paragraph (b), (c) or (d)
below, and property acquired by any Excluded Foreign Subsidiary) as to which the
Lender does not have a perfected Lien, promptly (i) execute and deliver to the
Lender such amendments to the Guarantee and Security Agreement or such other
documents or agreements as the Lender may require to grant to the Lender, a
perfected first priority security interest in such property and (ii) take all
actions required by the Lender to grant to the Lender a perfected first priority
security interest in such property, including the filing of Uniform Commercial
Code financing statements in such jurisdictions as may be required by the
Guarantee and Security Agreement or by law or as may be requested by the Lender.
 
(b)           With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $100,000 acquired after
the Closing Date by any Group Member, promptly (i) execute and deliver a first
priority Mortgage, in favor of the Lender covering such real property, (ii) if
requested by the Lender, provide the Lender with (A) title and extended coverage
insurance covering such real property in an amount at least equal to the
purchase price of such real property (or such other amount as shall be specified
by the Lender), together with such endorsements as the Lender may require, (B) a
current ALTA survey of such real property, together with a surveyor's
certificate, (C) an environmental site assessment report for such real property,
(D) an appraisal of such real property, and (E) such consents, waivers, and
estoppels, and intercreditor, attornment and subordination agreements as may be
required by the Lender in connection with such Mortgage, each of the foregoing
to be in scope, form and substance satisfactory to the Lender, and (iii) if
requested by the Lender, deliver to the Lender legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, satisfactory to the Lender.
 
(c)           With respect to any new Material Subsidiary (other than an
Excluded Foreign Subsidiary) which is created or acquired after the Closing Date
by any Group Member (which, for the purposes of this paragraph (c), shall
include any existing Subsidiary that ceases to be an Excluded Foreign
Subsidiary), promptly (i) execute and deliver to the Lender such amendments to
the Guarantee and Security Agreement and take such other action as the Lender
may require to grant to the Lender, for the benefit of the Lender, a perfected
first priority security interest in the Equity Interests of such new Material
Subsidiary that is owned by any Group Member, (ii) deliver to the Lender the
certificates representing such Equity Interests, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of the
relevant Group Member, (iii) cause such new Material Subsidiary (A) to become a
party to the Guarantee and Security Agreement, (B) to take all actions required
by the Lender to grant to the Lender a perfected first priority security
interest in the Collateral described in the Guarantee and Security Agreement
with respect to such new Material Subsidiary, including the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be required by
the Guarantee and Security Agreement or by law or as may be requested by the
Lender and (C) to deliver to the Lender a certificate of such Material
Subsidiary, substantially in the form of Exhibit B, with appropriate insertions
and attachments, and (iv) if requested by the Lender, deliver to the Lender
legal opinions relating to the matters described above, which opinions shall be
in form and substance, and from counsel, satisfactory to the Lender.

 
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(d)           With respect to any new Excluded Foreign Subsidiary that is a
Material Subsidiary which is created or acquired after the Closing Date by any
Group Member (other than by any Group Member that is an Excluded Foreign
Subsidiary), promptly (i) execute and deliver to the Lender such amendments to
the Guarantee and Security Agreement and take such other action as the Lender
may require to grant to the Lender a perfected first priority security interest
in the Equity Interests of such new Material Subsidiary that is owned by any
such Group Member (provided that in no event shall more than 66% of the total
outstanding voting Equity Interests of any such new Material Subsidiary be
required to be so pledged), (ii) deliver to the Lender the certificates
representing such Equity Interests, together with undated stock powers, in
blank, executed and delivered by a duly authorized officer of the relevant Group
Member and take such other action as may be required by the Lender to perfect
the Lender's security interest therein, and (iii) if requested by the Lender,
deliver to the Lender legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, satisfactory to
the Lender.
 
Section 5.10.   Further Assurances.
 
(a)           Promptly upon request by the Lender, correct any defect or error
that may be discovered from time to time in any Loan Document or in the
execution, acknowledgment, filing or recordation thereof; and
 
(b)           Promptly upon request by the Lender, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register any and all
such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of
trust, trust deeds, assignments, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as the Lender may require from time to time in
order to (i) carry out more effectively the purposes of the Loan Documents, (ii)
to the fullest extent permitted by applicable law, subject any Group Member's
properties, assets, rights or interests to the Liens now or hereafter intended
to be covered by any of the Security Documents, (iii) perfect and maintain the
validity, effectiveness and priority of any of the Security Documents and any of
the Liens intended to be created thereunder and (iv) assure, convey, grant,
assign, transfer, preserve, protect and confirm more effectively unto the Lender
the rights granted or now or hereafter intended to be granted to the Lender
under any Loan Document or under any other instrument executed in connection
with any Loan Document to which any Group Member is or is to be a party.
 
Section 5.11.   Compliance with Leases.  Make all payments and otherwise perform
all obligations in respect of all leases of real property to which any Group
Member is a party, keep such leases in full force and effect and not allow such
leases to lapse or be terminated or any rights to renew such leases to be
forfeited or canceled, notify the Lender of any default by any party with
respect to such leases and cooperate with the Lender in all respects to cure any
such default.
 
Section 5.12.   Material Contracts.  Perform and observe all the terms and
provisions of each Material Contract to be performed or observed by it, maintain
each such Material Contract in full force and effect, enforce each such Material
Contract in accordance with its terms, take all such action to such end as may
be from time to time requested by the Lender and, upon request of the Lender,
make to each other party to each such Material Contract such demands and
requests for information and reports or for action as any Group Member is
entitled to make under such Material Contract, except, in any case, where the
failure to do so, either individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect.

 
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Section 5.13.   Valuation and Appraisals.  Promptly upon the request of the
Lender at any time and from time to time, and at the sole cost and expense of
the Borrower, provide the Lender with descriptions, valuations, appraisals and
updates of any or all of the Collateral (including, to the extent requested by
the Lender, valuations and appraisals from third parties selected or approved by
the Lender), and prepared on a basis satisfactory to the Lender, such appraisals
and updates to include, without limitation, information required by applicable
Requirements of Law and by the internal policies of the Lender.
 
Section 5.14.   Board Visitation.  Permit the Lender to designate an observer,
without voting rights, who will be entitled to attend, observe or otherwise
participate in all meetings of the board of directors (or equivalent governing
body) of the Borrower (including meetings of committees and subcommittees
thereof).  The Borrower shall deliver to the Lender reasonable prior notice of
the time and place of each meeting of the board of directors (or equivalent
governing body) of the Borrower.  The Borrower shall deliver to the Lender (a)
in advance of execution, any resolutions adopted or taken by the board of
directors (or equivalent governing body), or any committee or subcommittee
thereof, without a meeting, and (b) all other materials provided to the board of
directors (or equivalent governing body) of the Borrower.  The Borrower shall
reimburse such observer on demand for all expenses incurred by it in attending
such meetings.
 
Section 5.15.   Operating Accounts and Other Business.  At all times maintain
all of the Borrower's primary operating accounts with the Lender and enter into
Cash Management Agreements with the Lender to the extent required by the Lender
to operate and maintain all such operating accounts, and take all actions
reasonably requested by the Lender from time to time to enable the Lender to
provide any Group Member with information regarding any products or services
offered by the Lender, including Cash Management Agreements and overnight
investments.
 
Section 5.16.   Net Capital.  Cause SMH Capital Inc. to (a) maintain at all
times a ratio of Net Capital to Aggregate Indebtedness (computed in accordance
with Rule 15c3-1) of not less than 10% and (b) at all times extend or maintain
credit to or for its customers in compliance with the applicable provisions of
Regulation T, and with respect to any Customer Securities, in compliance with
Regulation T, Rule 8c-1, Rule 15c2-1, and Rule 15c3-1, and all other applicable
Requirements of Law from time to time in effect.
 
Section 5.17.   Capital Markets Division Disposition.  Consummate in full to the
satisfaction of the Lender the Capital Markets Division Disposition on or prior
to June 30, 2009.

 
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Section 5.18.   Concept Capital Division Disposition and Indemnification.
 
(a)           Consummate in full to the satisfaction of the Lender the Concept
Capital Division Disposition on or prior to September 30, 2009 (including the
transfer by the Borrower to NewCo LLC of all short sales transactions and
exposures of the Concept Capital Division, either by assignment and assumption
or by termination of all short sales transactions, in effect on or immediately
prior to the date of such consummation; and
 
(b)           take all actions necessary or requested by the Lender to terminate
each Contractual Obligation (including any Clearing Agreement), the terms and
provisions of which directly or indirectly create (or may create) any Concept
Capital Obligations, on or prior to the date which is thirty (30) days after the
date of consummation of the Concept Capital Division Disposition, and provide
evidence of each such termination to the Lender.
 
ARTICLE VI
 
NEGATIVE COVENANTS
 
The Borrower hereby agrees that, so long as any Obligations remain outstanding
or any Loan Document remains in effect, the Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly:
 
Section 6.01.   Financial Covenants.
 
(a)           Consolidated Leverage Ratio.  Permit the Consolidated Leverage
Ratio as at the last day of any Fiscal Quarter of the Borrower to exceed 0.50 to
1.00.
 
(b)           Consolidated Tangible Net Worth.  Permit Consolidated Tangible Net
Worth as at the last day of any calendar month to be less than $90,000,000.
 
(c)           Consolidated Liquid Assets.  Permit (i) Consolidated Liquid Assets
as at the last day of any Fiscal Quarter of the Borrower to be less than
$40,000,000, or (ii) the portion of Consolidated Liquid Assets consisting of
Available Cash and Cash Equivalents as at the last day of any calendar month to
be less than $20,000,000.
 
(d)           Consolidated Client Assets.  Permit Consolidated Client Assets at
any time to be less than $8,000,000,000.
 
(e)           Consolidated Short Sales Exposure.  Permit (i) Consolidated Short
Sales Exposure at any time during the period from the Closing Date until
September 30, 2009 to be greater than $1,000,000, or (ii) Consolidated Short
Sales Amount at any time during the period from October 1, 2009 until the
Maturity Date to be greater than $1,000,000.
 
(f)           Consolidated Net Income.  Permit (i) Consolidated Net Income for
any Fiscal Year of the Borrower to be less than zero, or (ii) Consolidated Net
Income for any three (3) consecutive Fiscal Quarters of the Borrower to be less
than zero for any such Fiscal Quarter.
 
Section 6.02.   Indebtedness.  Create, issue, incur, assume, become liable in
respect of or suffer to exist any Indebtedness, except:
 
(a)           Indebtedness of any Loan Party pursuant to any Loan Document;

 
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(b)           Indebtedness of (i) the Borrower to any Subsidiary, (ii) of any
Material Subsidiary to the Borrower or any other Subsidiary, and (iii) subject
to Section 6.08(h), of any Foreign Subsidiary to the Borrower or any Material
Subsidiary;
 
(c)           Guarantee Obligations incurred by the Borrower or any Material
Subsidiary in respect of any Indebtedness of the Borrower or any Material
Subsidiary otherwise permitted by this Section 6.02;
 
(d)           Indebtedness outstanding on the date hereof and listed on Schedule
6.02(d) and any refinancings, refundings, renewals or extensions thereof
(without increasing, or shortening the maturity of, the principal amount
thereof);
 
(e)           Unsecured Indebtedness arising under Swap Contracts permitted by
Section 6.20 entered into in the ordinary course of business having an aggregate
Swap Termination Value not to exceed $100,000 at any time outstanding;
 
(f)           Indebtedness arising under securities repurchase agreements
entered into in the ordinary course of business in an aggregate amount not to
exceed $100,000 at any time outstanding;
 
(g)           Indebtedness arising from liabilities and obligations (including
Concept Capital Obligations) under any Clearing Agreement in an aggregate amount
not to exceed $500,000 at any time outstanding;
 
(h)           Indebtedness of the Borrower in respect of the Subordinated Note
in an aggregate principal amount not to exceed $10,000,000, provided that such
Indebtedness is at all times subject in all respects to the Edelman
Subordination Agreement;
 
(i)           Indebtedness arising from (i) Permitted Letters of Credit and any
renewals thereof in an aggregate stated face amount not to exceed $1,250,000 at
any time outstanding and (ii) any letter of credit issued from time to time by
the Lender for the account of any Loan Party, provided that any reimbursement
obligations in respect of any letter of credit issued by the Lender is fully
cash-collateralized by the Borrower at all times in a manner satisfactory to the
Lender; and
 
(j)           Additional Indebtedness of the Borrower or any of its Subsidiaries
in an aggregate principal amount (for the Borrower and all Subsidiaries) not to
exceed $250,000 at any one time outstanding.
 
Section 6.03.   Liens.  Create, incur, assume or suffer to exist any Lien upon
any of its property, whether now owned or hereafter acquired, except for:
 
(a)           Liens for taxes, assessments or governmental charges not yet due
or that are being contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on the books of the
Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;

 
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(b)           carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business that are not
overdue or that are being contested in good faith by appropriate proceedings;
 
(c)           pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security, retirement benefit, or similar
legislation;
 
(d)           deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal bonds
(not in excess of $100,000 in the aggregate), performance bonds and other
obligations of a like nature incurred in the ordinary course of business;
 
(e)           easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the aggregate,
are not substantial in amount and that do not in any case materially detract
from the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or any of its Subsidiaries;
 
(f)           Liens in existence on the date hereof listed on Schedule 6.03(f),
securing Indebtedness permitted by Section 6.02(d), provided that no such Lien
is spread to cover any additional property after the Closing Date and that the
amount of Indebtedness secured thereby is not increased;
 
(g)           Liens created pursuant to the Security Documents;
 
(h)           any interest or title of a lessor under any lease entered into by
the Borrower or any other Subsidiary in the ordinary course of its business and
covering only the assets so leased;
 
(i)           Liens arising (i) under any Clearing Agreement as in effect on the
date hereof (provided that such Lien, the obligations secured by any such Lien
and the property (and amount or value of property) subject to any such Lien is
not or are not increased or extended in any manner after the date hereof), (ii)
under any other Clearing Agreement which are approved in writing by the Lender,
and (iii) by operation of law in the ordinary course of the clearance and
settlement of securities purchase and sale transactions; and
 
(j)           Liens securing reimbursement obligations in respect of letters of
credit permitted under Section 6.02(i).
 
Section 6.04.   Fundamental Changes.  Enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of, all or substantially all of its
property or business, except that:
 
(a)           any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any Material Subsidiary (provided that
the Material Subsidiary shall be the continuing or surviving Person);

 
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(b)           any Subsidiary of the Borrower may Dispose of any or all of its
assets (i) to the Borrower or any Material Subsidiary (upon voluntary
liquidation or otherwise) or (ii) pursuant to a Disposition permitted by Section
6.05;
 
(c)           any Investment expressly permitted by Section 6.08 may be
structured as a merger, consolidation or amalgamation, provided that in no event
shall the Borrower participate in a merger, consolidation, or amalgamation
without being the surviving entity; and
 
(d)           any Subsidiary with assets of less than $50,000 may be liquidated,
wound up, or dissolved.
 
Section 6.05.   Disposition of Property.  Dispose of any of its property,
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any of such Subsidiary's Equity Interests to any Person, except:
 
(a)           Dispositions of obsolete or worn out property in the ordinary
course of business;
 
(b)           Dispositions of securities in the ordinary course of business;
 
(c)           Dispositions permitted by Sections 6.04(a), (b) or (d);
 
(d)           the sale or issuance of any Subsidiary's Equity Interests to the
Borrower or any Material Subsidiary;
 
(e)           the Capital Markets Division Disposition and the Concept Capital
Division Disposition; and
 
(f)           the Dispositions of other property having a fair market value not
to exceed $3,000,000 in the aggregate during the period from and including the
Closing Date and to but excluding the Maturity Date.
 
Section 6.06.   Restricted Payments.  Declare or make any Restricted Payment, or
incur any obligation (contingent or otherwise) to do so, except that (a) any
Subsidiary may make any Restricted Payment to the Borrower or any Material
Subsidiary, (b) provided that no Default or Event of Default has occurred and is
continuing at the time of any such dividend or distribution or would result from
the declaration of or making of any such dividend or distribution, any
Subsidiary may make any dividends or distributions to any Minority Owner of such
Subsidiary in an aggregate amount during any consecutive twelve (12) month
period not to exceed the lesser of (i) such Minority Owner's pro rata share of
the net income of such Subsidiary for such period or (ii) any amounts such
Subsidiary is obligated to pay to such Minority Owner during such period
pursuant to a Contractual Obligation listed on Schedule 6.06, and (c) the
Borrower may declare and pay a cash dividend on its issued and outstanding
shares of common stock, provided that (x) no Default or Event of Default has
occurred and is continuing at the time of any such dividend or would result from
the declaration of or making of any such dividend, and (y) on the day of and
after giving effect to the making of any such dividend, the Cumulative Dividend
Amount on such date would be less than Cumulative Consolidated Net Income on
such date.

 
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Section 6.07.   Capital Expenditures.  Make or commit to make any Capital
Expenditure, except Capital Expenditures of the Borrower and its Subsidiaries
made in the ordinary course of business in an aggregate amount during any of the
Fiscal Year of the Borrower not to exceed the amount set forth below opposite
such Fiscal Year below:
 
Fiscal Year
 
Amount
         
2009
  $ 6,000,000  
2010
  $ 6,000,000  
2011
  $ 6,000,000  
2012
  $ 4,500,000  

provided, that (a) up to $1,000,000 of any such amount referred to above, if not
so expended in the Fiscal Year for which it is permitted, may be carried over
for expenditure in the next succeeding Fiscal Year and (b) Capital Expenditures
made pursuant to this Section 6.07 during any Fiscal Year of the Borrower shall
for purposes hereof be deemed made, first, in respect of amounts permitted for
such Fiscal Year as provided above and, second, in respect of amounts carried
over from the prior Fiscal Year pursuant to clause (a) above.
 
Section 6.08.   Investments.  Make, hold, maintain,  or permit to exist any
Investments, except:
 
(a)           Investments in Subsidiaries and Affiliates existing on the date
hereof and listed on Schedule 6.08(a) hereof;
 
(b)           Investments in Cash Equivalents;
 
(c)           Investments in (i) Marketable Equity Securities and Marketable
Debt Securities made in the ordinary course of business, and (ii) private equity
participations, other non-publicly traded debt or equity securities or other
private Investments, provided that the aggregate cost of all such Investments
shall not exceed (A) $55,000,000 in the aggregate at any time outstanding or (B)
with respect to all such Investments made during any Fiscal Year of the Loan
Parties, $10,000,000 in the aggregate at any time outstanding during such Fiscal
Year;
 
(d)           Guarantee Obligations permitted by Section 6.02;
 
(e)           securities purchased under repurchase agreements entered into in
the ordinary course of business;
 
(f)           securities owned and loaned under securities lending agreements
entered into in the ordinary course of business;
 
(g)           repurchases of up to 1,000,000 shares of the Borrower's common
stock to fund the Borrower's incentive stock option and stock purchase plan;
 
(h)           loans and advances to employees of any Group Member in the
ordinary course of business (including for travel, entertainment and relocation
expenses) in an aggregate amount for all Group Members not to exceed $100,000 on
the last day of any quarter;

 
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(i)           upfront or bonus loans to employees of any Group Member in the
ordinary course of business in an aggregate amount for all Group Members not to
exceed $5,000,000 at any time outstanding;
 
(j)           the Acquisition;
 
(k)           Investments in assets useful in the business of the Borrower and
its Subsidiaries made by the Borrower or any of its Subsidiaries with the
proceeds of any Reinvestment Deferred Amount;
 
(l)           intercompany Investments by any Group Member in any other Group
Member; and
 
(m)           any other Investments by the Borrower or any of its Subsidiaries
in an aggregate amount (valued at cost) not to exceed $250,000 at any time
outstanding.
 
Section 6.09.   Transactions with Affiliates.  Enter into any transaction,
including any purchase, sale, lease or exchange of property, the rendering of
any service or the payment of any management, advisory or similar fees, with any
Affiliate (other than the Borrower or any Material Subsidiary) unless such
transaction is (a) otherwise expressly permitted under this Agreement, (b) in
the ordinary course of business of the relevant Group Member, and (c) upon fair
and reasonable terms no less favorable to the relevant Group Member than it
would obtain in a comparable arm's length transaction with a Person that is not
an Affiliate.
 
Section 6.10.   Sales and Leasebacks.  Enter into any arrangement with any
Person providing for the leasing by any Group Member of real or personal
property that has been or is to be sold or transferred by such Group Member to
such Person or to any other Person to whom funds have been or are to be advanced
by such Person on the security of such property or rental obligations of such
Group Member.
 
Section 6.11.   Changes in Fiscal Periods.  Permit the Fiscal Year of the
Borrower to end on a day other than December 31 or change the Borrower's method
of determining Fiscal Quarters.
 
Section 6.12.   Negative Pledge Clauses.  Enter into or suffer to exist or
become effective any agreement that prohibits or limits the ability of any Group
Member to create, incur, assume or suffer to exist any Lien upon any of its
property or revenues, whether now owned or hereafter acquired, to secure its
obligations under the Loan Documents to which it is a party or any refinancings
thereof, other than (a) this Agreement and the other Loan Documents and (b) any
agreements governing any purchase money Liens or Capital Lease Obligations
otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby).

 
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Section 6.13.   Clauses Restricting Subsidiary Distributions.  Enter into or
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Subsidiary of the Borrower to (a) make Restricted Payments in
respect of any Equity Interests of such Subsidiary held by, or pay any
Indebtedness owed to, the Borrower or any other Subsidiary, (b) make loans or
advances to, or other Investments in, the Borrower or any other Subsidiary or
(c) transfer any of its assets to the Borrower or any other Subsidiary except
for such encumbrances or restrictions existing under or by reason of (i) any
restrictions existing under the Loan Documents, (ii) any restrictions with
respect to a Subsidiary imposed pursuant to an agreement that has been entered
into in connection with the Disposition of all or substantially all of the
Equity Interests or assets of such Subsidiary, or (iii) any restrictions imposed
by the Exchange Act or rules issued thereunder or rules of any Governmental
Authority having jurisdiction over the Borrower or any Subsidiary.
 
Section 6.14.   Lines of Business.  Enter into any business, either directly or
through any Subsidiary, except for those businesses in which the Borrower and
its Subsidiaries are engaged on the date of this Agreement (after giving effect
to the Acquisition) or that are reasonably related thereto.
 
Section 6.15.   Amendments to Acquisition Documents.
 
(a)           Amend, supplement or otherwise modify (pursuant to a waiver or
otherwise) the terms and conditions of the indemnities and licenses furnished to
the Borrower or any of its Subsidiaries pursuant to the Acquisition Documents or
any other document delivered in connection therewith such that after giving
effect thereto such indemnities or licenses shall be materially less favorable
to the interests of the Loan Parties or the Lenders with respect thereto; or
 
(b)           amend, supplement or otherwise modify the terms and conditions of
any of the Acquisition Documents or any such other documents in any other manner
except for any such amendment, supplement or modification that (i) becomes
effective after the Closing Date and (ii) could not reasonably be expected to
have a Material Adverse Effect.
 
Section 6.16.   Amendments to Organizational Documents.  Amend, modify or
supplement any Organizational Document of any Group Member, in any manner that
could be materially adverse to the rights of the Lender.
 
Section 6.17.   Material Contracts.  (a) Cancel or terminate any Assigned
Agreement or any other Material Contract or permit, consent to or accept any
cancellation or termination thereof (other than as expressly permitted, without
any requirement that consent to such cancellation or termination be provided by
any non-terminating party, pursuant to the existing terms of any such Assigned
Agreement or other Material Contract), (b) except as and to the extent set forth
in the SMH SPEADV Assignments, amend, modify or supplement in any manner any
term or provision of any Assigned Agreement or any other Material Contract or
give any consent, waiver or approval thereunder, (c) waive any default or
termination event under or any breach or violation of any term or condition of
any Assigned Agreement or any other Material Contract, (d) agree in any manner
to any other amendment, modification or change of any term or condition of any
Assigned Agreement or any other Material Contract, (e) fail to perform any of
its obligations under any Assigned Agreement or any other Material Contract, or
(f) take any other action in connection with any Assigned Agreement or any other
Material Contract that would impair the value of the interests or rights of any
Loan Party thereunder or the timing or amount of any payment made (or to be
made) by any Person to any Loan Party thereunder or that would otherwise be
adverse to the interests or rights of the Lender thereunder or under any Consent
and Agreement or with respect to any of the foregoing.

 
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Section 6.18.   Terrorism Sanctions Regulations.  Become a Person described or
designated in the Specially Designated Nationals and Blocked Persons List of the
Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or
engage in any dealings or transactions with any such Person.
 
Section 6.19.   Management and Director Compensation.  Pay any management,
consulting or similar fee (excluding salary and bonus payments made to employees
in the ordinary course of business) to any Affiliate of any Loan Party or to any
officer, director or employee of any Loan Party or any Affiliate of any Loan
Party, except the payment of directors' fees in an aggregate amount not to
exceed $500,000 during any Fiscal Year of the Borrower; provided, however, the
Borrower shall not, and shall not permit any of its Subsidiaries to, pay any
such directors' fees if a Default or Event of Default shall have occurred and be
continuing or would result from any such payment.
 
Section 6.20.   Swap Contracts.  Enter into any Swap Contract, except Swap
Contracts that are reasonably acceptable to the Lender and which (a) hedge or
mitigate risks to which the Borrower or any Subsidiary of the Borrower has
actual exposure (other than those in respect of Equity Interests), and (b)
effectively cap, collar or exchange interest rates (from fixed to floating
rates, from one floating rate to another floating rate or otherwise) with
respect to any interest-bearing liability or investment of the Borrower or any
Subsidiary of the Borrower.
 
Section 6.21.   Margin Stock.  Use any of the proceeds of the Loan to purchase
or carry any Margin Stock in violation of Regulation T, Regulation U or
Regulation X.
 
Section 6.22.   Loan Party Accounts.
 
(a)           Establish or maintain any deposit account, securities account or
commodity account with any Person, other than (i) the SMHG Operating Accounts,
(ii) the Clearing Accounts in effect on the date hereof, (iii) the L/C
Collateral Account in effect on the date hereof, and (iv) the Existing Accounts;
 
(b)           hold or maintain cash or any other assets or properties in the
Existing Accounts in an aggregate amount which (i) at any time from the Closing
Date through September 30, 2009 exceeds $500,000, or (ii) at any time from
October 10, 2009 through the Maturity Date exceeds $400,000; or
 
(c)           cause (or permit SMH SPEADV to cause) any Assigned Agreement
Payment made to the Borrower and/or SMH SPEADV to be initially deposited or
transferred into any deposit account, securities account or other account other
than the Assigned Agreement Payment Account.

 
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Section 6.23.   Subordinated Note.
 
(a)           Make or offer to make any optional or voluntary payment,
prepayment, repurchase or redemption of or otherwise optionally or voluntarily
defease or segregate funds with respect to the Subordinated Note;
 
(b)           make any payment, repurchase or redemption with respect to the
Subordinated Note or take any other action in violation of the Edelman
Subordination Agreement;
 
(c)           amend, modify, waive or otherwise change, or consent or agree to
any amendment, modification, waiver or other change to, any of the terms of any
Subordinated Loan Document (as defined in the Edelman Subordination Agreement)
(other than any such amendment, modification, waiver or other change that (i)
would extend the maturity or reduce the amount of any payment of principal
thereof or reduce the rate or extend any date for payment of interest thereon
and (ii) does not involve the payment of a consent fee); or
 
(d)           amend, modify or supplement any Subordinated Loan Document (as
defined in the Edelman Subordination Agreement).
 
Section 6.24.   SMHG - Salient Intercreditor Agreement.  Enter into, or amend,
modify or supplement in any respect, any SMHG - Salient Intercreditor Agreement,
in each case without the prior written consent of the Lender.
 
ARTICLE VII
 
EVENTS OF DEFAULT
 
Section 7.01.   Events of Default.  If any of the following events shall occur
and be continuing:
 
(a)           the Borrower shall fail to pay any principal of the Loan when due
in accordance with the terms hereof; or the Borrower shall fail to pay any
interest on the Loan, or any other amount payable hereunder or under any other
Loan Document, within three (3) Business Days after any such interest or other
amount becomes due in accordance with the terms hereof; or
 
(b)           any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement or any such other Loan Document
shall prove to have been inaccurate in any material respect on or as of the date
made or deemed made; or
 
(c)           any Loan Party shall default in the observance or performance of
any agreement contained in clause (i) or (ii) of Section 5.04(a) (with respect
to the Borrower only), Section 5.07(a), Section 5.16, Section 5.17, Section
5.18, Section 5.19 or Article VI of this Agreement or Section 5.05 or Section
5.07(b) of the Guarantee and Security Agreement; or

 
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(d)           any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section), and such
default shall continue unremedied for a period of thirty (30) days after notice
to the Borrower from the Lender; or
 
(e)           any Group Member shall (i) default in making any payment of any
principal of any Indebtedness (including any Guarantee Obligation, but excluding
the Loan) on the scheduled or original due date with respect thereto; or (ii)
default in making any payment of any interest on any such Indebtedness when the
same becomes due and payable; or (iii) default in the observance or performance
of any other agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder
or beneficiary) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or (in the case of any
such Indebtedness constituting a Guarantee Obligation) to become payable; or
 
(f)           (i) any Group Member shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or any Group Member shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any Group Member any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry of an order
for relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of sixty (60) days; or (iii) there shall
be commenced against any Group Member any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets that results in the
entry of an order for any such relief that shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof; or (iv) any Group Member shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) any Group Member shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due; or
 
(g)           (i) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Lender, likely to result in the termination of
such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Lender is likely
to, incur any liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan or (vi) any other event or condition
shall occur or exist with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other such events
or conditions, if any, could, in the sole judgment of the Lender, reasonably be
expected to have a Material Adverse Effect; or

 
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(h)           one or more judgments or decrees for the payment of money in an
aggregate amount in excess of $250,000 shall be rendered against any of the
Group Members or any combination thereof and the same shall remain undischarged
for a period of thirty (30) consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment creditor
to attach or levy upon any assets of any Group Member to enforce any such
judgment; or
 
(i)           any non-monetary judgment or order shall be rendered against any
Group Member that could reasonably be expected to have a Material Adverse
Effect, and there shall be any period of ten (10) consecutive days during which
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
 
(j)           any of the Security Documents shall cease, for any reason, to be
in full force and effect, or any Loan Party or any Affiliate of any Loan Party
shall so assert, or any Lien created by any of the Security Documents shall
cease to be perfected, enforceable and of the same effect and priority purported
to be created thereby; or
 
(k)           the guarantee of any Loan Party contained in Article II of the
Guarantee and Security Agreement shall cease, for any reason, to be in full
force and effect or any Loan Party or any Affiliate of any Loan Party shall so
assert; or
 
(l)           The SEC or any Self-Regulatory Organization has notified the SIPC
pursuant to Section 5(a)(1) of the SIPA of facts which indicate that the
Borrower or any other Loan Party is in or is approaching financial difficulty,
or the SIPC shall file an application for a protective decree with respect to
the Borrower, or such other Loan Party under Section 5(a)(3) of the SIPA; or
 
(m)           The SEC or other Governmental Authority shall revoke or suspend
the license or authorization of the Borrower or any other Loan Party under
Federal or state law to conduct business as a securities broker-dealer (and such
license or authorization shall not be reinstated within 5 days), or the Borrower
or any other Loan Party shall be suspended or expelled from membership in the
FINRA or any other Self-Regulatory Organization or securities exchange; or
 
(n)           there shall occur in the judgment of the Lender any Material
Adverse Change; or
 
(o)           except to the extent expressly permitted under this Agreement, any
of the Assigned Agreements shall be terminated by any party thereto or shall
otherwise cease for any reason to be in full force and effect, or any Loan Party
or any other party thereto shall so assert, or any failure by any Person to make
any payment required to be made to the Borrower or any other Loan Party or other
default shall occur and be continuing under any Assigned Agreement; or

 
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(p)           the Subordinated Note shall cease, for any reason, to be validly
subordinated to the payment of the Obligations, as provided in the Edelman
Subordination Agreement, or any holder of the Subordinated Note shall so assert;
 
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitment shall immediately terminate and the Loan hereunder
(with accrued interest thereon) and all other amounts owing under this Agreement
and the other Loan Documents shall immediately become due and payable, and (B)
if such event is any other Event of Default, either or both of the following
actions may be taken: (i) the Lender may by notice to the Borrower declare the
Commitment to be terminated forthwith, whereupon the Commitment shall
immediately terminate; and (ii) the Lender may by notice to the Borrower,
declare the Loan hereunder (with accrued interest thereon) and all other amounts
owing under this Agreement and the other Loan Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable.  Except
as expressly provided above in this Section, the Borrower waives presentment,
demand, protest, notice of acceleration, notice of intent to accelerate, and all
other notices of any kind.  If any Event of Default occurs and is continuing,
the Lender may exercise and all rights and remedies available to it under the
Loan Documents, and the Lender may apply all payments made in respect of any of
the Obligations, all funds on deposit in any Collateral Account or other account
pledged to the Lender under the Guarantee and Security Agreement, and all other
proceeds of Collateral, to the payment and performance of the Obligations in
such order and manner as the Lender may from time to time determine in its sole
discretion..
 
ARTICLE VIII
 
MISCELLANEOUS
 
Section 8.01.   Amendments and Waivers.  Neither this Agreement, any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 8.01.  The
Lender and each Loan Party to the relevant Loan Document may from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Lender may specify in such instrument, any of the
requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences.  Any such waiver and any such amendment,
supplement or modification shall be binding upon the Loan Parties and the
Lender.  In the case of any waiver, the Loan Parties and the Lender shall be
restored to their former position and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereon.

 
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Section 8.02.   Notices; Electronic Communication.
 
(a)           Notices Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in paragraph (b) below), all notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopier as
follows:
 
(i)           if to the Borrower or any other Loan Party, to it at 600 Travis
Street, Suite 5800, Houston, Texas 77002, Attention of Rick Berry, Chief
Financial Officer (Telecopier No. 713.993.4677; Telephone No. 713.993.4614);
 
(ii)           if to the Lender, to Prosperity Bank at 777 Walker Street, Suite
L140, Houston, Texas 77002, Attention of Randall R. Reeves, President-Houston
Area (Telecopier No. 713.693.9259; Telephone No. 713.693.9251);
 
Notices and other communications sent by hand or overnight courier service, or
mailed by certified or registered mail, shall be deemed to have been given when
received; notices and other communications sent by telecopier shall be deemed to
have been given when sent (except that, if not given during normal business
hours for the recipient, shall be deemed to have been given at the opening of
business on the next business day for the recipient).  Notices and other
communications delivered through electronic communications to the extent
provided in paragraph (b) below, shall be effective as provided in said
paragraph (b).
 
(b)           Electronic Communications.
 
(i)           The Lender or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it, provided that approval of such procedures
may be limited to particular notices or communications.
 
(ii)           Unless the Lender otherwise prescribes, (A) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender's receipt of an acknowledgement from the intended recipient (such as by
the "return receipt requested" function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (B) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (A) of notification that such notice or communication is
available and identifying the website address therefor.
 
(c)           Change of Address, Etc.  Each of the Borrower and the Lender may
change its address, telecopier or telephone number for notices and other
communications hereunder by notice to the other parties hereto.
 
(d)           Reliance by the Lender.  The Lender shall be entitled to rely and
act upon any notices (including telephonic borrowing requests) purportedly given
by or on behalf of the Borrower even if (i) such notices were not made in a
manner specified herein, were incomplete or were not preceded or followed by any
other form of notice specified herein, or (ii) the terms thereof, as understood
by the recipient, varied from any confirmation thereof.  The Borrower shall
indemnify the Lender and Related Parties from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of the Borrower.  All telephonic notices to
and other telephonic communications with the Lender may be recorded by the
Lender and each of the parties hereto hereby consents to such recording.

 
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Section 8.03.   No Waiver; Cumulative Remedies; Enforcement.  No failure to
exercise and no delay in exercising, on the part of the Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
 
Section 8.04.   Survival.  All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of the Loan,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Lender may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any fee or any other amount
payable under this Agreement is outstanding and unpaid.
 
Section 8.05.   Expenses; Indemnity; Damage Waiver.
 
(a)           Costs and Expenses.  The Borrower shall pay (i) all reasonable
out-of-pocket expenses incurred by the Lender and its Affiliates (including the
reasonable fees, charges and disbursements of counsel for the Lender), and shall
pay all fees and time charges and disbursements for attorneys who may be
employees of the Lender, in connection with the preparation, negotiation,
execution, delivery and administration of this Agreement and the other Loan
Documents or any amendments, modifications or waivers of the provisions hereof
or thereof (whether or not the transactions contemplated hereby or thereby shall
be consummated), and (ii) all out-of-pocket expenses incurred by the Lender
(including the fees, charges and disbursements of counsel), in connection with
any Default or the enforcement or protection of its rights (a) in connection
with this Agreement and the other Loan Documents, including its rights under
this section, or (b) in connection with the Loan, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of the Loan.

 
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(b)           Indemnification by the Borrower.  The Borrower shall indemnify the
Lender and each of its Related Parties (each such Person being referred to
herein as an "Indemnitee") against, and hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities, penalties, actions, judgments,
suits, costs, expenses, and disbursements (including the fees, charges and
disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or
asserted against any Indemnitee by any third party or by the Borrower or any
other Loan Party arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, (ii) the Loan
or the use or proposed use of the proceeds therefrom, (iii) any actual or
alleged presence or release of Hazardous Materials on or from any property owned
or operated by any Group Member, or any Environmental Liability related in any
way to any Group Member, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by any
Group Member, and regardless of whether any Indemnitee is a party thereto,
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities, penalties, actions,
judgments, suits, costs, expenses or disbursements (x) are determined by a court
of competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee or (y) result
from a claim brought by any Group Member against an Indemnitee for breach in bad
faith of such Indemnitee's obligations hereunder or under any other Loan
Document, if such Group Member has obtained a final nonappealable judgment in
its favor on such claim as determined by a court of competent
jurisdiction.  Without limiting any provisions of this Agreement or of any other
Loan Document, it is the express intention of the parties hereto that each
Indemnitee shall be indemnified from and held harmless against any and all
losses, claims, damages, liabilities, penalties, actions, judgments, suits,
costs, expenses and disbursements (including the fees, charges and disbursements
of counsel) arising out of or caused in whole or in part by the ordinary
negligence of any Indemnitee.
 
(c)           Waiver of Consequential Damages.  To the fullest extent permitted
by applicable law, the Borrower shall not assert, and the Borrower hereby
irrevocably and unconditionally waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby, the transactions contemplated hereby or thereby,
the Loan or the use of the proceeds thereof.  No Indemnitee shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby.
 
(d)           Payments.  All amounts due under this Section 8.05 shall be
payable not later than ten (10) days after written demand therefor.  The
agreements in this Section 8.05 shall survive repayment of the Loan and all
other amounts payable hereunder.
 
Section 8.06.   Successors and Assigns; Participations and Assignments.
 
(a)           The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
the Lender and the Lender may not assign or otherwise transfer any of its rights
or obligations hereunder except (i) to an Eligible Assignee in accordance with
the provisions of subsection (b) of this Section, (ii) by way of participation
in accordance with the provisions of subsection (c) of this Section, or (iii) by
way of pledge or assignment of a security interest subject to the restrictions
of subsection (e) of this Section (and any other attempted assignment or
transfer by any party hereto shall be null and void).  Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby, Participants to the extent provided in subsection (c) of this
Section and, to the extent expressly contemplated hereby, the Indemnitees) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

 
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(b)           The Lender may at any time assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of the Loan at the time owing to it) pursuant to
documentation acceptable to the Lender and the assignee.  From and after the
effective date specified in such documentation, such Eligible Assignee shall be
a party to this Agreement and, to the extent of the interest assigned by the
Lender, have the rights and obligations of the Lender under this Agreement, and
the Lender shall, to the extent of the interest so assigned, be released from
its obligations under this Agreement (and, in the case of an assignment of all
of the Lender's rights and obligations under this Agreement, shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.09,
2.10 and 8.05 with respect to facts and circumstances occurring prior to the
effective date of such assignment.  Upon request, the Borrower (at its expense)
shall execute and deliver a new or replacement Note to the Lender and the
assignee, and shall execute and deliver any other documents reasonably necessary
or appropriate to give effect to such assignment and to provide for the
administration of this Agreement after giving effect thereto.
 
(c)           The Lender may at any time, without the consent of, or notice to,
the Borrower, sell participations to any Person (other than a natural person or
the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a
"Participant") in all or a portion of the Lender's rights and/or obligations
under this Agreement (including all or a portion of the Loan); provided that (i)
the Lender's obligations under this Agreement shall remain unchanged, (ii) the
Lender shall remain solely responsible to the Borrower for the performance of
such obligations and (iii) the Borrower shall continue to deal solely and
directly with the Lender in connection with the Lender's rights and obligations
under this Agreement.  Any agreement or instrument pursuant to which the Lender
sells such a participation shall provide that the Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or
waiver of any  provision of this Agreement; provided that such agreement or
instrument may provide that the Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification that would (i)
postpone any date upon which any payment of money (other than a mandatory
prepayment) is scheduled to be made to such Participant, (ii) reduce the
principal, interest, fees or other amounts payable to such Participant
(provided, however, that the Lender may, without the consent of the Participant,
(A) amend any financial covenant hereunder (or any defined term used therein)
even if the effect of such amendment would be to reduce the rate of interest on
the Loan or to reduce any fee payable hereunder and (B) waive the right to be
paid interest at the Default Rate), or (iii) release any Guarantor from its
obligations under the Guarantee and Security Agreement.  Subject to subsection
(d) of this Section, the Borrower agrees that each Participant shall be entitled
to the benefits of Section 2.09 to the same extent as if it were the Lender and
had acquired its interest by assignment pursuant to subsection (b) of this
Section.  To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 8.07 as though it were the Lender.

 
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(d)           A Participant shall not be entitled to receive any greater payment
under Section 2.09 or 2.10 than the Lender would have been entitled to receive
with respect to the participation sold to such Participant, unless the sale of
the participation to such Participant is made with the Borrower's prior written
consent.  A Participant that is not a "United States person" within the meaning
of Section 7701(a)(30) of the Code shall not be entitled to the benefits of
Section 2.10 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
provide to the Lender such tax forms prescribed by the IRS as are necessary or
desirable to establish an exemption from, or reduction of, U.S. withholding tax.
 
(e)           The Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement (including under the Term
Note, if any) to secure obligations of the Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that no
such pledge or assignment shall release the Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for the Lender as a party
hereto.
 
Section 8.07.   Setoff.  If an Event of Default shall have occurred and be
continuing, each of the Lender and its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by applicable law,
to set off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by the Lender and its
Affiliates to or for the credit or the account of the Borrower or any other Loan
Party against any and all of the obligations of the Borrower or such other Loan
Party now or hereafter existing under this Agreement or any other Loan Document
to the Lender irrespective of whether or not the Lender shall have made any
demand under this Agreement or any other Loan Document and although such
obligations of the Borrower or such other Loan Party may be contingent or
unmatured or are owed to a branch or office of the Lender different from the
branch or office holding such deposit or obligated on such indebtedness.  The
rights of the Lender and its Affiliates under this Section are in addition to
other rights and remedies (including other rights of setoff) that the Lender or
its Affiliates may have.  The Lender agrees to notify the Borrower promptly
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application.
 
Section 8.08.   Counterparts; Integration; Effectiveness; Electronic
Execution.  This Agreement may be executed in counterparts (and by different
parties hereto in different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.  This Agreement and the other Loan Documents, and any separate letter
agreements with respect to fees payable to the Lender, constitute the entire
contract among the parties relating to the subject matter hereof and supersede
any and all previous agreements and understandings, oral or written, relating to
the subject matter hereof.  Except as provided in Section 3.01, this Agreement
shall become effective when it shall have been executed by the Lender and when
the Lender shall have received counterparts hereof that, when taken together,
bear the signatures of each of the other parties hereto.  Delivery of an
executed counterpart of a signature page of this Agreement by telecopy or other
electronic imaging means shall be effective as delivery of a manually executed
counterpart of this Agreement.

 
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Section 8.09.   Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
 
Section 8.10.   GOVERNING LAW; JURISDICTION, ETC.
 
(a)           THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF TEXAS.
 
(b)           THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
TEXAS SITTING IN HARRIS COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE
SOUTHERN DISTRICT OF TEXAS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF
THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
TEXAS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH
FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY
RIGHT THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR
ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
 
(c)           THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED
TO IN PARAGRAPH (B) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.
 
(d)           EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN
THE MANNER PROVIDED FOR NOTICES IN SECTION 8.02.  NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW.
 
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Section 8.11.   Acknowledgments.  The Borrower hereby acknowledges that:
 
(a)           it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
 
(b)           the Lender nor the Lender has no fiduciary relationship with or
duty to the Borrower arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between the Lender, on one
hand, and the Borrower, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
 
(c)           no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby between
the Borrower and the Lender.
 
Section 8.12.   Treatment of Certain Information; Confidentiality.
 
(a)           The Lender agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its Affiliates and to its and its Affiliates' respective partners, directors,
officers, employees, agents, advisors and other representatives (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any Self-Regulatory
Authority), (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party hereto, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any action or proceeding relating to this Agreement or any other
Loan Document or the enforcement of rights hereunder or thereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of or Participant in, or any prospective assignee
of or Participant in, any of its rights or obligations under this Agreement,
(ii) any actual or prospective counterparty (or its advisors or representatives)
to any swap or derivative transaction relating to the Borrower and its
obligations, (iii) any rating agency, or (iv) the CUSIP Bureau Service or any
similar organization, (g) with the consent of the Borrower or (h) to the extent
such Information (x) becomes publicly available other than as a result of a
breach of this Section or (y) becomes available to the Lender or any of its
Affiliates on a nonconfidential basis from a source other than the Borrower.
 
For purposes of this Section, "Information" means all information received from
the Borrower or any of its Subsidiaries relating to the Borrower or any of its
Subsidiaries or any of their respective businesses, other than any such
information that is available to the Lender on a nonconfidential basis prior to
disclosure by the Borrower or any of its Subsidiaries, provided that, in the
case of information received from the Borrower or any of its Subsidiaries after
the date hereof, such information is clearly identified at the time of delivery
as confidential.  Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.

 
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Section 8.13.   Interest Rate Limitation.  It is the intent of the Lender and
the Borrower to conform to and contract in strict compliance with all applicable
usury laws from time to time in effect.  Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the Highest Lawful Rate.  If Lender
shall receive interest in an amount that exceeds the Highest Lawful Rate, the
excess interest shall be applied to the principal of the Loan or, if it exceeds
such unpaid principal, refunded to the Borrower.  In determining whether the
interest contracted for, charged, or received by the Lender exceeds the Highest
Lawful Rate, such Person may, to the extent permitted by applicable law, (a)
characterize any payment that is not principal as an expense, fee, or premium
rather than interest, (b) exclude voluntary prepayments and the effects thereof,
and (c) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the contemplated term of the Obligations
hereunder.  The right to accelerate maturity of the Loan and the other
Obligations does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and the Lender does not
intend to charge or receive any unearned interest in the event of acceleration.
 
Section 8.14.   Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
 
Section 8.15.   Time of the Essence.  Time is of the essence of this Agreement
and the other Loan Documents.
 
Section 8.16.   WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
 
Section 8.17.   Electronic Execution of Assignments and Certain Other
Documents.  If expressly stated in such document, the words "execution,"
"signed," "signature," and words of like import in any Assignment and Assumption
or in any amendment or other modification hereof (including waivers and
consents) shall be deemed to include electronic signatures or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act or any other similar state laws based on the
Uniform Electronic Transactions Act.

 
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Section 8.18.   USA PATRIOT Act Notice.  The Lender hereby notifies the Borrower
that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the "Act"), it is required to
obtain, verify and record information that identifies each Loan Party, which
information includes the name and address of each Loan Party and other
information that will allow the Lender to identify each Loan Party in accordance
with the Act.  The Borrower shall, promptly following a request by the Lender,
provide all documentation and other information that the Lender requests in
order to comply with its ongoing obligations under applicable "know your
customer" and anti-money laundering rules and regulations, including the Act.
 
Section 8.19.   Press Releases and Related Matters.  The Borrower agrees that
neither it nor any of its Affiliates will issue any press release or public
disclosure using the name of Prosperity Bank or any of its Affiliates or
referring to this Agreement or any of the other Loan Documents without at least
two (2) Business Days prior notice to Prosperity Bank and without the prior
written consent of Prosperity Bank unless (and only to the extent that) the
Borrower or such Affiliate is required to do so under applicable Requirements of
Law and then, in any event, the Borrower or such Affiliate will consult with
Prosperity Bank before issuing such press release or other public
disclosure.  The Borrower consents to the publication by the Lender of a
tombstone or similar advertising material relating to the financing transactions
contemplated by this Agreement.  The Lender reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.
 
Section 8.20.   No Advisory or Fiduciary Responsibility.  In connection with all
aspects of each transaction contemplated hereby, the Borrower acknowledges and
agrees, and acknowledge its Affiliates' understanding, that:  (i) the credit
facility provided for hereunder and any related arranging or other services in
connection therewith (including in connection with any amendment, waiver or
other modification hereof or of any other Loan Document) are an arm's-length
commercial transaction between the Borrower and its Affiliates, on the one hand,
and the Lender, on the other hand, and the Borrower is capable of evaluating and
understanding and understands and accepts the terms, risks and conditions of the
transactions contemplated hereby and by the other Loan Documents (including any
amendment, waiver or other modification hereof or thereof); (ii) in connection
with the process leading to such transaction, the Lender is and has been acting
solely as a principal and is not the financial advisor, agent or fiduciary, for
the Borrower or any of its Affiliates, stockholders, creditors or employees or
any other Person; (iii) the Lender has not assumed nor will assume an advisory,
agency or fiduciary responsibility in favor of the Borrower with respect to any
of the transactions contemplated hereby or the process leading thereto,
including with respect to any amendment, waiver or other modification hereof or
of any other Loan Document (irrespective of whether the Lender has advised or is
currently advising the Borrower or any of its Affiliates on other matters) and
the Lender has no obligation to the Borrower or any of its Affiliates with
respect to the transactions contemplated hereby except those obligations
expressly set forth herein and in the other Loan Documents; (iv) the Lender and
its Affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of the Borrower and its Affiliates, and the
Lender has no obligation to disclose any of such interests by virtue of any
advisory, agency or fiduciary relationship; and (v) the Lender has not provided
and will not provide any legal, accounting, regulatory or tax advice with
respect to any of the transactions contemplated hereby (including any amendment,
waiver or other modification hereof or of any other Loan Document) and the
Borrower has consulted its own legal, accounting, regulatory and tax advisors to
the extent it has deemed appropriate.  The Borrower hereby waives and releases,
to the fullest extent permitted by law, any claims that it may have against the
Lender with respect to any breach or alleged breach of agency or fiduciary duty.

 
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Section 8.21.   Independence of Covenants.  All covenants and agreements
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants or agreements, the fact that
it would be permitted by an exception to, or would otherwise be within the
limitations of, another covenant or agreement, shall not avoid the occurrence of
a Default or Event of Default if such action is taken or such condition exists.
 
Section 8.22.   ENTIRE AGREEMENT.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
 
[remainder of this page intentionally left blank]

 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
 
SANDERS MORRIS HARRIS GROUP INC.
     
By:
/s/ Bruce R. McMaken
 
Name: 
Bruce R. McMaken
 
Title:
Executive Vice President

 
PROSPERITY BANK
     
By: 
/s/ Randall R. Reeves  
Name: 
Randall R. Reeves
 
Title:
President-Houston Area

 
Signature Page to Credit Agreement
 
 

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SCHEDULE 4.04
 
Consents, Authorizations, Filings and Notices

 

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SCHEDULE 4.13
 
Investment Advisers
 

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SCHEDULE 4.15
 
Subsidiaries

 

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SCHEDULE 4.18
 
UCC Filing Jurisdictions

 

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SCHEDULE 4.22
 
Material Contracts

 

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SCHEDULE 4.23
 
Insurance

 

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SCHEDULE 4.25
 
Existing Accounts

 

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SCHEDULE 6.02(d)
 
Existing Indebtedness

 

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SCHEDULE 6.03(f)
 
Existing Liens

 

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SCHEDULE 6.06
 
Contractually Obligated Restricted Payments
 

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SCHEDULE 6.08(a)
 
Existing Investments

 

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EXHIBIT A
 
Form of Guarantee and Security Agreement

 

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EXHIBIT B
 
Form of Closing Certificate

 

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EXHIBIT C
 
Form of Mortgage

 

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EXHIBIT D
 
Form of Term Note

 

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EXHIBIT E
 
Form of Legal Opinion

 

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EXHIBIT F
 
Form of Solvency Certificate

 

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EXHIBIT G
 
Form of Notice of Borrowing

 

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EXHIBIT H
 
Form of Compliance Certificate

 

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EXHIBIT I
 
Form of Edelman Subordination Agreement

 

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SCHEDULE 1.01
 
Existing Letters of Credit
 

           
Effective
 
Expiration
 
Stated Face
Name of Beneficiary
 
Issued By
 
Account Party
 
Date
 
Date
 
Amount
                     
NY - 527 Madison, LLC
 
JP Morgan Chase
 
SMH Capital Inc.
 
11/19/2008
 
11/24/2009
 
$
420,003
                       
111 South Wacker LLC
 
JP Morgan Chase
 
SMH Capital Inc.
 
03/09/2006
 
10/31/2011
 
$
144,000
                       
Carnegie Hall Tower, L.L.C.
 
JP Morgan Chase
 
SMH Capital Inc.
 
8/15/2007
 
11/15/2009
 
$
229,845
                       
Northwest 546 Fifth Ave
 
JP Morgan Chase
 
SMH Capital Inc.
 
12/27/2007
 
12/31/2009
 
$
245,000
                       
Federal Insurance Co.
 
Amegy Bank N.A.
 
Sanders Morris Harris Group Inc.
 
8/8/2008
 
8/8/2009
 
$
100,000
(Workman’s Compensation)
                     
VA-Centerponte, LLC
 
James Monroe Bank
 
Edelman Financial Services, LLC
 
02/14/2005
 
1/13/2013
 
$
91,962

 
 

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SCHEDULE 4.04
 
Consents, Authorizations, Filings and Notices
 
1.           Notice to Salient Partners, LP and Salient Capital Management, LLC
with respect to assignment of Salient Note and interest in Purchase AND Sale
Agreement dated as of August 29, 2009.

2.           Notice to Endowment Advisers, L.P., The Endowment Fund GP, L.P.,
and The Endowment Fund Management, LLC with respect to assignment of interest in
the Agreement to Retire Partnership Interest and Second Amendment to Limited
Partnership Agreement of Endowment Advisers, L.P.

 
 

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SCHEDULE 4.13
 
Investment Advisers
 
SMH Capital Inc.
SMH Capital Advisors, Inc.
Miller-Green Financial Services, Inc.
Edelman Financial Services, LLC
Edelman Financial Advisors, LLC
SOF Management, LLC
The Rikoon Group, LLC
Leonetti & Associates, LLC
Pool Capital Partners, LLC

 
 

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SCHEDULE 4.15
 
Subsidiaries
 
Subsidiary
 
State of
Organization
 
Percentage Ownership of
Equity Interests*
             
SMH Capital Inc.
 
Texas
    100 %
SMH Capital Advisors, Inc.
 
Texas
    100 %
Miller-Green Financial Services, Inc.
 
Texas
    100 %
The Edelman Financial Center, LLC
 
Delaware
    76 %
Edelman Business Services, LLC
 
Delaware
    100 % (2)
Edelman Financial Services, LLC
 
Delaware
    100 % (2)
Edelman Financial Advisors, LLC
 
Delaware
    10 %
SOF Management, LLC
 
Delaware
    100 % (1)
SMH GP LP
 
Texas
    100 % (3)
The Rikoon Group, LLC
 
Delaware
    75 %
The Dickenson Group, LLC
 
Ohio
    50.1 %
Leonetti & Associates, LLC
 
Illinois
    50.1 %
SMM Corporate Management, LLC
 
Delaware
    99 % (1)
SMH Life Science Management, LLC
 
Delaware
    50 % (1)
Signet Healthcare Partners, LLC
 
Delaware
    50 % (1)
SMH PEG Management, LLC
 
Delaware
    62.5 % (1)
SMH PEG Management II, LLC
 
Delaware
    51.36 % (1)
SMH PE Management, LLC
 
Delaware
    98 % (1)
SMH Colorado, LLC
 
Delaware
    50 % (1)
PTC GP Management, LLC
 
Texas
    50 % (1)
PTC-Houston Management, LP
 
Texas
    42.5 % (1)
SMH NuPhysicia Management, LLC
 
Delaware
    38.2 % (1)
Select Sports Group Holdings, LLC
 
Texas
    50 %
Select Sports Group, Ltd.
 
Texas
    50 %
10 Sports Marketing GP, LLC
 
Texas
    50 %
10 Sports Marketing, LP
 
Delaware
    64.95 %
SMH MLS, LLC
 
New York
    100 %

 

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*
Unless otherwise specified, the Equity Interests of each Subsidiary are owned by
the Borrower.

(1)
By SMH Capital Inc.

(2)
By The Edelman Financial Center, LLC

(3)
By SMH Capital Advisors, Inc.

 
 

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SCHEDULE 4.18
 
UCC Filing Jurisdictions
 
Filing
 
Filing Office
     
UCC-1 Financing Statement
 
Texas Secretary of State
     
UCC-1 Financing Statement
 
Delaware Secretary of State
     
UCC-1 Financing Statement
 
New York Secretary of State

 
 

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SCHEDULE 4.21
 
Material Contracts
 
Clearing Agreements

1.           Fully Disclosed Clearing Agreement dated June 5, 2005, between
Pershing LLC and Sanders Morris Harris Inc. with Agreement for Prospectus
Delivery Facilitation Services dated December 11, 2007; B/D Peakadvisor Contract
dated June 21, 2005; Regulation NMS Compliance Addendum dated June 6, 2007; and
Amendment for Utilization of Managed Accounts as Collateral for Non Purpose
Credit Agreement to the Fully Disclosed Clearing Agreement of Pershing, LLC
dated June 4, 2008.

2.           Fully Disclosed Clearing Agreement dated December 13, 2002, between
Banc of America Broker/Dealer Services, a division of Banc of America Securities
LLC (now Ridge Outsourcing and Clearing Solutions, Inc.)

3.           Fully Disclosed Clearing Agreement dated November 8, 2002, between
Spear, Leeds & Kellogg (now Goldman Sachs Clearing & Execution, LP) and Clearing
Agreement (Independent (non-Guaranteed) Introducing Broker) dated July 1, 2004,
between Spear Leeds & Kellogg and SMH Capital Inc.

4.           Agreement for Securities Clearance Services dated January 14, 2009,
between J.P. Morgan Clearing Corp. and SMH Capital Inc.

Office Leases

1.
Lease Agreement dated September 23, 1987, between Texas Tower Limited and
Sanders Morris Harris Inc., with respect to 57th, 58th, and 59th floors at 600
Travis, as amended by:

 
a.
First Amendment to Lease Agreement dated October 26, 1990,

 
b.
Second Amendment to Lease Agreement dated December 1, 1990,

 
c.
Third Amendment to Lease Agreement dated May 21, 1991,

 
d.
Fourth Amendment to Lease Agreement dated April 20, 1992,

 
e.
Fifth Amendment to Lease Agreement dated July 25, 1994,

 
f.
Sixth Amendment to Lease Agreement dated September 25, 1996,

 
g.
Seventh Amendment to Lease Agreement dated January 1998,

 
h.
Eighth Amendment to Lease Agreement dated April 27, 2000,

 
i.
Ninth Amendment to Lease Agreement dated September 18, 2000,

 
j.
Tenth Amendment to Lease Agreement dated December 7, 2001, and

 
k.
Eleventh Amendment to Lease Agreement dated December 21, 2006

2.
Office Lease Agreement dated as of November 26, 2003, between NY-527 Madison,
LLC and Sanders Morris Harris Inc., with respect to 6th, 7th, and 14th floors at
527 Madison Avenue, New York, New York, as amended by First Amendment dated
October 16, 2005, between NY-527 Madison, LLC and Sanders Morris Harris Inc.,
with respect to the 10th and 15th floors of 527 Madison Avenue, and as amended
by a Second Amendment (Storage Space Supplement) dated August 3, 2006, between
NY-517 Madison, LLC and Sanders Morris Harris Inc, with respect to storage space
on floor C1..

 
 

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3.
Agreement of Lease dated January 8, 1997, between Garden City Associates and
Blackford Securities Corporation (now Sanders Morris Harris Inc.), as modified
by Modification of Lease dated July 11, 2005, with respect tom 1010 Franklin
avenue, Garden City, New York.

4.
Assignment and Assumption of Lease and Novation Agreement dated October 29,
2007, between Samco-BD, LLC f/k/a Service Asset Management company and Concept
Capital, a division of SMH Capital Inc. with respect to Agreement of Lease dated
July 15, 2001, between Northwest 5th & 45th Realty Corp. and Service Asset
Management Company, with respect to 546 Fifth Avenue.

5.
Sub-Sublease dated January 31, 2006, between Sagamore Hill Capital Management LP
and Sanders Morris Harris Group Inc. with respect to the 3rd floor of 10
Glenville Street, Greenwich, Connecticut, as modified by letter dated June 7,
2007, to become a direct lease.

6.
Deed of Lease dated February 16, 2005, between VA-Centerpointe, L.L.C. and
Edelman Financial Services, LLC, as amended by a First Amendment dated March 10,
2006, and a Second Amendment dated as of November 7, 2006, with respect to
Suites 900  and 1000 at 4000 Legato Road, Fairfax, Virginia.

Other Agreements

1.
Reorganization and Purchase Agreement dated as of May 10, 2005, among Sanders
Morris Harris Group Inc., The Edelman Financial Center, Inc., The Edelman
Financial Center, LLC, and Fredric M. Edelman.

2.
Letter agreement dated as of January 1, 2009, among Sanders Morris Harris Group,
Inc., Frederic M. Edelman, and Edward Moore

3.
Agreement to Retire Partnership Interest and Second Amendment to the Limited
Partnership Agreement of Endowment Advisers, L.P. dated as of August 29, 2008,
among Sanders Morris Harris Group Inc. and Endowment Advisers, L.P., The
Endowment Fund GP, L.P., and The Endowment Fund Management, LLC, and their
respective partners and members.

4.
Purchase and Sale Agreement dated August 29, 2008, among Sanders Morris Harris
Group, Inc., Salient Partners, L.P. (“Salient Partners”), and Salient Capital
Management, LLC (the “SCM”) and the respective limited partners and members of
Salient Partners and SCM.

 
 

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5.
Contribution Agreement dated as of January 22, 2009, among Sanders Morris Harris
Group Inc., SMH Capital Inc., Pan Asia China Commerce Corp., Siwanoy Capital,
LLC, and Siwanoy Securities, LLC.

6.
Term Sheet dated as of January 1, 2009, among Sanders Morris Harris group Inc.,
SMH Capital Inc., Michael S. Rosen, and Jack D. Seibald.

7.
Bloomberg Agreements dated March 30, 1990, between Bloomberg L.P. and Blackford
Securities (Account No. 5939), dated December 3, 1996, between Bloomberg, L.P.
and Cummer/Moyers Securities (Account No. 55691), dated January 12, 1994,
between Bloomberg, L.P. and Sanders Morris Mundy Inc. (Account No. 24907), dated
February 17, 1994, between Bloomberg, L.P. and Harris Webb & Garrison, Inc.
(Account No. 23899), pertaining to Bloomberg terminals and access.

8.
Master Agreement Number 101843 with Thomson Financial LLC (Customer ID 4275) for
Thomson ONE services. (Account Nos. 10360 and 212636).

9.
Membership with Nasdaq Stock Market (Location No. 9087; MPID: SMHI and Location
No. 10082, Site Name SMMITX)(Account Nos. 100003806 and 100037053).

10.
Software License and Support Agreement dated September 20, 2006, between Advent
Software, Inc. and Concept Capital for Advent Partner Premium Bundle.

11.
Account No. ARTC00979 with NYSE ARCA LLC (MPID: SMHJ).

12.
Account with NYSE Market Inc. (Account No. 03-77085) for 273 NYSE data devices.

13.
Account with NYSE Market, Inc. (Account No. 03-16656) for NYSE data services.

14.
Medical Benefit Plan with United Healthcare Insurance Co.

15.
Medical Benefit Plan with Anthem Blue Cross Blue Shield

16.
Engagement with KPMG, LLP

17.
Engagement with CBIZ Risk & Advisory Services, LLC

18.
Consulting Agreement dated as of November 1, 2004, between SMH Capital Inc. and
Select Partners, Ltd., as amended March 1, 2008 (Jeff Cummer).

19.
Amended and Restated Employment Agreement dated as of August 31, 2003, between
SMH Capital Inc. and Dwayne Moyers, as amended February 25, 2008.

20.
Employment Agreement dated May 10, 2005, between The Edelman Financial Center,
LLC and Fredric M. Edelman.

21.
Purchase Agreement dated May 24, 2007, among Rikoon Investment Advisors,
Incorporated, Robert A. Rikoon, and Sanders Morris Harris Group Inc.

 
 

--------------------------------------------------------------------------------

 

SCHEDULE 4.22
 
Insurance
 
Named Insureds
 
Carrier
 
Expiration
 
Limits
 
Coverage
                 
SMH Capital Inc.
Sanders Morris Harris Group Inc.
Edelman Financial Services
The Rikoon Group LLC
 
Scottsdale Insurance Co
 
9/8/2009
 
$1,000,000 each “wrongful act” aggregate, $1000,000 representative aggregate,
and $3,000,000 policy aggregate
 
Financial Services Professional Liability Insurance Policy
                 
SMH Capital Advisors, Inc
 
National Union Fire Ins. Co.
 
1/31/2010
 
$5,000,000 each “wrongful act” aggregate and policy aggregate
 
Financial Services Professional Liability Insurance Policy
                 
Edelman Financial Advisors
 
Scottsdale Insurance Co.
 
12/18/2009
 
$1,000,000 each “wrongful act” aggregate; $2,000,000 policy aggregate
 
Financial Services Professional Liability Insurance Policy
                 
Sanders Morris Harris Group
 
AIG
 
1/29/2010
 
$5,000,000 per occurrence and aggregate
 
Directors & Officers Liability
                 
Sanders Morris Harris Group
 
XL
 
1/29/2010
 
$5,000,000 per occurrence and aggregate
 
Excess Directors & Officers Liability
                 
Sanders Morris Harris Group
 
Federal Insurance Co
 
7/18/2009
 
$100,000 per occurrence; $1,000,000 aggregate
 
Workers Compensation
                 
Sanders Morris Harris Group
 
Federal Insurance Co
 
7/18/2009
 
$1,000,000 per occurrence and aggregate
 
Automobile Liability
                 
Sanders Morris Harris Group
 
Great Northern Insurance
 
7/18/2009
 
$1,000,000 per occurrence; $5,000,000 aggregate
 
Commercial Liability Package

 
 

--------------------------------------------------------------------------------

 

SCHEDULE 4.22
 
Deposit Accounts
 

--------------------------------------------------------------------------------

 
SCHEDULE 6.02(d)
 
Existing Indebtedness
 
1.
Master Installment Payment Agreement Schedule dated June 2, 2008, between
Sanders Morris Harris Group Inc. and Cisco Systems Capital Corporation,
Schedules No. 1 and No. 2.

 
2.
Agreement to purchase an additional 5% Member Interest in the Rikoon Group LLC
from Rikoon Investment Advisors Incorporated on February 15, 2011, as provided
in the Purchase Agreement dated May 24, 2007, among Rikoon Investment Advisors,
Incorporated, Robert A. Rikoon, and Sanders Morris Harris Group Inc.

 
 

--------------------------------------------------------------------------------

 

SCHEDULE 6.03(f)
 
Existing Liens
 
 
1.
Cisco Systems Capital Corporation, UCC Filing No. 08-0036300626, 11/07/2008 and
08-0036300737, 11/07/2008, Texas

 
 
2.
Equipment leases:

 

   
Secured Party
                                     
SMH Capital Inc. (Sanders Morris Harris Inc.)
 
IBM Credit
 
07-0009212384
 
3/20/2007
 
Texas
 
IBM equipment
                     
SMH Capital Inc. (Sanders Morris Harris Inc.)
 
MidFirst Bank
 
08-0006770947
 
. 2/26/2008
 
Texas
                         
SMH Capital Inc. (Sanders Morris Harris Inc.)
 
Intrust Bank
 
08-0014805884
 
4/30/2008
 
Texas
                         
SMH Capital Inc. (Sanders Morris Harris Inc.)
 
Union Bank assigned to Chase Bank
 
08-003627459
 
12/12/2008
 
Texas
                         
SMH Capital Inc. (Sanders Morris Harris Inc.)
 
MidFirst Bank
 
08-0014806683
 
04/30/2008
 
Texas
                         
Edelman Business Services, LLC
 
Dell Financial Services, LLC
 
2008 1623238
 
05/09/2008
 
VA
 
Computer Equipment
                     
Edelman Financial Services, LLC
 
CIT Bankl
 
5233777 3
 
07/28/2005
 
VA
 
Computer Equipment

 
 

--------------------------------------------------------------------------------

 

SCHEDULE 6.06
 
RESTRICTED PAYMENTS
 
 
1.
Payments to The Edelman Financial Center, Inc. or Ric Edelman under the Limited
Liability Company Agreement of The Edelman Financial Center, LLC dated as of May
10, 2005.

 
 
2.
Payments to Rikoon Investment Advisors, Incorporated under the Amended and
Restated Limited Liability Company Agreement of The Rikoon Group, LLC dated as
of May 24, 2007.

 
 
3.
Payments to Michael Leonetti under the Operating Agreement of Leonetti &
Associates, LLC dated as of February 29, 2008.

 
 
4.
Payments to John Olson and Stephen Pouns under the Operating Agreement of Pool
Capital Partners, LLC dated June 2003.

 
 
5.
Payments to Vann McElroy, Jeff Nalley, and Graylan Crain under the Amended and
Restated Agreement of Limited Partnership of Selects Sports Group, Ltd. dated as
of November 23, 2004.

 
 
6.
Payments to Vann McElroy, Jeff Nalley, Graylan Crain, and William J. Henkel
under the Agreement of Limited Partnership of 10 Sports Marketing, LP dated as
of November 14, 2005.

 
 
7.
Payments to David S. Dickenson II, D.S.D. III, INC., and Amy P. Dickenson, Inc.
under the Limited Liability Company Agreement of The Dickenson Group, LLC dated
effective as of September 14, 2007.

 
 
8.
Payments to James C. Gale, Al Hansen, and Joyce Erony under the Limited
Liability Company Agreement of Signet Healthcare Partners, LLC darted as of
December 12, 2003.

 
 
9.
Payments to Bruce R. McMaken, Charles L. Davis, and Ben T. Morris under the
Limited Liability Company Agreement of SMH PEG Management, LLC dated August 27,
2004.

 
 
10.
Payments to Bruce R. McMaken, Charles L. Davis, Ben T. Morris, and Don Weir
under the Limited Liability Company Agreement of SMH PEG Management II, LLC
dated August 24, 2006.

 
 
11.
Payments to Bruce R. McMaken and Ben T. Morris under the Limited Liability
Company Agreement of SMH PE Management, LLC dated September 25, 2007.

 
 
12.
Payments to StylesCo, LP under the Limited Liability Company Agreement of PTC GP
Management, LLC dated December 19, 2002.

 
 

--------------------------------------------------------------------------------

 

 
13.
Payments to StylesCo, LP, Bruce R. McMaken, and PTC GP Management LLC under the
Agreement of Limited Partnership of PTC-Houston Management, LP dated December
19, 2002.

 
 
14.
Payments to Charles L. Davis, Robert E. Garrison II, Tyson Weihs, and Bruce R.
McMaken under the Limited Liability Company Agreement of SMH NuPhysicia
Management, LLC dated August 20, 2007.

 
 

--------------------------------------------------------------------------------

 

SCHEDULE 6.08(a)
 
Existing Investments
 

   
Common
Stock
   
Additional Paid-in
Capital/Member’s or
Partner’s Interest
   
Shareholders’
Equity
   
Estimated Fair
Market Value
 
SMH Capital Inc.
  $ 607     $ 60,032,477     $ 62,378,404        
SMH Capital Advisors, Inc.
  $ 30       (35,169 )     15,445,855        
Miller-Green Financial Services, Inc.
                    364,270        
The Edelman Financial Center, LLC
                    (6,729,472 )      
Edelman Business Services, LLC
                    (1,700,101 )      
Edelman Financial Services, LLC
            (152,808 )     32,570,931        
SMH GP LP
    25,000               -        
The Rikoon Group, LLC
            390694       2,120,349        
The Dickenson Group, LLC
    6,026,123               4,531,343        
Leonetti & Associates, LLC
            (153,819 )     245,142        
SOF Management, LLC
            50,000       5,725,819     $ 311,753  
SMH Life Science Management, LLC
            1,500,000       5,219,661       1,274,053  
Signet Healthcare Partners, LLC
            455,754       965,864       167,745  
SMH PEG Management, LLC
            10,060       1,419,245       -  
SMH PEG Management II, LLC
            15,054       111,262       -  
SMH Colorado, LLC
                    1,814,554       N/A  
PTC GP Management, LLC and PTC-Houston Management, LP
            321,849       334,278       105,147  
SMH NuPhysicia Management, LLC
            100       (2,831 )     -  
Select Sports Group, Ltd.
                            5,.115,169  
Pool Capital Partners, LLC
                               
Communique Compliance & Communications, LLC
            25,000               25,000  
iPro One, Inc.
                            1,258,457  

 
 

--------------------------------------------------------------------------------

 

 
EXHIBIT A TO
   
CREDIT AGREEMENT
 

 

--------------------------------------------------------------------------------

 
GUARANTEE AND SECURITY AGREEMENT

made by

SANDERS MORRIS HARRIS GROUP INC.

and certain of its Subsidiaries

in favor of

PROSPERITY BANK

as Secured Party

Dated as of May [__], 2009

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 
TABLE OF CONTENTS
 

       
Page
         
ARTICLE I
 
DEFINED TERMS
 
1
Section 1.01
 
Definitions
 
1
Section 1.02
 
Other Definitional Provisions
 
7
         
ARTICLE II
 
GUARANTEE
 
8
Section 2.01
 
Guarantee
 
8
Section 2.02.
 
Right of Contribution
 
9
Section 2.03.
 
No Subrogation
 
9
Section 2.04.
 
Guarantee Absolute
 
9
Section 2.05.
 
Waivers and Acknowledgments
 
11
Section 2.06.
 
Reinstatement
 
12
Section 2.07.
 
Payments
 
12
Section 2.08.
 
Subordination
 
12
         
ARTICLE III
 
GRANT OF SECURITY INTEREST
 
13
Section 3.01.
 
Grant of Security
 
13
Section 3.02.
 
Security for Obligations
 
14
Section 3.03.
 
Continuing Liability Under Collateral
 
14
         
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES
 
15
Section 4.01.
 
Title; No Other Liens
 
15
Section 4.02.
 
Perfected First Priority Liens
 
15
Section 4.03.
 
Chief Executive Office, Etc
 
16
Section 4.04.
 
Inventory and Equipment
 
16
Section 4.05.
 
Investment Property
 
17
Section 4.06.
 
Receivables
 
18
Section 4.07.
 
Intellectual Property
 
18
Section 4.08.
 
Securities Accounts, Commodities Accounts and Deposit Accounts
 
20
Section 4.09.
 
Commercial Tort Claims
 
20
Section 4.10.
 
Letters of Credit
 
20
Section 4.11.
 
Independent Investigation
 
21
Section 4.12.
 
Specified Agreements
 
21
         
ARTICLE V
 
COVENANTS
 
22
Section 5.01.
 
Delivery and Control of Instruments, Investment Property, Negotiable Documents,
Chattel Paper, Letter-of-Credit Rights, and Transferable Records
 
22
Section 5.02.
 
Maintenance of Insurance
 
24
Section 5.03.
 
Payment of Obligations
 
25
Section 5.04.
 
Maintenance of Perfected Security Interest; Limitation on Dispositions; Further
Documentation; Inspection
 
25
Section 5.05.
 
Changes in Locations; Name; Jurisdiction of Incorporation
 
26
Section 5.06.
 
Notices
 
27
Section 5.07.
 
Investment Property
 
27
Section 5.08.
 
Inventory and Equipment
 
29
Section 5.09.
 
Receivables
 
29
Section 5.10.
 
Intellectual Property
 
30
Section 5.11.
 
Commercial Tort Claims
 
31

 
-i-

--------------------------------------------------------------------------------

 
TABLE OF CONTENTS (cont'd)
 

       
Page
         
Section 5.12.
 
Covenants in Credit Agreement
 
31
Section 5.13.
 
Specified Agreements
 
31
ARTICLE VI
 
REMEDIAL PROVISIONS
 
34
Section 6.01.
 
Certain Matters Relating to Receivables
 
34
Section 6.02.
 
Communications with Obligors; Grantors Remain Liable
 
34
Section 6.03.
 
Investment Property
 
35
Section 6.04.
 
Proceeds to be Turned Over to Secured Party
 
36
Section 6.05.
 
Remedies
 
36
Section 6.06.
 
Registration Rights
 
38
Section 6.07.
 
Deficiency
 
39
Section 6.08.
 
Sales on Credit
 
39
ARTICLE VII
 
THE SECURED PARTY
 
39
Section 7.01.
 
Secured Party's Appointment as Attorney-in-Fact; Etc
 
39
Section 7.02.
 
Duty of Secured Party
 
41
Section 7.03.
 
Financing Statements
 
41
ARTICLE VIII
 
MISCELLANEOUS
 
42
Section 8.01.
 
Amendments in Writing
 
42
Section 8.02.
 
Notices
 
42
Section 8.03.
 
Security Interest Absolute
 
42
Section 8.04.
 
Survival of Agreement
 
42
Section 8.05.
 
No Waiver by Course of Conduct; Cumulative Remedies
 
43
Section 8.06.
 
EXPENSES AND INDEMNIFICATION
 
43
Section 8.07.
 
Successors and Assigns
 
44
Section 8.08.
 
Set-Off
 
44
Section 8.09.
 
Counterparts
 
45
Section 8.10.
 
Severability
 
45
Section 8.11.
 
Headings
 
45
Section 8.12.
 
Governing Law
 
45
Section 8.13.
 
Submission to Jurisdiction
 
45
Section 8.14.
 
Acknowledgments
 
45
Section 8.15.
 
Additional Grantors
 
46
Section 8.16.
 
Releases
 
46
Section 8.17.
 
WAIVER OF JURY TRIAL
 
47
Section 8.18.
 
WAIVER OF CONSEQUENTIAL DAMAGES; ETC
 
47

 
A-ii

--------------------------------------------------------------------------------

 
SCHEDULES
 
Schedule 1       Notice Addresses
Schedule 2       Investment Property
Schedule 3       Perfection Matters
Schedule 4       Jurisdictions of Organization and Chief Executive Offices
Schedule 5       Inventory and Equipment Locations
Schedule 6       Intellectual Property
Schedule 7       Commercial Tort Claims
Schedule 8       Equipment Subject to Certificate of Title Statutes
Schedule 9       Letters of Credit
Schedule 10     Existing Prior Liens
Schedule 11     Investment Agreements
 
ANNEXES
 
Annex 1            Form of Assumption Agreement
Annex 2            Form of Intellectual Property Security Agreement
Annex 3            Form of Intellectual Property Security Agreement Supplement
Annex 4            Form of Uncertificated Security Control Agreement
Annex 5            Form of Securities Account Control Agreement
Annex 6            Form of Commodity Account Control Agreement
Annex 7            Form of Deposit Account Control Agreement
Annex 8            Form of Consent to Assignment of Letter of Credit Rights
Annex 9            Form of Acknowledgment and Consent
Annex 10          Form of Investment Consent and Agreement

 
-iii-

--------------------------------------------------------------------------------

GUARANTEE AND SECURITY AGREEMENT
 
GUARANTEE AND SECURITY AGREEMENT, dated as of May [__], 2009, made by each of
the signatories hereto (together with any other person or entity that may become
a party hereto as provided herein, the "Grantors"), in favor of PROSPERITY BANK,
as Secured Party (the "Secured Party").
 
RECITALS
 
SANDERS MORRIS HARRIS GROUP INC., a Texas corporation (the "Borrower") has
entered into that certain Credit Agreement dated as of May [__], 2009, with the
Secured Party (said Credit Agreement, as it may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement");
 
Pursuant to the Credit Agreement, the Secured Party has agreed to make the Loan
to the Borrower upon the terms and subject to the conditions set forth therein;
 
The Borrower is a member of an affiliated group of companies that includes each
other Grantor;
 
The proceeds of the Loan under the Credit Agreement will be used in part to
enable the Borrower to make valuable transfers to one or more of the other
Grantors in connection with the operation of their respective businesses;
 
The Borrower and the other Grantors are engaged in related businesses, and each
Grantor will derive substantial direct and indirect benefit from the making of
the Loan under the Credit Agreement; and
 
It is a condition precedent to the obligation of the Secured Party to make the
Loan to the Borrower under the Credit Agreement that the Grantors shall have
executed and delivered this Agreement to the Secured Party.
 
NOW, THEREFORE, in consideration of the premises and to induce the Secured Party
to enter into the Credit Agreement and to induce the Secured Party to make the
Loan to the Borrower thereunder and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, each Grantor
hereby agrees with the Secured Party as follows:
 
(a)
 
DEFINED TERMS
 
(i)           Definitions.  Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings specified in the
Credit Agreement.  Furthermore, unless otherwise defined in this Agreement or in
the Credit Agreement, terms defined in Article 8 or 9 of the UCC (as defined
below) are used in this Agreement as such terms are defined in such Article 8 or
9.
 
(1)           The following terms shall have the following meanings:

 
A-1

--------------------------------------------------------------------------------

 
"Accounts" means all "accounts" as such term is defined in Article 9 of the UCC.
 
"Agreement" means this Guarantee and Security Agreement, as amended, restated,
supplemented or otherwise modified from time to time.
 
"Assumption Agreement" means an Assumption Agreement in substantially the form
of Annex 1 to this Agreement.
 
"Collateral" has the meaning specified in Section 3.01.
 
"Collateral Accounts" means any collateral account established by the Secured
Party pursuant to this Agreement or the Credit Agreement, each of which shall be
in the name of the Secured Party, shall be under the sole dominion and control
of the Secured Party and shall be established in a manner satisfactory to the
Secured Party.
 
"Commodity Account Control Agreement" has the meaning specified in Section
5.01(e).
 
"Consent to Assignment of Letter of Credit Rights" has the meaning specified in
Section 5.01(g).
 
"Control Agreement" means a Deposit Account Control Agreement, Securities
Account Control Agreement, Commodity Account Control Agreement or Uncertificated
Security Control Agreement.
 
"Copyright Licenses" means any and all agreements (written or oral) naming any
Grantor as licensor or licensee (including, without limitation, those listed in
Schedule 6), providing for the granting of any right in, to or under any
Copyright, and all renewals and extensions thereof.
 
"Copyrights" (i) all United States and foreign copyrights, whether or not the
underlying works of authorship have been published, and all works of authorship
and other intellectual property rights therein, all copyrights of works based
on, incorporated in, derived from or relating to works covered by such
copyrights, all right, title and interest to make and exploit all derivative
works based on or adopted from works covered by such copyrights, and all United
States and foreign copyright registrations and applications for copyright, and
any renewals or extensions thereof, including, without limitation, each
registration and application identified in Schedule 6, (ii) the rights to print,
publish and distribute any of the foregoing, (iii) the right to sue or otherwise
recover for any and all past, present and future infringements and
misappropriations of any of the foregoing, (iv) all income, royalties, damages
and other payments now and hereafter due and/or payable with respect to any of
the foregoing and (v) all other rights of any kind whatsoever accruing
thereunder or pertaining to any of the foregoing.
 
"Deposit Account Control Agreement" has the meaning specified in Section
5.01(f).
 
"Equipment" means all "equipment" as such term is defined in Article 9 of the
UCC and all parts thereof and all accessions thereto and all software related
thereto.

 
A-2

--------------------------------------------------------------------------------

"Excluded Assets" means any lease, license, license, contract, property right or
agreement to which any Grantor is a party or any of its rights or interests
thereunder if and only for so long as the grant of a security interest hereunder
shall constitute or result in a breach, termination or default under any such
lease, license, contract, property right or agreement (other than to the extent
that any such term would be rendered ineffective pursuant to Sections 9.406,
9.407, 9.408 or 9.409 of the UCC of any relevant jurisdiction or any other
applicable law or principles of equity); provided, however, that such security
interest shall attach immediately to any portion of such lease, license,
contract, property rights or agreement that does not result in any of the
consequences specified above.
 
"Excluded Foreign Subsidiary Voting Interests" means the voting equity interests
of any Excluded Foreign Subsidiary.
 
"General Intangibles" means all "general intangibles" as such term is defined in
Article 9 of the UCC, including, without limitation, with respect to each
Grantor, (i) all tax refunds, claims for tax refunds, and tax credits, (ii) all
permits, licenses, approvals, authorizations, consents, variances, and
certifications of any Governmental Authority, (iii) all judgments, claims, tort
claims, causes of action, and choses in action, (iv) all property, casualty,
liability, business interruption, and other insurance of any kind or character,
and all insurance claims and insurance refund claims, (v) all letters of credit
and letter-of-credit rights, (vi) all payment intangibles, (vii) all lists,
customer lists, books, records, recorded knowledge, goodwill, ledgers, files
(whether in printed form or stored electronically), designs, blueprints, data,
specifications, engineering reports, manuals, computer records, computer
programs and computer software (including source codes, object codes and related
applications), (viii) all internet domain names, registrations and websites and
related licenses and agreements, and (ix) all Swap Contracts, Assigned
Agreements, other Material Contracts and all other contracts, agreements
(including, without limitations, all subleases, all securities repurchase
agreements and all securities loan agreements), instruments and indentures in
any form, and portions thereof, to which such Grantor is a party or under which
such Grantor has any right, title or interest or to which such Grantor or any
property of such Grantor is subject, as the same may from time to time be
amended, supplemented, replaced or otherwise modified, including, without
limitation, (A) all rights of such Grantor to receive moneys due and to become
due to it thereunder or in connection therewith, (B) all rights of such Grantor
to damages arising thereunder and (C) all rights of such Grantor to perform and
to exercise all remedies thereunder.
 
"Guarantors" means the collective reference to each Grantor other than the
Borrower.
 
"Indemnified Party" has the meaning specified in Section 8.06(d).
 
"Intellectual Property" means the collective reference to all rights, priorities
and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without
limitation, all Copyrights, Patents, Trademarks, IP Agreements, Trade Secrets,
and internet domain names, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to receive all
proceeds and damages therefrom.
 
"Intercompany Note" means any promissory note evidencing loans, advances or
other extensions of credit made by any Grantor to the Borrower or any of its
Subsidiaries.

 
A-3

--------------------------------------------------------------------------------

 
"Inventory" means all "inventory" as such term is defined in Article 9 of the
UCC.
 
"Investment Agreement" means any agreement, instrument or document (including
any warrant agreement, limited partnership agreement, limited liability company
agreement, or other Organizational Document) to which any Grantor is a party
which creates, governs the terms of, or establishes any Grantor's rights, titles
or interests in or to, any Investment Property (including any agreement,
instrument and document identified in Schedule 11 hereto), as amended, restated,
supplemented or otherwise modified from time to time.
 
"Investment Consent and Agreement" has the meaning specified in Section 4.12.
 
"Investment Control Affiliate" means any Person that is owned or controlled
(directly or indirectly) by any Issuer.
 
"Investment Financing Document" means any agreement, instrument or document
pursuant to which any Person makes a loan or provides any other extension of
credit to any Issuer (or to any Investment Control Affiliate of any Issuer)
which is or will be secured by a Lien on all or any material portion of the
assets and properties owned by, or on any of the Equity Interests of, such
Issuer or any such Investment Control Affiliate.
 
"Investment Party" means each Person that is a party to an Investment Agreement
(other than any Grantor).
 
"Investment Property" means the collective reference to (a) all "investment
property" as such term is defined in Section 9.102(a)(49) of the UCC including,
without limitation, all certificated securities and uncertificated securities,
all security entitlements, all securities accounts, all commodity contracts and
all commodity accounts (other than any Excluded Foreign Subsidiary Voting
Interests excluded from the definition of Pledged Equity Interests), (b) all
security entitlements, in the case of any United States Treasury book-entry
securities, as defined in 31 C.F.R. section 357.2, or, in the case of any United
States federal agency book-entry securities, as defined in the corresponding
United States federal regulations governing such book-entry securities, and (c)
whether or not constituting "investment property" as so defined, all Pledged
Notes, Pledged Debt Securities, Pledged Equity Interests, Pledged Commodity
Contracts, Pledged Security Entitlements, securities accounts, and commodity
accounts.
 
"IP Agreements" means all Copyright Licenses, Patent Licenses, Trademark
Licenses and all other agreements, permits, consents, orders, and franchises
relating to the license, development or use of any Copyright, Patent, Trademark,
Computer Software or Trade Secret.
 
"Issuer" means any Person which is an issuer of any Investment Property
(including any limited partnership, limited liability company or trust created
by or under any Investment Agreement to which any Grantor is a party).
 
"Material Investment Agreement" means, on any date, any Investment Agreement
which creates, governs the terms of, or establishes any Grantor's rights, titles
or interests in or to, any Material Investment Property.

 
A-4

--------------------------------------------------------------------------------

 
"Material Investment Property" means, on any date, any Investment Property owned
or controlled by any Grantor which has a cost basis or a fair market value (as
reasonably determined by such Grantor or by the Secured Party) which is equal to
or greater than $1,000,000 on such date.
 
"Obligations" has the meaning specified in the Credit Agreement.
 
"Patent Licenses" means all agreements, whether written or oral, providing for
the grant by or to any Grantor of any right to make, manufacture, use, sell,
offer to sell, or import any invention covered in whole or in part by a Patent,
including, without limitation, those listed on Schedule 6, and all extensions
and renewals thereof.
 
"Patents" means (i) all United States and foreign patents, patent applications
and patentable inventions, including, without limitation, each patent and patent
application identified in Schedule 6, all certificates of invention or similar
property rights, (ii) all inventions and improvements described and claimed
therein, (iii) the right to sue or otherwise recover for any and all past,
present and future infringements and misappropriations of any of the foregoing,
(iv) all income, royalties, damages and other payments now and hereafter due
and/or payable with respect thereto and (v) all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and extensions
thereof, all improvements thereon and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto.
 
"Pledged Commodity Contracts"  means all commodity contracts listed on Schedule
2 and all other commodity contracts to which any Grantor is party from time to
time.
 
"Pledged Debt Securities" means all debt securities now owned or hereafter
acquired by any Grantor, including, without limitation, the debt securities
listed on Schedule 2, together with any certificates, options, rights or
security entitlements of any nature whatsoever in respect of the debt securities
of any Person that may at any time be issued or granted to, or held by, any
Grantor.
 
"Pledged Equity Interests" means all Pledged Stock, Pledged LLC Interests,
Pledged Partnership Interests and Pledged Trust Interests; provided, however, in
no event shall more than 66% of the total outstanding Excluded Foreign
Subsidiary Voting Interests be required to be pledged hereunder.
 
"Pledged LLC Interests" means all membership and other interests of any Grantor
now owned or hereafter acquired in any limited liability company including,
without limitation, all limited liability company interests listed on Schedule 2
hereto under the heading "Pledged LLC Interests" and the certificates, if any,
representing such limited liability company interests and any interest of such
Grantor on the books and records of such limited liability company and all
dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of such
limited liability company interests and any other warrant, right or option to
acquire any of the foregoing.

 
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"Pledged Notes" means all Intercompany Notes at any time issued to any Grantor
and all other promissory notes issued to or held by any Grantor, including,
without limitation, the Pledged Notes described on Schedule 2.
 
"Pledged Partnership Interests" means all partnership and other interests of any
Grantor now owned or hereafter acquired in any general partnership, limited
partnership, limited liability partnership or other partnership including,
without limitation, all partnership interests listed on Schedule 2 hereto under
the heading "Pledged Partnership Interests" and the certificates, if any,
representing such partnership interests and any interest of such Grantor on the
books and records of such partnership and all dividends, distributions, cash,
warrants, rights, options, instruments, securities and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such partnership interests and any
other warrant, right or option to acquire any of the foregoing.
 
"Pledged Securities" means the collective reference to the Pledged Debt
Securities, the Pledged Notes and the Pledged Equity Interests.
 
"Pledged Security Entitlements" means all security entitlements with respect to
the financial assets listed on Schedule 2 and all other security entitles of any
Grantor.
 
"Pledged Stock" means all shares of capital stock and other Equity Interests now
owned or hereafter acquired by any Grantor, including, without limitation, all
shares of capital stock described on Schedule 2 hereto under the heading
"Pledged Stock", and the certificates, if any, representing such shares and any
interest of such Grantor in the entries on the books of the issuer of such
shares and all dividends, distributions, cash, warrants, rights, options,
instruments, securities and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares and any other warrant, right or option to acquire any
of the foregoing.
 
"Pledged Trust Interests" means all interests of any Grantor now owned or
hereafter acquired in a Delaware business trust or other trust including,
without limitation, all trust interests listed on Schedule 2 hereto under the
heading "Pledged Trust Interests" and the certificates, if any, representing
such trust interests and any securities intermediary pertaining to such
interests and all dividends, distributions, cash, warrants, rights, options,
instruments, securities and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such trust interests and any other warrant, right or option to
acquire any of the foregoing.
 
"Proceeds" means all "proceeds" as defined in Article 9 of the UCC.
 
"Receivables" means all rights to payment, whether or not earned by performance,
for goods or other property sold, leased, licensed, assigned or otherwise
disposed of, or services rendered or to be rendered, including, without
limitation all such rights constituting or evidenced by any Account, chattel
paper, instrument, General Intangible or Investment Property, together with all
rights of the Grantors, if any, in any goods or other property giving rise to
such right to payment and all supporting obligations related thereto.
 
"Securities Account Control Agreement" has the meaning specified in Section
5.01(d).

 
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"Securities Act" means the Securities Act of 1933, as amended.
 
"Specified Agreements" means the collective reference to each Assigned Agreement
and each Investment Agreement.
 
"Trademark Licenses" means all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right in or to any Trademark,
including, without limitation, those listed on Schedule 6, and all renewals and
extensions thereof.
 
"Trademarks" means (i) all United States and foreign trademarks, trade names,
corporate names, company names, business names, fictitious business names,
service marks, logos, trade dress, trade styles, designs, know-how, slogans,
words, terms, names, symbols and devices and all combinations thereof, and all
other source or business identifiers, and all goodwill of the business connected
with the use thereof as symbolized thereby, all registrations and recordings
thereof, and all applications therefore or  in connection therewith, whether in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related thereto,
including, without limitation, those listed on Schedule 6, and any and all
extensions and renewals of any of the foregoing, (ii) the right to sue or
otherwise recover for any and all past, present and future infringements,
misappropriations and dilutions of any of the foregoing, (iii) all income,
royalties, damages and other payments now and hereafter due and/or payable with
respect to any of the foregoing and (iv) all other rights of any kind whatsoever
accruing thereunder or pertaining thereto, together in each case with all of the
goodwill of the business connected with the use of, and symbolized by, each of
the above.
 
"Trade Secrets" means all confidential and proprietary information, including,
without limitation, know-how, trade secrets, manufacturing and production
processes and techniques, inventions, research and development information,
databases and data, including, without limitation, technical data, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information.
 
"UCC" means the Uniform Commercial Code as in effect from time to time in the
State of Texas or, when the context implies, the Uniform Commercial Code as in
effect from time to time in any other applicable jurisdiction.
 
"UETA" means the Uniform Electronic Transactions Act, as in effect in any
applicable jurisdiction.
 
"Uncertificated Security Control Agreement" has the meaning specified in Section
5.01(c).
 
(ii)           Other Definitional Provisions.
 
(1)           The rules of construction specified in Section 1.02 of the Credit
Agreement shall apply to this Agreement.
 
(2)           The expressions "payment in full," "paid in full" and any other
similar terms or phrases when used herein with respect to the Obligations shall
mean the unconditional, final, indefeasible and irrevocable payment in full, in
immediately available funds, of all of the Obligations.

 
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(3)           No inference in favor of, or against, any party to this Agreement
shall be drawn from the fact that such party has drafted any portion of this
Agreement.
 
(4)           Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
 
(b)
 
GUARANTEE
 
(i)           Guarantee.
 
(1)           Each of the Guarantors hereby, jointly and severally, absolutely,
unconditionally and irrevocably, guarantees to the Secured Party and its
successors, endorsees, transferees and assigns, the prompt and complete payment
and performance when due (whether at stated maturity, by acceleration or
otherwise) of all of the Obligations (including, without limitation, any and all
extensions, modifications, substitutions, increases, restructurings, amendments,
restatements, and/or renewals of any or all of the Obligations).  Each Guarantor
is and shall be liable hereunder as a primary obligor and not as a surety.
 
(2)           Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.02).
 
(3)           Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor hereunder
without impairing the guarantee contained in this Article II or affecting the
rights and remedies of the Secured Party hereunder.
 
(4)           The guarantee contained in this Article II shall remain in full
force and effect until all of the Obligations shall have been paid in full,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrower may be free from any Obligations.
 
(5)           No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Secured Party from
the Borrower, any of the Guarantors, any other guarantor or any other Person by
virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment or
performance of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Guarantor hereunder which shall,
notwithstanding any such payment (other than any payment made by such Guarantor
in respect of the Obligations or any payment received or collected from such
Guarantor in respect of the Obligations), remain liable for the Obligations up
to the maximum liability of such Guarantor hereunder until the Obligations are
paid in full.

 
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(6)           If acceleration of the time for payment of any amount payable by
the Borrower under any Loan Document is stayed upon the insolvency, bankruptcy
or reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of such Loan Document shall nonetheless be payable
by each Guarantor hereunder forthwith on demand by the Secured Party.
 
(ii)           Right of Contribution.  Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment.  Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.03.  The provisions of
this Section 2.02 shall in no respect limit the obligations and liabilities of
any Guarantor to the Secured Party, and each Guarantor shall remain liable to
the Secured Party for the full amount guaranteed by such Guarantor hereunder.
 
(iii)          No Subrogation.  Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Secured Party, no Guarantor shall be entitled to be subrogated to any of the
rights of the Secured Party against the Borrower or any other Guarantor or any
collateral security or guarantee or right of offset held by the Secured Party
for the payment of the Obligations, nor shall any Guarantor seek or be entitled
to seek any contribution, indemnification or reimbursement from the Borrower or
any other Guarantor in respect of payments made by such Guarantor hereunder,
until all amounts owing to the Secured Party by the Borrower and the Guarantors
on account of the Obligations are paid in full.  If any amount shall be paid to
any Guarantor on account of such subrogation, contribution, indemnification or
reimbursement rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by such Guarantor in trust for the
Secured Party, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Secured Party in
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Secured Party, if required), to be applied against the Obligations, whether
matured or unmatured, in such order as the Secured Party may determine.
 
(iv)           Guarantee Absolute.  Each Guarantor guarantees that the
Obligations will be paid and performed strictly in accordance with their
respective terms, regardless of any Requirement of Law now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Secured Party with respect thereto.  Each Guarantor agrees that its guarantee
hereunder constitutes a guaranty of payment and performance when due and not of
collection, and waives any right to require that any resort be made by the
Secured Party to any of the Collateral, any other Person or any other
security.  The obligations of each Guarantor under or in respect of this
guarantee are independent of the Obligations of any other Guarantor or any
obligations of any other Person, and a separate action or actions may be brought
and prosecuted against each Guarantor to enforce its guarantee hereunder,
irrespective of whether any action is brought against the Borrower, any other
Guarantor or any other Person or whether the Borrower, any other Guarantor or
any other Person is joined in any such action or actions.  The liability of each
Guarantor under its guarantee hereunder shall be irrevocable, absolute and
unconditional irrespective of, and each Guarantor hereby unconditionally and
irrevocably waives any and all defenses and counterclaims it may now have or
hereafter acquire in any way relating to, any or all of the following:

 
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(1)           any lack of validity or enforceability of any of the Obligations,
any Loan Document or any agreement, document or instrument relating thereto;
 
(2)           any extension or change in the time, manner or place of payment
of, or in any other term or provision of, all or any of the Obligations, or any
other amendment, modification or waiver of or any consent to departure from any
Loan Document or any other agreement, document or instrument evidencing,
securing or otherwise relating to any of the Obligations, including, without
limitation, any increase in the Obligations resulting from the extension of
additional credit to the Borrower or otherwise;
 
(3)           any taking, exchange, release or non-perfection of any Collateral
or any other collateral, or any taking, release or amendment or waiver of, or
consent to departure from, any other guaranty, for all or any of the
Obligations;
 
(4)           the existence of any claim, set-off, recoupment, defense or other
right that any other Guarantor, the Borrower or any other Person may have
against any Person, including, without limitation, the Secured Party;
 
(5)           any manner of application of Collateral or any other collateral,
or proceeds thereof, to all or any of the Obligations, or any manner of
Disposition of any Collateral or any other collateral for all or any of the
Obligations or any other assets of any Loan Party or any of its Subsidiaries;
 
(6)           any change, restructuring or termination of the corporate or other
organizational structure, ownership or existence of any Loan Party or any of its
Subsidiaries;
 
(7)           any insolvency, bankruptcy, reorganization or other similar
proceeding affecting any Grantor, or any other guarantor of or other Person
liable for any of the Obligations, or their assets or any resulting release or
discharge of any obligation of any Loan Party, or any other guarantor of or
other Person liable for any of the Obligations;
 
(8)           any failure of the Secured Party to disclose to any Guarantor any
information relating to the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Borrower or any other
Loan Party now or hereafter known to the Secured Party;
 
(9)           the failure of any other Person to execute or deliver this
Agreement, any Assumption Agreement or any other guaranty or agreement, or the
release or reduction of liability of any Guarantor or other guarantor, surety or
obligor with respect to the Obligations or any part thereof; or

 
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(10)           any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
the Secured Party that might otherwise constitute a defense available to, or a
discharge of, any Loan Party or any other guarantor or surety.
 
(v)           Waivers and Acknowledgments.
 
(1)           Each Guarantor hereby unconditionally and irrevocably waives
promptness, diligence, notice of acceptance, presentment, demand for
performance, notice of nonperformance, notice of default, notice of
acceleration, notice of intent to accelerate, protest or dishonor, notice of the
existence or creation of any or all of the Obligations, and any other notice
with respect to any of the Obligations and the guarantee contained in this
Article II and any requirement that the Secured Party protect, secure, perfect
or insure any Lien or any property subject thereto or exhaust any right or take
any action against the Borrower, any other Guarantor, any other Person, any
Collateral, or any other security.
 
(2)           Each Guarantor hereby unconditionally and irrevocably waives any
right to revoke its guarantee hereunder and acknowledges that its guarantee
hereunder is continuing in nature and applies to all of the Obligations, whether
existing now or in the future.
 
(3)           Each Guarantor hereby unconditionally and irrevocably waives (i)
any defense arising by reason of any claim or defense based upon an election of
remedies by the Secured Party that in any manner impairs, reduces, releases or
otherwise adversely affects the subrogation, reimbursement, exoneration,
contribution or indemnification rights of such Guarantor or other rights of such
Guarantor to proceed against the Borrower, any other Guarantor, any other
guarantor or any other Person or any Collateral or other security and (ii) any
defense based on any right of set-off, recoupment, or counterclaim against or in
respect of the Obligations of such Guarantor hereunder.
 
(4)           Each Guarantor hereby unconditionally and irrevocably waives any
duty on the part of the Secured Party to disclose to such Guarantor any matter,
fact or thing relating to the business, condition (financial or otherwise),
operations, performance, properties or prospects of any Loan Party or any of its
respective Subsidiaries now or hereafter known by the Secured Party.
 
(5)           Each Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by the
Loan Documents and that its guarantee hereunder and its other agreements herein
are knowingly made in contemplation of such benefits.
 
(6)           Each Guarantor unconditionally and irrevocably waives any and all
rights and defenses that it may now or hereafter have under Chapter 34 of the
Texas Business and Commerce Code, Section 17.001 of the Texas Civil Practice and
Remedies Code, Rule 31 of the Texas Rules of Civil Procedure and Sections
51.003, 51.004, and 51.005 of the Texas Property Code.

 
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(vi)          Reinstatement.  The guarantee contained in this Article II shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is rescinded or must
otherwise be restored or returned by the Secured Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or any
other Loan Party, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Borrower or
any other Loan Party or any substantial part of its property, or otherwise, all
as though such payments had not been made.
 
(vii)         Payments.  Each Guarantor hereby agrees and guarantees that all
payments hereunder will be paid to the Secured Party when due without set-off,
counterclaim, recoupment or other defense.
 
(viii)        Subordination.  Each Guarantor hereby subordinates any and all
present and future indebtedness, liabilities or other obligations owed to such
Guarantor by each other Loan Party (the "Subordinated Obligations") to the
payment and performance of the Obligations to the extent and in the manner
hereinafter set forth in this Section:
 
(1)           If no Event of Default shall have occurred and be continuing, each
Guarantor may receive regularly scheduled payments from any other Loan Party on
account of the Subordinated Obligations (excluding payments prohibited by
Section 2.03).  Upon the occurrence and during the continuance of any Event of
Default, however, unless the Secured Party otherwise agrees in writing, no
Guarantor shall receive, demand or accept, or take any action to collect, any
payment on account of the Subordinated Obligations.
 
(2)           In any proceeding under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors (each a "Bankruptcy Law")
relating to any other Loan Party, each Guarantor agrees that the Secured Party
shall be entitled to receive payment in full of all Obligations (including all
interest and expenses accruing after the commencement of a proceeding under any
Bankruptcy Law, whether or not constituting an allowed claim in such proceeding
("Post Petition Interest")) before such Guarantor receives payment of any
Subordinated Obligations.
 
(3)           If any Event of Default shall have occurred and be continuing
(including the commencement and continuation of any proceeding under any
Bankruptcy Law relating to any other Loan Party), each Guarantor shall, if the
Secured Party so requests, collect, enforce and receive payments on account of
the Subordinated Obligations as trustee for the Secured Party and deliver such
payments to the Secured Party on account of the Obligations (including all Post
Petition Interest), together with any necessary endorsements or other
instruments of transfer, but without reducing or affecting in any manner the
liability of such Guarantor under the other provisions of this Agreement.
 
(4)           If any Event of Default shall have occurred and be continuing
(including the commencement and continuation of any proceeding under any
Bankruptcy Law relating to any other Loan Party), the Secured Party is
authorized and empowered (but without any obligation to so do), in its
discretion, (i) in the name of each Guarantor, to collect, enforce and vote, and
to submit and file proofs of claim in respect of, Subordinated Obligations and
to apply any amounts received thereon to the Obligations (including any and all
Post Petition Interest), and (ii) to require each Guarantor (A) to collect and
enforce, and to submit claims in respect of, Subordinated Obligations and (B) to
pay any amounts received on such obligations to the Secured Party for
application to the Obligations (including any and all Post Petition Interest).
 

 
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(5)           Each Guarantor shall not, without the prior written consent of the
Secured Party:
 
a.           accelerate, make demand, or otherwise make due and payable prior to
the original due date thereof any Subordinated Obligations or bring suit or
institute any other actions or proceedings to enforce its rights or interests in
respect of any indebtedness, liabilities or obligations of any other Loan Party
owing to such Guarantor;
 
b.           exercise any rights or remedies under or with respect to the
Subordinated Obligations;
 
c.           exercise any right of set-off, recoupment or counterclaim in
respect of any indebtedness, liabilities, or obligations of such Guarantor to
any other Loan Party or against any of the Subordinated Obligations; or
 
d.           commence, or cause to be commenced, or join with any creditor other
than the Secured Party, in commencing, any bankruptcy, insolvency, or
receivership proceeding against any other Loan Party.
 
(c)
 
GRANT OF SECURITY INTEREST
 
(i)            Grant of Security.  Each Grantor hereby pledges, assigns and
transfers to the Secured Party, and hereby grants to the Secured Party a
continuing security interest in and lien on, all right, title and interest in or
to any and all of the following assets and properties now owned or at any time
hereafter arising or acquired by such Grantor or in which such Grantor now has
or at any time in the future may acquire any right, title or interest
(collectively, the "Collateral"):
 
(1)           all Accounts;
 
(2)           all chattel paper;
 
(3)           all commercial tort claims described on Schedule 7;
 
(4)           all deposit accounts;
 
(5)           all documents;
 
(6)           all Equipment;
 
(7)           all fixtures;
 
(8)           all General Intangibles;

 
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(9)           all goods;
 
(10)           all instruments;
 
(11)           all Intellectual Property;
 
(12)           all Inventory;
 
(13)           all Investment Property;
 
(14)           all money;
 
(15)           all supporting obligations;
 
(16)           all other personal property of any kind or character, whether
tangible or intangible;
 
(17)           all books and records pertaining to the Collateral; and
 
(18)           to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees given
by any Person with respect to any of the foregoing.
 
Notwithstanding anything to the contrary contained in this Agreement, none of
the Excluded Assets shall constitute Collateral.
 
(ii)           Security for Obligations.  This Agreement and the Liens created
hereunder secure, in the case of each Grantor, the prompt and complete payment
and performance when due (whether at stated maturity, by acceleration or
otherwise) of all of the Obligations.  Without limiting the foregoing, this
Agreement secures, as to each Grantor, the payment of all amounts that
constitute part of the Obligations and would be owed by such Grantor to the
Secured Party but for the fact that they are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding involving
a Loan Party.
 
(iii)           Continuing Liability Under Collateral.  Notwithstanding anything
herein to the contrary, (a) each Grantor shall remain liable for all obligations
under the Collateral and nothing contained herein is intended or shall be a
delegation of duties to the Secured Party, (b) each Grantor shall remain liable
under each of the agreements included in the Collateral, including, without
limitation, any Receivables and any agreements relating to Pledged Securities,
to perform all of the obligations undertaken by it thereunder all in accordance
with and pursuant to the terms and provisions thereof and the Secured Party
shall have no obligation or liability under any of such agreements by reason of
or arising out of this Agreement or any other Loan Document nor shall the
Secured Party have any obligation to make any inquiry as to the nature or
sufficiency of any payment received by it or have any obligation to take any
action to collect or enforce any rights under any agreement included in the
Collateral, including, without limitation, any agreements relating to any
Receivables or any Pledged Securities and (c) the exercise by the Secured Party
of any of its rights hereunder shall not release any Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral.

 
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(d)
 
REPRESENTATIONS AND WARRANTIES
 
To induce the Secured Party to enter into the Credit Agreement and to make the
Loan thereunder, each Grantor hereby represents and warrants to the Secured
Party that:
 
(i)           Title; No Other Liens.  Except for the security interest granted
to the Secured Party pursuant to this Agreement and the other Liens expressly
permitted to exist on the Collateral by the Credit Agreement, such Grantor is
the legal and beneficial owner of each item of the Collateral free and clear of
any and all Liens, claims, or other encumbrances.  No financing statement,
fixture filing or other public notice with respect to all or any part of the
Collateral is on file or of record in any filing or recording office, except
such as have been filed in favor of the Secured Party pursuant to this Agreement
or as are otherwise expressly permitted under the Credit Agreement.
 
(ii)           Perfected First Priority Liens.
 
(1)           The security interests granted pursuant to this Agreement (i)
constitute valid perfected security interests in all of the Collateral in favor
of the Secured Party, as collateral security for the Obligations, enforceable in
accordance with the terms hereof against all creditors of such Grantor and any
Persons purporting to purchase any Collateral from such Grantor and (ii) are
prior to all other Liens on the Collateral except for (A) unrecorded Liens
expressly permitted by the Credit Agreement which have priority over the Liens
on the Collateral by operation of law and (B) existing Liens described on
Schedule 10.
 
(2)           Without limiting the foregoing, and except as provided in Section
5.01, each Grantor has taken all actions specified in Section 5.01 to:  (i)
establish the Secured Party's "control" (within the meanings of Sections 8.106
and 9.106 of the UCC) over any portion of the Investment Property of such
Grantor constituting certificated securities, uncertificated securities,
securities accounts, security entitlements, or commodity accounts or commodity
contracts, (ii) establish the Secured Party's "control" (within the meaning of
Section 9.104 of the UCC) over all deposit accounts of such Grantor, (iii)
establish the Secured Party's "control" (within the meaning of Section 9.107 of
the UCC) over all letter-of-credit rights of such Grantor, (iv) establish the
Secured Party's "control" (within the meaning of Section 9.105 of the UCC) over
all electronic chattel paper of such Grantor and (v) establish the Secured
Party's "control" within the meaning of Section 16 of the UETA over all
"transferable records" (as defined in UETA) of such Grantor.
 
(3)           All tangible chattel paper, instruments and negotiable documents
of each Grantor have been delivered to the Secured Party.

 
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(iii)          Chief Executive Office, Etc.
 
(1)           Such Grantor's type of organization, jurisdiction of organization,
organizational identification number, taxpayer identification number and the
location of such Grantor's chief executive office or sole place of business, as
the case may be, are specified on Schedule 4.
 
(2)           Such Grantor's exact legal name is set forth on Schedule 4 and
such Grantor has not conducted business in the last five (5) years, and does not
conduct business, under any other name (including any trade-name or fictitious
business name) except for those names listed on Schedule 4.
 
(3)           Except as provided in Schedule 4, such Grantor has not changed its
name, jurisdiction of organization, organizational identification number, type
of organization, taxpayer identification number, chief executive office or sole
place of business or its organizational structure in any way (e.g., by merger,
consolidation, change in organizational form or otherwise) within the past five
(5) years.
 
(4)           Such Grantor has not within the last five (5) years become bound
(whether by merger or otherwise) as a debtor under a security agreement entered
into by another Person, which has not been terminated other than security
agreements identified on Schedule 4.
 
(5)           With respect to each security agreement identified on Schedule 4
pursuant to clause (d) of this Section, such Grantor has set forth on Schedule 4
the information required pursuant to clauses (a), (b) and (c) of this Section
for the debtor under each such security agreement.
 
(6)           All actions and consents, filings, notices, registrations, and
recordings necessary or desirable for the exercise by the Secured Party of the
voting or other rights provided for in this Agreement or the exercise of
remedies in respect of the Collateral have been taken, made or obtained or, in
the case of filings or recordings, authorized.
 
(7)           The information on Schedule 4 with respect to such Grantor is true
and correct in all respects.
 
(8)           All information supplied by such Grantor to the Secured Party with
respect to the Collateral is accurate and complete.
 
(iv)          Inventory and Equipment.
 
(1)           All of the Inventory and the Equipment of such Grantor is kept at
the locations listed on Schedule 5.
 
(2)           None of the Inventory or Equipment of such Grantor is in the
possession of an issuer of a negotiable document therefore or otherwise in the
possession of a bailee or warehouseman.

 
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(3)           All Equipment of such Grantor that is subject to a certificate of
title statute is described on Schedule 8.
 
(v)           Investment Property.
 
(1)           Schedule 2 hereto sets forth under the headings "Pledged Stock,"
"Pledged LLC Interests," "Pledged Partnership Interests" and "Pledged Trust
Interests," respectively, all of the Pledged Stock, Pledged LLC Interests,
Pledged Partnership Interests and Pledged Trust Interests owned by such Grantor
and such Pledged Equity Interests constitute the percentage of issued and
outstanding shares of stock, percentage of membership interests, percentage of
partnership interests or percentage of beneficial or ownership interests,
respectively, of the respective Issuers thereof indicated on such Schedule.
 
(2)           Schedule 2 hereto sets forth under the heading "Pledged Debt
Securities" or "Pledged Notes" all of the Pledged Debt Securities and Pledged
Notes owned by such Grantor and (i) each such Pledged Debt Security and Pledged
Note (or, with respect to any such Pledged Debt Security or Pledged Note issued
by any Person other than a Loan Party, to such Grantor's knowledge) has been
duly authorized, authenticated or issued, and delivered and is the legal, valid
and binding obligation of the Issuer thereof enforceable against such Issuer in
accordance with its terms, and (ii) each Issuer of each such Pledged Debt
Security and each such Pledged Note (or, with respect to any such Pledged Debt
Security or Pledged Note issued by any Person other than a Loan Party, to such
Grantor's knowledge) is not in default of any of its obligations thereunder, and
each such Pledged Debt Security and Pledged Note constitutes all of the issued
and outstanding indebtedness evidenced by an instrument or a certificated
security of the respective Issuer thereof owing to such Grantor.
 
(3)           Each of the Pledged Equity Interests owned by such Grantor (or,
with respect to any such Pledged Equity Interests issued by any Person other
than a Loan Party, to such Grantor's knowledge) has been duly authorized and
validly issued and is fully paid and nonassessable.
 
(4)           Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Equity Interests pledged by it hereunder,
free and clear of any and all Liens or options in favor of, or claims of, any
other Person, except the security interest created by this Agreement and except
for any Liens expressly permitted under the Credit Agreement, and except as set
forth on Schedule 2 hereto, to such Grantor's knowledge there are no outstanding
preemptive rights, warrants, options or other rights to purchase, or
shareholder, voting trust or similar agreements outstanding with respect to, or
property that is convertible into, or that requires the issuance or sale of, any
such Pledged Equity Interests.
 
(5)           Except to the extent expressly required by any Investment
Agreement, no consent of any Person, including any other general or limited
partner, any other member of a limited liability company, any other shareholder
or any other trust beneficiary is necessary in connection with the creation,
perfection or first priority status of the security interest of the Secured
Party hereunder in any Pledged Equity Interests or the exercise by the Secured
Party of the voting or other rights provided for in this Agreement or the
exercise of rights and remedies hereunder.

 
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(6)           None of the Pledged LLC Interests or Pledged Partnership Interests
are or represent interests in issuers that: (i) are registered as investment
companies or (ii) are dealt in or traded on securities exchanges or markets.
 
(7)           Except as described in Schedule 2 or Schedule 11 hereto, the terms
of each Pledged Partnership Interest and each Pledged LLC Interest expressly
provide that they are securities governed by Article 8 of the Uniform Commercial
Code.
 
(8)           Each Issuer which is an Affiliate of the Borrower that is not a
Grantor hereunder has executed and delivered to the Secured Party an
Acknowledgement and Consent, in substantially the form of Annex 9, to the pledge
of the Pledged Notes, the Pledged Debt Securities and the Pledged Equity
Interests pursuant to the Agreement.
 
(vi)           Receivables. 
 
(1)           Each Receivable (i) is and will be the legal, valid and binding
obligation of the account debtor in respect thereof, (ii) is and will be
enforceable in accordance with its terms, (iii) is and will not be subject to
any setoffs, defenses, taxes or counterclaims (except with respect to disputes,
refunds, returns, discounts and allowances in the ordinary course of business)
and (iv) is and will be in compliance in all material respects with all
Requirements of Law.
 
(2)           No amount payable to such Grantor under or in connection with any
Receivable is evidenced by any certificated security, instrument or tangible
chattel paper that has not been delivered to the Secured Party or constitutes
electronic chattel paper that has not been subjected to the control (within the
meaning of Section 9.105 of the UCC) of the Secured Party.
 
(3)           None of the obligors on any of the Receivables is a Governmental
Authority.
 
(4)           No Receivable in excess of $100,000 requires the consent of the
account debtor to the attachment of the security interest hereunder to such
Receivable and the Proceeds thereof.
 
(5)           The amounts represented by such Grantor to the Secured Party from
time to time as owing to such Grantor in respect of the Receivables will at such
times be accurate.
 
(vii)         Intellectual Property.
 
(1)           The operation of such Grantor's business as currently conducted or
as contemplated to be conducted and the use of such Grantor's material
Intellectual Property in connection therewith do not conflict with, infringe,
misappropriate, dilute, misuse or otherwise violate the intellectual property
rights of any third party.

 
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(2)           Such Grantor is the exclusive owner of all right, title and
interest in and to such Grantor's material Intellectual Property, and is
entitled to use all such Intellectual Property subject only to the terms of the
IP Agreements.
 
(3)           The Intellectual Property of such Grantor described on Schedule 6
hereto includes all of the patents, patent applications, domain names, trademark
registrations and applications, copyright registrations and applications and IP
Agreements owned by such Grantor.
 
(4)           Such Grantor's material Intellectual Property of such Grantor is
subsisting and has not been adjudged invalid or unenforceable in whole or part,
and to the best of such Grantor's knowledge, is valid and enforceable.  Such
Grantor is not aware of any uses of any item of any such Intellectual Property
that could be expected to lead to such item becoming invalid or unenforceable.
 
(5)           Such Grantor has made or performed all filings, recordings and
other acts and has paid all required fees and taxes to maintain and protect its
interest in each and every item of its material Intellectual Property in full
force and effect throughout the world, and to protect and maintain its interest
therein including.
 
(6)           No claim, action, suit, investigation, litigation or proceeding
has been asserted or is pending or threatened against such Grantor (i) based
upon or challenging or seeking to deny or restrict the Grantor's rights in or
use of any of its material Intellectual Property, (ii) alleging that the
Grantor's rights in or use of any such Intellectual Property infringe,
misappropriate, dilute, misuse or otherwise violate any patent, trademark,
copyright or any other proprietary right of any third party, or (iii) alleging
that any such Intellectual Property is being licensed or sublicensed in
violation or contravention of the terms of any license or other agreement.  No
Person is engaging in any activity that infringes, misappropriates, dilutes,
misuses or otherwise violates such Grantor's material Intellectual Property or
such Grantor's rights therein or use thereof.  Except as set forth on Schedule 6
hereto, such Grantor has not granted any license, release, covenant not to sue,
non-assertion assurance, or other right to any Person with respect to any part
of such Grantor's Intellectual Property.  The consummation of the transactions
contemplated by the Loan Documents will not result in the termination or
impairment of any of such Grantor's material Intellectual Property.
 
(7)           With respect to each IP Agreement to which such Grantor is a
party: (i) such IP Agreement is valid and binding and in full force and effect
and represents the entire agreement between the respective parties thereto with
respect to the subject matter thereof; (ii) such IP Agreement will not cease to
be valid and binding and in full force and effect on terms identical to those
currently in effect as a result of the rights and interest granted herein, nor
will the grant of such rights and interest constitute a breach or default under
such IP Agreement or otherwise give any party thereto a right to terminate such
IP Agreement; (iii) such Grantor has not received any notice of termination or
cancellation under such IP Agreement; (iv) such Grantor has not received any
notice of a breach or default under such IP Agreement, which breach or default
has not been cured; (v) such Grantor has not granted to any other third party
any rights, adverse or otherwise, under such IP Agreement; and (vi) neither such
Grantor nor any other party to such IP Agreement is in breach or default thereof
in any material respect, and no event has occurred that, with notice or lapse of
time or both, would constitute such a breach or default or permit termination,
modification or acceleration under such IP Agreement.

 
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(8)           To the best of such Grantor's knowledge, (i) none of the material
Trade Secrets of such Grantor has been used, divulged, disclosed or appropriated
to the detriment of such Grantor for the benefit of any other Person other than
such Grantor; (ii) no employee, independent contractor or agent of such Grantor
has misappropriated any trade secrets of any other Person in the course of the
performance of his or her duties as an employee, independent contractor or agent
of such Grantor; and (iii) no employee, independent contractor or agent of such
Grantor is in default or breach of any term of any employment agreement,
non-disclosure agreement, assignment of inventions agreement or similar
agreement or contract relating in any way to the protection, ownership,
development, use or transfer of such Grantor's material Intellectual Property.
 
(9)           Neither such Grantor nor any of its material Intellectual Property
is subject to any outstanding consent, settlement, decree, order, injunction,
judgment or ruling restricting the use of any Intellectual Property or that
would impair the validity or enforceability of such Intellectual Property.
 
(viii)        Securities Accounts, Commodities Accounts and Deposit Accounts.
 
(1)           Schedule 2 sets forth under the headings "Securities Accounts" and
"Commodities Accounts," respectively, all of the securities accounts and
commodities accounts in which such Grantor has an interest.  Such Grantor is the
sole entitlement holder of each such securities account and commodity account,
and no Person (other than the Secured Party pursuant hereto) has or will have
"control" (within the meanings of Sections 8.106 and 9.106 of the UCC) over, or
any other interest in or claim against, any such securities account or commodity
account or any money or other property deposited therein or credited thereto
(other than the Clearing Accounts).
 
(2)           Schedule 2 sets forth under the heading "Deposit Accounts" all of
the deposit accounts in which such Grantor has an interest.  Such Grantor is the
sole account holder of each such deposit account and no Person (other than the
Secured Party pursuant hereto) has or will have "control" (within the meaning of
Section 9.104 of the UCC) over, or any other interest in or claim against, any
such deposit account or any money or other property deposited therein or
credited thereto (other than the Clearing Accounts).
 
(ix)          Commercial Tort Claims.  Such Grantor has no commercial tort
claims other than (a) those listed on Schedule 7, or (b) as to which the actions
required by Section 5.11 have been taken.
 
(x)           Letters of Credit.  Such Grantor is not a beneficiary or assignee
under any letter of credit, other than the letters of credit described in
Schedule 9, and legal, binding and enforceable consents, in substantially the
form of the Consent to Assignment of Letter of Credit Rights, are in effect for
each letter of credit in which such Grantor has rights.  Such Grantor has
instructed all issuers and nominated Persons under letters of credit in which
such Grantor is the beneficiary or assignee to make all payments thereunder to a
Collateral Account.

 
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(xi)           Independent Investigation. Such Grantor has, independently and
without reliance upon the Secured Party and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement.  Such Grantor will benefit directly and
indirectly from its execution and delivery of this Agreement and from the Loan
made by the Secured Party to the Borrower under the Credit Agreement.  There are
no conditions precedent to the effectiveness of this Agreement that have not
been satisfied or waived.
 
(xii)          Specified Agreements.
 
(1)           Schedule 11 sets forth a true and complete description of all
Investment Agreements to which such Grantor is a party or in which such Grantor
has any right, title or interest.
 
(2)           No consent, authorization or other approval or agreement of (i)
any Investment Party or (ii) to such Grantor's knowledge, any Person that has
made loans or other extensions of credit to any Issuer or any Investment Control
Affiliate pursuant to any Investment Financing Document is required (or is
purported to be required) pursuant to or with respect to any Investment
Agreement for or in connection with the execution, delivery and performance by
such Grantor of its obligations under this Agreement or any other Loan Document,
the validity or enforceability of this Agreement or any other Loan Document or
the exercise by the Secured Party of any of its rights and remedies hereunder or
thereunder, other than (x) those which have been duly obtained made or
performed, are in full force and effect and are evidenced by an executed consent
and agreement substantially in the form of Annex 10 hereto or in such other form
which is acceptable to the Secured Party which has been delivered to the Secured
Party (each, an "Investment Consent and Agreement") or (y) are described on
Schedule 11 hereto.
 
(3)           No consent, authorization or approval of any Person (other than
such Grantor) to any Assigned Agreement to which such Grantor is a party is
required (or is purported to be required) for or in connection with the
execution, delivery, and performance by such Grantor of its obligations under
this Agreement, the validity or enforceability of this Agreement or any other
Loan Document or the exercise by the Secured Party of any of its rights and
remedies hereunder or thereunder, other than those which have been duly
obtained, made or performed, are in full force and effect and are evidenced by a
Consent and Agreement or an Investment Consent and Agreement (as applicable).
 
(4)           Each Specified Agreement to which such Grantor is a party has been
duly authorized, executed and delivered by such Grantor and, to such Grantor's
knowledge, each of the other parties thereto, is in full force and effect, and
constitutes a valid and legally enforceable obligation of the parties thereto,
subject to the effects of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law).

 
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(5)           None of such Grantor nor to such Grantor’s knowledge any of the
other parties to any Specified Agreement to which such Grantor is a party is in
default in the performance or observance of any of the material terms or
provisions thereof (including any such term or provision requiring any such
other party to make payments to such Grantor).
 
(6)           The rights, titles and interests of such Grantor in, to and under
each Specified Agreement to which such Grantor is a party are not to such
Grantor's knowledge subject to any defenses, offsets, recoupments, counterclaims
or claims, except to the extent expressly provided in such Specified Agreement,
any Consent and Agreement or any Investment Consent and Agreement.
 
(7)           Such Grantor has delivered to the Secured Party a complete and
correct copy of each Assigned Agreement and each Material Investment Agreement,
including all amendments, supplements and other modifications thereto.
 
(8)           Except to the extent expressly provided in any Consent and
Agreement or in any Investment Consent and Agreement, no amount payable to such
Grantor under or in connection with any Specified Agreement is (i) subject to
any right of setoff, offset or reduction or (ii) evidenced by any instrument or
chattel paper that has not been delivered to the Secured Party.
 
(9)           None of the parties to any Specified Agreement is a Governmental
Authority.
 
(e)
 
COVENANTS
 
Each Grantor covenants and agrees with the Secured Party that, from and after
the date of this Agreement until the Obligations shall have been paid and
performed in full:
 
(i)            Delivery and Control of Instruments, Investment Property,
Negotiable Documents, Chattel Paper, Letter-of-Credit Rights, and Transferable
Records.
 
(1)           If any of the Collateral (other than Collateral held in Clearing
Accounts or securities accounts which are subject to a Securities Account
Control Agreement in favor of the Secured Party) is or shall become evidenced by
any instrument, certificated security, negotiable document or tangible chattel
paper, such Grantor shall promptly notify the Secured Party in writing and in
reasonable detail of same and, upon the request of the Secured Party,
immediately deliver such instrument, certificated security, negotiable document
or tangible chattel paper to the Secured Party, duly indorsed in a manner
satisfactory to the Secured Party, to be held as Collateral pursuant to this
Agreement.
 
(2)           If any of the Collateral is or shall become electronic chattel
paper, such Grantor shall ensure that (i) a single authoritative copy exists
which is unique, identifiable, and unalterable (except as provided in clauses
(iii), (iv) and (v) of this paragraph), (ii) such authoritative copy identifies
the Secured Party as the assignee and is communicated to and maintained by the
Secured Party or its designee, (iii) copies or revisions that add or change the
assignee of the authoritative copy can only be made with the participation of
the Secured Party, (iv) each copy of the authoritative copy and any copy of a
copy is readily identifiable as a copy and not the authoritative copy and (v)
any revision of the authoritative copy is readily identifiable as an authorized
or unauthorized revision.

 
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(3)           If any of the Collateral consisting of any Equity Interests in a
Subsidiary of the Borrower is or shall become evidenced or represented by an
uncertificated security, such Grantor shall promptly notify the Secured Party in
writing and in reasonable detail of same and, upon the request of the Secured
Party, immediately cause the Issuer thereof either to (i) register the Secured
Party as the registered owner of such uncertificated security, upon original
issue or registration of transfer or (ii) agree in writing with such Grantor and
the Secured Party that such Issuer will comply with instructions with respect to
such uncertificated security originated by the Secured Party without further
consent of such Grantor, such agreement to be in substantially the form of Annex
4 or otherwise satisfactory in form and substance to the Secured Party (each
such agreement being referred to herein as an "Uncertificated Security Control
Agreement").
 
(4)           With respect to any Investment Property of such Grantor consisting
of a securities account (other than the Clearing Accounts) or security
entitlement, such Grantor shall enter into, and shall cause the securities
intermediary maintaining such securities account or security entitlement to
enter into, a control agreement with the Secured Party in substantially the form
of Annex 5 or otherwise satisfactory in form and substance to the Secured Party,
in each case on or prior to the date described in Section 5.01(h), pursuant to
which such securities intermediary shall agree to comply with the entitlement
orders and other instructions originated by the Secured Party without further
consent of such Grantor (each such agreement being referred to herein as a
"Securities Account Control Agreement").
 
(5)           With respect to any Investment Property of such Grantor consisting
of a commodity account (other than the Clearing Accounts) or commodity contract,
such Grantor shall enter into, and shall cause the commodity intermediary
maintaining such commodity account or commodity contract to enter into, a
control agreement with the Secured Party in substantially the form of Annex 6 or
otherwise satisfactory in form and substance to the Secured Party, in each case
on or prior to the date described in Section 5.01(h), pursuant to which such
commodity intermediary shall agree to comply with the Secured Party's
instructions to apply any value distributed on account of any commodity contract
carried in the commodity account or other directions concerning the commodity
account originated by the Secured Party, in each case without further consent by
such Grantor (each such agreement being referred to herein as a "Commodity
Account Control Agreement").
 
(6)           With respect to each deposit account of such Grantor (other than
the Clearing Accounts), such Grantor shall either (i) maintain such account with
the Secured Party, or (ii) enter into, and shall cause the bank maintaining such
deposit account to enter into, a control agreement with the Secured Party in
substantially the form of Annex 7 or otherwise satisfactory in form and
substance to the Secured Party, in each case on or prior to the date described
in Section 5.01(h), pursuant to which such bank shall agree to comply with
instructions originated by the Secured Party directing the disposition of funds
in such deposit account without further consent by such Grantor (each such
agreement being referred to herein as a "Deposit Account Control Agreement").

 
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(7)           With respect to any letter-of-credit rights of such Grantor, such
Grantor shall obtain the consent of the issuer thereof and any nominated Person
thereon to the assignment of the proceeds of the related letter of credit to the
Secured Party in accordance with Section 5.114(c) of the UCC, such consent to be
in substantially the form of Annex 8 or otherwise satisfactory in form and
substance to the Secured Party (each such consent being referred to herein as a
"Consent to Assignment of Letter of Credit Rights").
 
(8)           Such Grantor shall have entered into Control Agreements with
respect to: (i) any securities accounts, security entitlements, commodity
contracts, commodity accounts, and deposit accounts of such Grantor that exist
on the Closing Date (other than the Clearing Accounts[, the Existing Accounts]
and the L/C Collateral Account), as of or prior to the Closing Date (except that
such Grantor is not required to enter into any Control Agreement until the date
which is ten (10) Business Days after the Closing Date), and (ii) any other
securities accounts, security entitlements, commodity contracts, commodity
accounts, and deposit accounts of such Grantor that are created or acquired
after the Closing Date, as of or prior to the date of deposit or transfer of any
such security entitlements, commodity contracts or funds into such securities
accounts, commodity accounts or deposit accounts.
 
(9)           Such Grantor will maintain all transferable records (as such term
is defined in the UETA) so that the Secured Party has control of the
transferable records in the manner specified in Section 16 of the UETA.
 
(10)           Upon the request of the Secured Party, such Grantor will notify
each Issuer of Investment Property that such Investment Property is subject to
the security interest granted hereunder.
 
(11)           In addition to and not in lieu of the foregoing, if any Issuer of
any Investment Property is organized under the law of, or has its chief
executive office in, a jurisdiction outside of the United States, each Grantor
shall take such additional actions, including, without limitation, causing the
issuer to register the pledge on its books and records, as may be necessary or
as may be requested by the Secured Party, under the laws of such jurisdiction to
insure the validity, perfection and priority of the security interest of the
Secured Party.
 
(ii)           Maintenance of Insurance.
 
(1)           Such Grantor will maintain (or cause to be maintained), with
financially sound and reputable companies, insurance policies (i) insuring its
assets and property against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to the Secured Party and (ii)
insuring such Grantor, the Secured Party and the other Secured Parties against
liability for personal injury and property damage relating to any Inventory and
Equipment, such policies to be in such form and amounts and having such coverage
as may be reasonably satisfactory to the Secured Party.  Such Grantor shall, if
so requested by the Secured Party, deliver to the Secured Party original or
duplicate copies of such policies of insurance.

 
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(2)           Each such policy of insurance shall (i) provide that no
cancellation, lapse, expiration, reduction in amount or change in coverage
thereof shall be effective until at least thirty (30) days after receipt by the
Secured Party of written notice thereof, (ii) in the case of liability
insurance, provide for all losses to be paid to such Grantor and the Secured
Party as their interests may appear, (iii) in the case of property insurance,
provide for all losses (except for losses less than $100,000 per occurrence) to
be adjusted with, and paid to, the Secured Party, (iv) contain an agreement by
the insurer that any loss thereunder shall be payable notwithstanding any
action, inaction or breach of representation or warranty by any Grantor, (v) be
reasonably satisfactory in all other respects to the Secured Party, and (vi)
provide that there will be no recourse against the Secured Party or any other
Secured Party for payment of premiums or other amounts in respect thereof.
 
(3)           If an Event of Default shall have occurred and be continuing, the
Secured Party shall have the sole right, in the name of the Grantor or in its
own name, to file claims under any insurance policies, to receive, receipt and
give acquitance for any payments that may be payable thereunder, and to execute
any and all endorsements, receipts, releases, assignments, reassignments or
other documents may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
 
(4)           The Borrower shall deliver to the Secured Party a report
describing such insurance concurrently with each delivery of the Borrower's
audited annual financial statements and such supplemental reports with respect
thereto as the Secured Party may from time to time reasonably request.
 
(iii)          Payment of Obligations.  Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all Taxes imposed upon the Collateral or in respect of income or
profits therefrom, as well as all claims of any kind (including, without
limitation, claims for labor, materials and supplies) against or with respect to
the Collateral, except that no such Tax or claim need be paid if (a) the amount
or validity thereof is currently being contested in good faith by appropriate
proceedings, reserves in conformity with GAAP with respect thereto have been
provided on the books of such Grantor, (b) such contest suspends the enforcement
of any Lien securing such Tax or claim or any other collection of such Tax or
claim, and (c) such proceedings could not reasonably be expected to result in
the sale, forfeiture or loss of any portion of the Collateral or any interest
therein.
 
(iv)          Maintenance of Perfected Security Interest; Limitation on
Dispositions; Further Documentation; Inspection. 
 
(1)           Such Grantor shall, at its sole cost and expense, maintain the
security interest created under this Agreement as a perfected security interest
having at least the priority described in Section 4.02 and shall defend such
security interest against the claims and demands of all Persons whomsoever.
 
(2)           Such Grantor shall not sell, assign, transfer, lease, or otherwise
dispose of, or abandon or permit a lapse of, or grant or permit any Lien on, any
of the Collateral or any interest therein, except in each case as and to the
extent expressly permitted by the Credit Agreement.

 
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(3)           Such Grantor will furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
other assets and property of such Grantor and such other reports in connection
therewith as the Secured Party may request, all in such detail as the Secured
Party may specify.
 
(4)           At any time and from time to time, upon the written request of the
Secured Party, and at the sole cost and expense of such Grantor, such Grantor
will promptly and duly authorize, execute and deliver, and have recorded, all
further instruments and documents and take all further actions as may be
necessary or desirable or that the Secured Party may request for the purpose of
perfecting or protecting the assignments and security interests granted
hereunder and obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted, including, without limitation,
(i) executing and filing any financing or continuation statements under the UCC
(or other similar laws) in effect in any jurisdiction with respect to the
security interests created hereby, (ii) delivering and pledging to the Secured
Party certificates representing the Pledged Equity Interests that constitute
certificated securities, accompanied by undated stock powers executed in blank,
(iii) complying with any Requirement of Law (including the Federal Assignment of
Claims Act) as to any Collateral if such compliance is deemed necessary or
advisable by the Secured Party for the attachment, perfection or priority of, or
the ability of the Secured Party to enforce, the Secured Party's security
interest in such Collateral, (iv) obtaining consents and approvals from any
Governmental Authority or other Person, including without limitation any consent
of any licensor, lessor or other Person obligated on Collateral, and
(v) obtaining waivers from mortgagees, lessors, landlords, warehousemen, and any
Governmental Authority or other Person in form and substance satisfactory to the
Secured Party.
 
(5)           Such Grantor shall permit the Secured Party, or its designee, to
inspect and audit the Collateral at any reasonable time or times, wherever
located.  Such Grantor shall reimburse the Secured Party on demand for all costs
and expenses incurred by the Secured Party in connection with inspections and
audits of Collateral.
 
(6)           Such Grantor shall not take or permit any action that could impair
the Secured Party's rights in the Collateral or the perfection or priority of
the security interests created hereunder.
 
(v)           Changes in Locations; Name; Jurisdiction of Incorporation.  Such
Grantor will not, except upon thirty (30) days' prior written notice to the
Secured Party and (a) taking all action required by the Secured Party to
maintain the validity, perfection and priority of the security interests
provided for herein and (b) if applicable, delivery to the Secured Party of a
written supplement to Schedule 5 showing any additional location at which
Inventory or Equipment shall be kept (which supplement may be attached to
Schedule 5 by the Secured Party):
 
a.           permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5; or

 
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b.           change its name, type of organization, jurisdiction of
organization, organizational identification number, federal taxpayer
identification number, or the location of its chief executive office or sole
place of business from that referred to in Schedule 4.
 
(vi)           Notices.  Such Grantor will advise the Secured Party immediately,
in reasonable detail, of:
 
(1)           any Lien (other than security interests created hereby or Liens
expressly permitted under the Credit Agreement) on any of the Collateral; and
 
(2)           the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereunder.
 
(vii)         Investment Property. 
 
(1)           If such Grantor shall become entitled to receive or shall receive
any stock or other ownership certificate (including, without limitation, any
warrant, option or other right or any certificate representing a dividend or a
distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization)
evidencing any of the Pledged Equity Interests of any Issuer (including, without
limitation, any Subsidiary of such Grantor), whether in addition to, in
substitution of, as a conversion of, or in exchange for, any of the Investment
Property, or otherwise, such Grantor shall notify the Secured Party and shall
accept such certificate as the agent of the Secured Party, hold the same in
trust for the Secured Party and shall, upon the request of the Secured Party,
immediately deliver such certificate forthwith to the Secured Party in the exact
form received, duly indorsed by such Grantor to the Secured Party, if required,
together with an undated stock power (or other instrument of transfer
satisfactory to the Secured Party) covering such certificate duly executed in
blank by such Grantor and with, if the Secured Party so requests, signature
guaranteed, to be held by the Secured Party, subject to the terms hereof, as
additional collateral security for the Obligations.
 
(2)           Any sums of money or property paid upon or in respect of
Investment Property upon the liquidation, dissolution or other winding-up of any
Issuer (except for sums paid upon or in respect of any liquidation, dissolution
or winding up of the Issuer of any Investment Property is permitted under
Section 6.04 or Section 6.05 of the Credit Agreement) shall be paid over to the
Secured Party to be held by it hereunder as additional collateral security for
the Obligations, and in case any distribution of capital shall be made on or in
respect of the Investment Property or any property shall be distributed upon or
with respect to the Investment Property pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, the property so distributed shall, unless otherwise subject to a
perfected security interest in favor of the Secured Party, be delivered to the
Secured Party to be held by it hereunder as additional collateral security for
the Obligations.  If any sums of money or property so paid or distributed in
respect of the Investment Property shall be received by such Grantor, such
Grantor shall, until such money or property is paid or delivered to the Secured
Party, hold such money or property in trust for the Secured Party, segregated
from other funds of such Grantor, as additional collateral security for the
Obligations.

 
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(3)           Without the prior written consent of the Secured Party, such
Grantor will not (except, in each case, pursuant to a transaction that is
expressly permitted under the Credit Agreement) (i) vote to enable, consent to
or take any other action to permit, any Issuer which is a Loan Party to issue
any Equity Interests of any nature or to issue any securities, obligations,
rights, or other interests convertible into or granting the right to purchase or
exchange for any Equity Interests of any nature of any Issuer, (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, any of the Investment Property owned by such Grantor or any Proceeds
thereof, or any interest therein, (iii) create, incur or permit to exist any
Lien or option in favor of, or any claim of any Person with respect to, any of
the Investment Property owned by such Grantor or any Proceeds thereof, or any
interest therein, except for the security interests created by this Agreement or
any other Lien which is expressly permitted by the Credit Agreement or (iv) vote
to enable, enter into or consent to any agreement or undertaking (including any
Investment Agreement or any Investment Financing Document) restricting the right
or ability of such Grantor or the Secured Party to sell, assign or transfer any
right, title or interest in and to any Investment Property, any Investment
Agreement or any Proceeds thereof, except in each case to the extent expressly
permitted under Section 5.13.
 
(4)           In the case of each Grantor which is an Issuer, such Grantor
agrees that (i) it will be bound by the terms of this Agreement relating to all
Investment Property issued by it and will comply with such terms insofar as such
terms are applicable to it, (ii) it will notify the Secured Party promptly in
writing of the occurrence of any of the events described in Section 5.07(a) with
respect to the Investment Property issued by it and (iii) the terms of Sections
6.03(c) and 6.06 shall apply to it, mutatis mutandis, with respect to all
actions that may be required of it pursuant to Section 6.03(c) or 6.06 with
respect to the Investment Property issued by it.  In addition, each Grantor
which is either an Issuer or an owner of any Investment Property hereby consents
to the grant by each other Grantor of the security interest hereunder in favor
of the Secured Party and to the transfer of any Investment Property to the
Secured Party or its nominee upon the occurrence or during the continuation of
an Event of Default and to the substitution of the Secured Party or its nominee
as a partner, member or shareholder of the Issuer of the related Investment
Property.
 
(5)           Such Grantor shall comply with all of its obligations under each
Investment Agreement relating to any Investment Property of such Grantor and
shall enforce all of its material rights and remedies with respect to all such
Investment Property.
 
(6)           Except as and to the extent expressly permitted under the Credit
Agreement, without the prior written consent of the Secured Party, such Grantor
shall not vote to enable, consent to or take any other action to:  (i) amend or
terminate any Investment Agreement or any Investment Financing Document in any
way that adversely affects the rights or interests of such Grantor with respect
to or in and to any Investment Property or the value of such Investment Property
to such Grantor or adversely affects the validity, enforceability, perfection or
priority of the Secured Party's security interest hereunder in and to such
Investment Property or the ability of the Secured Party to exercise its rights
and remedies with respect to such Investment Property, (ii) waive any default
under or breach of any terms of any Investment Agreement of any Issuer of any
Investment Property of such Grantor, or (iii) cause any Issuer of any Pledged
Partnership Interests or Pledged LLC Interests that are securities (for purposes
of Article 8 of the UCC) on the date hereof to elect or otherwise take any
action that would cause any of such Pledged Partnership Interests or Pledged LLC
Interests to not be treated as securities for purposes of the UCC.

 
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(viii)        Inventory and Equipment.
 
(1)           Such Grantor shall maintain all of its Inventory in good saleable
and usable condition.
 
(2)           Such Grantor will cause all of its Equipment to be maintained and
preserved in the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's manual
relating thereto, and will forthwith, or in the case of any material loss or
material damage to any of such Equipment as soon as practicable after the
occurrence thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith that are necessary or desirable to such
end.
 
(3)           Such Grantor shall not deliver any document evidencing any
Equipment or Inventory to any Person other than the issuer of such document to
claim the goods evidenced thereby or the Secured Party.
 
(4)           With respect to any item of Equipment that is covered by a
certificate of title or ownership under a statute of any jurisdiction under the
law of which indication of a security interest on such certificate is required
as a condition of perfection thereof, such Grantor shall promptly (i) provide to
the Secured Party information with respect to any such Equipment having a value
in excess of $50,000 individually or $100,000 in the aggregate, (ii) execute and
file with the registrar of motor vehicles or other appropriate authority in such
jurisdiction an application or other document requesting the notation or other
indication of the security interest created hereunder on each such certificate
of title, and (iii) deliver to the Secured Party copies of all such applications
or other documents so filed and copies of all such certificates of title issued
indicating the security interests created hereunder in the items of Equipment
covered thereby.
 
(ix)           Receivables. 
 
(1)           Other than in the ordinary course of business consistent with its
past practice, such Grantor will not (i) grant any extension of the time of
payment of any material Receivable, (ii) adjust, compromise or settle any
material Receivable for less than the full amount thereof, (iii) release, wholly
or partially, any Person liable for the payment of any material Receivable, (iv)
allow any credit or discount whatsoever on any material Receivable or (v) amend,
supplement or modify any material Receivable in any manner that would adversely
affect the value thereof; provided, however, that no Grantor shall take any
action specified in clauses (i) through (v) above if any Default or Event of
Default shall have occurred and be continuing.
 
(2)           Such Grantor shall keep and maintain at its own cost and expense
satisfactory and complete records of its Receivables, including, but not limited
to, the originals of all documentation with respect to all Receivables and
records of all payments received and all credits granted on the Receivables, all
merchandise returned and all other dealings therewith.

 
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(3)           Such Grantor shall perform in all material respects all of its
obligations with respect to its Receivables.
 
(4)           Such Grantor shall use its best efforts to keep in full force and
effect any supporting obligation relating to any of its Receivable.
 
(x)           Intellectual Property.
 
(1)           With respect to each item of such Grantor's material Intellectual
Property, such Grantor shall take, at its sole cost and expense, all necessary
steps, including, without limitation, in the United States Patent and Trademark
Office, the United States Copyright Office and any other Governmental Authority,
to (i) maintain the validity and enforceability of such Intellectual Property
and maintain such material Intellectual Property in full force and effect, and
(ii) pursue the registration and maintenance of each material Patent, Trademark,
or Copyright registration or application, now or hereafter included in such
Intellectual Property of such Grantor.  No Grantor shall, without the written
consent of the Secured Party, discontinue use of or otherwise abandon any of its
material Intellectual Property, or abandon any right to file an application for
patent, trademark, or copyright, unless such Grantor shall have reasonably
determined that such use or the pursuit or maintenance of such Intellectual
Property is no longer desirable in the conduct of such Grantor's business and
that the loss thereof would not be reasonably likely to have a Material Adverse
Effect, in which case, such Grantor will give prompt notice of any such
abandonment to the Secured Party.
 
(2)           Such Grantor agrees to promptly notify the Secured Party if such
Grantor becomes aware (i) that any of its material Intellectual Property may
have become abandoned, placed in the public domain, invalid or unenforceable, or
of any adverse determination or development regarding such Grantor's ownership
of any such Intellectual Property or its right to register the same or to keep
and maintain and enforce any of the same, or (ii) of any adverse determination
or the institution of any litigation or other proceeding regarding any item of
such Intellectual Property.
 
(3)           In the event that such Grantor becomes aware that any item of its
material Intellectual Property is being infringed or misappropriated by a third
party, such Grantor shall promptly notify the Secured Party and shall take such
actions, at its sole cost and expense, as such Grantor or the Secured Party
deems reasonable and appropriate under the circumstances to protect or enforce
such Intellectual Property, including, without limitation, suing for
infringement or misappropriation and for an injunction against such infringement
or misappropriation.
 
(4)           Grantor shall not permit any act or knowingly omit to do any act
whereby any such Intellectual Property may lapse or become invalid or
unenforceable or placed in the public domain.
 
(5)           Such Grantor shall take all steps which it or the Secured Party
deems reasonable and appropriate under the circumstances to preserve and protect
each item of its Intellectual Property.

 
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(6)           With respect to its material Intellectual Property, such Grantor
agrees upon the request of the Secured Party to promptly execute and deliver to
the Secured Party an agreement, in substantially the form set forth in Annex 2
hereto or otherwise in form and substance satisfactory to the Secured Party
(each, an "Intellectual Property Security Agreement"), for recording the
security interest granted hereunder to the Secured Party in such Intellectual
Property with the United States Patent and Trademark Office, the United States
Copyright Office and any other domestic or foreign Governmental Authorities
requested by the Secured Party to perfect the security interest hereunder in
such Intellectual Property.
 
(7)           Such Grantor agrees that should it obtain an ownership interest in
any of its material Intellectual Property that is not on the date hereof listed
on Schedule 6 ("After-Acquired Intellectual Property") (i) the provisions of
this Agreement shall automatically apply thereto, and (ii) any such
After-Acquired Intellectual Property and, in the case of Trademarks, the
goodwill symbolized thereby, shall automatically become part of the Collateral
subject to the terms and conditions of this Agreement with respect
thereto.  Within five (5) days after the end of each Fiscal Quarter of the
Borrower, each Grantor shall give written notice to the Secured Party
identifying the After-Acquired Intellectual Property acquired during such Fiscal
Quarter, and such Grantor shall upon the request of the Secured Party to
promptly execute and deliver to the Secured Party with such written notice, an
agreement substantially in the form of Annex 3 hereto or otherwise in form and
substance satisfactory to the Secured Party (each, an "IP Security Agreement
Supplement") covering such After-Acquired Intellectual Property which IP
Security Agreement Supplement shall be recorded with the United States Patent
and Trademark Office, the United States Copyright Office and any other
Governmental Authorities as may be requested by the Secured Party to evidence
and  perfect the security interest hereunder in such After-Acquired Intellectual
Property.  Upon the execution and delivery to the Secured Party of an IP
Security Agreement Supplement in accordance with this Section, Schedule 6 shall
automatically be deemed amended to include the After-Acquired Intellectual
Property covered by such IP Security Agreement Supplement.
 
(8)           Such Grantor shall take all steps reasonably necessary to protect
the secrecy of all of its material Trade Secrets, including, without limitation,
entering into confidentiality agreements with employees and labeling and
restricting access to secret information and documents.
 
(xi)           Commercial Tort Claims.  If such Grantor shall at any time hold
or acquire an interest in any commercial tort claim, then such Grantor shall
within fifteen (15) days of obtaining such interest sign and deliver
documentation acceptable to the Secured Party granting a security interest to
the Secured Party in and to such commercial tort claim under the terms and
provisions of this Agreement.
 
(xii)          Covenants in Credit Agreement.  In the case of each Guarantor,
such Guarantor shall take, or shall refrain from taking, as the case may be,
each action that is necessary to be taken or not taken, as the case may be, so
that no Default or Event of Default is caused by the failure to take such action
or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.
 
(xiii)         Specified Agreements.

 
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(1)           Such Grantor shall at its sole cost and expense:
 
a.           perform and observe all the terms and provisions of the Specified
Agreements to which such Grantor is a party to be performed or observed by it,
maintain such Specified Agreements in full force and effect, enforce such
Specified Agreements in accordance with their respective terms, and take all
such action to such end as may be from time to time reasonably requested by the
Secured Party;
 
b.           furnish to the Secured Party promptly (and in any event within two
(2) Business Days) following receipt thereof, copies of (A) each Material
Investment Agreement entered into by such Grantor from time to time and (B) all
amendments, restatements, supplements or modifications to, all waivers, consents
and approvals provided by such Grantor under or pursuant to, and all material
notices, requests and other documents received by such Grantor under or pursuant
to, any Assigned Agreement to which such Grantor is a party or any Material
Investment Agreement to which such Grantor is a party; and
 
c.           (A) promptly furnish to the Secured Party such other information
and reports regarding any such Specified Agreements and the other Collateral of
such Grantor as the Secured Party may reasonably request from time to time and
(B) upon request of the Secured Party from time to time, make to each other
party to any such Specified Agreement such demands and requests for information
and reports or for action as such Grantor or the Secured Party is entitled to
make thereunder or under any Consent and Agreement or any Investment Consent and
Agreement (as applicable).
 
(2)           Such Grantor shall not, except in each case as and to the extent
otherwise expressly permitted under the Credit Agreement:
 
a.           cancel or terminate any Specified Agreement to which it is a party
or consent to or accept any cancellation or termination thereof;
 
b.           amend, restate, supplement or otherwise modify any Specified
Agreement or give any consent, waiver or approval thereunder, except (x) to the
extent expressly permitted under any Consent and Agreement or in any Investment
Consent and Agreement or (y) if not so expressly permitted, only if such
amendment, restatement, supplement, modification, consent, waiver or approval
(A) will not violate any other term or provision of this Agreement, any other
Loan Document, any Consent and Agreement or any Investment Consent and Agreement
or (B) could not reasonably be expected to have an adverse effect on (1) such
Grantor's rights, titles or interests in, to or under such Specified Agreement
or any of the other Collateral created thereunder or evidenced thereby, (2) the
amount or value of any of the Collateral created thereunder or evidenced
thereby, (3) the validity, enforceability, perfection or priority of the Secured
Party's Liens in and to any of such Grantor's rights, titles and interests in
and to any such Specified Agreement or any such Collateral or (4) any of the
Secured Party's rights or remedies under this Agreement, any other Loan
Document, any Consent and Agreement, any Investment Consent and Agreement, or
any applicable law with respect to any of the foregoing (any of the rights,
interests and other items described in any of clauses (1) - (4) above,
inclusive, being referred to herein as a "Specified Right");

 
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c.           waive any default, event of default, termination event, violation
or breach under any such Specified Agreement, except (x) to the extent expressly
permitted under any Consent and Agreement or any Investment Consent and
Agreement or (y) if not so expressly permitted, only if such waiver (A) will not
violate any other term or provision of this Agreement, any other Loan Document,
any Consent and Agreement or any Investment Consent and Agreement or (B) could
not reasonably be expected to have an adverse effect on any Specified Rights;
 
d.           consent to or permit or accept any prepayment by such Grantor of
amounts to become due under or in connection with any such Specified Agreement
or waive or reduce (or consent to any reduction of or permit to be reduced) the
amount of any payment made (or to be made) to such Grantor under or in
connection with any such Specified Agreement, except in each case as expressly
provided therein; or
 
e.           fail to comply with any obligation under or take (or fail to take)
any other action under or in connection with any such Specified Agreement that
could reasonably be expected to materially impair any Specified Rights.
 
(3)           Such Grantor shall, promptly upon the request of the Secured Party
with respect to any Material Investment Agreement, enter into (and cause each
other Investment Party thereto requested by the Secured Party to enter into)
with the Secured Party, an Investment Consent and Agreement with respect to such
Material Investment Agreement, substantially in the form of Annex 10 hereto or
otherwise in form satisfactory to the Secured Party.
 
(4)           Such Grantor shall, promptly upon entering into any Investment
Agreement, deliver a supplement to Schedule 11 hereto reflecting such new
Investment Agreement.
 
(5)           Such Grantor shall use its best efforts acting in good faith to
cause each new Investment Agreement to permit (i) the granting by such Grantor
of Liens to the Secured Party in and to all of such Grantor's rights, titles and
interests in and to such new Investment Agreement and the Investment Property
and other rights and interests created, governed or evidenced thereunder, or
(ii) the exercise by the Secured Party of its rights and remedies under this
Agreement and applicable law on or with respect to any such Liens with respect
to such Investment Agreement, Investment Property and other rights and
interests, all in consultation with and in form and substance satisfactory to
the Secured Party.
 
(6)           If such Grantor becomes aware of any breach, violation, default or
event of default (or similar event or circumstance) by any Person under any
Assigned Agreement to which such Grantor is a party or any Material Investment
Agreement to which such Grantor is a party or any claim or dispute between such
Grantor and any other Person under, with respect to or in connection with any
such Assigned Agreement or any such Material Investment Agreement (any of the
foregoing, a "Specified Matter") which in each or any such case could reasonably
be expected to adversely affect any Specified Rights, then in each case such
Grantor shall promptly notify the Secured Party of such Specified Matter and
shall follow all [reasonable] instructions of the Secured Party with respect to
such Specified Matter and any Specified Rights relating to or affected by such
Specified Matter (as applicable).

 
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(f)
 
REMEDIAL PROVISIONS
 
(i)            Certain Matters Relating to Receivables.
 
(1)           Except as otherwise provided in this Section 6.01(a), each Grantor
shall collect, at its sole cost and expense, all amounts due or to become due to
such Grantor under such Grantor's Receivables.  In connection with such
collections, each Grantor may take (and, at the Secured Party's direction, shall
take) such action as such Grantor or the Secured Party may deem necessary or
advisable to enforce collection of the Receivables; provided, however, that the
Secured Party shall have the right at any time, upon the occurrence and during
the continuance of any Event of Default, (i) to notify, or require such Grantor
to notify, the account debtors or counterparties under any Receivables of the
Secured Party's security interest in such Receivables and (ii) to direct, or
cause such Grantor to direct, such account debtors or counterparties to make
payment of all amounts due or to become due to such Grantor under any of the
Receivables directly to the Secured Party, for deposit in a Collateral
Account.  If an Event of Default shall have occurred and be continuing, all
amounts and Proceeds (including instruments) received by any Grantor in respect
of the Receivables shall be received in trust for the benefit of the Secured
Party hereunder, shall be segregated from other funds of such Grantor and shall
be forthwith (and, in any event, within one (1) Business Day) paid over to the
Secured Party in the same form as so received (with any necessary endorsement)
and deposited in a Collateral Account and, at the discretion of the Secured
Party, be held as additional collateral security for the Obligations or applied
in payment of the Obligations as provided in Section 6.05(b).
 
(2)           No Grantor will permit or consent to the subordination of its
right to payment under any of the Receivables to any other indebtedness,
liabilities or obligations of the obligor thereunder.
 
(3)           At the Secured Party's request, each Grantor shall deliver to the
Secured Party all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to the Receivables.
 
(ii)           Communications with Obligors; Grantors Remain Liable.
 
(1)           The Secured Party in its own name or in the name of others may at
any time and from time to time communicate with obligors under the Receivables
to verify with them to the Secured Party's satisfaction the existence, amount
and terms of any Receivables.
 
(2)           Each Grantor shall remain liable under each of the Receivables and
the Assigned Agreements to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise thereto.  The Secured Party shall
have no obligation or liability under any Receivable (or any agreement giving
rise thereto) or Assigned Agreement by reason of or arising out of this
Agreement or the receipt by the Secured Party of any payment relating thereto,
nor shall the Secured Party be obligated in any manner to perform any of the
obligations of any Grantor under or pursuant to any Receivable (or any agreement
giving rise thereto) or Assigned Agreement, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.

 
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(iii)          Investment Property. 
 
(1)           Unless an Event of Default shall have occurred and be continuing
and the Secured Party shall have given notice to the relevant Grantor of the
Secured Party's intent to exercise its corresponding rights pursuant to
Section 6.03(b), each Grantor shall be permitted to receive all cash dividends
and distributions paid in respect of the Pledged Equity Interests and all
payments made in respect of the Pledged Notes and the Pledged Debt Securities,
in each case paid in the normal course of business of the relevant Issuer and
consistent with past practice, as and to the extent permitted by the Credit
Agreement, and to exercise all voting, corporate, partnership, limited liability
company, and other rights with respect to such Grantor's Investment Property;
provided, however, that no vote shall be cast or corporate, partnership, limited
liability company, or other right exercised or other action taken which, in the
Secured Party's reasonable judgment, would impair the value of such Collateral
or the Secured Party's rights or interests in and to such Collateral which would
violate any provision of the Credit Agreement, this Agreement or any other Loan
Document.
 
(2)           If an Event of Default shall occur and be continuing and the
Secured Party shall give notice of its intent to invoke the provisions of this
Section 6.03(b) to the relevant Grantor(s): (i) all rights of each Grantor to
exercise or refrain from exercising the voting and other consensual rights that
it would otherwise be entitled to exercise pursuant hereto with respect to such
Grantor's Investment Property shall cease and all such rights shall thereupon
become vested in the Secured Party who shall have the sole right, but shall be
under no obligation, to exercise or refrain from exercising such voting and
other consensual rights and (ii) the Secured Party shall have the right to
transfer all or any portion of any such Investment Property to its name or the
name of its nominee or agent, and the Secured Party shall have the right at any
time to exchange any certificates or instruments representing any such
Investment Property for certificates or instruments of smaller or larger
denominations.  In order to permit the Secured Party to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant hereto and
to receive all dividends and other distributions which it may be entitled to
receive hereunder, each Grantor shall promptly execute and deliver (or cause to
be executed and delivered) to the Secured Party all proxies, dividend payment
orders and other instruments as the Secured Party may from time to time
reasonably request and each Grantor acknowledges that the Secured Party may
utilize the power of attorney set forth herein.
 
(3)           Each Grantor hereby authorizes and instructs each Issuer of any
Investment Property pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Secured Party in writing that (x) states
that an Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Grantor, and each Grantor agrees that each Issuer shall
be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends, distributions or other payments with
respect to the Investment Property directly to the Secured Party.

 
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(4)           If an Event of Default shall have occurred and be continuing, the
Secured Party shall be authorized to send to each securities intermediary,
commodity intermediary or bank that is party to a Control Agreement, a Notice of
Exclusive Control as defined in and under such Control Agreement (or any
comparable notice permitted under such Control Agreement).
 
(iv)          Proceeds to be Turned Over to Secured Party.  In addition to the
rights of the Secured Party specified in Section 6.01, if an Event of Default
shall occur and be continuing, all Proceeds received by any Grantor consisting
of cash, checks and other near-cash items shall be held by such Grantor in trust
for the Secured Party, segregated from other funds of such Grantor, and shall,
immediately upon receipt by such Grantor, be turned over to the Secured Party in
the exact form received by such Grantor (duly indorsed by such Grantor to the
Secured Party, if required).  All Proceeds received by the Secured Party
hereunder shall be held by the Secured Party in a Collateral Account and shall
not constitute payment thereof until applied as provided in Section 6.05(b).
 
(v)           Remedies.  If any Event of Default shall have occurred and be
continuing:
 
(1)           The Secured Party, may exercise, in addition to all other rights
and remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the UCC (whether or not the UCC applies to the
affected Collateral) or any other applicable law or in equity.  Without limiting
the generality of the foregoing, the Secured Party, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, license, assign, give an option
or options to purchase, or otherwise dispose of and deliver the Collateral or
any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, at any exchange, broker's board or
office of the Secured Party or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk.  The Secured Party
shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
any Grantor, which right or equity is hereby waived and released.  Each Grantor
further agrees, at the Secured Party's request, to assemble the Collateral and
make it available to the Secured Party at places which the Secured Party shall
reasonably select, whether at such Grantor's premises or elsewhere.  The Secured
Party shall have no obligation to clean-up or otherwise prepare the Collateral
for sale.  If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least ten (10) days before any public sale of Collateral or of the time
after which any private sale or other disposition of Collateral is intended to
be made.  The Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given.  The Secured Party
may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefore, and any such sale may, without further notice,
be made at the time and place to which it was adjourned.  Each Grantor agrees
that it would not be commercially unreasonable for the Secured Party to dispose
of the Collateral or any portion thereof by using Internet sites that provide
for the auction of assets of the types included in the Collateral or that have
the reasonable capability of doing so, or that match buyers and sellers of
assets.  Each Grantor hereby waives any claims against the Secured Party arising
by reason of the fact that the price at which any Collateral may have been sold
at a private sale was less than the price which might have been obtained at a
public sale, even if the Secured Party accepts the first offer received and does
not offer such Collateral to more than one offeree.  To the extent permitted by
applicable law, each Grantor waives all claims, damages and demands it may
acquire against the Secured Party arising out of the exercise by them of any
rights or remedies hereunder.
 
 
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(2)           Any cash held by or on behalf of the Secured Party and all cash
proceeds received by or on behalf of the Secured Party in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Secured Party, be held by the Secured Party in a
Collateral Account as collateral for, and/or then or at any time or from time to
time thereafter applied (after payment or deduction of any amounts payable to
the Secured Party pursuant to Section 8.05 of the Credit Agreement) in whole or
in part by the Secured Party against, all or any part of the Obligations, in
such order and manner as the Secured Party may elect.  Any surplus of such cash
or cash proceeds held by or on the behalf of the Secured Party and remaining
after payment in full of all the Obligations shall be paid over to the
applicable Grantor or to whomsoever may be lawfully entitled to receive such
surplus.
 
(3)           The Secured Party may sell the Collateral without giving any
warranties as to the Collateral.  The Secured Party may disclaim or modify any
warranties of title or the like.  This procedure will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.
 
(4)           The Secured Party and its agents may enter upon and occupy any
real property owned or leased by any Grantor in order to exercise any of the
Secured Party's rights and remedies under this Agreement, without any obligation
to such Grantor in respect of such entry or occupation.
 
(5)           For the purpose of enabling the Secured Party to exercise its
rights and remedies hereunder, each Grantor hereby grants to the Secured Party
an irrevocable, non-exclusive worldwide license (exercisable without payment of
royalty or other compensation to such Grantor) to use, operate under, assign,
license or sublicense any of the Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer programs used for the compilation
or printout thereof.
 
(6)           The Secured Party may comply with any applicable Requirement of
Law in connection with a disposition of the Collateral or any part thereof and
such compliance will not be considered adversely to affect any sale of the
Collateral or any part thereof.

 
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(7)           In the event of any sale or other disposition of any of the
Intellectual Property of any Grantor, the goodwill symbolized by any Trademarks
subject to such sale or other disposition shall be included therein, and such
Grantor shall supply to the Secured Party or its designee such Grantor's
know-how and expertise, and documents and things relating to any Intellectual
Property subject to such sale or other disposition, and such Grantor's customer
lists and other records and documents relating to such Intellectual Property and
to the manufacture, distribution, advertising and sale of products and services
of such Grantor.
 
(8)           The Secured Party may apply the balance from any deposit account
or instruct the bank at which any deposit account is maintained to pay the
balance of any deposit account to or for the benefit of the Secured Party.
 
(9)           The Secured Party shall have no duty to marshal any of the
Collateral.
 
(vi)          Registration Rights. 
 
(1)           If the Secured Party shall determine to exercise its right to sell
any or all of the Pledged Equity Interests or Pledged Debt Securities pursuant
to Section 6.05, and if in the opinion of the Secured Party it is necessary or
advisable to have the Pledged Equity Interests or Pledged Debt Securities, or
that portion thereof to be sold, registered under the provisions of the
Securities Act, the relevant Grantor will cause the Issuer thereof to (i)
execute and deliver, and cause the directors and officers (or equivalent
managers) of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of the Secured Party, necessary or advisable to register the Pledged
Equity Interests or Pledged Debt Securities, or that portion thereof to be sold,
under the provisions of the Securities Act, (ii) use its best efforts to cause
the registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Equity Interests or Pledged Debt Securities, or that portion thereof
to be sold, and (iii) make all amendments thereto and/or to the related
prospectus which, in the opinion of the Secured Party, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto.  Each Grantor agrees to cause such Issuer to comply with the provisions
of the securities or "Blue Sky" laws of any and all jurisdictions which the
Secured Party shall designate and to make available to its security holders, as
soon as practicable, an earnings statement (which need not be audited) which
will satisfy the provisions of Section 11(a) of the Securities Act.
 
(2)           Each Grantor recognizes that the Secured Party may be unable to
effect a public sale of any or all the Pledged Equity Interests or Pledged Debt
Securities, by reason of certain prohibitions contained in the Securities Act
and applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the distribution or
resale thereof.  Each Grantor acknowledges and agrees that any such private sale
may result in prices and other terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner.  The Secured Party shall be under no obligation to delay a sale of any
of the Pledged Equity Interests or Pledged Debt Securities for the period of
time necessary to permit the Issuer thereof to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if such Issuer would agree to do so.

 
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(3)           Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Equity Interests or Pledged Debt Securities
pursuant to this Section valid and binding and in compliance with any and all
other applicable Requirements of Law.  Each Grantor further agrees that a breach
of any of the covenants contained in this Section will cause irreparable injury
to the Secured Party, that the Secured Party has no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section shall be specifically enforceable against such
Grantor, and such Grantor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Credit Agreement.
 
(vii)         Deficiency.  Each Grantor shall remain fully and unconditionally
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay in full its Obligations and the fees and
disbursements of any attorneys employed by the Secured Party to collect such
deficiency.
 
(viii)        Sales on Credit.  If the Secured Party sells any of the Collateral
on credit, the applicable Grantor will be credited only with cash payments
actually made by the purchaser and received by the Secured Party and applied to
the indebtedness of the purchaser.  In the event the purchaser fails to pay for
the Collateral, the Secured Party may resell the Collateral and the applicable
Grantor shall be credited with the proceeds of the sale.
 
(g)
 
THE SECURED PARTY
 
(i)            Secured Party's Appointment as Attorney-in-Fact; Etc. 
 
(1)           Each Grantor hereby irrevocably constitutes and appoints the
Secured Party and any officer or agent thereof, with full power of substitution,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of such Grantor and in the name of such Grantor
or in its own name, for the purpose of carrying out the terms of this Agreement,
to take any and all appropriate action and to execute any and all documents and
instruments which the Secured Party may deem necessary or desirable to
accomplish the purposes of this Agreement, and, without limiting the generality
of the foregoing, each Grantor hereby gives the Secured Party the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any or all of the following:
 

 
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a.           in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes, acceptances or
other instruments or chattel paper for the payment of moneys due under any
Receivable or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Secured Party for the purpose of collecting any and all such
moneys due under any Receivable or with respect to any other Collateral whenever
payable;
 
b.           in the case of any Intellectual Property, prepare, sign, deliver,
and file for recordation in any Intellectual Property registry any and all
agreements, instruments, documents and papers as the Secured Party may request
to evidence and perfect the Secured Party's security interest in such
Intellectual Property and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby;
 
c.           pay or discharge taxes and Liens levied or placed on or threatened
against the Collateral, effect any repairs or obtain any insurance called for by
the terms of this Agreement and pay all or any part of the premiums therefore
and the costs thereof;
 
d.           execute, in connection with any sale provided for in Article VI,
any endorsements, assignments or other instruments of conveyance or transfer
with respect to the Collateral; and
 
e.           (A) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Secured Party or as the Secured Party shall direct; (B) ask or
demand for, collect, recover and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in respect of
or arising out of any Collateral; (C) commence and prosecute any suits, actions
or proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof and to enforce any other right in
respect of any Collateral; (D) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (E) settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith, give
such discharges or releases as the Secured Party may deem appropriate; (F)
assign any Intellectual Property (along with the goodwill of the business to
which any such Intellectual Property pertains), throughout the world for such
term or terms, on such conditions, and in such manner, as the Secured Party
shall in its sole discretion determine; (G) exercise any and all rights, powers,
privileges and remedies of such Grantor under or with respect to the Collateral
(including all rights of performance, termination, and enforcement); (H)
operate, maintain, and repair the Collateral; (I) receive, open and dispose of
any and all mail addressed to any Grantor and notify postal authorities to
change the address for delivery thereof to such address as the Secured Party may
designate; and (J) generally, sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though the Secured Party were the absolute owner thereof for all purposes,
and do, at the Secured Party's option and such Grantor's expense, at any time,
or from time to time, all acts and things which the Secured Party deems
necessary to protect, preserve or realize upon the Collateral and the Secured
Party's security interests therein and to effect the intent of this Agreement,
all as fully and effectively as such Grantor might do.
 
Anything in this Section 7.01(a) to the contrary notwithstanding, the Secured
Party agrees that it will not exercise any rights under the power of attorney
provided for in this Section 7.01(a) unless an Event of Default shall have
occurred and be continuing.

 
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(2)           If any Grantor fails to perform or comply with any of its
agreements contained herein or in any other Loan Document, the Secured Party
may, but without any obligation so to do, perform or comply, or otherwise cause
performance or compliance, with such agreement.
 
(3)           The fees, costs and expenses of the Secured Party incurred in
connection with actions undertaken as provided in this Section 7.01, together
with interest thereon at a rate per annum equal to the Default Rate under the
Credit Agreement (which rate shall not exceed the maximum non-usurious rate
permitted by applicable law), from the date of payment by the Secured Party to
the date reimbursed by the relevant Grantor, shall be payable on demand by such
Grantor to the Secured Party.
 
(4)           Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof.  All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
 
(ii)           Duty of Secured Party.  The Secured Party's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under the UCC or otherwise, shall be to deal with such
Collateral in a manner substantially similar to that which the Secured Party
deals with similar property for its own account.  Neither the Secured Party nor
any of its officers, directors, partners, employees, agents, advisors,
attorneys, attorneys-in-fact or affiliates shall be liable for failure to
demand, collect or realize upon any of the Collateral or for any delay in doing
so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Grantor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof.  The
powers conferred on the Secured Party pursuant to this Agreement are solely to
protect the Secured Party's interests in the Collateral and shall not impose any
duty upon the Secured Party to exercise any such powers.  The Secured Party
shall be accountable only for amounts that it actually receives as a result of
the exercise of such powers, and neither the Secured Party nor any of its
officers, directors, employees, agents, advisors, attorneys, attorneys-in-fact
or affiliates shall be responsible to any Grantor for any act or failure to act
hereunder, except for its or their own gross negligence or willful misconduct.
 
(iii)           Financing Statements.  Each Grantor hereby authorizes the
Secured Party to file or record financing or continuation statements, and
assignments and amendments thereto, and other filing or recording documents or
instruments with respect to the Collateral without the signature of such Grantor
in such form and in such offices as the Secured Party determines appropriate to
perfect or maintain the perfection of the security interests of the Secured
Party under this Agreement.  Each Grantor agrees that such financing statements
may describe the collateral in the same manner as described in the Security
Documents or as "all assets" or "all personal property" of such Grantor, whether
now owned or hereafter existing or acquired by such Grantor, or contain such
other description as the Secured Party, in its sole judgment, determines is
necessary or advisable.  Each Grantor hereby ratifies each such financing
statement and any and all other financing statements filed prior to the date
hereof by the Secured Party.  A photographic or other reproduction of this
Agreement shall be sufficient as a financing statement or other filing or
recording document or instrument for filing or recording in any jurisdiction.
 

 
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(h)
 
MISCELLANEOUS
 
(i)            Amendments in Writing.  None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 8.01 of the Credit Agreement.
 
(ii)           Notices.  All notices, requests and demands and other
communications to or upon the Secured Party or any Grantor hereunder shall be
effected in the manner provided for in Section 8.02 of the Credit Agreement;
provided that any such notice, request, demand or other communication to or upon
any Grantor shall be addressed to such Guarantor at its notice address set forth
on Schedule 1.
 
(iii)           Security Interest Absolute.  All rights of the Secured Party
hereunder, each grant of a security interest in the Collateral and all
obligations of each Grantor hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, any
Grantor in respect of the Obligations or this Agreement.
 
(iv)           Survival of Agreement.  All covenants, agreements,
representations and warranties made by any Grantor and in the certificates or
other instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the Secured Party and
shall survive the execution and delivery of the Loan Documents and the making of
any Credit Extensions, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Secured Party may have had
notice or knowledge of any Default or Event of Default or incorrect
representation or warranty at any time under the Credit Agreement, and shall
continue in full force and effect as long as the principal of or any accrued
interest on the Loan or any fee or any other amount payable under any Loan
Document is outstanding and unpaid.

 
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(v)           No Waiver by Course of Conduct; Cumulative Remedies.  The Secured
Party shall not by any act (except by a written instrument pursuant to Section
8.01), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event of
Default.  No failure to exercise, nor any delay in exercising, on the part of
the Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof.  No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.  A waiver by the Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Secured Party would otherwise have on any future
occasion.  The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
 
(vi)           EXPENSES AND INDEMNIFICATION.
 
(1)           EACH GRANTOR SHALL UPON DEMAND PAY TO THE SECURED PARTY THE AMOUNT
OF ANY AND ALL COSTS AND EXPENSES, INCLUDING THE REASONABLE FEES AND EXPENSES OF
COUNSEL AND OF ANY EXPERTS, ADVISORS, AND AGENTS, THAT THE SECURED PARTY MAY
INCUR IN CONNECTION WITH (I) THE ADMINISTRATION OF THIS AGREEMENT, (II) THE
CUSTODY, INSPECTION, AUDITING, PRESERVATION, USE OR OPERATION OF, OR THE SALE
OF, COLLECTION FROM, OR OTHER REALIZATION UPON, ANY OF THE COLLATERAL, (III) THE
EXERCISE OR ENFORCEMENT OF ANY OF THE RIGHTS OR REMEDIES OF THE SECURED PARTY
HEREUNDER OR (IV) THE FAILURE BY ANY GRANTOR TO PERFORM OR OBSERVE ANY OF THE
PROVISIONS OF THIS AGREEMENT.
 
(2)           EACH GUARANTOR SHALL UPON DEMAND PAY TO THE SECURED PARTY ANY AND
ALL COSTS AND EXPENSES, INCLUDING THE REASONABLE FEES AND EXPENSES OF COUNSEL
AND OF ANY EXPERTS, ADVISORS OR AGENTS, THAT THE SECURED PARTY MAY INCUR IN
CONNECTION WITH THE COLLECTION OR ENFORCEMENT OF THE OBLIGATIONS OR THE EXERCISE
OR ENFORCEMENT OF ANY OTHER RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
 
(3)           EACH GRANTOR AGREES TO PAY, AND TO HOLD THE SECURED PARTY HARMLESS
FROM AND AGAINST, ANY AND ALL LIABILITIES WITH RESPECT TO, OR RESULTING FROM ANY
DELAY IN PAYING, ANY AND ALL STAMP, EXCISE, SALES OR OTHER TAXES WHICH MAY BE
PAYABLE OR DETERMINED TO BE PAYABLE WITH RESPECT TO ANY OF THE COLLATERAL OR IN
CONNECTION WITH ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 
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(4)           WITHOUT LIMITING ANY OF ITS OTHER INDEMNIFICATION OBLIGATIONS
UNDER ANY OTHER LOAN DOCUMENT, EACH GRANTOR AGREES TO INDEMNIFY, DEFEND AND SAVE
AND HOLD HARMLESS THE SECURED PARTY AND EACH OF ITS RELATED PARTIES (EACH, AN
"INDEMNIFIED PARTY") FROM AND AGAINST, AND SHALL PAY ON DEMAND, ANY AND ALL
CLAIMS, DAMAGES, LOSSES, LIABILITIES, PENALTIES, JUDGMENTS, DISBURSEMENTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, FEES AND EXPENSES OF COUNSEL) THAT MAY
BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNIFIED PARTY, IN EACH
CASE DIRECTLY OR INDIRECTLY ARISING OUT OF OR IN CONNECTION WITH OR RESULTING
FROM THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION OR
ENFORCEMENT OF THIS AGREEMENT, EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS,
LIABILITY, PENALTY, JUDGMENT, DISBURSEMENT, OR EXPENSE IS FOUND IN A FINAL,
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
SOLELY FROM SUCH INDEMNIFIED PARTY'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.  WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT EACH INDEMNIFIED PARTY SHALL BE INDEMNIFIED
FROM AND HELD HARMLESS AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES,
PENALTIES, JUDGMENTS, DISBURSEMENTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
FEES AND EXPENSES OF COUNSEL) ARISING OUT OF OR CAUSED IN WHOLE OR PART BY THE
ORDINARY NEGLIGENCE OF SUCH INDEMNIFIED PARTY.
 
i.           THE AGREEMENTS IN THIS SECTION 8.06 SHALL SURVIVE REPAYMENT OF THE
OBLIGATIONS AND ALL OTHER AMOUNTS PAYABLE UNDER THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
 
(vii)         Successors and Assigns.  This Agreement shall be binding upon the
successors and assigns of each Grantor from time to time party hereto and shall
inure to the benefit of the Secured Party and its successors and assigns;
provided that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Secured Party.
 
(viii)        Set-Off.  Each Grantor hereby irrevocably authorizes the Secured
Party at any time and from time to time while an Event of Default shall have
occurred and be continuing, without notice to such Grantor or any other Grantor,
any such notice being expressly waived by each Grantor, to set-off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Secured Party
to or for the credit or the account of such Grantor, or any part thereof in such
amounts as the Secured Party may elect, against and on account of the
obligations and liabilities of such Grantor to the Secured Party hereunder and
claims of every nature and description of the Secured Party against such
Grantor, in any currency, whether arising hereunder, under the Credit Agreement,
any other Loan Document or otherwise, as the Secured Party may elect, whether or
not the Secured Party has made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured.  The Secured
Party shall notify such Grantor promptly of any such set-off and the application
made by the Secured Party of the proceeds thereof, provided that the failure to
give such notice shall not affect the validity of such set-off and
application.  The rights of the Secured Party under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) which the Secured Party may have.

 
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(ix)           Counterparts.  This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall be deemed to constitute one and the same instrument.  Delivery of
an executed counterpart of a signature page to this Agreement by facsimile shall
be effective as delivery of an original executed counterpart of this Agreement.
 
(x)            Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
 
(xi)           Headings.  The Article and Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
 
(xii)          Governing Law.  This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Texas,
without regard to the principles of conflicts of laws thereof.  This Agreement
is performable in Harris County, Texas.
 
(xiii)         Submission to Jurisdiction.  Each Grantor hereby irrevocably and
unconditionally:
 
(1)           submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
Texas, the courts of the United States of America for the Southern District of
Texas, and appellate courts from any thereof;
 
(2)           consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
 
(3)           agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 8.02 or at such other address of which the
Secured Party shall have been notified pursuant thereto; and
 
(4)           agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
 
(xiv)         Acknowledgments.  Each Grantor hereby acknowledges and agrees
that:

 
A-45

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(1)           it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a party,
and this Agreement shall be construed as if jointly drafted by the parties
hereto;
 
(2)           the Secured Party has no fiduciary relationship with or duty to
any Grantor arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between the Grantors, on the one
hand, and the Secured Party, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
 
(3)           no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Secured Parties or among the Grantors and the Secured Party.
 
(xv)           Additional Grantors.  Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to the Credit Agreement
shall become and be a Grantor in all respects and for all purposes of this
Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.  The supplemental schedules attached to
each Assumption Agreement shall be incorporated into and become a part of and
supplement, respectively, the Schedules hereto, and the Secured Party may attach
such supplemental schedules to the Schedules hereto; and each reference to such
Schedules shall mean and be a reference to such Schedules as supplemented
pursuant to each Assumption Agreement.
 
(xvi)        Releases.  At such time as the Loan and the other Obligations shall
have been paid and performed in full, the Collateral shall be released from the
Liens created hereby, and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Secured Party and each
Grantor hereunder shall terminate, all without delivery of any instrument or
performance of any act by any party, and all rights to the Collateral shall
revert to the Grantors.  At the request and sole expense of any Grantor
following any such termination, the Secured Party shall deliver to such Grantor
any Collateral held by the Secured Party hereunder, and execute and deliver to
such Grantor such documents as such Grantor shall reasonably request to evidence
such termination.
 
(1)           If any of the Collateral shall be Disposed of by any Grantor in a
transaction expressly permitted by the Credit Agreement and no Default or Event
of Default shall have occurred and be continuing, then the Secured Party, at the
request and sole cost and expense of such Grantor, shall execute and deliver to
such Grantor all releases or other documents reasonably necessary for the
release of the Liens created hereunder on such Collateral.  At the request and
sole cost and expense of the Borrower, a Subsidiary Guarantor shall be released
from its obligations hereunder in the event that all of the Equity Interests of
such Subsidiary Guarantor shall be Disposed of in a transaction expressly
permitted by the Credit Agreement and no Default or Event of Default shall have
occurred and be continuing; provided that the Borrower shall have delivered to
the Secured Party, at least ten (10) Business Days prior to the date of the
proposed release, a written request for release identifying the relevant
Subsidiary Guarantor and the terms of the Disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a certification by the Borrower stating that such transaction is permitted
under the Credit Agreement and the other Loan Documents and that the Proceeds of
such Disposition will be applied in accordance therewith.

 
A-46

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(2)           Each Grantor acknowledges that it is not authorized to file any
financing statement or amendment or termination statement with respect to any
financing statement originally filed in connection herewith without the prior
written consent of the Secured Party subject to such Grantor's rights under
Section 9.509(d)(2) of the UCC.
 
(xvii)       WAIVER OF JURY TRIAL.  EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
SECURED PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE SECURED PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT THE SECURED PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION.
 
(xviii)      WAIVER OF CONSEQUENTIAL DAMAGES; ETC.  TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE REQUIREMENTS OF LAW, EACH GRANTOR AGREES THAT IT WILL
NOT ASSERT, AND HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY CLAIM AGAINST
ANY INDEMNIFIED PARTY ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES)
ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE LOAN OR
THE USE OF THE PROCEEDS THEREOF.  NO INDEMNIFIED PARTY SHALL BE LIABLE FOR ANY
DAMAGES ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR
OTHER MATERIALS DISTRIBUTED BY IT THROUGH ANY TELECOMMUNICATIONS, ELECTRONIC OR
OTHER INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
 
SECTION 8.19.   INTEGRATION.    THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT OF THE GRANTORS AND THE SECURED PARTY WITH RESPECT TO THE SUBJECT
MATTER HEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO PROMISES,
UNDERTAKINGS, REPRESENTATIONS OR WARRANTIES BY THE SECURED PARTY RELATIVE TO THE
SUBJECT MATTER HEREOF NOT EXPRESSLY SET FORTH OR REFERRED TO HEREIN.  THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
 

 
A-47

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Section 8.20.  Independence of Covenants.  All covenants and agreements
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants or agreements, the fact that
it would be permitted by an exception to, or would otherwise be within the
limitations of, another covenant or agreement, shall not avoid the occurrence of
a Default or Event of Default if such action is taken or such condition exists.
 
Section 8.21.   Time is of the Essence.  Time is of the essence of this
Agreement.
 
[Signature Page Follows]

 
A-48

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IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and
Security Agreement to be duly executed and delivered as of the date first above
written.
 

   
GRANTORS:
               
SANDERS MORRIS HARRIS GROUP INC.
             
By:
       
Name:
       
Title:
               
SMH CAPITAL INC.
             
By:
                 
Name:
       
Title:
               
SMH CAPITAL ADVISORS, INC.
             
By:
                 
Name:
       
Title:
               
MILLER-GREEN FINANCIAL SERVICES, INC.
             
By:
                 
Name:
       
Title:
 

 
A-49

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THE EDELMAN FINANCIAL CENTER, LLC
             
By:
       
Name:
       
Title:
               
EDELMAN BUSINESS SERVICES, LLC
             
By:
       
Name:
       
Title:
               
EDELMAN FINANCIAL SERVICES, LLC
             
By:
       
Name:
       
Title:
               
EDELMAN FINANCIAL ADVISORS, LLC
             
By:
       
Name:
       
Title:
               
SOF MANAGEMENT, LLC
             
By:
       
Name:
       
Title:
 

 
A-50

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SMH GP LP
             
By:
       
Name:
       
Title:
               
SMH MLS, LLC
             
By:
       
Name:
       
Title:
               
SMH SPEADV, LLC
             
By:
       
Name:
       
Title:
               
SECURED PARTY:
             
PROSPERITY BANK
         
 
 
By:
       
Name:
       
Title:
 

 
A-51

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EXHIBIT B TO
CREDIT AGREEMENT

 
FORM OF CLOSING CERTIFICATE

[INSERT LEGAL NAME OF COMPANY]
 
CLOSING CERTIFICATE
 
I, the undersigned, [President/Executive Vice President/Chief Financial Officer]
of [Name of Borrower/Subsidiary], a [corporation/limited liability company] duly
organized and validly existing under the laws of the State of _____________ (the
"Company"), do hereby certify on behalf of the Company that:
 
1.           This Certificate is furnished pursuant to Section 3.01(c) of the
Credit Agreement, dated as of March [   ] , 2009, among Sanders Morris Harris
Group, Inc., a Texas corporation and Prosperity Bank as Lender (such Credit
Agreement, as in effect on the date of this Certificate, being herein called the
"Credit Agreement").  Unless otherwise defined herein, capitalized terms used in
this Certificate shall have the meanings set forth in the Credit Agreement.
 
2.           The following named individuals are elected or appointed officers
of the Company, each of which holds the office of the Company set forth opposite
his name as of the date hereof.  The signature written opposite the name and
title of each such officer is his genuine signature.

Name 1
 
Office
 
Signature
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3.           Attached hereto as Exhibit A is a certified copy of the
[Certificate of Incorporation] [Articles of Incorporation] [Certificate of
Formation] of the Company, as filed in the Office of the Secretary of State of
the State of _____________ on ____________, ___, together with all amendments
and other modifications thereto adopted through the date hereof.
 
4.           Attached hereto as Exhibit B is a true and correct copy of the
[By-Laws] [Limited Liability Company Agreement] [Partnership Agreement] of the
Company which [were] [was] duly adopted, [are] [is] in full force and effect on
the date hereof, and [have] [has] been in effect since ________________, ____.
 

--------------------------------------------------------------------------------

1 Include name, office and signature of each officer who will sign any Loan
Document, including the officer who will sign the certification at the end of
this Certificate or related documentation.

 
 

--------------------------------------------------------------------------------

5.           Attached hereto as Exhibit C is a Certificate issued by the
Secretary of State of the State of [_________], certifying that the Company is
duly formed under the laws of the State of [__________], is in good standing,
has a legal corporate existence, is duly authorized to transact business, and
the Company's annual reports have been filed to date; and
 
6.           Attached hereto as Exhibit D is a Certificate issued by the
Secretary of State in each State where the nature of business in which the
Company is engaged requires the Company to be qualified as a foreign
corporation, certifying that the company is in good standing and duly qualified
to do business in each such State as a foreign corporation.
 
7.           [Attached hereto as Exhibit E is a Certificate of Account Status
issued by the Texas Comptroller of Public Accounts, certifying that the Company
is in good standing and the Company's franchise tax reports have been filed to
date.] 2
 
8.           Attached hereto as Exhibit [E][F] is a true and correct copy of
resolutions which were duly adopted on ____________, ____ [by unanimous written
consent of the Board of Directors of the Company] [by a meeting of the Board of
Directors of the Company at which a quorum was present and acting throughout],
and said resolutions have not been rescinded, amended or modified.  Except as
attached hereto as Exhibit C, no resolutions have been adopted by the Board of
Directors of the Company which deal with the execution, delivery or performance
of any of the Loan Documents to which the Company is party.
 
9.           On the date hereof, all of the conditions set forth in Section 3.01
of the Credit Agreement have been satisfied.
 
10.         On the date hereof, the representations and warranties of the
Borrower and each Subsidiary set forth in the Credit Agreement and in the other
Loan Documents are true and correct with the same effect as though such
representations and warranties had been made on the date hereof.
 
11.         On the date hereof, no Default or Event of Default has occurred and
is continuing or would result from the Loan being made on the date hereof or the
application of the proceeds thereof.
 
12.         There is no proceeding for the dissolution or liquidation of the
Company or threatening its existence.
 
[Signature Page Follows]
 

--------------------------------------------------------------------------------

2 NOTE:  Please include if the Company is a Texas corporation.

 
2

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of March, 2009.
 

 
[NAME OF BORROWER/SUBSIDIARY]
       
By:
   
Name:
   
Title:
 

I, the undersigned, [Secretary/Assistant Secretary] of the Company, do hereby
certify that:
 
1.           [Name of Person making above certifications] is the duly elected
and qualified [President/Executive Vice President/Chief Financial Officer] of
the Company and the signature above is his genuine signature.
 
2.           The certifications made by [name of Person making above
certifications] in Items 2 through [12] above are true and correct.
 
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of March, 2009.
 

 
[NAME OF BORROWER/SUBSIDIARY]
       
By:
 
 
Name:
 
 
Title:
 

 
3

--------------------------------------------------------------------------------

EXHIBIT A TO CLOSING CERTIFICATE
 
[ARTICLES OF INCORPORATION] [CERTIFICATE OF FORMATION] OF THE
COMPANY

 
 

--------------------------------------------------------------------------------

EXHIBIT B TO CLOSING CERTIFICATE
 
[BY-LAWS] [LIMITED LIABILITY COMPANY AGREEMENT]
 
[PARTNERSHIP AGREEMENT] [OTHER] OF THE COMPANY

 
 

--------------------------------------------------------------------------------

EXHIBIT C TO CLOSING CERTIFICATE
 
CERTIFICATE OF GOOD STANDING OF THE COMPANY ISSUED
 BY THE SECRETARY OF STATE OF THE STATE OF [__________]

 
 

--------------------------------------------------------------------------------

[EXHIBIT      ]
CERTIFICATE OF ACCOUNT STATUS OF THE COMPANY
ISSUED BY THE TEXAS COMPTROLLER OF PUBLIC ACCOUNTS

 
 

--------------------------------------------------------------------------------

[EXHIBIT      ]
CERTIFICATE ISSUED BY EACH STATE IN WHICH
 THE COMPANY IS QUALIFIED AS A FOREIGN CORPORATION

 
 

--------------------------------------------------------------------------------

exhibit [d][E][F] TO THE CLOSING CERTIFICATE
RESOLUTIONS OF THE COMPANY
 
[see attached]

 
 

--------------------------------------------------------------------------------

EXHIBIT C TO
CREDIT AGREEMENT

FORM OF MORTGAGE

PREPARED BY AND UPON
RECORDATION RETURN TO:
 
Bracewell & Giuliani LLP
1445 Ross Avenue, Suite 3800
Dallas, Texas  75202
 
Attention:  [______], Esq.
 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT
 
made by and from
 
[______________________],
as the Grantor
 
to
 
[______________________],
as the Trustee

 
for the benefit of
 
PROSPERITY BANK,
as the Beneficiary

 
DATED AS OF [______], 200[__]
 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

THIS DEED OF TRUST IS ALSO TO BE FILED FOR RECORD IN THE REAL ESTATE RECORDS [OF
________________ COUNTY, TEXAS] AS A FIXTURE FILING IN ACCORDANCE WITH THE TEXAS
UNIFORM COMMERCIAL CODE.
 
THIS DEED OF TRUST SECURES FUTURE ADVANCES AND CONTAINS AFTER-ACQUIRED PROPERTY
PROVISIONS.

 
 

--------------------------------------------------------------------------------

TABLE OF CONTENTS

       
Page
         
ARTICLE I
 
DEFINITIONS AND INTERPRETATION
 
1
Section 1.01.
 
Definitions
 
1
Section 1.02.
 
Terminology
 
4
Section 1.03.
 
Resolution of Drafting Ambiguities
 
5
         
ARTICLE II
 
GRANTING CLAUSES
 
5
Section 2.01.
 
Grant of Lien
 
5
Section 2.02.
 
Future Advances
 
8
         
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES
 
8
Section 3.01.
 
Title to Property; No Liens
 
8
Section 3.02.
 
Existence; Compliance with Requirements of Law; Permits
 
9
Section 3.03.
 
Power and Authority; Enforceability; No Conflicts
 
9
Section 3.04.
 
Impositions and Other Charges
 
9
Section 3.05.
 
No Default
 
9
Section 3.06.
 
Requirements of Law; Land Use Requirements
 
10
Section 3.07.
 
Utilities; Access
 
10
Section 3.08.
 
No Casualty or Condemnation; No Litigation
 
10
Section 3.09.
 
Disclosure
 
11
Section 3.10.
 
Tax Status
 
11
         
ARTICLE IV
 
COVENANTS
 
11
Section 4.01.
 
Payment and Performance of Obligations
 
11
Section 4.02.
 
Good Standing
 
11
Section 4.03.
 
Care of Property
 
11
Section 4.04.
 
Requirements of Law; Insurance Requirements; Claims; Etc
 
12
Section 4.05.
 
Impositions
 
12
Section 4.06.
 
Insurance
 
12
Section 4.07.
 
Books and Records; Inspection; Information
 
14
Section 4.08.
 
Condemnation
 
15
Section 4.09.
 
Liens
 
15
Section 4.10.
 
Protection of Liens; Defense of Action
 
15
Section 4.11.
 
Transfer
 
16
Section 4.12.
 
Increased Costs
 
16
Section 4.13.
 
Further Assurances
 
16
Section 4.14.
 
Filing and Recording
 
16
Section 4.15.
 
[Permitted Contests
 
17
         
ARTICLE V
 
ASSIGNMENT OF RENTS AND LEASES
 
17
Section 5.01.
 
Assignment of Rents and Leases
 
17
         
ARTICLE VI
 
RIGHTS AND REMEDIES
 
19
Section 6.01.
 
Events of Default
 
19
Section 6.02.
 
Events of Default; Remedies
 
19

 
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TABLE OF CONTENTS

(continued)

       
Page
         
Section 6.03.
 
Rights Pertaining to Sales
 
21
Section 6.04.
 
Additional Provisions as to Remedies
 
23
Section 6.05.
 
Application of Proceeds
 
24
Section 6.06.
 
Waivers by the Grantor
 
25
         
ARTICLE VII
 
SECURITY AGREEMENT
 
26
Section 7.01.
 
Security Agreement under UCC
 
26
Section 7.02.
 
Fixture Filing
 
26
Section 7.03.
 
Financing Statements
 
27
         
ARTICLE VIII
 
ENVIRONMENTAL MATTERS
 
27
Section 8.01.
 
Environmental Representations and Warranties
 
27
Section 8.02.
 
Environmental Covenants
 
28
Section 8.03.
 
Beneficiary's Rights
 
28
Section 8.04.
 
Operation and Maintenance Programs
 
28
Section 8.05.
 
Environmental Definitions
 
29
Section 8.06.
 
ENVIRONMENTAL INDEMNIFICATION
 
30
         
ARTICLE IX
 
MISCELLANEOUS
 
31
Section 9.01.
 
Right to Perform Obligations; Protective Advances
 
31
Section 9.02.
 
Notices
 
31
Section 9.03.
 
Covenants Running with the Land
 
32
Section 9.04.
 
EXPENSES AND GENERAL INDEMNIFICATION
 
32
Section 9.05.
 
ENTIRE AGREEMENT
 
34
Section 9.06.
 
Amendments in Writing
 
34
Section 9.07.
 
Severability
 
34
Section 9.08.
 
Compliance with Usury Laws
 
35
Section 9.09.
 
Successors and Assigns
 
35
Section 9.10.
 
GOVERNING LAW, ETC
 
35
Section 9.11.
 
WAIVER OF TRIAL BY JURY
 
35
Section 9.12.
 
Submission To Jurisdiction
 
36
Section 9.13.
 
Acknowledgements
 
36
Section 9.14.
 
Independence of Covenants
 
36
Section 9.15.
 
Sole Discretion
 
37
Section 9.16.
 
Subrogation
 
37
Section 9.17.
 
Co-Agents
 
37
Section 9.18.
 
Right to Deal
 
37
Section 9.19.
 
No Merger
 
37
Section 9.20.
 
Duplicate Originals; Counterparts
 
38
Section 9.21.
 
Termination
 
38
Section 9.22.
 
Waiver of Setoff
 
38
Section 9.23.
 
Dealing with the Property
 
38
Section 9.24.
 
Lien Absolute
 
38

ii-

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TABLE OF CONTENTS
 
(continued)

       
Page
         
Section 9.25.
 
[Multistate Transaction
 
38
         
ARTICLE X
 
ADDITIONAL TEXAS LAW PROVISIONS
 
39
Section 10.01.
 
Foreclosure Pursuant to Power of Sale
 
39
Section 10.02.
 
Deficiency Statute
 
39
         
ARTICLE XI
 
TRUSTEE
 
40
Section 11.01.
 
Concerning the Trustee
 
40
Section 11.02.
 
Trustee's Fees
 
40
Section 11.03.
 
Certain Rights
 
40
Section 11.04.
 
Retention of Money
 
41
Section 11.05.
 
Perfection of Appointment
 
41
Section 11.06.
 
Succession Instruments
 
41

EXHIBITS

EXHIBIT A           Land
EXHIBIT B           Permitted Exceptions

 
iii-

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DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT
 
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT, FIXTURE
FILING AND FINANCING STATEMENT (this "Deed of Trust"), dated as of
[______________] 20[__], is made by [___________________________], a
_______________ (the "Grantor"), having its principal office at
[___________________________], to [_______________], an individual, as trustee
(the "Trustee") having an address at [______________________________], for the
benefit of [___________________________], as lender (the "Lender") (Lender,
together with its successors and assigns, the "Beneficiary"), having an address
at [___________________________________].  All references to this Deed of Trust
shall mean this instrument and any and all renewals, modifications, amendments,
supplements, extensions, consolidations, substitutions, and restructurings of
this instrument.
 
RECITALS:
 
A.           The Grantor is party to that certain Credit Agreement dated as of
the date hereof (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") between the Grantor and the
Lender, pursuant to which the Lender has agreed to make the Loan to the Grantor.
 
B.           It is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lender to make the Loan thereunder that the
Grantor execute and deliver this Deed of Trust to the Beneficiary.
 
NOW THEREFORE, in consideration of the Loan and the foregoing recitals, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Grantor hereby agrees as follows:
 
ARTICLE I
 
DEFINITIONS AND INTERPRETATION
 
Section 1.01.     Definitions.
 
Capitalized terms used but not defined in this Deed of Trust shall have the
meanings specified in the Credit Agreement.
 
All terms used but not capitalized in this Deed of Trust that are defined in the
UCC shall have the meanings ascribed to such terms in the UCC.
 
As used herein, the following terms shall have the following meanings:
 
"Casualty" means any damage to, or destruction of, the Property or any part
thereof.

 
 

--------------------------------------------------------------------------------

 

"Condemnation" means any condemnation or other taking or temporary or permanent
requisition of any Property, any interest therein or right appurtenant thereto,
or any change of grade affecting any Property, as the result of the exercise of
any right of condemnation or eminent domain.  A Transfer in lieu or anticipation
of Condemnation shall be deemed to be a Condemnation.
 
"Condemnation Awards" means, at any time, all awards paid or payable by reason
of any Condemnation or in connection with any agreement with any condemning
authority that has been made in settlement of any proceeding relating to a
Condemnation.
 
"Default Rate" means the rate of interest per annum that is or would be payable
on overdue payments of principal under the Credit Agreement.
 
"Equipment" has the meaning specified in Section 2.01(c).
 
"Impositions" means all taxes (including real estate taxes and transfer taxes),
assessments (including all assessments for public improvements or benefits,
whether or not commenced or completed prior to the date hereof), gas,
electricity, steam, water, sewer or other rents, rates and charges, excises,
levies, license fees, permit fees, inspection fees and other authorization fees
and other charges, in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, of every kind or character (including all
interest and penalties thereon), which at any time may be assessed, levied,
confirmed or imposed on or in respect of, or be a Lien upon, (i) the Premises,
any other Property or any interest therein, (ii) any ownership, occupancy,
operation, use or possession of, or activity conducted on, the Premises, (iii)
the Rents, or (iv) the Obligations or the Loan Documents.
 
"Improvements" means has the meaning specified in Section 2.01(b).
 
"Indemnified Party" means the collective reference to the Beneficiary, and the
Trustee, and each Related Party of each of the foregoing Persons.
 
"Insurance Policies" means all insurance policies and coverages of any kind or
character required to be maintained by the Grantor pursuant to this Deed of
Trust with respect to the Premises and the use, management, ownership,
occupancy, enjoyment or operation thereof, including, without limitation, all
property insurance ("all risk" or "special perils form"), liability insurance,
builder's risk insurance, flood insurance, terrorist risk insurance, earthquake
insurance, title insurance, reinsurance, business interruption insurance and
environmental insurance.
 
"Insurance Proceeds" means, at any time, all insurance proceeds or payments to
which the Grantor is or may be or become entitled under any or all Insurance
Policies by reason of a Casualty plus all insurance proceeds and payments to
which the Grantor is or may be or become entitled under any and all other
insurance or coverage maintained with respect to the Premises or the use,
ownership, occupancy, enjoyment or operation thereof.
 
"Insurance Requirements" means all provisions of the Insurance Policies, all
requirements of the issuer of any of the Insurance Policies and all orders,
rules, regulations and any other requirements of the National Board of Fire
Underwriters (or any other body exercising similar functions) binding upon the
Grantor or applicable to the Property, any adjoining vaults, sidewalks, parking
areas or driveways or any use, operation or condition thereof.

 
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"Land" has the meaning specified in Section 2.01(a).
 
"Leases" has the meaning specified in Section 2.01(f).
 
"Minerals" has the meaning specified in Section 2.01(e).
 
"Obligations" means the collective reference to the following, whether now
existing or hereafter arising:
 
 
(i)
all Obligations (as such term is defined in the Credit Agreement) all
obligations of the Grantor under the Loan Documents[, including all obligations
of the Grantor under its guaranty made pursuant to Article II of the Guaranty
and Security Agreement];3

 
 
(ii)
all obligations, indebtedness and liabilities of the Grantor under this Deed of
Trust (including the obligation of the Grantor to repay all advances made by the
Beneficiary to preserve or protect the Property and the Liens created hereby)
and the other Loan Documents; and

 
 
(iii)
any and all amendments, restatements, renewals, extensions, modifications,
increases, and restructurings of any or all of the foregoing.

 
"Permits" has the meaning specified in Section 2.01(j).
 
"Permitted Exceptions" has the meaning specified in Section 3.01.
 
"Premises" means the Land, Improvements and Equipment.
 
"Property" has the meaning specified in Section 2.01.
 
"Related Agreements" has the meaning specified in Section 2.01(h).
 
"Rents" has the meaning specified in Section 2.01(g).
 
"Requirements of Law" means (i) all provisions of Permitted Exceptions and
Permits, and (ii) with respect to any Person or the Property, all provisions of
the Organizational Documents of such Person, and any law, statute, treaty, rule,
regulation, order, ordinance, code, judgment, decree, injunction, requirement of
any Governmental Authority or quasi-Governmental Authority applicable to or
binding upon such Person or the Property or to which such Person or the Property
is subject.
 
"Restoration" means the restoration, repair, replacement or rebuilding of the
Property after a Casualty or Condemnation and "Restore" means to restore,
repair, replace or rebuild the Property after a Casualty or Condemnation, in
each case as nearly as possible to its value and condition immediately prior to
such Casualty or Condemnation.

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3 Include bracketed text if the Grantor is a guarantor.

 
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"Transfer" means, when used as a noun, any sale, conveyance, assignment, lease
or other transfer and, when used as a verb, to sell, convey, assign, lease or
otherwise transfer, in each case (i) whether voluntary or involuntary, (ii)
whether direct or indirect and (iii) including any agreement providing for a
Transfer or granting any right or option providing for a Transfer.
 
"UCC" means the Uniform Commercial Code as in effect in the State in which the
Land and Improvements are located provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the Lien on any Property is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State in which the Land and Improvements
are located, UCC means the Uniform Commercial Code as in effect in such
jurisdictions for purposes of the provisions hereof relating to such perfection
or effect of perfection or non-perfection.
 
Section 1.02.     Terminology.  Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided in this Deed of Trust, (a) the
word "Grantor" means "each Grantor or any subsequent owner or owners of the
Property or any part thereof or interest therein," the word "Beneficiary" means
the "Beneficiary or any successor agent for the Secured Parties," the word
"Trustee" means the "Trustee and any substitute or successor trustee hereunder";
(b) words that include a number of constituent parts, things or elements,
including the terms Land, Improvements, Equipment, Minerals, Obligations,
Premises and Property shall be construed as referring to each constituent part,
thing or element thereof, as well as to all of such constituent parts, things or
elements taken as a whole; (c) whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural and vice
versa; (d) references to any Person shall include such Person's successors and
assigns and in the case of an individual, the word "successors" includes such
Person's heirs, devisees, legatees, executors, administrators and personal
representatives; (e) references to any statute or other law shall include all
applicable rules, regulations and orders adopted or made thereunder and all
statutes or other laws amending, consolidating or replacing the statute or law
referred to; (f) the words "include" and "including", and words of similar
import, shall be deemed to be followed by the words "without limitation"; (g)
the words "hereto", "herein", "hereof" and "hereunder", and words of similar
import, refer to this Deed of Trust in its entirety; (h) references to Articles,
Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the
Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses of
this Deed of Trust; (i) the titles and headings of Articles, Sections,
Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a
matter of reference only and shall not in any way alter, modify or define, or
affect the construction of, this Deed of Trust; (j) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, restated, supplemented, extended, renewed or otherwise
modified (subject to any restrictions on such amendments, restatements,
supplements, extensions, renewals or modifications set forth herein or in the
Credit Agreement); (j) all obligations of the Grantor hereunder shall be
satisfied by the Grantor at the Grantor's sole cost and expense; (k) the
expressions "payment in full," "paid in full" and any other similar terms or
phrases when used herein with respect to the Obligations shall mean the
unconditional, final, indefeasible and irrevocable payment in full, in
immediately available funds, of all of the Obligations; and (l) all rights and
powers granted to or for the benefit of the Beneficiary shall be deemed to be
coupled with an interest and be irrevocable.

 
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Section 1.03.    Resolution of Drafting Ambiguities.  The Grantor acknowledges
that it was represented by counsel in connection with this Deed of Trust, that
it and its counsel reviewed and participated in the preparation and negotiation
of this Deed of Trust and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party or the Grantor shall
not be employed in the interpretation of this Deed of Trust.
 
ARTICLE II
 
GRANTING CLAUSES
 
Section 2.01.     Grant of Lien.  To secure the due and punctual payment,
performance and observance of the Obligations, the Grantor by these presents
does hereby GRANT, BARGAIN, SELL, ASSIGN, TRANSFER, WARRANT AND CONVEY, unto the
Trustee and the Trustee's successors, assigns and substitutes, in trust, WITH
POWER OF SALE and right of entry and possession, for the use and benefit of the
Beneficiary, and (to the extent covered by the UCC) does hereby GRANT to the
Beneficiary a continuing security interest in, all of the Grantor's right,
title, interest and estate in, to and under any and all of the following
property, rights, interests and estates, whether now owned or existing or
hereafter arising or acquired (collectively, the "Property"):
 
(a)           the lots, pieces, tracts or parcels of land located in [______]
County, Texas, more particularly described in Exhibit A (the "Land");
 
(b)           all buildings, structures, foundations, facilities and other
improvements of every kind and description now or hereafter located on or
affixed or attached to the Land or any part thereof, including all parking
areas, roads, driveways, walks, fences, walls, berms, recreation facilities,
drainage facilities, lighting facilities and other site improvements; all water,
sanitary and storm sewer, drainage, electricity, steam, gas, telephone,
telecommunications and other utility equipment and facilities; all plumbing,
lighting, heating, ventilating, air-conditioning, refrigerating, incinerating,
compacting, fire protection and sprinkler, surveillance and security, vacuum
cleaning, public address and communications equipment and systems; all screens,
awnings, floor coverings, partitions, elevators, escalators, motors, machinery,
pipes, fittings and other items of equipment and personal property of every kind
and description now or hereafter located on or affixed or attached to the Land
or attached or affixed to or located in or on the Improvements which by the
nature of their location thereon or attachment thereto are real property under
applicable law; and including all materials intended for the construction,
reconstruction, repair, replacement, alteration, addition or improvement of or
to such buildings, structures, equipment, fixtures, and improvements, all of
which materials shall be deemed to be part of the Property immediately upon
delivery thereof on the Land and to be part of the improvements immediately upon
their incorporation therein (the foregoing being collectively called the
"Improvements");

 
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(c)           all equipment, machinery, fixtures, chattels and other property
now or hereafter located on, or in, or affixed to, the Land or the Improvements,
whether or not affixed thereto and which are not real property under applicable
law, including all partitions, screens, awnings, shades, blinds, curtains,
draperies, carpets, rugs, furniture and furnishings; all heating, lighting,
plumbing, ventilating, air conditioning, refrigerating, gas, steam, electrical,
incinerating, compacting, water treatment, pollution control, and communications
systems, fixtures and equipment; all elevators, ovens, stoves, ranges, other
kitchen and laundry appliances, vacuum and other cleaning systems, call systems,
switchboards, sprinkler systems and other fire prevention, alarm and
extinguishing apparatus; and all materials, motors, machinery, pipes, conduits,
dynamos, engines, compressors, generators, boilers, stokers, furnaces, pumps,
trunks, ducts, pipes, appliances, equipment, utensils, tools, implements,
fittings and fixtures and including any of the foregoing that is temporarily
removed from the Land or the Improvements to be repaired and later reinstalled
thereon or therein (all of the foregoing being collectively called the
"Equipment";
 
(d)           all tenements, hereditaments and appurtenances now or hereafter
relating to the Premises; all streets, roads, sidewalks and alleys abutting the
Premises; all strips and gores within or adjoining the Land; all land in the bed
of any body of water adjacent to the Land; all land adjoining the Land created
by artificial means or by accretion; all air space and rights to use air space
above the Land; all development or similar rights now or hereafter appurtenant
to the Land; all rights of ingress and egress now or hereafter appertaining to
the Premises; all easements, servitudes, privileges and rights of way now or
hereafter appertaining to the Premises; and all royalties and other rights now
or hereafter appertaining to the use and enjoyment of the Premises, including
alley, party walls, support, drainage, crop, timber, agricultural,
horticultural, oil, gas and other mineral, water stock, riparian and other water
rights now or hereafter appertaining to the use and enjoyment of the Premises;
 
(e)           all substances in, on, under, or above the Land or any part
thereof which are now, or may become in the future, intrinsically valuable and
which now or may in the future be enjoyed through extraction or removal from the
Land or any part thereof, including, without limitation, all oil, gas, and all
other hydrocarbons, coal, lignite, carbon dioxide and all other nonhydrocarbon
gas, uranium and all other radioactive substances, and gold, silver, copper,
iron and all other metallic substances or ores (the foregoing being collectively
called the "Minerals");
 
(f)           all leases, master leases, subleases, underlettings, concession
agreements, management agreements, occupancy agreements, licenses and other
agreements, whether written or oral and whether or not of record, now existing
or hereafter entered into, granting a possessory interest in and to, or relating
to or affecting, the enjoyment, occupancy, operation, possession or use of the
Premises or any part thereof (including, without limitation, all leases
involving Minerals), together with all guarantees and other supporting
obligations of the obligations of any Person thereunder and all security,
deposits and payments, security interests and contractual Liens made or existing
in connection therewith (the foregoing being collectively called the "Leases");
 
(g)           all rents, royalties, issues, profits, receipts, revenue, income
and other benefits now or hereafter accruing or payable with respect to the
Premises or any part thereof, including all rents and other sums now or
hereafter payable pursuant to the Leases; all other sums now or hereafter
payable with respect to the use, occupancy, management, operation or control of
the Premises or any part thereof; and all other claims, rights and remedies now
or hereafter belonging or accruing or payable with respect to the Premises or
any part thereof or the Leases, including fixed, additional and percentage
rents, occupancy charges, security deposits, parking, maintenance, common area,
tax, insurance, utility and service charges and contributions (whether collected
under the Leases or otherwise), proceeds of sale of electricity, gas, heating,
air-conditioning and other utilities and services (whether collected under the
Leases or otherwise), and deficiency rents and liquidated damages following
default or cancellation (all of the foregoing being collectively called the
"Rents");

 
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(h)           all Insurance Policies (including all unearned premiums and
dividends thereunder);
 
(i)            all guarantees, indemnities, and warranties relating to the
Premises; all supply and service contracts for water, sanitary and storm sewer,
drainage, electricity, steam, gas, telephone and other utilities now or
hereafter relating to the Premises; and all other contracts and agreements
(other than Leases) affecting or relating to the construction, use, maintenance,
management, ownership, operation, repair, servicing, enjoyment or occupancy of
the Premises (the foregoing being collectively called the "Related Agreements");
 
(j)            all licenses, permits, certificates, variances, consents,
approvals and other authorizations now or hereafter required for or relating to
the Premises or the construction, use, maintenance, management, ownership,
operation, enjoyment or occupancy thereof (the foregoing being collectively
called the "Permits");
 
(k)           all books and records, including tenant files, credit files,
customer files, drawings, designs, plans, specifications, computer print outs,
files, programs and other computer and electronic materials and records, now or
hereafter relating to the construction, use, maintenance, management, ownership,
operation, enjoyment or occupancy of the Premises;
 
(l)           all money now or subsequently on deposit for the payment of real
estate taxes or assessments against the Premises or for the payment of premiums
on Insurance Policies and all tax refunds, rebates or credits payable with
respect to or arising in connection with any of the Property;
 
(m)          all trade names, trademarks, logos, symbols, copyrights, patents,
goodwill and other intellectual property relating to or existing or arising from
or in connection with the Premises or any part thereof;
 
(n)           all accounts, chattel paper, commercial tort claims, deposit
accounts, documents, general intangibles, goods, instruments, inventory,
investment property, letters of credit, letter-of-credit rights, supporting
obligations and all other personal property of any kind or character, located
on, relating to, derived from or arising in connection with the use, ownership,
management, operation, enjoyment or occupancy of the Premises;
 
(o)           all reserves, deposits, escrows or impounds required hereunder or
under the Credit Agreement or any other Loan Document;
 
(p)           all extensions, improvements, betterments, renewals, substitutions
and replacements of, and additions and appurtenances to, any of the Property
hereafter acquired by or released to the Grantor or constructed or located on,
or attached to, the Property, in each case, immediately upon such acquisition,
release, construction, location or attachment, without any further conveyance,
mortgage, assignment or other act by the Grantor; and all property and rights
which are, by the provisions of the Loan Documents, required to be subjected to
the Lien hereof; and all other property and rights which are by any instrument
or otherwise subjected to the Lien hereof by the Grantor or by anyone acting on
its behalf; and
 
 
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(q)           all products and proceeds, both cash and noncash, of any and all
of the foregoing.
 
TO HAVE AND TO HOLD the Property, whether now owned or leased or hereafter
acquired and whether now or hereafter existing, together with all the rights,
privileges and appurtenances thereunto belonging, unto Trustee for the benefit
of the Beneficiary, forever, for the uses and purposes herein set forth.
 
Section 2.02.     Future Advances.  It is the intention of the Grantor and the
Beneficiary that this Deed of Trust shall secure any and all future advances,
which may or will be advanced from time to time after the date hereof by one or
more of the Secured Parties and may include readvances of sums repaid, and this
Deed of Trust shall attach upon execution and have priority from the time of
recording as to all advances, whether obligatory or discretionary, until this
Deed of Trust is released of record.
 
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES
 
The Grantor hereby represents and warrants to the Beneficiary as follows:
 
Section 3.01.     Title to Property; No Liens
 
(a)           The Grantor has and will have good, [indefeasible]
[marketable]4 and insurable title to the Land and the Improvements in fee
simple, free and clear of all Liens, claims, encumbrances and charges of every
kind and character, except for those exceptions set forth in Exhibit B hereto
(collectively, the "Permitted Exceptions").  The Grantor owns and will own all
of the other Property free and clear of all Liens, claims, encumbrances and
charges of every kind and character.
 
(b)           This Deed of Trust creates valid, enforceable first priority Lien
on the Property in favor of the Beneficiary, for the benefit of the Secured
Parties, as security for the Obligations, subject only to Permitted Exceptions.
 
(c)           The Grantor shall forever warrant and defend (i) its estate,
right, title and interest in and to the Property, (ii) the validity,
enforceability and priority of the Lien of this Deed of Trust on the Property,
and (iii) the right, title and interest of the Beneficiary and any purchaser at
any sale of the Property hereunder or relating hereto, in each case, against all
other Liens, subject only to the Permitted Exceptions.
 

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4 NOTE:  use "marketable title" standard for Property outside of Texas.

 
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(d)           Nothing herein shall be construed to subordinate the Lien of this
Deed of Trust to any Permitted Exception.
 
Section 3.02.     Existence; Compliance with Requirements of Law; Permits.  The
Grantor (a) is duly organized, validly existing and in good standing under the
laws of the Grantor's jurisdiction of organization, and is duly qualified and in
good standing to do business in the State where the Property is located, (b) is
in compliance with all conditions prerequisite to the Grantor's lawfully
conducting business in the State of Texas, (c) has the power and authority to
own its properties (including the Property) and to carry out is business as
presently conducted and as proposed to be conducted, and (d) is in compliance
with all Requirements of Law.  No authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other Person is
necessary or required in connection with the execution, delivery, performance,
validity or enforceability of this Deed of Trust.
 
Section 3.03.     Power and Authority; Enforceability; No Conflicts.  The
Grantor has the power and authority, and the legal right, to execute and deliver
this Deed of Trust and perform its obligations hereunder.  The Grantor has taken
all necessary action to authorize the execution, delivery and performance of
this Deed of Trust.  This Deed of Trust constitutes, and each other Loan
Document to which the Grantor is a party upon execution and delivery by the
Grantor will constitute, a legal, valid and binding obligation of the Grantor,
enforceable against the Grantor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).  The execution,
delivery and performance of this Deed of Trust do not and will not violate,
contravene, conflict with or create or constitute a breach of or default under
any applicable Requirement of Law or any Contractual Obligation (including,
without limitation, any Insurance Requirement) binding upon the Grantor or
relating to the Property and will not result in, or require, the creation or
imposition of any Lien on any of the Grantor's properties or assets pursuant to
any Requirement of Law or any such Contractual Obligation (other than the Lien
created by this Deed of Trust and any other Security Document).
 
Section 3.04.      Impositions and Other Charges.
 
(a)           The Grantor has filed all federal, state, county, municipal and
city income and other tax returns required to have been filed by it with any
Governmental Authority as of the date hereof and has paid all Impositions that
have become due and payable pursuant to such returns or pursuant to any
assessments or charges received by it.  The Grantor has no knowledge of any
basis for any additional assessment or charge for Impositions for prior years.
 
(b)           The Grantor has paid in full all amounts owing or claimed for
labor, material, supplies, personal property (whether or not constituting
Equipment hereunder) and services of every kind and character used, provided or
installed in or affixed or attached to the Property or any part thereof, and no
claim for any of the foregoing exists.
 
Section 3.05.     No Default.  No Default or Event of Default has occurred and
is continuing.  No violation, default or event of default has occurred under any
Related Agreement, Permit or Insurance Requirement that could reasonably be
expected to have a Material Adverse Effect on any of the Property.

 
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Section 3.06.     Requirements of Law; Land Use Requirements.
 
(a)           The Property and the present and contemplated use, ownership,
occupancy and operation thereof comply with all Requirements of Law, Related
Agreements and Insurance Requirements.
 
(b)           The Grantor has obtained all Permits required for the use,
ownership, operation, enjoyment, or occupation of the Property.
 
(c)           All of the Improvements lie wholly within the boundaries and
building restriction lines of the Land.  No improvements on adjoining properties
encroach upon the Land.
 
(d)           The Premises are taxed separately without regard to any other real
estate, and the Premises constitute a legally subdivided lot under and in
compliance with all subdivision laws and similar Requirements of Law (or, if not
subdivided, no subdivision or platting of the Premises is required under any
Requirements of Law), and for all purposes may be mortgaged, conveyed or dealt
with as an independent lot.
 
(e)           The Premises are not located in any area identified by the Federal
Emergency Management Agency as having special flood hazards.
 
Section 3.07.     Utilities; Access.
 
(a)           The Property is served by all necessary water, sanitary and storm
sewer, drainage, electric, steam, gas, telephone, cable and other utility
services and facilities which services and facilities are sufficient to serve
the current and anticipated future use and occupancy of the Property.
 
(b)           The Property has legal access to all streets or roads necessary
for the operation of the Property, which have been fully completed and properly
dedicated, accepted or otherwise legally constructed as a public street or road
(including, as appropriate, access over properly-granted, perpetual, private
rights of way or easements) sufficient to serve the current and anticipated
future use, occupancy and operation of the Property.
 
Section 3.08.     No Casualty or Condemnation; No Litigation.
 
(a)           No Casualty has occurred with respect to any of the Property and
no Condemnation is pending, proposed or threatened against any of the Property.
 
(b)           No suit, action or other legal proceeding, whether judicial,
administrative or otherwise, is pending or threatened or, to the best of the
Grantor's knowledge, contemplated against or affecting the Grantor or any of the
Property.

 
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Section 3.09.     Disclosure.  All reports, statements, certificates and other
information furnished by or on behalf of the Grantor to the Beneficiary or the
Trustee in connection with this Deed of Trust or the other Loan Documents, or
the transactions contemplated thereunder or hereunder, are true and correct in
all material respects and do not omit to state any fact or circumstance
necessary to make the statements contained therein not misleading.
 
Section 3.10.      Tax Status.  The Grantor is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
 
ARTICLE IV
 
COVENANTS
 
The Grantor hereby covenants and agrees with the Beneficiary that:
 
Section 4.01.     Payment and Performance of Obligations.  The Grantor shall
duly pay and perform its Obligations at the times and places and in the manner
specified in this Deed of Trust and the other Loan Documents.
 
Section 4.02.     Good Standing.  The Grantor shall maintain in good standing
its organizational existence, franchises, rights and privileges under the law of
the jurisdiction of its formation and its right to transact business in the
State of Texas, and will not dissolve, liquidate or terminate its legal
existence.
 
Section 4.03.     Care of Property.  The Grantor (a) shall cause the
representations and warranties contained in Article III to at all times be true
and correct in each and every respect; (b) shall not cause or permit the
Property to be misused, wasted, altered, disfigured, or damaged in any material
manner or (except, subject to the provisions of this Section, for reasonable
wear and tear) to deteriorate in any material manner; (c) shall operate and
maintain the Property, or cause the same to be operated and maintained, in good
order, repair and condition; (d) shall promptly make, or cause to be made, all
repairs, replacements, renewals, restorations, alterations, additions and
improvements of and to the Property, whether interior or exterior, structural or
nonstructural, foreseen or unforeseen, that are necessary or appropriate to keep
the Property in good order, repair and condition, all of which repairs,
replacements, renewals, restorations, alterations, additions and improvements
shall be equal in quality to or better than the Property as of the date hereof;
(e) shall do or cause others to do all shoring of the Property, including the
foundations and walls thereof, and to take all other actions necessary or
appropriate for the preservation and safety thereof by reason of or in
connection with any excavation or other construction operation on the Property,
whether or not the Grantor shall be required by any Requirement of Law to take
such action or be liable for failure to do so; (f) shall not initiate, support
or acquiesce in any change in the applicable zoning adversely affecting the
Property, seek any variance (or any change in any variance) under the zoning
adversely affecting the Property, execute or file any easement, subdivision or
other plat or map or any other public or private restriction adversely affecting
the Property or consent to any of the foregoing; (g) shall, promptly after
receiving notice or obtaining knowledge of any proposed or threatened change in
the zoning adversely affecting the Property which would result in the current
use of such Property being a non-conforming use, notify the Beneficiary thereof
and diligently contest the same by any action or proceeding deemed reasonably
appropriate by the Grantor or reasonably requested by the Beneficiary; (h) shall
not abandon the Property; (i) shall continuously use the Property as
[____________]; (j) shall not modify, amend or supplement any Permitted
Exception; (k) shall not permit any Property to be removed at any time from the
Premises unless it is (A) removed temporarily for maintenance, repair or
restoration, or (B) replaced by other property of equivalent suitability, use
and value that is owned by the Grantor free and clear of any Liens, and (l)
shall not permit any drilling or exploration for extraction, removal, or
production of any Minerals from the surface or the subsurface of the Land,
regardless of the depth thereof or the method of mining or extraction.
 
 
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Section 4.04.     Requirements of Law; Insurance Requirements; Claims; Etc.  The
Grantor shall (a) duly and punctually comply in all respects with all Related
Agreements, Requirements of Law, and Insurance Requirements; (b) pay, bond, or
otherwise discharge, from time to time when the same become due, all claims and
demands of mechanics, materialmen, suppliers, laborers and others which, if
unpaid, might result in, or permit the creation of, a Lien on the Property; (c)
procure, maintain and duly and punctually comply in all respects with all
Permits required for any construction, reconstruction, repair, alteration,
addition, improvement, maintenance, management, use, ownership, occupancy or
operation of the Property; (d) promptly notify the Beneficiary of the receipt by
the Grantor of any notice of a default under or violation of any Related
Agreement, Requirement of Law, or Insurance Requirement or any likely or actual
termination of any Related Agreement, Permit or Insurance Policy and furnish to
the Beneficiary a copy of such notice of default or termination; (e) promptly
after obtaining knowledge thereof notify the Beneficiary of any event or
condition that, with or without the giving of notice or the passage of time or
both, would constitute a default or violation under any Related Agreement,
Requirement of Law, or Insurance Requirement or a termination of any Related
Agreement, Permit or Insurance Policy and the action being taken to remedy such
condition; and (f) upon request, promptly furnish to the Beneficiary a copy of
any Permit obtained by the Grantor with respect to the Property.
 
Section 4.05.     Impositions.  The Grantor shall (a) duly and punctually pay
(or cause to be paid) all Impositions prior to the delinquency date thereof; (b)
duly and punctually file all returns and other statements required to be filed
with respect to any Imposition; (c) promptly notify the Beneficiary of the
receipt by the Grantor of any notice of default in the payment of any Imposition
or in the filing of any return or other statement relating to any Imposition and
simultaneously furnish to the Beneficiary a copy of such notice of default; (d)
not make any deduction from or claim any credit on any Obligation by reason of
any Imposition and, to the extent permitted by applicable law, hereby waives any
right to do so; and (e) upon reasonable request, promptly deliver to the
Beneficiary (A) a certificate of the Grantor evidencing that the Grantor has
complied with the provisions of this Section 4.05, accompanied to the extent
required by copies of official receipts evidencing the payment of the
Impositions, and (B) such other information and documents with respect to the
matters referred to in this Section as the Grantor shall reasonably request.
 
Section 4.06.     Insurance.
 
(a)           The Grantor shall maintain (or cause to be maintained) in full
force and effect all Insurance Policies with respect to the Property as required
by Section 4.22 of the Credit Agreement.
 
 
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(b)           All Insurance Policies required under this Section shall be fully
paid for, nonassessable and shall contain such provisions, endorsements and
expiration dates, as the Beneficiary shall from time to time request, and shall
be in such form and amounts, and be issued by such insurance companies as shall
be approved by the Beneficiary.  Without limiting the generality of the
foregoing, with respect to each Insurance Policy, the Grantor shall cause (i)
the Beneficiary to be named as "lender loss payee" on a standard noncontributory
mortgagee endorsement (or its equivalent) naming the Beneficiary or its designee
as the party to receive Insurance Proceeds, (ii) the insurance carrier to issue
a waiver of subrogation endorsement.  All liability Insurance Policies shall
name the Beneficiary as an additional insured by endorsement.  Each Insurance
Policy shall by its terms remain valid and insure the Beneficiary's interest
regardless of any (i) named, insured's act, failure to act, negligence, or
violation of warranties, declarations or conditions, (ii) occupancy or use of
the Premises for purposes more hazardous than those permitted, or (iii) the
exercise by the Beneficiary of any remedies under any of the Loan Documents or
applicable law.  Each Insurance Policy shall provide that (i) it will not be
cancelled, terminated, not renewed, amended or materially altered (including by
reduction in the scope or limits of coverage) without at least thirty (30) days
prior notice by the insurance carrier to the Beneficiary, (ii) the insurance
carrier waives any right to claim any premiums and commissions against the
Beneficiary, provided that the policy need not waive the requirement that the
premium be paid in order for a claim to be paid to the insured, and (iii) the
Beneficiary shall be allowed to pay premiums to continue such Insurance Policy
upon notice of cancellation for nonpayment.
 
(c)           Duplicate original policies evidencing the insurance required
under this Section and any additional insurance taken out on the Property by or
on behalf of the Grantor shall be deposited with and held by the Beneficiary
and, in addition, the Grantor shall deliver to the Beneficiary (i) upon the
request of the Beneficiary receipts evidencing payment of all premiums thereon
and (ii) duplicate original renewal policies with evidence satisfactory to the
Beneficiary of payment of all premiums thereon, at least fifteen (15) days prior
to the expiration of each such policy.  In lieu of the duplicate original
policies provided herein to be delivered to the Beneficiary, the Grantor may
deliver original certificates from the issuing insurance company, evidencing
that such policies are in full force and effect and containing information
which, in the Beneficiary's judgment, is sufficient to allow the Beneficiary to
determine whether such policies comply with the requirements of this Section.
 
(d)           The Grantor shall not maintain separate or additional insurance
concurrent in form or contributing in the event of loss with that required under
this Section unless endorsed in favor of Beneficiary in accordance with the
requirements of this Section and otherwise approved by the Beneficiary in all
respects.
 
 
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(e)           In the event of a Casualty [involving an amount in excess of
$_____________], (i) the Grantor shall promptly give notice thereof to the
Beneficiary describing in detail reasonably satisfactory to the Beneficiary the
nature and extent of such Casualty, the work required to Restore the Property
affected thereby, and an estimate of the cost of Restoration, itemized in detail
reasonably satisfactory to the Beneficiary, (ii) the Grantor shall promptly make
proof of loss under the applicable Insurance Policies and diligently pursue to
conclusion its claim for Insurance Proceeds payable thereunder and any suit,
action or other proceeding necessary or appropriate to obtain payment of such
Insurance Proceeds, and (iii) if an Event of Default shall have occurred and be
continuing, (A) the Grantor shall have no right to settle, and shall not settle,
any such claim or proceeding without the prior written consent of the
Beneficiary, (B) the Grantor shall, upon receipt, turn over to the Beneficiary
any and all Insurance Proceeds received by the Grantor under any Insurance
Policies in the exact form received (duly indorsed by the Grantor to the
Administrative Agent) for application against the Obligations in accordance with
Section 6.05, and (C) the Grantor authorizes and empowers the Beneficiary to
enforce, settle or compromise any claim in connection with such insurance and to
all Insurance Proceeds thereof and apply such Insurance Proceeds against the
Obligations in accordance with Section 6.05.  If no Event of Default shall have
occurred and be continuing, all Insurance Proceeds with respect to a Casualty
shall constitute Net Cash Proceeds governed by Section 2.05(d) of the Credit
Agreement.
 
(f)           In the event of any foreclosure of this Deed of Trust or other
transfer of title to the Property in extinguishment in whole or in part of the
Obligations, all right, title and interest of the Grantor in and to any
Insurance Policies then in effect with respect to the Property and all Insurance
Proceeds payable thereunder shall thereupon vest in the Beneficiary or the
purchaser or other transferee and the Grantor hereby appoints the Beneficiary
its attorney-in-fact, in the Grantor's name, to assign and transfer all such
policies and proceeds to such purchaser or grantee.
 
(g)           The Grantor irrevocably authorizes the Beneficiary, at any time
and from time to time, to communicate directly with the Grantor's insurance
carrier(s), broker(s) and tenant(s) about any Insurance Policies required
hereunder.  Any determination or request that the Beneficiary makes about any
Insurance Policy shall impose no liability or obligation on the
Beneficiary.  The Grantor shall not rely on any such determination or request
(or its absence) as an implied or express representation about the adequacy of
the Grantor's insurance.  The Grantor acknowledges that any such determination
or request would be made solely for the Beneficiary's own benefit and not for
the Grantor's.  The Grantor retains sole responsibility for the adequacy and
prudence of its insurance program.
 
Section 4.07.     Books and Records; Inspection; Information.
 
(a)           The Grantor shall keep and maintain complete and accurate books
and records in accordance with GAAP with respect to all operations of or
transactions involving the Property.
 
(b)           The Grantor shall permit the Beneficiary and the Trustee, and each
of their respective agents, representatives and employees, at any time and from
time to time, upon reasonable prior written notice to the Grantor and at the
Grantor's sole cost and expense, to inspect the Property or any part thereof and
any of the Grantor's books and records relating thereto.
 
(c)           Upon request by the Beneficiary, the Grantor shall deliver to the
Beneficiary promptly after such request or, if requested by the Beneficiary, on
a continuing or periodic basis, any information, certificates and documents with
respect to the matters referred to in this Deed of Trust as the Beneficiary
shall reasonably request in order to protect its rights under this Deed of Trust
or with respect to the Property.
 
 
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Section 4.08.     Condemnation.  In the event of a Condemnation, or the
commencement of any negotiation or proceeding that might result in a
Condemnation, or in the event of any proposed or threatened Condemnation, (i)
the Grantor shall promptly give notice thereof to the Beneficiary describing in
detail reasonably satisfactory to the Beneficiary the nature and extent of such
Condemnation, negotiation or proceeding, the work required to Restore the
Property affected by such Condemnation and an estimate of the cost of such
Restoration, itemized in detail reasonably satisfactory to the Beneficiary, (ii)
the Grantor shall do all things deemed necessary or appropriate by the Grantor
or requested by the Beneficiary to preserve the Beneficiary's interest in the
Property and promptly make claim for Condemnation Awards payable with respect
thereto and diligently pursue to conclusion such claim for such Condemnation
Awards and any suit, action or other proceeding necessary or appropriate to
obtain payment thereof, and (iii) if an Event of Default shall have occurred and
be continuing, (A) the Grantor shall have no right to settle, and shall not
settle, any such negotiation, claim or proceeding without the prior written
consent of the Beneficiary, (B) the Grantor shall turn over to the Beneficiary
any and all payments received by the Grantor in respect of Condemnation Awards
in the exact form received (duly indorsed by the Grantor to the Administrative
Agent) for application against the Obligations in accordance with Section 6.05,
and (C) the Grantor authorizes and empowers the Beneficiary to enforce, settle
or compromise any claim in connection with such Condemnation, negotiation, or
proceeding and to collect and receive all Condemnation Awards in respect thereof
and apply such Condemnation Awards against the Obligations in accordance with
Section 6.05.  If no Event of Default shall have occurred and be continuing, all
proceeds of Condemnation Awards shall constitute Net Cash Proceeds governed by
Section 2.05(d) of the Credit Agreement.
 
Section 4.09.     Liens.  The Grantor shall not create or permit to be created
or to remain, and shall immediately discharge or cause to be discharged, any
Lien on the Property, in each case (a) whether voluntarily or involuntarily
created, and (b) whether directly or indirectly a Lien thereon, and (c) whether
or not subordinated hereto, except Permitted Exceptions and the Lien of this
Deed of Trust.  The provisions of this Section 4.09 shall apply to each and
every Lien (other than Permitted Exceptions) on the Property, regardless of
whether or not a consent to, or waiver of a right to consent to, any other Lien
thereon has been previously obtained in accordance with the terms of the Loan
Documents.
 
Section 4.10.     Protection of Liens; Defense of Action.  If the Lien, security
interest, validity, perfection or priority of this Deed of Trust, or if title or
any of the rights of the Grantor, the Trustee or the Beneficiary in or to any of
the Property, shall be endangered or questioned, or shall be challenged directly
or indirectly, or if any action, suit or other proceeding is instituted against
the Grantor, the Trustee or the Beneficiary with respect thereto, the Grantor
shall promptly notify the Trustee and the Beneficiary in writing thereof and
will immediately cure any defect which may be developed or claimed, and will
take all necessary and proper steps for the defense of such action, suit or
other proceeding, including the employment of counsel, the prosecution or
defense of litigation and, subject to the Beneficiary's approval, the
compromise, release or discharge of any and all adverse claims.  The Trustee and
the Beneficiary, or either of them (whether or not named as a party to such
actions or proceedings), are hereby authorized and empowered (but shall not be
obligated) to take such additional action as they may deem necessary or proper
for the defense of any such action or proceeding or the perfection or protection
of the Lien, security interest, validity, perfection or priority of this Deed of
Trust or of such title or rights, including the employment of counsel, the
prosecution or defense of litigation, the compromise, release or discharge of
such adverse claims, the purchase of any tax title and the removal of prior
Liens and security interests.  The Grantor shall, on demand, reimburse the
Trustee and the Beneficiary for all expenses (including attorneys' fees and
disbursements) incurred by either of them in connection with the foregoing
matters, and the party incurring such expenses shall be subrogated to all rights
of the Person receiving such payment.

 
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Section 4.11.     Transfer.  The Grantor shall not Transfer, or suffer or permit
any Transfer of, the Property or any part thereof or interest therein, except as
expressly permitted by Section 6.05 of the Credit Agreement.  The provisions of
this Section shall apply to each and every Transfer of the Property or any
interest therein, regardless of whether or not a consent to, or waiver of a
right to consent to, any other Transfer thereof has been previously obtained in
accordance with the provisions of the Loan Documents.
 
Section 4.12.     Increased Costs.  In the event of the enactment after the date
hereof of any applicable law deducting from the value of the Property for the
purpose of taxation any Lien thereon, or changing in any way the laws for the
taxation of mortgages, deeds of trust or other Liens or obligations secured
thereby, or the manner of collection of such taxes, so as to affect this Deed of
Trust, the Obligations secured thereby, the manner of collection of such taxes,
the Beneficiary or any other Secured Party, then, and in such event, to the
extent permitted by applicable law, the Grantor shall, on demand, pay to the
Beneficiary or such Secured Party, or reimburse the Beneficiary or such Secured
Party for the payment of, all taxes, assessments, or other charges for which the
Beneficiary or such other Secured Party is or may be liable as a result thereof,
provided that if any such payment or reimbursement shall be unlawful, then the
Beneficiary may, at its option, declare the Obligations immediately due and
payable or require the Grantor to pay or reimburse the Beneficiary for payment
of the lawful portion thereof.
 
Section 4.13.     Further Assurances.  The Grantor shall, at the request of the
Trustee or the Beneficiary, (a) promptly correct any defect, error or omission
which may be discovered in the contents of this Deed of Trust or any other Loan
Document to which the Grantor is a party, or in the execution, acknowledgment or
recordation thereof or hereof, and (b) promptly do, execute, acknowledge and
deliver any and all such further acts, deeds, conveyances, mortgages, deeds of
trust, assignments, estoppel certificates, financing statements and
continuations thereof, notices of assignment, transfers, certificates,
assurances and other instruments as the Trustee or the Beneficiary may require
from time to time in order to effectuate the purposes of this Deed of Trust, to
subject to the Lien and security interest hereby created any of the Grantor's
properties, rights or interests covered or now or hereafter intended to be
covered hereby, to perfect and maintain said Lien and security interest, and to
convey, grant, assign, transfer and confirm unto the Trustee and the Beneficiary
the rights granted or now or hereafter intended to be granted to the Trustee or
the Beneficiary hereunder or under any other instrument executed in connection
with this Deed of Trust or which the Grantor may be or become bound to convey,
mortgage or assign to the Trustee or the Beneficiary in order to carry out the
intention or facilitate the performance of the provisions of this Deed of Trust.
 
 
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Section 4.14.     Filing and Recording.  The Grantor shall, at the request of
the Trustee or the Beneficiary, promptly record and re-record, file and refile
and register and re-register this Deed of Trust, any financing or continuation
statements and every other instrument in addition or supplemental to any thereof
that shall be required by law in order to perfect and maintain the validity,
effectiveness and priority of this Deed of Trust and the Lien and security
interest intended to be created hereby, or to subject after-acquired property of
the Grantor or proceeds to such Lien and security interest, in such manner and
places and within such times as may be necessary to accomplish such purposes and
to preserve and protect the rights and remedies of the Trustee or the
Beneficiary.  The Grantor will furnish to the Trustee and the Beneficiary
evidence satisfactory to them of every such recording, filing or registration.
 
Section 4.15.     Permitted Contests.  The Grantor may contest, by appropriate
proceedings conducted in good faith and with due diligence, any Requirement of
Law, any Insurance Requirement, any Imposition or Lien therefor on the Property
or any interest therein, or any Lien of any laborer, mechanic, materialman,
supplier or vendor on the Property or any interest therein, provided (a) prior
written notice of the contest is given to the Beneficiary, (b) none of the
Property is in danger of being sold, forfeited or lost while such proceedings
are pending; (c) the Beneficiary and the other Secured Parties are not in danger
of any criminal or civil penalty or any other liability for failure to comply
therewith and none of the Property is subject to the imposition of any Lien as a
result of such failure which is not properly contested pursuant to this Section
4.15; (d) in the case of any Insurance Requirement, no Insurance Policy or
coverage is in danger of being forfeited or lost while such proceedings are
pending; and (e) in the case of (A) any Lien of a laborer, mechanic,
materialman, supplier or vendor, or (B) any Imposition or Lien therefor, such
proceedings suspend the foreclosure of such Lien or any other collection thereof
from the Property and all interests therein and Grantor shall bond such Lien to
the satisfaction of the Beneficiary.  Upon request, the Grantor shall promptly
deliver to the Beneficiary (x) a certificate of the Grantor describing in detail
satisfactory to the Beneficiary the contests pending as of the date thereof and
evidencing that the Grantor has complied with the provisions of this Section
with respect thereto and (y) such other information and documents with respect
to the contests conducted pursuant to this Section as the Beneficiary shall
request.
 
ARTICLE V
 
ASSIGNMENT OF RENTS AND LEASES
 
Section 5.01.     Assignment of Rents and Leases.
 
(a)           The Grantor hereby irrevocably, absolutely and unconditionally
assigns to the Beneficiary all of the Grantor's right, title and interest in and
to all Leases and Rents.  Subject to the terms of Section 5.02, it is intended
by the Grantor that the assignments of Leases and Rents contained in Sections
2.01(f) and 2.01(g) and this Section 5.01 are and shall be present, irrevocable,
absolute and unconditional assignments of the Leases and Rents.  Subject to the
terms of this Article V, the Beneficiary grants to the Grantor a license to
collect and receive all Rents upon, but not prior to thirty (30) days before,
the due date thereof and to exercise all other rights of the Grantor under the
Leases.  If an Event of Default shall occur and be continuing, the foregoing
license shall automatically terminate and the Beneficiary shall have the
absolute, immediate and continuing right to collect and receive all Rents and
exercise all of its rights and remedies under this Deed of Trust, the other Loan
Documents, and applicable law.
 
 
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(b)           At the request of the Beneficiary, the Grantor shall promptly
execute, acknowledge, deliver, record, register and file any additional general
assignment of the Rents and Leases or specific assignment of any Lease which the
Beneficiary may require from time to time (all in form and substance
satisfactory to the Beneficiary) to effectuate, complete, perfect, continue or
preserve the assignments of the Leases and Rents under Section 2.01(f), Section
2.01(g) and Section 5.01(a).
 
(c)           If an Event of Default shall occur and be continuing, (i) the
Grantor shall promptly pay to the Beneficiary all Rents, all Rent prepayments
and all security or other deposits paid to or held by the Grantor pursuant to
any of the Leases, (ii) Rents received by the Beneficiary shall be applied by
the Beneficiary in accordance with Section 6.05, and (iii) any security or other
deposits actually received by the Beneficiary shall be held, applied and
disbursed by the Beneficiary as provided in the applicable Leases and applicable
law.  Without impairing any of its rights hereunder or under any of the other
Loan Documents, the Beneficiary may, at its option, at any time and from time to
time, release to the Grantor any Rents received by the Beneficiary.
 
(d)           Neither the assignments of Rents and Leases contained in Section
2.01(f), Section 2.01(g) and this Section 5.01 nor the receipt of Rents by the
Beneficiary shall effect or constitute a payment of the Obligations.  No credit
against the Obligations shall be given for any Rents received by the Beneficiary
unless and until such Rents are received by the Beneficiary in the form of cash
or immediately available funds and applied by the Beneficiary in accordance with
Section 6.05.
 
(e)           No Assumption of Leases; Etc.  Neither the acceptance hereof nor
the exercise of the rights and remedies hereunder nor any other action on the
part of the Beneficiary or any Person exercising the rights of the Beneficiary
hereunder shall be construed to be an assumption by the Beneficiary or any such
Person of, or to otherwise make the Beneficiary or such Person liable or
responsible for, any of the obligations of the Grantor under or with respect to
the Leases or for any Rent, security deposit or other amount delivered to the
Grantor, provided that the Beneficiary or any such Person exercising the rights
of the Beneficiary hereunder shall be accountable for any Rents, security
deposits or other amounts actually received by the Beneficiary or such Person,
as the case may be.  Neither the acceptance hereof nor the exercise of the
rights and remedies hereunder nor any other action on the part of the
Beneficiary or any Person exercising the rights of the Beneficiary hereunder
shall be construed to obligate the Beneficiary or any such Person to take any
action under or with respect to the Leases or with respect to the Property, to
incur any expense or perform or discharge any duty or obligation under or with
respect to the Leases or with respect to the Property, to appear in or defend
any action or proceeding relating to the Leases or the Property, to constitute
the Beneficiary as a mortgagee in possession, or to be liable in any way for any
injury or damage to person or property sustained by any Person in or about the
Property.
 
(f)           Leases.  The Grantor represents and warrants that none of the
Property is subject to a Lease.  The Grantor shall not enter into any Lease with
respect to all or any part of the Property without the prior written consent of
the Beneficiary.

 
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ARTICLE VI
 
RIGHTS AND REMEDIES
 
Section 6.01.     Events of Default.
 
(a)           Any Event of Default under the Credit Agreement shall constitute
an Event of Default hereunder.
 
(b)           All notice and cure periods provided in the Credit Agreement and
the other Loan Documents shall run concurrently with any notice of cure periods
provided under applicable law.
 
Section 6.02.     Events of Default; Remedies.  If any Event of Default shall
occur and be continuing, the Beneficiary may (or, to the extent permitted or
required by applicable law, acting by and through the Trustee, may), in addition
to and without impairing or otherwise affecting any other rights, remedies,
powers and privileges of or available to the Beneficiary (or the Trustee, if
required by applicable law or requested by the Beneficiary) under this Deed of
Trust, any other Loan Document or other agreement, any applicable laws now or
hereafter in effect, in equity or otherwise, immediately exercise any and all
rights, powers and remedies under this Deed of Trust, the other Loan Documents,
and applicable law, and take any other action personally or by or through its
representatives, attorneys and agents, without any notice or demand (all of
which are hereby waived), as it deems necessary or advisable to protect and
enforce its rights and remedies against the Grantor and in, to and under the
Property, including, without limitation, any of the following actions, each of
which shall be cumulative and may be pursued concurrently, successively,
separately or otherwise, at such time and in such order and manner as the
Beneficiary (or the Trustee, if required by applicable law or requested by the
Beneficiary) may determine in its or their sole discretion, without impairing or
otherwise affecting any other rights, remedies, powers and privileges of or
available to the Beneficiary, any other Secured Party or the Trustee under this
Deed of Trust, any other Loan Document, any other agreement, any applicable laws
now or hereafter in effect, in equity or otherwise:
 
(a)           Subject to Section 7.01 of the Credit Agreement, declare all of
the Obligations (including the entire principal balance thereof, all accrued and
unpaid interest and any premium thereon and all other such sums secured hereby)
to be immediately due and payable, and upon any such declaration all of the
Obligations shall become and be immediately due and payable, without
presentment, demand, protest, notice of acceleration, notice of intent to
accelerate, or further notice of any kind, all of which are hereby expressly
waived by the Grantor; or
 
(b)           Institute a proceeding or proceedings for the complete or partial
foreclosure of this Deed of Trust under the power of sale hereunder or under any
applicable law; or

 
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(c)           To the extent permitted by applicable law, sell the Property, and
all estate, right, title, interest, claim and demand of the Grantor therein, and
all rights of redemption thereof, at one or more sales, as an entirety or in
parcels, with such elements of real and/or personal property (and, to the extent
permitted by applicable law, may elect to deem all of the Property to be real
property for purposes thereof), and at such time and place and upon such terms
as it may deem expedient, or as may be required by applicable law, and in the
event of a sale, by foreclosure or otherwise, of less than all of the Property,
this Deed of Trust shall continue as a Lien and security interest on the
remaining portion of the Property; or
 
(d)           Institute an action, suit or proceeding for the specific
performance of any of the provisions contained in this Deed of Trust or any
other Loan Document; or
 
(e)           Sue and recover a judgment on the Obligations or any part thereof;
or
 
(f)           Apply for the appointment of a receiver, custodian, trustee,
liquidator or conservator of the Property, to be invested with the fullest
powers permitted under applicable law, as a matter of right and without regard
to or the necessity to disprove the adequacy of the security for the Obligations
or the solvency of the Grantor or any other Person liable for the payment of the
Obligations, and the Grantor and each other Person so liable waives or shall be
deemed to have waived such necessity and consents or shall be deemed to have
consented to such appointment; or
 
(g)           Enter upon the Property, and exclude the Grantor and its managers,
employees, contractors, agents and other representatives therefrom, without
liability for trespass, damages or otherwise, and take possession of all other
Property and all books, records and accounts relating thereto, and the Grantor
agrees to surrender possession of the Property and of such books, records and
accounts to the Trustee or the Beneficiary on demand after the occurrence of any
Event of Default; and having and holding the same, the Person exercising the
rights under this clause may use, operate, manage, preserve, control and
otherwise deal therewith and conduct the business thereof, either personally or
by its managers, employees, contractors, agents and other representatives,
without interference from the Grantor or any of its managers, employees,
contractors, agents and other representatives; and upon each such entry and from
time to time thereafter may, at the expense of the Grantor and the Property,
without interference by the Grantor or any of its managers, employees,
contractors, agents and other representatives, the Person exercising the rights
under this clause may, as such Person deems appropriate and without any
obligation to so act, (i) either by purchase, repair or construction, maintain
and restore the Property, (ii) insure or reinsure the same, (iii) make all
necessary or proper repairs, renewals, replacements, alterations, additions,
betterments and improvements thereto and thereon, (iv) complete the construction
of any of the Improvements and, in the course of such completion, make such
changes in the contemplated or completed Improvements as it may deem advisable,
and (v) exercise all rights and powers of the Grantor with respect to the
Property, either in the Grantor's name or otherwise, including the right to
make, cancel, enforce or modify Leases, obtain and evict tenants and subtenants
on such terms as it shall deem advisable; and the Person exercising the rights
under this clause shall not be liable to account for any action taken hereunder
and shall not be liable for any loss sustained by the Grantor resulting from any
failure to let the Property or from any other act or omission of such Person; or
 
 
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(h)           With or without entry upon or taking possession of the Property,
in the name of the Beneficiary or the Trustee (as required by law and whichever
Person is exercising rights under this clause) or, at such Persons' option, in
the name of the Grantor, collect and receive all earnings, revenues, royalties,
Rents, issues, profits, income, proceeds and cash collateral arising or derived
from or in connection with any of the Property, and after deducting therefrom
all fees, costs and expenses of every kind or character incurred by the Trustee
or the Beneficiary (or Trustee) in collecting and receiving the same and in
using, operating, managing, repairing, preserving and controlling the Property,
and otherwise in exercising the Trustee's or the Beneficiary's rights under this
Section, including, without limitation, all amounts necessary to pay
Impositions, insurance premiums and other charges in connection with the
Property, as well as compensation for the services of the Trustee, the
Beneficiary and their respective managers, employees, attorneys, contractors,
agents or other representatives, apply the remainder as provided in Section
6.05; or
 
(i)           Release any portion of the Property for such consideration as the
Trustee or the Beneficiary may require without, as to the remainder of the
Property, in any way impairing or affecting the Lien or priority of this Deed of
Trust, or improving the position of any subordinate lienholder with respect
thereto, except to the extent that the Obligations shall have been reduced by
the actual monetary consideration, if any, received by the Trustee or the
Beneficiary for such release, and may accept by assignment, pledge or otherwise
any other property in place thereof as the Trustee or the Beneficiary may
require without being accountable for so doing to any other Lien; or
 
(j)           Take any actions permitted under the UCC; or
 
(k)           Exercise any statutory or common law power of sale; or
 
(l)           Take any other action, or pursue any other right or remedy, as the
Trustee, the Beneficiary and/or the Secured Parties may have under applicable
law.
 
Section 6.03.     Rights Pertaining to Sales.  The following provisions shall
apply, at the election of the Beneficiary, to any sale or sales of all or any
portion of the Property hereunder, whether made under the power of sale granted
hereunder or by virtue of any judicial proceeding or any judgment or decree of
foreclosure or sale or otherwise:
 
(a)           The Beneficiary (or an agent appointed to act on behalf of the
Beneficiary), the Trustee or the court officer (whichever is the Person
conducting any sale) may conduct any number of sales from time to time.  The
power of sale set forth in Section 2.01 and Section 6.02 hereof shall not be
exhausted by any one or more such sales as to any part of the Property which
shall not have been sold, nor by any sale which is not completed or is defective
in the Trustee's or the Beneficiary's opinion, until the Obligations shall have
been paid in full.
 
(b)           Any sale may be postponed or adjourned by public announcement at
the time and place appointed for such sale or for such postponed or adjourned
sale without further notice.
 
 
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(c)           After each sale, the Beneficiary, the Trustee or an officer of any
court empowered to do so, shall execute and deliver to the purchaser or
purchasers at such sale a good and sufficient instrument or instruments
granting, conveying, assigning and transferring all right, title and interest of
the Grantor in and to the Property sold and shall receive the proceeds of said
sale or sales and apply the same as provided in Section 6.05.  Each of the
Beneficiary and the Trustee is hereby appointed the true and lawful
attorney-in-fact of the Grantor, which appointment is irrevocable and shall be
deemed to be coupled with an interest, in the Grantor's name and stead, to make
all necessary conveyances, assignments, transfers and deliveries of the property
and rights so sold, and for that purpose the Beneficiary or the Trustee may
execute all necessary instruments of conveyance, assignment, transfer and
delivery, and may substitute one or more Persons with like power, the Grantor
hereby ratifying and confirming all that said attorney or such substitute or
substitutes shall lawfully do by virtue thereof.  Nevertheless, the Grantor, if
requested by the Trustee or the Beneficiary, shall ratify and confirm any such
sale or sales by executing and delivering to the Trustee or such purchaser or
purchasers all such instruments as may be advisable, in the Trustee's or the
Beneficiary's judgment, for the purposes designated in such request.
 
(d)           Any and all statements of fact or other recitals made in any of
the instruments referred to in subsection (c) of this Section given by the
Beneficiary or the Trustee as to nonpayment of the Obligations, or as to the
occurrence of any Event of Default, or as to the Beneficiary having declared all
or any of the Obligations to be due and payable, or as to the amount of the
Obligations or as to the request to sell, or as to notice of time, place and
terms of sale and of the property or rights to be sold having been duly given,
or as to the refusal, failure or inability to act of the Trustee, or as to the
appointment of any substitute or successor the Trustee, or as to any other act
or thing having been duly done by the Beneficiary or by such the Trustee, shall
be taken as conclusive and binding as against all other Persons as evidence of
the truth of the facts so stated and recited.  The Beneficiary or the Trustee
may appoint or delegate any one or more Persons as agent to perform any act or
acts necessary or incident to any sale so held, including the posting of notices
and the conduct of sale, but in the name and on behalf of the Trustee.
 
(e)           The receipt of the Beneficiary or the Trustee for the purchase
money paid at any such sale, or the receipt of any other Person authorized to
give same, shall be sufficient discharge therefor to any purchaser of any
property or rights sold as aforesaid, and no such purchaser, or its
representatives, grantees or assigns, after paying such purchase price and
receiving such receipt, shall be bound to see to the application of such
purchase price or any part thereof upon or for any trust or purpose of this Deed
of Trust or, in any manner whatsoever, be answerable for any loss,
misapplication or nonapplication of any such purchase money, or part thereof, or
be bound to inquire as to the authorization, necessity, expediency or regularity
of any such sale.
 
(f)           Any such sale or sales shall operate to divest all of the estate,
right, title, interest, claim and demand whatsoever, whether at law or in
equity, of the Grantor in and to the properties and rights so sold, and shall be
a perpetual bar both at law and in equity against the Grantor and any and all
Persons claiming or who may claim the same, or any part thereof, by, through or
under the Grantor to the fullest extent permitted by applicable law.
 
(g)           At any sale, the Beneficiary may bid for and acquire the Property
sold and, in lieu of paying cash therefor, may make settlement for the purchase
price by causing the Secured Parties to credit against the Obligations,
including the expenses of the sale and the cost of any enforcement proceeding
hereunder, the amount of the bid made therefor to the extent necessary to
satisfy such bid.
 
 
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(h)           If the Grantor or any Person claiming by, through or under the
Grantor shall transfer or fail to surrender possession of the Property, after
the exercise by the Beneficiary or the Trustee of the remedies under Article VI
or after any sale of the Property pursuant hereto, then the Grantor or such
Person shall be deemed a tenant at sufferance of the purchaser at such sale,
subject to eviction by means of summary process for possession of land, or
subject to any other right or remedy available hereunder or under applicable
law.
 
(i)           Upon any sale hereunder, it shall not be necessary for the
Trustee, the Beneficiary or any public officer acting under execution or order
of court to have present or constructively in its possession any or all of the
Property.
 
(j)           In the event a foreclosure hereunder shall be commenced by the
Trustee, the Trustee or the Beneficiary may, at any time before the sale of the
Property, abandon or direct the Trustee to abandon the sale, and may institute
suit for the collection of the Obligations and for the foreclosure of this Deed
of Trust, or in the event that the Trustee or the Beneficiary should institute a
suit for collection of the Obligations, or for the foreclosure of this Deed of
Trust, the Beneficiary may at any time before the entry of final judgment in
said suit dismiss the same and sell the Property in accordance with the
provisions of this Deed of Trust.
 
(k)           The Beneficiary shall have no obligation to clean-up or otherwise
prepare the Property for sale.
 
(l)           The Beneficiary may sell the Property without giving any
warranties as to the Property.  The Beneficiary may disclaim or modify any
warranties of title or the like.
 
Section 6.04.     Additional Provisions as to Remedies.
 
(a)           No right or remedy herein conferred upon or reserved to the
Trustee, the Beneficiary or the Secured Parties is intended to be exclusive of
any other right or remedy, and each and every such right or remedy shall be
cumulative and continuing, shall be in addition to every other right or remedy
given under this Deed of Trust or any other Loan Document or now or hereafter
existing at law or in equity, and may be exercised from time to time and as
often as may be deemed appropriate by the Trustee, the Beneficiary, or the
Secured Parties.
 
(b)           No failure to exercise or delay in exercising any remedy or right
hereunder, under any other Loan Document or under applicable law shall be
construed as a waiver of any Default or Event of Default hereunder or under any
other Loan Document.
 
(c)           No waiver of, failure to exercise or delay in exercising any
remedy or right hereunder, under any other Loan Document or under applicable law
upon any Default or Event of Default hereunder or under any other Loan Document
shall be construed as a waiver of, or otherwise limit the exercise of, such
remedy or right upon any other or subsequent Default hereunder or under any
other Loan Document.
 
(d)           No single or partial exercise of any remedy or right hereunder,
under any other Loan Document or under applicable law upon the occurrence of any
Default or Event of Default hereunder or under any other Loan Document shall
preclude or otherwise limit the exercise of any other remedy or right hereunder,
under any other Loan Document or under applicable law upon such Default or Event
of Default or upon any other or subsequent Default or Event of Default
thereunder or under any other Loan Document.
 
 
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(e)           Neither the Trustee, the Beneficiary nor any Secured Party shall
have any obligation to pursue any rights or remedies it may have under any other
agreement prior to pursuing its rights or remedies under this Deed of Trust or
any other Loan Document.
 
(f)           No recovery of any judgment by the Trustee, the Beneficiary or any
Secured Party and no levy of an execution upon the Property or any other
property of the Grantor shall affect, in any manner or to any extent, the Lien
and security interest of this Deed of Trust upon the Property, or any Liens,
rights, powers or remedies of the Trustee or the Beneficiary hereunder, and such
Liens, rights, powers and remedies shall continue unimpaired as before.
 
(g)           The Trustee and the Beneficiary may resort to any security given
by this Deed of Trust or any other security now given or hereafter existing to
secure the Obligations, in whole or in part, in such portions and in such order
and manner as the Trustee or the Beneficiary may deem advisable, and no such
action shall be construed as a waiver of any of the Liens, rights or benefits
granted hereunder.
 
(h)           The acceptance by the Beneficiary or any other Secured Party of
any payment after the occurrence of a Default or Event of Default shall not be
deemed a waiver or a cure of such Default, and acceptance of any payment less
than any amount then due shall be deemed an acceptance on account only and shall
not be construed as a waiver of any Default or Event of Default hereunder or
under any other Loan Document with respect thereto.
 
(i)           Nothing in this Deed of Trust or any other Loan Document shall
affect the obligations of the Grantor to pay and perform the Obligations in the
manner and at the time and place herein or therein respectively expressed.
 
(j)           In the event that the Beneficiary or the Trustee has proceeded to
enforce any remedy or right hereunder or with respect hereto by foreclosure,
sale, entry or otherwise, it may compromise, discontinue or abandon such
proceeding for any reason without notice to the Grantor or any other Person;
and, in the event that any such proceeding shall be discontinued, abandoned or
determined adversely for any reason, the Grantor, the Beneficiary and the
Trustee shall retain and be restored to their former positions and rights
hereunder with respect to the Property, subject to the Lien hereof.
 
Section 6.05.     Application of Proceeds.  Except as otherwise provided herein
or required under applicable law, the proceeds of any sale of, or other
realization upon, the Property hereunder, whether made pursuant to the power of
sale hereunder, any judicial proceeding or any judgment or decree of foreclosure
or sale or otherwise shall be applied and paid as follows:
 
First:  To the payment of all costs and expenses of any such sale, including
compensation to the Trustee, the Beneficiary, their agents and counsel, and of
any judicial proceeding wherein the same may be made, and of all expenses,
liabilities and advances made or incurred by the Trustee or the Beneficiary
hereunder (including reasonable attorneys' fees and expenses), together with
interest thereon as provided herein;

 
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Second:  To the payment in full of the Obligations in accordance with such order
and manner as the Beneficiary may elect;
 
Third:  To the payment of any other sums secured hereunder or required to be
paid by Grantor pursuant to any provision of this Deed of Trust, the Credit
Agreement, or any other Loan Document;
 
Fourth:  To the extent permitted by applicable law, to be set aside by the
Trustee or the Beneficiary as adequate security in its judgment for the payment
of sums which would have been paid by application under clauses First through
Third above to the Trustee or the Beneficiary, arising out of an obligation or
liability with respect to which the Grantor has agreed to indemnify it, but
which sums are not yet due and payable or liquidated; and
 
Fifth:  To the payment of the surplus, if any, to whomsoever may be lawfully
entitled to receive the same.
 
Section 6.06.     Waivers by the Grantor.  To the fullest extent permitted under
applicable law, the Grantor shall not assert, and hereby irrevocably waives, any
right or defense the Grantor may have under any statute or rule of law or equity
now or hereafter in effect relating to (a) appraisement, valuation, homestead
exemption, extension, moratorium, stay, statute of limitations, redemption,
marshalling of the Property or the other assets of the Grantor, sale of the
Property in any order or notice of deficiency or intention to accelerate any
Obligation; (b) impairment of any right of contribution, subrogation or
reimbursement; (c) any requirement that at any time any action must be taken
against any other Person, any portion of the Property or any other asset of the
Grantor or any other Person; (d) any provision barring or limiting the right of
the Beneficiary or the Trustee to sell any Property after any other sale of any
other Property or any other action against the Grantor or any other Person; (e)
any provision barring, limiting or otherwise affecting the recovery by the
Beneficiary of a deficiency after any sale of the Property; (f) any other
provision of applicable law which might defeat, limit or adversely affect any
right or remedy of the Beneficiary, the Trustee (as applicable) or the Secured
Parties under or with respect to this Deed of Trust or any other Loan Document
as it relates to any Property; or (g) the right of the Beneficiary or the
Trustee to foreclose this Deed of Trust in its own name on behalf of all of the
Secured Parties by judicial actions as the real party in interest without the
necessity of joining any other Secured Party.
 
 
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ARTICLE VII
 
SECURITY AGREEMENT
 
Section 7.01.     Security Agreement under UCC.  To the extent that the Property
includes or constitutes personal property to which Article 9 of the UCC applies,
this Deed of Trust shall also be construed as a security agreement under the
UCC.  To this end, as security for the Obligations, the Grantor hereby grants to
the Beneficiary, for the benefit of the Secured Parties, a security interest in
all of the Property, whether now owned or existing or hereafter arising or
acquired, that constitutes personal property to which Article 9 of the UCC
applies.  The Beneficiary shall have all of the rights and remedies of a secured
party under the UCC with respect to such personal property (including, without
limitation, the right to proceed against all or any portion of such property in
accordance with the rights and remedies available under Section 9.604 of the
UCC) and all other rights and remedies available with respect to personal
property under applicable law.  If an Event of Default shall have occurred, then
in addition to having any other right or remedy available at law or in equity,
the Beneficiary shall have the option of either (a) proceeding under the UCC and
exercising such rights and remedies as may be provided to a secured party by the
UCC with respect to all or any portion of the Property which is personal
property (including, without limitation, taking possession of and selling such
property and exercising any other  right or remedy described in Section 6.02(g))
or (b) treating such property as real property and proceeding with respect to
both the real and personal property constituting the Property in accordance with
the Beneficiary's rights, powers and remedies with respect to the real property
(in which event the default provisions of the UCC shall not apply).  If any
notice of a proposed sale or other disposition of personal property separately
from the real property shall be required by law, such notice shall be deemed
reasonable and proper if given at least ten (10) days before any public sale of
personal property or of the time after which any private sale or other
disposition of personal property is intended to be made.
 
Section 7.02.     Fixture Filing.  Without limiting in any manner the generality
of any other terms and provisions in this Deed of Trust, to the extent that the
Property includes items of personal property that are or are to become fixtures
under applicable law, this Deed of Trust shall constitute a "fixture filing"
within the meaning of the UCC against and with respect to all Property which is
or is to become fixtures and shall be filed in the real property records of
[________ County, Texas].  The information provided in this Section 7.02 is
provided so that this Deed of Trust shall comply with the requirements of the
UCC for a mortgage instrument to be filed as a "fixture filing" and financing
statement.
 
(a)           The Grantor is the "Debtor" and its exact legal name and mailing
address are set forth in the introductory paragraph to this Deed of Trust
immediately preceding Article I.
 
(b)           The Beneficiary is the "Secured Party" and its name and mailing
address from which information concerning the security interest granted herein
may be obtained are also set forth in the preamble of this Deed of Trust
immediately preceding Article I.
 
(c)           The Grantor represents and warrants to the Beneficiary that (i)
the Grantor is the record owner of the Land and the Improvements and the
Property constituting fixtures, (ii) the Grantor is a [corporation] [limited
partnership] [limited liability company] [other] and is duly [incorporated]
[formed] [organized] and validly existing under the laws of [Delaware] [Texas]
[specify jurisdiction of incorporation, formation or organization], (iii) the
Grantor's employer identification number is [_____________], and (iv) the
Grantor's organizational identification number is [____________].
 
(d)           The Grantor will not change (i) its name, (ii) type of
organization, (iii) jurisdiction of organization, (iv) organizational
identification number, federal taxpayer identification number or (v) the
location of its chief executive office or principal place of business without
the prior written consent of the Beneficiary.
 
(e)           The Grantor will not change the location of any of the Property if
such change would cause the Beneficiary's Lien on such Property to lapse or
cease to be perfected.
 
 
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Section 7.03.     Financing Statements.  The Grantor hereby authorizes the
Beneficiary to file or record financing or continuation statements, and
assignments and amendments thereto, and other filing or recording documents or
instruments with respect to the Property without the signature of the Grantor in
such form and in such offices as the Beneficiary determines appropriate to
perfect or maintain the perfection of the Liens of the Beneficiary under this
Deed of Trust.  The Grantor agrees that such financing statements may describe
the Property in the same manner as described in this Deed of Trust or as "all
assets" or "all personal property" of the Grantor, whether now owned or
hereafter existing or acquired by the Grantor, or such other description as the
Beneficiary, in its sole judgment, determines is necessary or advisable.  The
Grantor hereby ratifies each such financing statement and any and all other
financing statements filed prior to the date hereof by the Beneficiary.  A
photographic or other reproduction of this Deed of Trust shall be sufficient as
a financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction.
 
ARTICLE VIII
 
ENVIRONMENTAL MATTERS
 
Section 8.01.     Environmental Representations and Warranties.  The Grantor
represents and warrants that:  (a) there are no Hazardous Materials or
underground storage tanks in, on, or under the Property, except those that are
both (i) in compliance with Environmental Laws and with all Permits issued
pursuant thereto, if any, and (ii) either (A) in amounts not in excess of that
necessary to operate the Property or (B) fully disclosed to and approved by the
Beneficiary in writing pursuant to an Environmental Report; (b) there are no
past, present or threatened Releases of Hazardous Materials in violation of any
Environmental Law and that would require remediation by a Governmental Authority
in, on, under or from the Property except as described in the Environmental
Report; (c) there is no threat of any Release of Hazardous Materials migrating
to the Property except as described in the Environmental Report; (d) there is no
past or present actual or alleged non-compliance with Environmental Laws, or
with Permits issued pursuant thereto, in connection with the Property except as
described in the Environmental Report; (e) the Grantor does not know of, and has
not received, any written or oral notice or other communication from any Person
relating to Hazardous Materials in, on, under or from the Property; and (f) the
Grantor has truthfully and fully provided to the Beneficiary, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property known to the Grantor or contained in the Grantor's files and
records, including but not limited to any reports relating to Hazardous
Materials in, on, under or migrating to or from the Property and/or to the
environmental condition of the Property.

 
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Section 8.02.     Environmental Covenants.  The Grantor covenants and agrees
that so long as the Grantor owns, manages, is in possession of, or otherwise
controls the operation of the Property:  (a) all uses and operations on or of
the Property, whether by the Grantor or any other Person, shall be in compliance
with all Environmental Laws and Permits issued pursuant thereto; (b) there shall
be no Release of Hazardous Materials in, on, under or from the Property; (c)
there shall be no Hazardous Materials in, on, or under the Property, except
those that are both (i) in compliance with all Environmental Laws and with
Permits issued pursuant thereto, if and to the extent required, and (ii) (A) in
amounts not in excess of that necessary to operate the Property or (B) fully
disclosed to and approved by the Beneficiary in writing; (d) the Grantor shall
keep the Property free and clear of all Environmental Liens; (e) the Grantor
shall, at its sole cost and expense, fully and expeditiously cooperate in all
activities pursuant to Section 8.04 below, including but not limited to
providing all relevant information and making knowledgeable persons available
for interviews; (f) the Grantor shall, at its sole cost and expense, perform any
environmental site assessment or other investigation of environmental conditions
in connection with the Property, pursuant to the written request of the
Beneficiary, upon Beneficiary's reasonable belief that the Property is not in
full compliance with all Environmental Laws, and share with the Beneficiary the
reports and other results thereof, and the Beneficiary and other Indemnified
Parties shall be entitled to rely on such reports and other results thereof; (g)
the Grantor shall, at its sole cost and expense, comply with all reasonable
written requests of the Beneficiary to (i) reasonably effectuate remediation of
any Hazardous Materials in, on, under or from the Property; and (ii) comply with
any Environmental Law; (h) the Grantor shall not allow any tenant, operator or
other user of the Property to violate any Environmental Law; and (i) the Grantor
shall immediately notify the Beneficiary in writing after it has become aware of
(A) any presence or Release or threatened Release of Hazardous Materials in, on,
under, from or migrating towards the Property; (B) any actual or alleged
non-compliance with any Environmental Laws related in any way to the Property;
(C) any actual or potential Environmental Lien against the Property; (D) any
required or proposed remediation of environmental conditions on, under or
otherwise relating to the Property; and (E) any written or oral notice or other
communication from any Person of which the Grantor becomes aware from any source
whatsoever (including but not limited to a Governmental Authority) relating in
any way to Hazardous Materials on, in, under, about, migrating toward, or
otherwise relating to the Property.
 
Section 8.03.     Beneficiary's Rights.  The Beneficiary and any other Person
designated by the Beneficiary, including but not limited to any representative
of a Governmental Authority, and any environmental consultant, and any receiver
appointed by any court of competent jurisdiction, shall have the right, but not
the obligation, to enter upon the Property at all reasonable times to assess any
and all aspects of the environmental condition of the Property and its use,
including but not limited to conducting any environmental assessment or audit
(the scope of which shall be determined in the Beneficiary's sole discretion)
and taking samples of soil, groundwater or other water, air, or building
materials, and conducting other invasive testing.  The Grantor shall cooperate
with and provide access to the Beneficiary and any such Person designated by the
Beneficiary.
 
Section 8.04.     Operation and Maintenance Programs.  If recommended by the
Environmental Report or any other environmental assessment or audit of the
Property,  the Grantor shall establish and comply with an operations and
maintenance program with respect to the Property, in form and substance
reasonably acceptable to the Beneficiary, prepared by an environmental
consultant reasonably acceptable to the Beneficiary, which program shall address
any asbestos-containing material or lead based paint that may now or in the
future be detected at or on the Property.  Without limiting the generality of
the preceding sentence, the Beneficiary may require (a) periodic notices or
reports to the Beneficiary in form, substance and at such intervals as the
Beneficiary may specify, (b) an amendment to such operations and maintenance
program to address changing circumstances, laws or other matters, (c) at the
Grantor's sole expense, supplemental examination of the Property by consultants
specified by the Beneficiary, (d) access to the Property by the Beneficiary, its
agents or servicer, to review and assess the environmental condition of the
Property and the Grantor's compliance with any operations and maintenance
program, and (e) variation of the operations and maintenance program in response
to the reports provided by any such consultants.

 
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Section 8.05.     Environmental Definitions.  "Environmental Law" means any
present and future federal, state and local laws, statutes, ordinances, rules,
regulations, standards, policies and other government directives or
requirements, as well as common law, including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act, that apply to the Grantor or the
Property and relate to Hazardous Materials or protection of human health or the
environment.  "Environmental Liens" means all Liens and other encumbrances
imposed pursuant to any Environmental Law, whether due to any act or omission of
the Grantor or any other Person.  "Environmental Report" means the written
reports resulting from  the environmental site assessments of the Property
delivered to the Beneficiary.  "Hazardous Materials" shall mean petroleum and
petroleum products and compounds containing them, including gasoline, diesel
fuel and oil; explosives, flammable materials; radioactive materials;
polychlorinated biphenyls ("PCBs") and compounds containing them; lead and
lead-based paint; toxic mold; asbestos or asbestos-containing materials in any
form that is or could become friable; underground or above-ground storage tanks,
whether empty or containing any substance; any substance the presence of which
on the Property is prohibited by any federal, state or local authority; any
substance that requires special handling; and any other material or substance
now or in the future defined as a "hazardous substance," "hazardous material",
"hazardous waste", "toxic substance", "toxic pollutant", "contaminant", or
"pollutant" within the meaning of any Environmental Law.  "Release" of any
Hazardous Materials includes but is not limited to any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping, disposing or other movement of Hazardous
Materials.
 
 
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Section 8.06.      ENVIRONMENTAL INDEMNIFICATION.
 
(a)           THE GRANTOR SHALL, AT ITS SOLE COST AND EXPENSE, INDEMNIFY,
PROTECT, DEFEND (AT TRIAL AND APPELLATE LEVELS AND WITH ATTORNEYS, CONSULTANTS
AND OTHER EXPERTS SELECTED BY THE GRANTOR AND REASONABLY ACCEPTABLE TO THE
INDEMNIFIED PARTIES), RELEASE AND HOLD HARMLESS EACH INDEMNIFIED PARTY FOR, FROM
AND AGAINST ANY AND ALL CLAIMS, SUITS, LIABILITIES (INCLUDING, WITHOUT
LIMITATION, STRICT LIABILITIES), ACTIONS, PROCEEDINGS, INVESTIGATIONS,
OBLIGATIONS, DEBTS, DAMAGES, LOSSES, COSTS, EXPENSES, DIMINUTIONS IN VALUE,
FINES, PENALTIES, CHARGES, FEES, EXPENSES, JUDGMENTS, ASSESSMENTS, CITATIONS,
DIRECTIVES, LIENS, AWARDS, DEFENSES, AMOUNTS PAID IN SETTLEMENT AND OTHER
AMOUNTS OF WHATEVER KIND OR NATURE (INCLUDING, WITHOUT LIMITATION, ATTORNEYS'
FEES AND DISBURSEMENTS, EXPERT'S FEES AND DISBURSEMENTS, COURT COSTS AND OTHER
COSTS AND EXPENSES) (COLLECTIVELY, "ENVIRONMENTAL LOSSES"), INCLUDING, WITHOUT
LIMITATION, ANY AND ALL ENVIRONMENTAL LOSSES ARISING FROM, AS A RESULT OF OR IN
CONNECTION WITH ANY INDEMNIFIED PARTY'S NEGLIGENT ACTS OR OMISSIONS, AND ALL
OTHER COSTS OF REMEDIATION (WHETHER OR NOT PERFORMED VOLUNTARILY), ENGINEERS'
FEES, ENVIRONMENTAL CONSULTANTS' FEES, AND COSTS OF ANY INVESTIGATION (INCLUDING
BUT NOT LIMITED TO SAMPLING, TESTING, AND ANALYSIS OF SOIL, WATER, AIR, BUILDING
MATERIALS AND OTHER MATERIALS AND SUBSTANCES WHETHER SOLID, LIQUID OR GAS) WHICH
MAY AT ANY TIME BE IMPOSED UPON, INCURRED BY OR ASSERTED OR AWARDED AGAINST SUCH
INDEMNIFIED PARTY, AND ARISING DIRECTLY OR INDIRECTLY FROM, AS A RESULT OF, IN
CONNECTION WITH OR IN ANY WAY RELATING TO ANY ONE OR MORE OF THE FOLLOWING:  (i)
ANY ACTUAL, THREATENED OR ALLEGED PRESENCE OF ANY HAZARDOUS MATERIALS IN, ON,
ABOVE, OR UNDER ANY OF THE PROPERTY; (ii) ANY PAST OR PRESENT RELEASE OR
THREATENED RELEASE IN, ON, ABOVE, UNDER OR FROM ANY OF THE PROPERTY; (iii) ANY
ACTIVITY BY THE GRANTOR, ANY AFFILIATE OF THE GRANTOR, OR ANY TENANT, OPERATOR,
LESSEE OR OTHER USER OF ANY OF THE PROPERTY AS A RESULT OF OR IN CONNECTION WITH
ANY ACTUAL OR THREATENED USE, TREATMENT, STORAGE, HOLDING, EXISTENCE,
DISPOSITION, RELEASE, GENERATION, PRODUCTION, MANUFACTURING, PROCESSING,
REFINING, CONTROL, MANAGEMENT, ABATEMENT, REMOVAL, HANDLING, TRANSFER OR
TRANSPORTATION TO, FROM OR OF ANY OF THE PROPERTY OF ANY HAZARDOUS MATERIALS AT
ANY TIME LOCATED IN, UNDER, ON OR ABOVE ANY OF THE PROPERTY; (iv) ANY ACTIVITY
BY THE GRANTOR, ANY AFFILIATE OF THE GRANTOR, OR ANY TENANT, OPERATOR, LESSEE OR
OTHER USER OF ANY OF THE PROPERTY IN CONNECTION WITH ANY ACTUAL REMEDIATION OF
ANY HAZARDOUS MATERIALS AT ANY TIME LOCATED IN, UNDER, ON OR ABOVE ANY OF THE
PROPERTY, WHETHER OR NOT SUCH REMEDIATION IS VOLUNTARY OR PURSUANT TO COURT OR
ADMINISTRATIVE ORDER, INCLUDING BUT NOT LIMITED TO ANY REMOVAL, REMEDIAL OR
CORRECTIVE ACTION; (v) ANY PAST, PRESENT, THREATENED OR ALLEGED NON-COMPLIANCE
OR VIOLATION OF ANY APPLICABLE ENVIRONMENTAL LAW (OR AUTHORIZATIONS ISSUED
PURSUANT TO ANY APPLICABLE ENVIRONMENTAL LAW) IN CONNECTION WITH ANY OF THE
PROPERTY OR OPERATIONS THEREON; (vi) THE IMPOSITION, RECORDING OR FILING OR THE
THREATENED IMPOSITION, RECORDING OR FILING OF ANY ENVIRONMENTAL LIEN ENCUMBERING
ANY OF THE PROPERTY; (vii) ANY ADMINISTRATIVE CLAIMS, PROCESSES, INVESTIGATIONS
OR PROCEEDINGS OR JUDICIAL PROCEEDINGS IN ANY WAY CONNECTED WITH ANY MATTER
ADDRESSED IN THIS ARTICLE VIII; (viii) ANY PERSONAL INJURY, WRONGFUL DEATH, OR
PROPERTY DAMAGE ARISING UNDER ANY STATUTORY OR COMMON LAW OR TORT LAW THEORY,
INCLUDING BUT NOT LIMITED TO DAMAGES ASSESSED FOR THE MAINTENANCE OF A PRIVATE
OR PUBLIC NUISANCE OR FOR THE CONDUCTING OF A DANGEROUS ACTIVITY ON OR NEAR ANY
OF THE PROPERTY; (ix) ANY MISREPRESENTATION OR INACCURACY IN ANY REPRESENTATION
OR WARRANTY IN THIS ARTICLE VIII OR BREACH AND/OR ANY FAILURE TO PERFORM ANY
COVENANTS OR OTHER OBLIGATIONS SET FORTH IN OR PURSUANT TO THIS ARTICLE VIII; OR
(x) THE ENFORCEMENT OF ANY PROVISION OF THIS ARTICLE VIII, PROVIDED THAT SUCH
INDEMNITY SHALL NOT, AS TO ANY INDEMNIFIED PARTY, BE AVAILABLE TO SUCH
INDEMNIFIED PARTY THE EXTENT THAT ANY SUCH ENVIRONMENTAL LOSSES ARE DETERMINED
BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO
HAVE RESULTED SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNIFIED PARTY.
 
 
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(b)           ALL AMOUNTS DUE UNDER THIS SECTION 8.06 SHALL BE PAYABLE ON
DEMAND.  THE AGREEMENTS IN THIS SECTION 8.06 SHALL SURVIVE REPAYMENT OF THE
LOANS AND ALL OTHER AMOUNTS PAYABLE UNDER THE LOAN DOCUMENTS.
 
ARTICLE IX
 
MISCELLANEOUS
 
Section 9.01.     Right to Perform Obligations; Protective Advances.
 
(a)           If the Grantor fails to pay or perform any obligation of the
Grantor under this Deed of Trust, the Beneficiary, without waiving or releasing
the Grantor from any obligation or default under this Deed of Trust or any other
Loan Document, at any time and from time to time (but shall be under no
obligation to) without notice pay or perform such obligation, and the amount or
cost and expense thereof, together with interest thereon at the Default Rate
commencing from the date of payment, shall be due and payable by the Grantor to
the Beneficiary upon demand.
 
(b)           The Beneficiary may (but shall have no obligation to) make
advances to protect and preserve the Property and the Liens created
hereby.  Each such advance, together with interest thereon at the Default Rate
commencing from the date of such advance, shall be payable by the Grantor to the
Beneficiary upon demand.
 
(c)           No such payment, performance or advance by the Beneficiary under
this Section shall be deemed or construed to cure the Grantor's default or waive
any right or remedy of the Beneficiary.
 
Section 9.02.     Notices.  All notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
 
(a)           if to the Grantor:
 

_______________________________________ 
_______________________________________  _______________________________________
Facsimile No: (__) ________________________
 
Attention: _______________________________
 

 
(b)           if to the Beneficiary:
 
 
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Prosperity Bank
777 Walker Street, Suite L140
Houston, TX 77002
Facsimile No: (713) 693-9259
Attention:  Randall R. Reeves, President – Houston Area
 
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto.  All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
 
Section 9.03.      Covenants Running with the Land.  All Obligations contained
in this Deed of Trust are intended by the Grantor, the Beneficiary and the
Trustee to be, and shall be construed as, covenants running with the Land.
 
Section 9.04.      EXPENSES AND GENERAL INDEMNIFICATION.
 
(a)           THE GRANTOR SHALL UPON DEMAND PAY TO THE BENEFICIARY THE AMOUNT OF
ANY AND ALL COSTS AND EXPENSES, INCLUDING THE REASONABLE FEES AND EXPENSES OF
COUNSEL AND OF ANY EXPERTS, ADVISORS, REPRESENTATIVES, AND AGENTS, WHICH THE
BENEFICIARY, THE TRUSTEE OR ANY OF THE OTHER SECURED PARTIES MAY INCUR IN
CONNECTION WITH (I) THE PREPARATION, NEGOTIATION, EXECUTION, DELIVERY, CLOSING
AND ADMINISTRATION OF THIS DEED OF TRUST (AND ANY AMENDMENTS, RESTATEMENTS,
EXTENSIONS, RENEWALS, MODIFICATIONS OR WAIVERS TO ANY OF THIS DEED OF TRUST),
INCLUDING, WITHOUT LIMITATION, ALL APPRAISAL FEES, RECORDING AND FILING FEES,
TAXES, ABSTRACT FEES, TITLE INSURANCE PREMIUMS AND FEES, ESCROW FEES, AND
TRUSTEE'S FEES, (II) THE ENFORCEMENT AND COLLECTION OF THE GRANTOR'S
OBLIGATIONS, (III) THE CUSTODY, INSPECTION, AUDITING, PRESERVATION, MAINTENANCE,
SERVICING, USE OR OPERATION OF, OR THE SALE OF, COLLECTION FROM, OR OTHER
REALIZATION UPON, ANY OF THE PROPERTY, (IV) THE EXERCISE OR ENFORCEMENT OF ANY
OF THE RIGHTS OR REMEDIES OF THE BENEFICIARY, THE TRUSTEE OR ANY OF THE OTHER
SECURED PARTIES HEREUNDER OR (V) ANY FAILURE BY THE GRANTOR TO PERFORM OR
OBSERVE ANY OF THE TERMS OR PROVISIONS OF THIS DEED OF TRUST.
 
(b)           THE GRANTOR AGREES TO PAY, AND TO INDEMNIFY, DEFEND, AND SAVE AND
HOLD HARMLESS EACH INDEMNIFIED PARTY FROM AND AGAINST, ANY AND ALL LIABILITIES
WITH RESPECT TO, OR RESULTING FROM ANY DELAY IN PAYING, ANY AND ALL STAMP,
EXCISE, SALES OR OTHER TAXES WHICH MAY BE PAYABLE OR DETERMINED TO BE PAYABLE
WITH RESPECT TO ANY OF THE PROPERTY OR IN CONNECTION WITH ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS DEED OF TRUST (INCLUDING, WITHOUT LIMITATION,
ANY TAX ON THE MAKING AND/OR RECORDING OF THIS DEED OF TRUST (INCLUDING, WITHOUT
LIMITATION, ANY RECORDING TAX AND GENERAL INTANGIBLES TAX).
 
 
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(c)           THE GRANTOR SHALL INDEMNIFY, DEFEND AND SAVE AND HOLD HARMLESS
EACH INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES,
LIABILITIES, ACTIONS, PROCEEDINGS, OBLIGATIONS, PENALTIES, ACTIONS, JUDGMENTS,
ASSESSMENTS, FINES, FEES, CHARGES, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
(INCLUDING, WITHOUT LIMITATION, FEES, EXPENSES AND DISBURSEMENTS OF COUNSEL)
THAT MAY AT ANY TIME BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY
INDEMNIFIED PARTY BY ANY PERSON DIRECTLY OR INDIRECTLY FROM, ARISING OUT OF, IN
CONNECTION WITH OR AS A RESULT OF (i) THIS DEED OF TRUST OR ANY OF THE PROPERTY
(INCLUDING, WITHOUT LIMITATION, (A) ENFORCEMENT OF THIS DEED OF TRUST AND (B)
ARTICLE V OF THIS DEED OF TRUST), OR (ii) ANY ACTION TAKEN BY THE BENEFICIARY OR
SUCH OTHER INDEMNIFIED PARTY HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT OR BY
REASON OR IN DEFENSE OF ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER WHICH MAY BE
ASSERTED AGAINST THE BENEFICIARY OR SUCH OTHER INDEMNIFIED PARTY BY REASON OF
ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS ON THE PART OF THE BENEFICIARY OR SUCH
OTHER INDEMNIFIED PARTY TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS OR
AGREEMENTS CONTAINED IN THE LEASES, INCLUDING, WITHOUT LIMITATION, ANY CLAIMS BY
THE GRANTOR WITH RESPECT TO PAYMENTS OF RENTS MADE DIRECTLY TO THE BENEFICIARY
AFTER DEFAULT AND CLAIMS BY ANY TENANT FOR SECURITY DEPOSITS OR FOR RENTAL
PAYMENTS MORE THAN ONE (1) MONTH IN ADVANCE AND NOT DELIVERED TO THE
BENEFICIARY, EXCEPT IN EACH CASE TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS,
LIABILITY, ACTION, PROCEEDING, OBLIGATIONS, PENALTY, JUDGMENT, ASSESSMENT, FINE,
CHARGE, SUIT, COST, EXPENSE OR DISBURSEMENT IS FOUND IN A FINAL, NON-APPEALABLE
JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED SOLELY FROM SUCH
INDEMNIFIED PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
 
(d)           WITHOUT LIMITING ANY PROVISION OF THIS DEED OF TRUST, IT IS THE
EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH INDEMNIFIED PARTY SHALL BE
INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES,
LIABILITIES, PENALTIES, JUDGMENTS, DISBURSEMENTS AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, FEES AND EXPENSES OF COUNSEL) ARISING OUT OF OR CAUSED IN
WHOLE OR PART BY THE ORDINARY NEGLIGENCE OF SUCH INDEMNIFIED PARTY.
 
(e)           THE GRANTOR WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO CLAIM
OR RECOVER IN ANY ACTION OR PROCEEDING UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.

 
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(f)           ALL AMOUNTS DUE UNDER THIS SECTION 9.04 SHALL CONSTITUTE
OBLIGATIONS SECURED BY THIS DEED OF TRUST AND SHALL BE PAYABLE ON DEMAND.  THE
AGREEMENTS IN THIS SECTION 9.04 SHALL SURVIVE REPAYMENT OF THE LOANS AND ALL
OTHER AMOUNTS PAYABLE UNDER THE LOAN DOCUMENTS.
 
Section 9.05.     ENTIRE AGREEMENT.  THIS DEED OF TRUST REPRESENTS THE FINAL AND
ENTIRE AGREEMENT BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND
SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS BETWEEN THE PARTIES RELATING
TO THE SUBJECT MATTER HEREOF.  THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
 
Section 9.06.     Amendments in Writing.  No provision of this Deed of Trust
shall be modified, waived or terminated, and no consent to any departure by the
Grantor from any provision of this Deed of Trust shall be effective, unless the
same shall be evidenced by an instrument in writing, signed by the Grantor and
the Beneficiary in compliance with all the terms and provisions of the Credit
Agreement.  Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
 
Section 9.07.     Severability.  In the event any one or more of the provisions
contained in this Deed of Trust or the application thereof to any Person or
circumstance shall for any reason be held to be invalid, illegal or
unenforceable in any respect in any jurisdiction, or cause this Deed of Trust
not to be entitled to be recorded, registered or filed, the remaining provisions
of this Deed of Trust or the application of such provisions to other Persons or
circumstances shall not be invalidated, rendered unenforceable or otherwise
affected thereby, and each provision of this Deed of Trust shall be valid and
enforced to the fullest extent permitted under applicable law.

 
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Section 9.08.     Compliance with Usury Laws.  It is the intent of the
Beneficiary, the other Secured Parties, and the Grantor to conform to and
contract in strict compliance with all applicable usury laws from time to time
in effect.  All agreements (including the Loan Documents) between or among the
Beneficiary, the other Secured Parties and the Grantor (or any other party
liable with respect to any of the Obligations under the Loan Documents) are
hereby limited by the provisions of this Section which shall override and
control all such agreements, whether now existing or hereafter arising and
whether written or oral.  In no way, nor in any event or contingency (including
but not limited to prepayment, default, demand for payment, or acceleration of
the maturity of any obligation), shall the interest taken, reserved, contracted
for, charged or received under this Deed of Trust, any other Loan Document, or
otherwise, exceed the maximum nonusurious amount permissible under applicable
law.  If, from any possible construction of this Deed of Trust, any other Loan
Document, or any other document, interest would otherwise be taken, reserved,
contracted for, charged or payable in excess of the maximum nonusurious amount,
any such construction shall be subject to the provisions of this Section and
this Deed of Trust, such other Loan Document, and such other document shall be
automatically reformed and the interest taken, reserved, contracted for, charged
or payable shall be automatically reduced to the maximum nonusurious amount
permitted under applicable law, without the necessity of execution of any
amendment or new document.  If the Beneficiary shall ever receive anything of
value which is interest or characterized as interest under applicable law and
which would apart from this provision be in excess of the maximum lawful
nonusurious amount, an amount equal to the amount which would have been
excessive interest shall, without penalty, be applied to the reduction of the
principal amount owing on the Note (in accordance with Section 8.13 of the
Credit Agreement, in the case of the Term Note) and not to the payment of
interest, or refunded to the Grantor if and to the extent such amount which
would have been excessive exceeds such unpaid principal.  The right to
accelerate maturity of the Note and the other Obligations does not include the
right to accelerate any interest which has not otherwise accrued on the date of
such acceleration, and the Beneficiary does not intend to charge or receive any
unearned interest in the event of acceleration.  All interest paid or agreed to
be paid to the Lender under the Note shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
stated term (including any renewal or extension) of the Note so that the amount
of interest on account of the Note does not exceed the maximum nonusurious
amount permitted by applicable law.  As used in this Section, (i) the term
"applicable law" shall mean such laws as they now exist or may be changed or
amended or come into effect in the future and (ii) the term "interest" includes
all amounts that constitute, are deemed, or are characterized as interest under
applicable law.
 
Section 9.09.     Successors and Assigns.  This Deed of Trust shall be binding
upon and inure to the benefit of the Beneficiary, the Trustee, and the Grantor
and their respective successors and assigns; provided, however, that the Grantor
shall not, without the prior written consent of the Beneficiary, assign any
rights, duties or obligations hereunder.
 
Section 9.10.    GOVERNING LAW, ETC.  THIS DEED OF TRUST AND THE RIGHTS AND
OTHER OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
 
Section 9.11.     WAIVER OF TRIAL BY JURY.  EACH PARTY HERETO WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS DEED OF TRUST OR ANY TRANSACTION CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
 
 
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Section 9.12.      Submission To Jurisdiction.  The Grantor hereby irrevocably
and unconditionally:
 
(a)           submits for itself and its property in any legal action or
proceeding relating to this Deed of Trust and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
Texas, the courts of the United States of America for the Southern District of
Texas, and appellate courts from any thereof;
 
(b)           consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
 
(c)           agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 9.02 or at such other address of which the
Beneficiary shall have been notified pursuant thereto; and
 
(d)           agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
 
Section 9.13.      Acknowledgements.  The Grantor hereby acknowledges and agrees
that:
 
(a)           it has been advised by counsel in the negotiation, execution and
delivery of this Deed of Trust and the other Loan Documents to which it is a
party, and this Deed of Trust shall be construed as if jointly drafted by the
parties hereto;
 
(b)           the Beneficiary has no any fiduciary relationship with or duty to
the Grantor arising out of or in connection with this Deed of Trust or any other
Loan Document, and the relationship between the Grantor, on the one hand, and
the Beneficiary and the other Secured Parties, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
 
(c)           no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Beneficiary and the other Secured Parties or among the Grantor, the Beneficiary
and the other Secured Parties.
 
Section 9.14.     Independence of Covenants.  All covenants and agreements
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants or agreements, the fact that
it would be permitted by an exception to, or would otherwise be within the
limitations of, another covenant or agreement, shall not avoid the occurrence of
a Default or Event of Default if such action is taken or such condition exists.
 
 
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Section 9.15.     Sole Discretion.  Whenever the Beneficiary's or the Trustee's
judgment, consent or approval is required hereunder for any matter, or either of
them shall have an option or election hereunder, such judgment, the decision as
to whether or not to consent to or approve the same or the exercise of such
option or election shall be in the sole discretion of the Beneficiary or the
Trustee, as the case may be, unless otherwise expressly indicated herein to be
reasonably given or exercise.
 
Section 9.16.     Subrogation.  If any or all of the proceeds of the extensions
of credit under the Loan Documents have been used to extinguish, extend or renew
any indebtedness heretofore existing against the Property, then, to the extent
of the funds so used, the Beneficiary shall be subrogated to all of the rights,
claims, Liens, titles, and interests existing against the Property heretofore
held by, or in favor of, the holder of such indebtedness and such former rights
claims, Liens, titles and interests, if any, are not waived but rather are
continued in full force and effect in favor of the Beneficiary and are merged
with the Lien and security interest created herein as cumulative security for
the payment and performance of the Obligations.
 
Section 9.17.     Co-Agents.  At any time or times, in order to comply with any
legal requirement in any jurisdiction, the Beneficiary may appoint another bank
or trust company or one or more other Persons, either to act as co-agent or
co-agents, jointly with the Beneficiary, or to act, in accordance with the
provisions of this Deed of Trust, as separate agent or agents on behalf of the
Secured Parties with such power and authority as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment.
 
Section 9.18.     Right to Deal.  In the event that ownership of the Property
becomes vested in a Person other than the Grantor, the Trustee and the
Beneficiary may, without notice to the Grantor, deal with such successor or
successors in interest with reference to this Deed of Trust or the Obligations
in the same manner as with the Grantor, without in any way impairing or
discharging the Grantor's liability hereunder or for the payment and performance
of the Obligations or being deemed a consent to such vesting.
 
Section 9.19.      No Merger.
 
(a)           If both the lessor's and the lessee's interest under any Lease
with constitutes a part of the Property shall at any time become vested in any
one Person, this Deed of Trust and the Lien and the security interest created
hereby shall not be destroyed or terminated by the application of the doctrine
of merger and, in such event, the Trustee and the Beneficiary shall continue to
have and enjoy all of the rights and privileges of the Trustee and the
Beneficiary hereunder to each separate estate.
 
(b)           Upon the foreclosure of the Lien created hereby on the Property,
as herein provided, any Leases then existing shall not be destroyed or
terminated by application of the doctrine of merger or as a matter of law or as
a result of such foreclosure unless the Trustee or the Beneficiary or any
purchaser at a foreclosure sale shall so elect by notice to the lessee in
question.
 
 
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Section 9.20.     Duplicate Originals; Counterparts.  This Deed of Trust may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Deed of Trust may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Deed of Trust. The failure
of any party hereto to execute this Deed of Trust, or any counterpart hereof,
shall not relieve the other signatories from their obligations hereunder.
 
Section 9.21.     Termination.  This Deed of Trust shall cease, terminate and
thereafter be of no further force and effect (except for those provisions
expressly stated to survive the termination hereof) in the event all of the
Obligations shall have been paid in full.  Upon such termination and at the
Grantor's request and expense, the Beneficiary shall execute and deliver to the
Grantor an instrument, in proper form for recording, without warranty, releasing
this Deed of Trust.
 
Section 9.22.     Waiver of Setoff.  All payments by the Grantor hereunder shall
be made without setoff, counterclaim, recoupment or other defense, and shall be
made free and clear of, and without deduction for, any Taxes.
 
Section 9.23.     Dealing with the Property.  The Beneficiary shall have the
right to release any portion of the Property to or at the request of the
Grantor, for such consideration as the Beneficiary may require without, as to
the remainder of the Property, in any way impairing or affecting the Lien or
priority of this Deed of Trust, or improving the position of any subordinate
lienholder with respect thereto, and may accept by assignment, pledge or
otherwise any other property in place thereof as the Beneficiary may require
without being accountable therefor to any other lienholder.
 
Section 9.24.     Lien Absolute.  All rights of the Beneficiary and the other
Secured Parties, all Liens and all obligations of the Grantor hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement or any other Loan Document, (b) any
change in the time, manner or place of payment of, or in any other term or
provision in respect of, all or any of the Obligations, or any other amendment
or waiver of or consent to any departure from the Credit Agreement or any other
Loan Document, (c) any exchange or release of, or non-perfection of any Lien on
any collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations, or (d) any other
circumstances that might otherwise constitute a defense available to, or a
discharge of, the Grantor in respect of the Obligations.
 
Section 9.25.    [Multistate Transaction.  The Grantor acknowledges that this
Deed of Trust is one of a number of mortgages, deeds of trust or similar
instruments ("Other Mortgages") that secure the Obligations.  The Grantor agrees
that the Lien of this Deed of Trust shall be absolute and unconditional and
shall not in any manner be affected or impaired by any acts or omissions
whatsoever of the Beneficiary, and without limiting the generality of the
foregoing, the Lien hereof shall not be impaired by any acceptance by the
Beneficiary of any security for or guarantees of the Obligations, or by any
failure, neglect or omission on the part of the Beneficiary to realize upon or
protect any obligation or any collateral security therefor including the Other
Mortgages.  The Lien hereof shall not in any manner be impaired or affected by
any release (except as to the property released), sale, pledge, surrender,
compromise, settlement, renewal, extension, indulgence, alteration, changing,
modification or disposition of any of the Obligations or of any of the
collateral security therefor, including the Other Mortgages or of any guarantee
thereof, and, to the fullest extent permitted by applicable law, the Beneficiary
may at its discretion foreclose, exercise any power of sale, or exercise any
other remedy available to it under any or all of the Other Mortgages without
first exercising or enforcing any of its rights and remedies hereunder.  Such
exercise of the Beneficiary's rights and remedies under any or all of the Other
Mortgages shall not in any manner impair the indebtedness hereby secured or by
the Lien of this Deed of Trust and any exercise of the rights or remedies of the
Beneficiary hereunder shall not impair the Lien of any of the Other Mortgages or
any of the Beneficiary's rights and remedies thereunder.  To the fullest extent
permitted by applicable law, the Grantor specifically consents and agrees the
Beneficiary may exercise its rights and remedies hereunder and under the Other
Mortgages separately or concurrently and in any order that it may deem
appropriate and waives any rights of subrogation.]
 
 
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ARTICLE X
 
ADDITIONAL TEXAS LAW PROVISIONS
 
Section 10.01.   Foreclosure Pursuant to Power of Sale.  Any foreclosure by
power of sale permitted by this Deed of Trust shall be conducted in accordance
with Section 51.002 of the Texas Property Code as amended or superseded from
time to time.
 
Section 10.02.   Deficiency Statute.  Alternative to Waiver.  In the event the
waiver in Section 6.06(e) above is determined by a court of competent
jurisdiction to be unenforceable, the following shall be the basis for the
determination of the fair market value of the Property as of the date of the
foreclosure sale in proceedings governed by Sections 51.003, 51.004 and 51.005
of the Texas Property Code (as amended from time to time):  (a) the Property
shall be valued in an "as is" condition as of the date of the foreclosure sale,
without any assumption or expectation that the Property will be repaired or
improved in any manner before a resale of the Property after foreclosure; (b)
the valuation shall be based upon an assumption that the foreclosure purchaser
desires a resale of the Property for cash promptly (but no later than twelve
(12) months) following the foreclosure sale; (c) all reasonable closing costs
customarily borne by the seller in commercial real estate transactions should be
deducted from the gross fair market value of the Property, including, without
limitation, brokerage commissions, title insurance, a survey of the Property,
tax prorations, attorneys' fees, and marketing costs; (d) the gross fair market
value of the Property shall be further discounted to account for any estimated
holding costs associated with maintaining the Property pending sale, including,
without limitation, utilities expenses, property management fees, taxes and
assessments (to the extent not accounted for in clause (c) above), and other
maintenance, operational and ownership expenses; and (e) any expert opinion
testimony given or considered in connection with a determination of the fair
market value of the Property must be given by persons having at least five (5)
years experience in appraising property similar to the Property and who have
conducted and prepared a complete written appraisal of the Property taking into
consideration the factor set forth above.
 
 
-39-

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ARTICLE XI
 
TRUSTEE
 
Section 11.01.   Concerning the Trustee.  The Trustee shall be under no duty to
take any action hereunder except as expressly required hereunder or by law, or
to perform any act which would involve the Trustee in any expense or liability
or to institute or defend any suit in respect hereof, unless properly
indemnified to the Trustee's reasonable satisfaction.  The Trustee, by
acceptance of this Deed of Trust, covenants to perform and fulfill the trusts
herein created, being liable, however, only for gross negligence or willful
misconduct, and hereby waives any statutory fee and agrees to accept reasonable
compensation, in lieu thereof, for any services rendered by the Trustee in
accordance with the terms hereof.  The Trustee may resign at any time upon
giving thirty (30) days prior written notice to the Grantor and to the
Beneficiary.  The Beneficiary may remove the Trustee at any time or from time to
time, with or without cause or notice, and appoint a successor trustee.  In the
event of the death, removal, resignation, refusal to act, or inability to act of
the Trustee, or in its sole discretion for any reason whatsoever, the
Beneficiary may, without notice and without specifying any reason therefor and
without applying to any court, select and appoint a successor trustee, and all
powers, rights, duties and authority of the Trustee, as aforesaid, shall
thereupon become vested in such successor.  Such substitute trustee shall not be
required to give bond for the faithful performance of the duties of the Trustee
hereunder unless required by the Beneficiary.  The procedure provided for in
this Section for substitution of the Trustee shall be in addition to and not in
exclusion of any other provisions for substitution, by law or otherwise.  The
Trustee shall not be responsible for the execution, acknowledgement, or validity
of the Loan Documents, or for the property action taken thereof, or for the
sufficiency of the lien and security interest created hereby, and the Trustee
makes no respect of the rights and remedies of the Beneficiary.
 
Section 11.02.   Trustee's Fees.  The Grantor shall pay all reasonable costs,
fees and expenses incurred by the Trustee and the Trustee's agents and counsel
in connection with the performance by the Trustee of the Trustee's duties
hereunder and all such costs, fees and expenses shall be Obligations secured by
this Deed of Trust.
 
Section 11.03.   Certain Rights.  With the approval of the Beneficiary, the
Trustee shall have the right to take any and all of the following actions:  (a)
to select, employ, and advise with counsel (who may be, but need not be, counsel
for the Beneficiary) upon any matters arising hereunder, including the
preparation, execution, and interpretation of this Deed of Trust or the other
Loan Documents, and shall be fully protected in relying as to legal matters on
the advice of counsel, (b) to execute any of the trusts and powers hereof and to
perform any duty hereunder either directly or through his/her agents or
attorneys, (c) to select and employ, in and about the execution of his/her
duties hereunder, suitable accountants, engineers and other experts, agents and
attorneys-in-fact, either corporate or individual, not regularly in the employ
of the Trustee, and the Trustee shall not be answerable for any act, default,
negligence, or misconduct of any such accountant, engineer or other expert,
agent or attorney-in-fact, if selected with reasonable care, or for any error of
judgment or act done by the Trustee in good faith, or be otherwise responsible
or accountable under any circumstances whatsoever, except for the Trustee's
gross negligence or bad faith, and (d) any and all other lawful action as the
Beneficiary may instruct the Trustee to take to protect or enforce the
Beneficiary's rights hereunder.  The Trustee shall not be personally liable in
case of entry by the Trustee, or anyone entering by virtue of the powers herein
granted to the Trustee, upon the Property for debts contracted for or liability
or damages incurred in the management or operation of the Property.  The Trustee
shall have the right to rely on any instrument, document, or signature
authorizing or supporting any action taken or proposed to be taken by the
Trustee hereunder, believed by the Trustee in good faith to be genuine.  The
Grantor shall reimburse the Trustee for all costs and expenses incurred by the
Trustee in the performance of the Trustee's duties hereunder and for reasonable
compensation for such of the Trustee's services hereunder as shall be
rendered.  Notwithstanding anything herein to the contrary, the Trustee shall
not exercise or waive the exercise of any of its rights, powers or remedies
hereunder or otherwise act or refrain from acting hereunder unless directed to
do so by the Beneficiary, and the Trustee shall exercise or waive the exercise
of any of its rights, powers or remedies hereunder and otherwise act or refrain
from acting when and in the manner directed by the Beneficiary, provided that
the Trustee shall not be required to follow any direction of the Beneficiary if
the Trustee has been advised by counsel that such action would violate
applicable law.
 
 
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Section 11.04.   Retention of Money.  All moneys received by the Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated in any manner from any
other moneys (except to the extent required by applicable law) and the Trustee
shall be under no liability for interest on any moneys received by the Trustee
hereunder.
 
Section 11.05.   Perfection of Appointment.  Should any deed, conveyance, or
instrument of any nature be required from the Grantor by any the Trustee or
substitute trustee to more fully and certainly vest in and confirm to the
Trustee or substitute trustee such estates rights, powers, and duties, then,
upon request by the Trustee or substitute trustee, any and all such deeds,
conveyances and instruments shall be made, executed, acknowledged, and delivered
and shall be caused to be recorded and/or filed by the Grantor.
 
Section 11.06.   Succession Instruments.  Any substitute trustee appointed
pursuant to any of the provisions hereof shall, without any further act, deed,
or conveyance, become vested with all the estates, properties, rights, powers,
and trusts of its or his/her predecessor in the rights hereunder with like
effect as if originally named as the Trustee herein; but nevertheless, upon the
written request of the Beneficiary or of the substitute trustee, the Trustee
ceasing to act shall execute and deliver any instrument transferring to such
substitute trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers, and trusts of the Trustee so ceasing to act, and
shall duly assign, transfer and deliver any of the property and moneys held by
such the Trustee to the substitute trustee so appointed in the Trustee's place.
 
IN WITNESS WHEREOF, this Deed of Trust has been duly executed and delivered by
the Grantor on [______], 20[__], and is intended to be effective as of the date
first above written.
 
GRANTOR:
  [ 
   ]
     
By:
   
Name:
   
Title:
 

 
-41-

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THE STATE OF TEXAS
§
 
§
COUNTY OF __________
§

 
(A)           This instrument was acknowledged before me on the ____ day of
______________, 200__, by _____________________________________________ of
[specify the Grantor], a [specify type of entity], on behalf of said
_________________.
 

 
Notary Public in and for the State of Texas
Printed Name:
 

[SEAL]
My Commission Expires:_________
 
 
-42-

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EXHIBIT A
 
Land

 
 

--------------------------------------------------------------------------------

 

EXHIBIT B
 
Permitted Exceptions

 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT D TO
CREDIT AGREEMENT

FORM OF TERM NOTE

TERM NOTE
$25,000,000
March [__], 2009

 
FOR VALUE RECEIVED, the undersigned, Sanders Morris Harris Group, Inc., a Texas
corporation (the "Borrower"), hereby unconditionally promises to pay to the
order of Prosperity Bank (the "Lender"), at the Funding Office, in lawful money
of the United States of America and in immediately available funds, the
principal amount of (a) Twenty-Five Million Dollars ($25,000,000.00), or, if
less, (b) the unpaid principal amount of the Loan made by the Lender to the
Borrower pursuant to Section 2.01 of the Credit Agreement (as hereinafter
defined).  The principal amount of this Note shall be payable in the amounts and
on the dates specified in the Credit Agreement.  The Borrower further agrees to
pay interest in like money at such office on the unpaid principal amount hereof
from time to time outstanding at the rates and on the dates specified in the
Credit Agreement.
 
The holder of this Note is authorized to endorse on the schedule annexed hereto
and made a part hereof or on a continuation thereof which shall be attached
hereto and made a part hereof the date and amount of the Loan of the Lender and
the date and amount of each payment or prepayment of principal thereof.  Each
such endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed.  The failure to make any such endorsement (or any error
therein) shall not affect the obligations of the Borrower in respect of any Loan
or the Credit Agreement.
 
This Note (a) is the Term Note referred to in the Credit Agreement dated as of
March [__], 2009 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"), between the Borrower and the Lender,
(b) is subject to the provisions of the Credit Agreement and (c) is subject to
optional and mandatory prepayment in whole or in part as provided in the Credit
Agreement.  This Note is secured and guaranteed as provided in the Security
Documents.  Reference is hereby made to the Security Documents for a description
of  the properties and assets in which a lien or security interest has been
granted, the nature and extent of the security and the guarantees, the terms and
conditions upon which the liens and security interests and each guarantee were
granted and the rights of the holder of this Note in respect thereof.
 
Upon the occurrence of any one or more Events of Default, all amounts then
remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
 
All parties now and hereafter liable with respect to this Note, whether maker,
principal, surety, guarantor, endorser or otherwise, hereby waive presentment,
demand, protest, notice of acceleration and intent to accelerate, and all other
notices of any kind.

 
 

--------------------------------------------------------------------------------

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
 
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF TEXAS.
 
BORROWER:
 
SANDERS MORRIS HARRIS GROUP, INC.,
a Texas corporation
     
By:
   
Name:
   
Title:
 

 
-2-

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Schedule to Term Note

Date Loan
Made
or Paid
 
Principal 
Amount
of Loan
 
Amount of
Principal
Paid
 
Outstanding 
Principal 
Balance
of Note
 
Notation
Made By
                                                                               
                                                                               
                                                                               
                                                                               
                                       

 
-3-

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EXHIBIT E TO
CREDIT AGREEMENT
 
FORM OF LEGAL OPINION
 
_______, 200_
 
____________________, as Lender
 
________________________
 
________________________
 
Ladies/Gentlemen:
 
We have acted as counsel to ___________, a _____________ (the "Borrower"), and
its Subsidiaries in connection with (a) the Credit Agreement, dated as of
______,  ____ (the "Credit Agreement"), among the Borrower, Prosperity Bank, as
administrative agent for the Lenders (in such capacity, the "Lender") and (b)
the Term Note and the other Loan Documents referred to in the Credit Agreement.
 
The opinions expressed below are furnished to you pursuant to Section 3.01(h) of
the Credit Agreement.  Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.  The State of Texas is referred to herein as the UCC
Jurisdiction.
 
In arriving at the opinions expressed below,
 
we have examined and relied on the originals, or copies certified or otherwise
identified to our satisfaction, of each of (1) the Credit Agreement, (2) the
Term Note dated the date hereof and (3) the other Loan Documents listed on
Schedule 1 attached hereto (the Credit Agreement, the Note and such other
documents being hereinafter referred to collectively as the "Transaction
Documents");
 
we have examined time-stamped copies of the financing statements listed on
Schedule 2 (collectively, the "Financing Statements") naming the relevant Loan
Party as debtor and the Lender as secured party and describing the Collateral
(as defined in the Guarantee and Security Agreement) as to which security
interests may be perfected by filing financing statements under the Uniform
Commercial Code of the State of Texas (the "UCC Filing Collateral"), which have
been filed in the filing offices listed on Schedule 2 (the "UCC Filing
Offices");

 
 

--------------------------------------------------------------------------------

 

we have examined the reports listed on Schedule 3 as to UCC financing statements
(collectively, the "UCC Search Report"); and
 
we have examined such corporate documents and records of the Loan Parties and
such other instruments and certificates of public officials, officers and
representatives of the Loan Parties and other Persons as we have deemed
necessary or appropriate for the purposes of this opinion.
 
In arriving at the opinions expressed below, we have made such investigations of
law, in each case as we have deemed appropriate as a basis for such opinions.
 
In rendering the opinions expressed below, we have assumed, with your
permission, without independent investigation or inquiry, (a) the authenticity
of all documents submitted to us as originals, (b) the genuineness of all
signatures on all documents that we examined (other than those of the Loan
Parties and officers of the Loan Parties), and (c) the conformity to authentic
originals of documents submitted to us as certified, conformed or photostatic
copies.
 
When our opinions expressed below are stated "to the best of our knowledge," we
have made reasonable and diligent investigation of the subject matter of such
opinions and have no reason to believe that there exist any facts or other
information that would render such opinions incomplete or incorrect.
 
Based upon and subject to the foregoing, we are of the opinion that:
 
1.           Each Loan Party (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate or other organizational power and authority and the legal right to own
and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged and (c) is duly qualified
as a foreign organization and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification, except to the extent that the
failure to be so qualified could not, in the aggregate, have a Material Adverse
Effect.
 
2.           The Borrower has the corporate power and authority, and the legal
right, to execute, deliver and perform its obligations under the Credit
Agreement and each of the other Transaction Documents to which it is a party and
to borrow under the Credit Agreement.  Each other Loan Party has the corporate
or other organizational power and authority, and the legal right, to execute,
deliver and perform its obligations under each of the other Transaction
Documents to which it is a party.  The Borrower has taken all necessary
corporate action to authorize the borrowings on the terms and conditions of the
Credit Agreement and the other Transaction Documents, to grant the liens and
security interests contemplated by the Security Documents to which it is a party
and to authorize the execution, delivery and performance of the Credit Agreement
and the other Transaction Documents to which it is a party.  Each other Loan
Party has taken all necessary corporate or other organizational action to grant
the liens and security interests contemplated by the Security Documents to which
it is a party and to authorize the execution, delivery and performance by it of
the Transaction Documents to which it is a party.  Except for consents,
authorizations, approvals, notices and filings described on Schedule 6 attached
hereto, all of which have been obtained, made or waived and are in full force
and effect, and the filings and recordings described on Schedules 2, 4 and 8
attached hereto, no consent or authorization of, approval by, notice to, filing
with or other act by or in respect of, any Governmental Authority or any other
Person is required in connection with the borrowings under the Credit Agreement
or with the execution, delivery, performance, validity or enforceability of the
Credit Agreement and the other Transaction Documents or the perfection of the
liens and security interests created by the Security Documents.

 
5

--------------------------------------------------------------------------------

 
 
3.           Each of the Transaction Documents to which a Loan Party is a party
has been duly executed and delivered on behalf of each Loan Party that is a
party thereto and constitutes a legal, valid and binding obligation of each such
Loan Party, enforceable against each such Loan Party in accordance with its
terms.
 
4.           The execution and delivery of the Transaction Documents by the Loan
Parties, the performance by the Loan Parties of their respective obligations
thereunder, the consummation of the transactions contemplated thereby, the
compliance by the Loan Parties with any of the provisions thereof, the
borrowings under the Credit Agreement and the use of proceeds thereof, all as
provided therein, of any Loan Party (a) will not violate, or constitute a
default under, any Requirement of Law or any Contractual Obligation of any Loan
Party and (b) will not result in, or require, the creation or imposition of any
Lien on any of its or their respective properties or revenues, except the liens
and security interests created pursuant to the Security Documents.
 
5.           To the best of our knowledge, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or
threatened by or against any Loan Party or any of its Subsidiaries or against
any of its or their respective properties or revenues (a) with respect to the
Credit Agreement or any of the other Transaction Documents, or (b) which could
reasonably be expected to have a Material Adverse Effect.
 
6.           To the best of our knowledge, none of the Loan Parties nor any of
their respective Subsidiaries is in default under or with respect to any
Contractual Obligation in any respect which could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
 
7.           None of the Loan Parties is an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.  [None of the Loan Parties is subject to
regulation under any Federal or state statute or regulation which limits its
ability to incur Indebtedness.]
 
8.           Schedule 7 attached hereto sets forth, as of the date hereof, the
number of authorized, issued and outstanding shares of each class of Equity
Interests of each Subsidiary of Holdings, the names and record owners of such
shares and the number of shares owned of record by each such owner.  There are
no outstanding subscriptions, options, warrants, calls, rights (including
preemptive rights) or any other agreements or commitments of any nature with
respect to the Equity Interests of any Subsidiary.  All of the Equity Interests
described on Schedule 7 attached hereto have been duly authorized and validly
issued, and are fully paid and nonassessable and represent the percentages of
the issued and outstanding Equity Interests of the issuers thereof specified on
Schedule 7 attached hereto.

 
6

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9.           The provisions of the Guarantee and Security Agreement create in
favor of the Lender, a legal, valid and enforceable security interest in the
Pledged Equity Interests, the Pledged Notes, the Pledged Debt Securities, and
the Proceeds thereof (as those terms are defined in the Guarantee and Security
Agreement) as security for the Obligations.  The actions specified in Schedule 3
of the Guarantee and Security Agreement are all of the actions necessary to
perfect the security interest of the Lender in the Pledged Equity Interests, the
Pledged Notes, and the Pledged Debt Securities and the security interest of the
Lender in the Pledged Equity Interests, the Pledged Notes and the Pledged Debt
Securities is a perfected security interest.  Assuming the Lender acquires its
interest in the Pledged Equity Interests without notice of any adverse claims
and that each certificate evidencing shares of the Pledged Equity Interests is
either in bearer form or registered form, issued or indorsed in the name of the
Lender or in blank, the Lender will acquire its security interest in the Pledged
Equity Interests free of adverse claims.
 
10.           The provisions of the Guarantee and Security Agreement create in
favor of the Lender, a legal, valid and enforceable security interest in the UCC
Filing Collateral as security for the Obligations.  The provisions of the
Guarantee and Security Agreement are sufficient to constitute authorization of
the filing of the Financing Statements for purposes of Section 9-509 of the
Uniform Commercial Code as in effect in each of the UCC Jurisdictions.  The
Financing Statements include all of the types of information required by Section
9-516 of the Uniform Commercial Code as in effect in each of the UCC
Jurisdictions in order for the Financing Statements to be in appropriate form
for filing in the UCC Filing Offices in such jurisdictions.  Each Loan Party is
a "registered organization" within the meaning of the Uniform Commercial Code as
in effect in the UCC Jurisdiction in which it was incorporated or otherwise
organized.  The  Lender, upon the filing of the Financing Statements in the UCC
Filing Offices, will have a perfected security interest in the UCC Filing
Collateral.  The UCC Search Report sets forth the proper filing offices and the
proper debtors necessary to identify those Persons who have on file in the
jurisdictions listed on Schedule 2 financing statements covering the UCC Filing
Collateral as of the dates and times specified on Schedule 3.  Except for the
matters listed on Schedule 3, the UCC Search Report identifies no Person who has
filed in any UCC Filing Office a financing statement describing the UCC Filing
Collateral prior to the effective dates of the UCC Search Report.
 
11.           The provisions of the Guarantee and Security Agreement create in
favor of the Lender, a legal, valid and enforceable security interest in the
Intellectual Property as security for the Obligations.  The Lender, upon the
filing of the Intellectual Property Filings in the Intellectual Property Filing
Offices, will have a perfected security interest in the Intellectual
Property.  The Intellectual Property Search Report sets forth the proper filing
offices and the proper debtors necessary to identify those Persons who have on
file in the jurisdictions listed on Schedule 4 and in the United States Patent
and Trademark Office or the United States Copyright Office financing statements
or other filings covering the Intellectual Property as of the dates and times
specified on Schedule 5.  Except for the matters listed on Schedule 5, the
Intellectual Property Search Report identifies no Person who has filed in any
Intellectual Property Filing Office a financing statement or other Lien
instrument describing the Intellectual Property prior to the effective dates of
the Intellectual Property Search Report.

 
7

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12.           [The Guarantee and Security Agreement and the Deposit Account
Control Agreement identified on Schedule 1 together create in favor of the
Lender as security for the Obligations, a perfected security interest in the
rights of [specify Loan Party] in the deposit account[s] that [is] [are] subject
to such Deposit Account Control Agreement.]
 
13.           [The Guarantee and Collateral Agreement and the Securities Account
Control Agreement identified on Schedule 1 together create in favor of the
Administrative Agent, as security for the Obligations, a perfected security
interest in the rights of [specify the Loan Party] in the security entitlements
that constitute Investment Property (as defined in the Guarantee and Collateral
Agreement) of [specify Loan Party] .  No security interest of any creditor of
such Loan Party will be equal to or prior to such security interest of the
Administrative Agent in such security entitlements.]
 
14.           The provisions of the Loan Documents (without regard for any
provisions thereof limiting the payment of interest or any other sums thereunder
to the highest rate permitted by applicable law) do not violate any Requirement
of Law of the State of Texas or any political subdivision thereof pertaining to
usury.
 
15.           The making of the Loans and the issuance of Letters of Credit and
the application of the proceeds thereof will not violate Regulation T, U, or X
of the Board of Governors of the Federal Reserve System.
 
Our opinions set forth in paragraph [3] and paragraph [14(d)] above are subject
to the effects of bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and general
equitable principles (whether considered in a proceeding in equity or at law).
 
We are members of the bar of the State[s] of _____________ and we express no
opinion as to the laws of any jurisdiction other than the laws of the State[s]
of ________, the General Corporation Law of the State of Delaware and the
Federal laws of the United States of America [and, to the extent relevant to the
opinions expressed in paragraph 10, the Uniform Commercial Code as in effect in
the UCC Jurisdictions].
 
This opinion has been rendered solely for your benefit and for the benefit of
the permitted assigns of the Lenders and Participants pursuant to Section 8.06
of the Credit Agreement in connection with the Credit Agreement and the
transactions contemplated thereby and may not be used, circulated, quoted,
relied upon or otherwise referred to for any other purpose without our prior
written consent; provided, however, that this opinion may be delivered to your
regulators, accountants, attorneys and other professional advisers and may be
used in connection with any legal or regulatory proceeding relating to the
subject matter of this opinion.
 
Very truly yours,

 
8

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Schedule 1
 
TRANSACTION DOCUMENTS

 
9

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Schedule 2
 
FINANCING STATEMENTS

State
 
Filing Office
     

 
10

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Schedule 3

UCC SEARCH REPORT[S]

Search Service
 
 
Search Date
 
Effective Date
 
 
State
 
UCC Filing 
Office
 
Name of Debtor
 
Exceptions 
Disclosed
                         

 
11

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Schedule 4
 
FINANCING STATEMENTS
 
AND OTHER FILINGS
 
FOR THE INTELLECTUAL PROPERTY COLLATERAL
 
UCC Financing Statements

State
 
Filing Office
                                   

 
Federal Filings

United States
Patent and Trademark Office
 
United States
Copyright Office
                                   

 
[Foreign Filings]

 
12

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Schedule 5

INTELLECTUAL PROPERTY SEARCH REPORT[S]

UCC Financing Statements

Search Service
 
Search Date
 
Effective Date
 
State
 
Filing Office
 
Name of Debtor
 
Exceptions
Disclosed
                         

Federal Filings

Search Service
 
Search Date
 
Effective Date
 
Filing Office
 
Name of Debtor
 
Exceptions 
Disclosed
                                 
U.S. Patent and Trademark Office
                   
U.S. Copyright Office
       

 
13

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Schedule 6

CONSENTS, AUTHORIZATIONS, APPROVALS,
 
NOTICES AND FILINGS

 
14

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SCHEDULE 7
 
EQUITY INTERESTS OF
 
SUBSIDIARIES OF THE BORROWER

 
15

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Schedule 8
 
MORTGAGE RECORDING OFFICE[S]

 
16

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EXHIBIT F TO
CREDIT AGREEMENT
 
FORM OF SOLVENCY CERTIFICATE
 
SOLVENCY CERTIFICATE
 
I, ____________________, hereby certify that I am the chief financial officer of
each of the companies listed on Schedule I hereto (the "Companies") and that I
am duly authorized to execute this Solvency Certificate, which is hereby
delivered on behalf of each of the Companies pursuant to Section 3.01 of that
certain Credit Agreement, dated as of March [__], 2009 (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement";
the terms used but not defined herein having the meanings therein defined),
between Sanders Morris Harris Group, Inc., a Texas corporation, as Borrower, and
Prosperity Bank, as Lender.
 
I further certify that I am generally familiar with the properties, businesses
and assets of each of the Companies and its Subsidiaries and have carefully
reviewed the Loan Documents and the contents of this Solvency Certificate and in
connection herewith, have reviewed such other documentation and information and
have made such investigations and inquiries as I have deemed necessary and
prudent therefor.  I further certify that the financial information and
assumptions that underlie and form the basis for the representations made in
this Solvency Certificate were reasonable when made and were made in good faith
and continue to be reasonable as of the date hereof.
 
I understand that the Lender is relying on the truth and accuracy of this
Solvency Certificate in connection with the transactions contemplated in the
Loan Documents.
 
I hereby further certify that:
 
·           On the date hereof, after giving effect to the consummation of the
transactions contemplated by the Credit Agreement and the other Loan Documents,
the present fair saleable value of the assets of each of the Companies exceeds
the amount that will be required to pay the probable liabilities of such Company
on its debts as they become absolute and matured.
 
·           On the date hereof, after giving effect to the consummation of the
transactions contemplated by the Credit Agreement and the other Loan Documents,
each Company does not have an unreasonably small capital with which to engage in
its anticipated businesses.  In reaching this conclusion, I understand that
"unreasonably small capital" depends upon the nature of the particular business
or businesses conducted or to be conducted, and I have reached my conclusions
based on the needs and anticipated needs for capital of the business conducted
or anticipated to be conducted by such Company.

 
 

--------------------------------------------------------------------------------

 
 
·           Each Company does not intend or believe that it will incur debts and
liabilities that will be beyond its ability to pay or refinance such debts or
liabilities as they mature.
 
·           Each Company does not intend, in consummating the transactions
contemplated by the Credit Agreement and the other Loan Documents, to hinder,
delay or defraud either present or future creditors or any other Person to which
such Company is or will become on or after the date hereof, indebted.
 
·           In reaching the conclusions set forth in this Solvency Certificate,
I have considered, among other things:
 
 o           the cash and other current assets of each Company reflected in the
December 31, 2008 consolidated and consolidating balance sheet of such Company
and its consolidated Subsidiaries;
 
 o           all contingent liabilities of each Company, including without
limitation, any claims arising out of, pending or, to the best knowledge of the
undersigned, threatened litigation against such Company, and in so doing, such
Company has computed the amount of each such contingent liability as the amount
that, in light of all the facts and circumstances existing on the date hereof,
represents the amount that can reasonably be expected to become an actual or
matured liability;
 
 o           all obligations and liabilities of each Company, whether matured or
unmatured, liquidated or unliquidated, disputed or undisputed, secured or
unsecured, subordinated, absolute, fixed or contingent, including, among other
things, claims arising out of, pending, or to the best knowledge of the
undersigned, threatened litigation against such Company, and in so doing, such
Company has computed the amount of each such contingent liability as the amount
that, in light of all the facts and circumstances existing on the date hereof,
represents the amount that can reasonably be expected to become an actual or
matured liability;
 
 o           historical and anticipated growth in the sales volume of each
Company and in the income stream generated by such Company;
 
 o           the customary terms of the trade payables of each Company;
 
 o           the amount of the credit extended by and to customers of each
Company;
 
 o           the amortization requirements of the Credit Agreement and the
anticipated interest payable on the Loans under the Credit Agreement; and
 
 o           the level of capital customarily maintained by each Company and
other entities engaged in the same or similar business as the business of such
Company.
 
Delivery of an executed counterpart of a signature page to this Solvency
Certificate by facsimile shall be effective as delivery of a manually executed
counterpart of this Solvency Certificate.
 
[The remainder of this page intentionally left blank]

 
-2-

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IN WITNESS WHEREOF, the Chief Financial Officer has executed this Solvency
Certificate in his corporate capacity and on behalf of each of the Companies
specified herein this ____ day of March, 2009.
 
By:
 
Name:
 
Title:  Chief Financial Officer
 
On Behalf of Each of the Companies

 
-3-

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SCHEDULE I TO SOLVENCY CERTIFICATE
 
[Companies]

 
 

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EXHIBIT G TO
CREDIT AGREEMENT
 
FORM OF NOTICE OF BORROWING
 
March [_________], 2009
 
Prosperity Bank, Lender
777 Walker Street, Suite L140
Houston, TX  77002
Attention: [____________]

Ladies and Gentlemen:
 
The undersigned, Sanders Morris Harris Group, Inc., a Texas corporation (the
"Borrower"), refers to the Credit Agreement dated as of March [   ], 2009 (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the "Credit Agreement"), between the Borrower and Prosperity Bank (the
"Lender").  Capitalized terms used but not otherwise defined herein shall have
the meanings assigned to such terms in the Credit Agreement.
 
The Borrower hereby gives you irrevocable notice pursuant to Section 2.02 of the
Credit Agreement that it hereby requests the Term Loan under the Credit
Agreement (the "Requested Loan"), and in that connection sets forth below the
information relating to such Requested Loan as required by Section 2.02 of the
Credit Agreement:
 
The Borrowing Date of the Requested Loan is __________.
 
The aggregate principal amount of the Requested Loan is $25,000,000.
 
The undersigned hereby certifies that the following statements are true and
correct on the date hereof, and will be true and correct on the Borrowing Date
of the Requested Loan:
 
The representations and warranties of each of the Loan Parties contained in each
Loan Document are true and correct on and as of the date hereof and will be true
and correct on and as of the Borrowing Date of the Requested Loan, both before
and after giving effect to the Requested Loan and to the application of the
proceeds thereof on and as of such earlier date)];
 
No Default or Event of Default has occurred and is continuing or would result
from such Requested Loan or from the application of the proceeds thereof; [and]

 
 

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Delivery of an executed counterpart of this Notice of Borrowing by facsimile
will be effective as delivery of an original executed counterpart of this Notice
of Borrowing.

Very truly yours,
 
SANDERS MORRIS HARRIS GROUP, INC.
   
By
     
Name:
     
Title:
 

 
 

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EXHIBIT H TO
CREDIT AGREEMENT
 
FORM OF COMPLIANCE CERTIFICATE
 
Financial Statement Date: _________

To:           Prosperity Bank, as Lender

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of March [____],
2009 (as amended, restated, extended, supplemented or otherwise modified from
time to time, the "Credit Agreement"; the terms defined therein being used
herein as therein defined), among Sanders Morris Harris Group, Inc., a Texas
corporation (the "Borrower") and Prosperity Bank, as Lender.
 
The undersigned Responsible Officer hereby certifies as of the date hereof that
he/she is the ___________________________________ of the Borrower, and that, as
such, he/she is authorized to execute and deliver this Certificate to the
Administrative Agent on the behalf of the Borrower, and that:
 
[Use following paragraph 1 for Fiscal Year-end financial statements]
 
1.           Attached hereto as Schedule 1 are the year-end audited financial
statements required by Section 5.01(a) of the Credit Agreement for the Fiscal
Year of the Borrower and its Subsidiaries ended as of the Financial Statement
Date shown above (the "Statement Date"), together with the report and opinion of
an independent certified public accountant required by such section:
 
[Use following paragraph 1 for Fiscal Quarter-end financial statements]
 
1.           Attached hereto as Schedule 1 are the unaudited financial
statements required by Section 5.01(b) of the Credit Agreement for the Fiscal
Quarter of the Borrower and its Subsidiaries ended as of the Financial Statement
Date shown above (the "Statement Date").  Such financial statements fairly
present the financial condition, results of operations and cash flows of the
Borrower and its Subsidiaries in accordance with GAAP as at such date and for
such period, subject only to normal year-end audit adjustments and the absence
of footnotes.
 
2.           The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and the other Loan Documents and has made, or has caused to be
made under his/her supervision, a detailed review of the transactions and
condition (financial or otherwise) of the Borrower and its Subsidiaries during
the accounting period covered by the attached financial statements.
 
3.           A review of the activities of the Borrower and the other Loan
Parties during such fiscal period has been made under the supervision of the
undersigned with a view to determining whether during such fiscal period the
Borrower and each of the other Loan Parties performed and observed all their
respective Obligations under the Loan Documents, and

 
 

--------------------------------------------------------------------------------

 
 
 [to the best knowledge of the undersigned during such fiscal period, the
Borrower and each of the other Loan Parties performed and observed each covenant
and condition of the Loan Documents applicable to it, and no Default or Event of
Default has occurred and is continuing.]
 
—or—
 
[the following covenants or conditions have not been performed or observed and
the following is a list of each such Default or Event of Default and its nature
and status:]
 
4.           The financial covenant analyses and information set forth on
Schedule 2 attached hereto are true and accurate on and as of the date of this
Certificate.
 
For purposes of this Certificate, the information described on Schedule 1 and
Schedule 2 attached hereto is provided as of _______________, 20___, and
pertains to the period commencing on ___________, _____ and ending on
___________, ______ (the "Measurement Period").
 
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
___________, ____.
 
SANDERS MORRIS HARRIS GROUP,
INC.
   
By:
  
   
Name:
  
   
Title:
  

 
-2-

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SCHEDULE 1
 
To the Compliance Certificate

 
Schedule 1

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SCHEDULE 2

To the Compliance Certificate
[to be provided]

 
 

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EXHIBIT I TO
CREDIT AGREEMENT

FORM OF EDELMAN SUBORDINATION AGREEMENT

SUBORDINATION AGREEMENT
 
THIS SUBORDINATION AGREEMENT, dated as of May [__], 2009 (as amended, restated,
supplemented or otherwise modified from time to time, this "Agreement"), by and
among Sanders Morris Harris Group Inc., a Texas corporation (together with its
successors and permitted assigns, the "Borrower"), Frederic M. Edelman, an
individual resident of the Commonwealth of Virginia (together with his
successors and permitted assigns, the "Subordinated Creditor", and Prosperity
Bank, a Texas corporation (together with its successors and assigns, the "Senior
Creditor"; each of the Borrower, the Subordinated Creditor and the Senior
Creditor are referred to herein from time to time individually as a "Party" and
collectively as the "Parties").  Unless otherwise specified herein, capitalized
terms used but not defined herein shall have the meanings specified in the
Senior Credit Agreement (defined below).
 
WHEREAS, the Borrower has entered into (a) that certain Reorganization and
Purchase Agreement, dated as of May 10, 2005, among the Borrower, the
Subordinated Creditor, The Edelman Financial Center, Inc. ("EFC Inc.") and The
Edelman Financial Center, LLC ("EFC LLC"), pursuant to which the Borrower has
and will from time to time purchase certain limited liability company membership
interests in EFC LLC from EFC Inc. and the Subordinated Creditor from time to
time (the "Purchase Agreement"), (b) that certain Letter Loan Agreement and
Letter Agreement, each dated December 8, 2006, between the Borrower and Edelman
Financial Advisors, LLC ("EFA LLC"), pursuant to which the Borrower agreed to
make certain loans to EFA and acquired 10 units (10%) of the limited liability
company membership interests in EFA (the "Letter Agreements"), and (c) that
certain Credit Agreement, dated as of May [__], 2009, between the Borrower and
the Senior Creditor (as amended, restated, renewed, replaced, refinanced,
restructured, supplemented or otherwise modified from time to time, the "Senior
Credit Agreement"), pursuant to which the Borrower has issued that certain Term
Note, dated May [__], 2009 (as amended, restated, renewed, replaced, refinanced,
restructured, supplemented or otherwise modified from time to time, the "Senior
Note"), payable to the order of the Senior Creditor in the original principal
amount of $25,000,000 (the "Senior Loan") (the Senior Credit Agreement, the
Senior Note, all other Loan Documents, and all other agreements, instruments and
documents from time to time made, entered into, executed or delivered in
connection therewith, as any of the foregoing may be amended, restated, renewed,
replaced, refinanced, restructured, supplemented or otherwise modified from time
to time being referred to herein individually as a "Senior Loan Document" and
collectively as the "Senior Loan Documents"; the Senior Loan, all accrued and
unpaid interest thereon, and any and all other loans, indebtedness, liabilities,
obligations, indemnities, costs, fees, covenants and expenses of any kind owing
at any time and from time by to time by the Borrower to the Senior Creditor
arising from, out of, under or in connection with any Senior Loan Document,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter arising (including, without limitation, all interest
accruing at the then applicable rate provided in the Senior Credit Agreement
after the maturity of the Senior Loan and interest accruing at the then
applicable rate provided in the Senior Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) being
referred to herein individually and collectively as the "Senior Debt");

 
 

--------------------------------------------------------------------------------

 

WHEREAS, under the Purchase Agreement, the Borrower has agreed to acquire
certain additional limited liability company membership interests in EFA LLC
(the "Specified EFA Interests") from Edward Moore, an individual, and the
Subordinated Creditor (collectively, the "Sellers") as described further
therein;
 
WHEREAS, as partial consideration for the Specified EFA Interests, the Borrower
has on or about the date hereof issued that certain Unsecured Subordinated
Promissory Note, dated May [__], 2009 (as amended, restated, supplemented, or
otherwise modified from time to time in accordance with the terms and provisions
of this Agreement, the "Subordinated Note"), payable to the order of the
Subordinated Creditor in the original principal amount of $10,000,000 (the
"Subordinated Loan") the terms of which provide that the original principal
amount of and all accrued and unpaid interest on the Subordinated Loan shall be
due and payable on [____] [__], 2010 (the "Subordinated Loan Maturity Date")
(the Subordinated Note, the Purchase Agreement, the Letter Agreements, and all
other agreements, instruments and documents at any time and from time to time
made, entered into, executed or delivered between the Borrower and the
Subordinated Creditor with respect to the Subordinated Loan or any other
Subordinated Debt (defined below) being referred to herein individually as a
"Subordinated Loan Document" and collectively as the "Subordinated Loan
Documents"; the Subordinated Loan and all other loans, indebtedness,
liabilities, obligations, indemnities, costs, fees, covenants and expenses of
any kind owing at any time and from time to time by the Borrower to the
Subordinated Creditor arising from, out of, under or in connection with any
Subordinated Loan Document, or any other agreement, instrument or document,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising (other than the Purchase Agreement and the
Registration Rights Agreement dated May 10, 2005, among the Borrower, the
Subordinated Creditor and EFC, Inc.) are referred to herein individually and
collectively as the "Subordinated Debt");
 
WHEREAS, the Subordinated Creditor will benefit directly and indirectly from the
Senior Loan, the sale of the Specified EFA Interests, the issuance of the
Subordinated Note, the incurrence by the Borrower of the Subordinated Loan and
the other Subordinated Debt, and the execution, delivery and performance of the
Subordinated Loan Documents;
 
WHEREAS, as consideration for and as an inducement to the Senior Creditor to
make the Senior Loan and to enter into the Senior Loan Documents with the
Borrower, the Subordinated Creditor has agreed to enter into this Agreement and
to subordinate all of its rights to collect, receive payment of and to enforce
the Subordinated Debt as set forth herein; and
 
WHEREAS, the Parties desire to enter into this Agreement to evidence such
subordination.
 
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereby agree as
follows:

 
2

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Section 1.     Recitals.  Each recital to this Agreement is hereby incorporated
by reference into this Agreement.  The Parties hereby acknowledge and agree that
each such recital is true and correct in all respects.
 
Section 2.     Subordination.
 
(a)           Notwithstanding any term or provision in any Subordinated Document
to the contrary, the Subordinated Creditor hereby covenants and agrees that the
Subordinated Debt shall be junior and subordinate in right of payment, to the
extent and in the manner set forth in this Agreement, to the indefeasible
payment and performance in full of the Senior Debt.
 
(b)           Except as and to the extent expressly permitted under this Section
2 or Section 11 of this Agreement, the Borrower shall not at any time pay, give
or permit, directly or indirectly, and the Subordinated Creditor shall not
demand, accept or receive, directly or indirectly, by set-off, prepayment,
purchase, redemption or in any other manner, any payment, distribution,
dividend, prepayment or any other assets or properties of the Borrower of any
kind of, on, with respect to, or on account of, any of the Subordinated Debt at
any time (i) prior to the Subordinated Loan Maturity Date or (ii) on or after
the Subordinated Loan Maturity Date, if (A) a Default or Event of Default has
occurred and is continuing under the Senior Credit Agreement at such time or (B)
in the determination of the Senior Creditor at such time, a Default or an Event
of Default would occur under the Senior Credit Agreement as a result of the
making of such payment (each such Default, Event of Default, and other event or
circumstance described or referred to in clause (A) and (B) above being referred
to herein as a "Senior Default").
 
(c)           If the Borrower intends to pay any portion of the Subordinated
Debt at any time on or after the Subordinated Loan Maturity Date, the Borrower
shall deliver to the Senior Creditor, at least five (5) business days prior to
the date the Borrower expects to make (and, for the avoidance of doubt, at least
five (5) business days prior to the date the Borrower actually makes) such
payment (any such date of expected or actual payment, a "Subordinated Debt
Payment Date"), a certificate, signed by the Chief Financial Officer of the
Borrower, specifying the expected Subordinated Debt Payment Date and the
proposed amount of such payment and certifying to the Senior Creditor that no
Senior Default has occurred and is continuing and no Senior Default will occur
as a result of the Borrower making such payment on such Subordinated Debt
Payment Date.  Notwithstanding the foregoing, if the Senior Creditor delivers
notice to the Borrower on any day at any time prior to the making of such
payment on such Subordinated Debt Payment Date that a Senior Default has
occurred and is continuing or that in its determination a Senior Default will
occur as a result of the making of such payment on such Subordinated Debt
Payment Date (any such notice, a "Senior Default Notice"), then such payment
shall be prohibited by this Section 2, the Borrower shall not make and the
Subordinated Creditor shall not collect, receive or accept such payment, and the
Subordinated Creditor shall not take or commence any Enforcement Action (defined
below) of any kind on or with respect to such payment, any other Subordinated
Debt or any Subordinated Loan Document, at any time and for any reason until the
earlier to occur of (i) the date on which no Senior Default of any kind exists,
as determined by the Senior Creditor and notified to the Subordinated Creditor,
and (ii) with respect to any Permitted Enforcement Action (defined below) during
the existence of a Senior Default, the date immediately following the last day
of the Standstill Period (defined below).  [The Senior Creditor shall not
deliver more than two (2) Senior Default Notices in any consecutive twelve month
period after the third anniversary of the date of this Agreement.  If the Senior
Creditor does not deliver a Senior Default Notice to the Borrower on or prior to
such Subordinated Debt Payment Date, the Borrower may pay and the Subordinated
Creditor may receive the payment on the Subordinated Debt on the Subordinated
Debt Payment Date.]

 
3

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Section 3.     Insolvency Proceedings.  Without limiting any other term or
provision of this Agreement, during any Insolvency Proceeding:
 
(a)           the Senior Creditor shall first be entitled to receive the
indefeasible payment and performance in full of all of the Senior Debt and the
Senior Loan Documents shall be satisfied and terminated before the Subordinated
Creditor is entitled to receive any payment from the Borrower of principal or
interest, whether in equity interests, cash, property or securities to which the
Subordinated Creditor would, in the absence of this agreement be entitled, on
the Subordinated Note or any other payment directly or indirectly arising from,
out of or in connection with any of the Subordinated Debt or the Subordinated
Loan Documents.
 
(b)           The Senior Creditor is hereby irrevocably authorized and empowered
by the Subordinated Creditor (in its own name or in the name of the Subordinated
Creditor or otherwise), but shall have no obligation, to (i) file proofs of
claim and to vote claims pertaining to the Subordinated Debt in any Insolvency
Proceeding if the Subordinated Creditor fails to so file such proof of claim or
vote such claim and to take such actions as it may deem necessary or advisable
for the enforcement of the provisions of this Agreement, and (ii) demand, sue
for, collect and receive every payment or distribution on account of the
Subordinated Debt payable or deliverable in connection with such Insolvency
Proceeding to be applied toward the payment in full of the Senior Debt; provided
that the Senior Creditor shall have no obligation to execute, verify, deliver or
file any such proof of claim, to vote such claim or to demand, or to sue or
collect such payments.  In the event that the Senior Creditor votes any claim
pursuant to the authority granted hereby, the Subordinated Creditor shall not
change or withdraw such vote.
 
(c)           The Subordinated Creditor shall, if and when requested by the
Senior Creditor, execute and deliver such powers of attorney, assignments or
proofs of claim or other instruments as the Senior Creditor may reasonably
request to enable the Senior Creditor or the Subordinated Creditor to enforce
any and all claims in respect of the Subordinated Debt and to collect and
receive any and all payments and distributions which may be payable or
deliverable at any time upon or in respect of any of the Subordinated Debt.
 
Section 4.     Turnover of Prohibited Transfers.
 
(a)           If any payment or distribution, whether in connection with any
Insolvency Proceeding or otherwise, of any kind or character, and whether in
cash, equity interests, securities or other properties, and whether through the
exercise of any set-off or otherwise, shall be (i) collected, accepted or
received (actually or constructively) by the Subordinated Creditor in violation
of any of the terms of this Agreement, such payment or distribution shall be
deemed to be received by the Subordinated Creditor in trust for the benefit of,
and shall then promptly be paid or delivered and transferred to, the Senior
Creditor to be applied against the Senior Debt, or (ii) proposed to be made by a
liquidating trustee, agent or other Person pursuant to any order or decree made
by any court of competent jurisdiction in which any Insolvency Proceeding is
pending, such payment or distribution shall be paid by such liquidating trustee,
agent or other Person directly to the Senior Creditor to be applied against the
Senior Debt, and if, notwithstanding the foregoing, any such payment or
distribution is made to or received by the Subordinated Creditor, the
Subordinated Creditor shall immediately transfer and turn over any such payment
or distribution to the Senior Creditor to be applied against the Senior Debt.

 
4

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(b)           In connection with any payment or distribution of cash, equity
interests, securities or other properties of the Borrower in any Insolvency
Proceeding, the Subordinated Creditor shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such Insolvency
Proceeding is pending, or a certificate of the liquidating trustee, agent or
other Person making such payment or distribution, delivered to the Subordinated
Creditor, for the purpose of ascertaining the Person(s) entitled to receive
payment from the Subordinated Creditor pursuant to the foregoing provisions of
this Section 4, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all of the facts pertinent thereto or to this
Agreement.
 
Section 5.     Representations, Warranties, and Covenants of Borrower.  The
Borrower hereby represents and warrants to, and covenants and agrees with, the
Senior Creditor on the date hereof and at all times hereafter until the earlier
to occur of (i) the indefeasible payment and performance in full of all of the
Senior Debt and the termination of all of the Senior Loan Documents or (ii) the
date of termination of this Agreement pursuant to Section 32 hereof (the
"Termination Date"), that:
 
(a)           the Borrower has not relied on and will not rely on any
representation or information of any nature made by or received from the Senior
Creditor relative to the Borrower or the Senior Debt in entering into and
performing its obligations under this Agreement and any Subordinated Loan
Document;
 
(b)           no consent or authorization of, filing with, or other act by or in
respect of, any Governmental Authority or any other Person is or will be
required on the part of or with respect to the Borrower in connection with the
execution, delivery, performance, validity or enforceability of this Agreement;
 
(c)           the Borrower has no knowledge of, and has not authorized or
consented to, any sale, assignment or transfer by the Subordinated Creditor of
any of the Subordinated Debt or any Subordinated Loan Document, or any right,
title or interest therein, to any other Person in violation of this Agreement;
 
(d)           attached hereto as Exhibits A, B and C are true, correct and
complete executed copies of the Subordinated Note, the Purchase Agreement and
the Letter Agreements, and none of the Subordinated Note, the Purchase Agreement
nor the Letter Agreements have been amended, restated, replaced or modified as
of the date hereof;
 
(e)           the Borrower has not made, and the Subordinated Creditor has not
collected, accepted or received, any payment or distribution of any kind on, in
satisfaction of or with respect to any of the Subordinated Debt at any time
prior to the Subordinated Loan Maturity Date or otherwise in violation of this
Agreement;

 
5

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(f)           as of the date hereof, no default, event of default, or other
similar event or circumstance has occurred and is continuing under any
Subordinated Loan Document; and
 
(g)          except to the extent expressly permitted under the Senior Credit
Agreement, (i) the Borrower shall not enter into any other agreements,
instruments or documents that cause the Borrower to make, incur, assume, or
otherwise become liable for any other Subordinated Debt (except to the extent
otherwise expressly permitted under this Agreement) that evidence, govern,
document, or otherwise relate to any Subordinated Debt, and (ii) the original
principal amount specified in such Subordinated Note, together with any accrued
and unpaid interest thereon and all other liabilities, obligations, indemnities,
costs, fees, and expenses of any kind incurred at any time and from time to time
by the Borrower to the Subordinated Creditor under the Subordinated Loan
Documents as in effect on the date hereof, shall comprise and represent all of
the Subordinated Debt of any kind now or hereafter owing by the Borrower to the
Subordinated Creditor.
 
Section 6.     Representations, Warranties and Covenants of Subordinated
Creditor.  The Subordinated Creditor hereby represents and warrants to, and
covenants and agrees with, the Senior Creditor on the date hereof and at all
times hereafter until the earlier to occur of (i) the indefeasible payment and
performance in full of all of the Senior Debt and the termination of all of the
Senior Loan Documents or (ii) the Termination Date, that:
 
(a)           the Subordinated Note and each other Subordinated Loan Document:
 
(i)           has been issued to and executed by the Subordinated Creditor for
good and valuable consideration;
 
(ii)          is owned by the Subordinated Creditor free and clear of any
security interests, liens, charges or encumbrances whatsoever arising from,
through or in connection with the Subordinated Creditor (other than the interest
of the Senior Creditor under this Agreement);
 
(iii)         is payable solely and exclusively to the Subordinated Creditor and
to no other Person and is payable without deduction for any defense, offset or
counterclaim; and
 
(iv)         constitute the only agreements, instruments and documents
evidencing the Subordinated Debt.
 
(b)          the Subordinated Debt (i) is and shall be and remain unsecured at
all times and (ii) is not an shall not be supported by any lien or security
interest in any assets or properties of the Borrower or any guarantee, letter of
credit or other credit enhancement provided by or on behalf of the Borrower or
any of its Subsidiaries;
 
(c)          the Subordinated Creditor has the capacity and the legal right to
execute and deliver and to perform his obligations under this Agreement;
 
(d)          no consent or authorization of, filing with, or other act by or in
respect of, any Governmental Authority or any other Person is or will be
required on the part of or with respect to the Subordinated Creditor in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement;

 
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(e)          this Agreement constitutes a legal, valid and binding obligation of
the Subordinated Creditor, and is enforceable against the Subordinated Creditor
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law);
 
(f)           the Subordinated Creditor has received, reviewed, been advised of,
understands and obtained legal and financial counsel regarding this Agreement
and, in connection with such understanding and in consideration of same, has
voluntarily elected to enter into this Agreement and to receive, as partial
consideration for the Specified EFA Interests, the Subordinated Note;
 
(g)          the execution, delivery and performance of this Agreement will not
violate any provision of any requirement of law affecting or any contractual
obligation of the Subordinated Creditor or any of his affiliates or related
parties and will not result in the creation or imposition of any lien on any of
the properties or revenues of the Subordinated Creditor pursuant to any
requirement of law affecting, or any contractual obligation of, the Subordinated
Creditor;
 
(h)          the Subordinated Creditor has not relied on and will not rely on
any representation, statement or other information of any kind or nature made by
or received from the Senior Creditor in entering into and performing his
obligations under this Agreement and any Subordinated Loan Document;
 
(i)           the Subordinated Creditor is on the date hereof the sole lawful
and beneficial owner of all of the Subordinated Debt;
 
(j)           the Subordinated Creditor has not sold, assigned or transferred
and will not sell, assign or transfer any right, title or interest in any of the
Subordinated Debt or any Subordinated Loan Document to any other Person, except
to the extent expressly permitted under this Agreement;
 
(k)          as of the date hereof, no default, event of default, or other
similar event or circumstance has occurred and is continuing under any
Subordinated Loan Document;
 
(l)           the Borrower has not made, and the Subordinated Creditor has not
collected, accepted or received, any payment or distribution of any kind on, in
satisfaction of or with respect to any of the Subordinated Debt at any time
prior to the Subordinated Loan Maturity Date or otherwise in violation of this
Agreement;
 
(m)         attached hereto as Exhibits A, B, and C are true, correct and
complete executed copies of the Subordinated Note, the Purchase Agreement, and
the Letter Agreements, and none of the Subordinated Note, the Purchase
Agreement, nor the Letter Agreements have been amended, restated, replaced or
modified as of the date hereof;

 
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(n)          except to the extent expressly permitted under the Senior Credit
Agreement, (i) the Subordinated Note, the Purchase Agreement and the Letter
Agreements are and shall be the only Subordinated Loan Documents (other than
this Agreement) that evidence, govern, document, or otherwise relate to any
Subordinated Debt, and (ii) the original principal amount specified in the
Subordinated Note, together with any accrued and unpaid interest thereon and all
other liabilities, obligations, indemnities, costs, fees and expenses of any
kind incurred at any time and from time to time by the Borrower to the
Subordinated Creditor under the Subordinated Loan Documents as in effect on the
date hereof, shall comprise and represent all Subordinated Debt of any kind now
or hereafter owing by the Borrower to the Subordinated Creditor; and
 
(o)          the Subordinated Creditor (i) has received, reviewed and analyzed
the Subordinated Note, the Letter Agreements and this Agreement and all of the
terms and provisions hereof and thereof prior to the date hereof, and (ii) is
capable of assessing and has assessed the merits and risks represented by the
Subordinated Note, the Letter Agreements and this Agreement and has voluntarily
elected to enter into the Subordinated Note, the Letter Agreements and this
Agreement.
 
Section 7.     Waivers and Consents of Subordinated Creditor.
 
(a)          The Subordinated Creditor hereby acknowledges, consents, covenants
and agrees that the payment and performance by the Borrower of any of the Senior
Debt will not cause or constitute a Subordinated Default (defined below) and,
without the necessity of any reservation of any rights or remedies by the Senior
Creditor against the Subordinated Creditor or any other Person, and without any
notice to or any further assent by the Subordinated Creditor, until the earlier
to occur of (i) the indefeasible payment and performance in full of the Senior
Debt and the termination of the Senior Loan Documents or (ii) the Termination
Date:
 
(i)           any demand for payment of any Senior Debt made by the Senior
Creditor may be rescinded in whole or in part by the Senior Creditor for a
period of up to six (6) months following the maturity date for the Senior Loan
specified in the Senior Credit Agreement on the date hereof (the "Senior
Maturity Date"), and any Senior Debt may be continued, and any of the Senior
Debt, or the liability of the Borrower or the Subordinated Creditor or any other
Person upon or for any part thereof, or any Collateral or guarantee therefor or
right of offset with respect thereto, or any obligation or liability of the
Borrower or any other Person under any Senior Loan Document, may, from time to
time, in whole or in part, be renewed, extended, modified, accelerated,
compromised, waived, surrendered, or released by the Senior Creditor for a
period of up to six (6) months following the Senior Maturity Date; and
 
(ii)           any of the Senior Debt and any Senior Loan Document may be
amended, restated, renewed, restructured, refinanced, replaced, extended,
modified, supplemented or terminated, in whole or in part, as the Senior
Creditor may deem advisable at any time and from time to time in its sole
discretion, any Collateral securing the payment of any of the Senior Debt may be
sold, exchanged, waived, surrendered or released, in accordance with the terms
of the Senior Loan Documents, and the Senior Creditor may exercise (or refrain
from exercising) any of its rights and remedies with respect to any of the
Senior Debt, any Senior Loan Document, applicable law, or otherwise, in each
case all without notice to or further assent by the Subordinated Creditor, which
will remain bound under this Agreement, and all without impairing, abridging,
releasing or otherwise affecting in any way the subordination provided for in
this Agreement.

 
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(b)           The Subordinated Creditor hereby irrevocably and unconditionally
waives any and all notice of the creation, renewal, restatement, restructuring,
replacement, refinancing, extension or accrual of any of the Senior Debt and
notice of or proof of reliance by the Senior Creditor upon this Agreement.  The
Senior Debt shall be deemed conclusively to have been created, contracted,
continued and incurred in reliance upon this Agreement, and all dealings between
the Borrower and the Senior Creditor shall be deemed to have been consummated in
reliance upon this Agreement.  The Subordinated Creditor hereby further
irrevocably and unconditionally waives protest, demand for payment, notice of
default, and any other notice of any kind whatsoever relating to any of the
Senior Debt or any Senior Loan Document.
 
(c)           To the maximum extent permitted by law, the Subordinated Creditor
hereby irrevocably and unconditionally waives any claim of any kind or character
which it now has or may at any time hereafter have against the Senior Creditor
with respect to, or arising out of, any action or omission or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of the
Senior Creditor or any of its respective directors, officers, employees,
attorneys or agents with respect to any of the Senior Debt, the Collateral, any
exercise (or failure to exercise) of rights or remedies under the Senior Loan
Documents or any transaction relating to the Borrower or any of the Collateral,
except to the extent such claim arises from the gross negligence or willful
misconduct of the Senior Creditor and, without limiting the generality of the
foregoing, none of the Senior Creditor nor any of its respective directors,
officers, employees, attorneys or agents shall be (i) liable for failure to
demand, collect or realize upon any of the Senior Debt or the Collateral or for
any forbearance or delay in doing so, (ii) under any obligation to sell or
otherwise dispose of any Collateral upon the request of the Borrower or the
Subordinated Creditor or any other Person or (iii) required to take any other
action whatsoever with regard to any of the Senior Debt or the Collateral,
except to the extent such claim arises from the gross negligence or willful
misconduct of the Senior Creditor.
 
Section 8.     Senior Debt Unconditional.  All rights and interests of the
Senior Creditor hereunder, and all agreements and obligations of the
Subordinated Creditor and the Borrower hereunder, shall be absolute, irrevocable
and unconditional and shall remain in full force and effect irrespective of:
 
(a)           any lack of validity, enforceability, perfection or priority of
any Senior Debt or any Senior Loan Document;
 
(b)           any change in the time, amount, manner or place of payment of, or
in any other term of, all or any of the Senior Debt, or any amendment or waiver
or other modification, whether by course of conduct or otherwise, of any Senior
Loan Document;
 
(c)           any exchange, release or nonperfection of any security interest in
any Collateral, or any release, amendment, waiver or other modification,
pursuant to the terms of the Guarantee and Security Agreement or any of the
other Senior Loan Documents, of all or any of the Senior Debt or any guarantees
thereof or any Senior Loan Document; or

 
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(d)           any other event or circumstance which otherwise might constitute a
defense, counterclaim or other right or remedy available to, or a discharge of,
the Borrower or any other Loan Party in respect of any of the Senior Debt or any
Senior Loan Document, or of the Subordinated Creditor or the Borrower in respect
of this Agreement.
 
Section 9.     Subordinated Note Legend.  The Subordinated Creditor and the
Borrower further covenant and agree with the Senior Creditor that the
Subordinated Note shall contain the following language (or a statement
substantially similar to the following language) on the face thereof set forth
conspicuously and in capital letters:
 
NOTWITHSTANDING ANY TERM OR PROVISION SET FORTH IN THIS INSTRUMENT, THE RIGHTS
AND OBLIGATIONS EVIDENCED BY THIS INSTRUMENT ARE SUBORDINATED IN THE MANNER AND
TO THE EXTENT SET FORTH A CERTAIN SUBORDINATION AGREEMENT TO WHICH THE MAKER OF
THIS INSTRUMENT IS A PARTY AND WHICH PROHIBITS CERTAIN TRANSFERS, SALES OR
ASSIGNMENTS OF THIS INSTRUMENT.  ANY SUCH TRANSFER, SALE OR ASSIGNMENT OF THIS
INSTRUMENT SHALL BE NULL AND VOID.
 
NOTWITHSTANDING THE FOREGOING, ANY ASSIGNEE OR HOLDER OF THIS INSTRUMENT THAT
TAKES THIS INSTRUMENT SUBJECT TO THE TRANSFER, SALE OR ASSIGNMENT OF SAME IS
BOUND BY AND SUBJECT IN ALL RESPECTS AND FOR ALL PURPOSES TO THE TERMS AND
PROVISIONS OF THE SUBORDINATION AGREEMENT AS IF SUCH ASSIGNEE OR HOLDER WERE A
PARTY TO SUCH SUBORDINATION AGREEMENT.
 
Section 10.     Negative Covenants of Subordinated Creditor.  The Subordinated
Creditor hereby covenants and agrees that it shall not, without the prior
written consent of the Senior Creditor, until the earlier to occur of (i) the
indefeasible payment and performance in full of the Senior Debt and the
termination of all of the Senior Loan Documents or (ii) the Termination Date:
 
(a)           sell, assign, or transfer, directly or indirectly, in whole or in
part, any of the Subordinated Debt or any Subordinated Loan Document or any
right, title or interest therein (each, a "Subordinated Interest") to any other
Person (a "Transferee"), other than any family member of the Subordinated
Creditor or any trust created by or on behalf of the Subordinated Creditor for
estate planning or tax purposes (each, a "Permitted Transferee"), provided that
(x) any such Permitted Transferee shall contemporaneously with any such sale,
assignment or transfer execute a counterpart to this Agreement and thereupon
become a "Subordinated Creditor" under this Agreement in all respects and for
all purposes to the extent of the Subordinated Interest and (y) any sale,
assignment or transfer of any Subordinated Interest that is made or consummated
in violation of this Section 10(a) shall be null and void in all respects);
 
(b)           permit any Subordinated Loan Document to be directly or indirectly
amended, restated, modified, restructured, renewed, replaced or otherwise
supplemented, if and to the extent such amendment, restatement, modification,
restructuring, renewal or replacement would in any manner:

 
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(i)           increase the then outstanding amount of any of the Subordinated
Debt;
 
(ii)          increase the interest rate on or any of the yield provisions
applicable to any of the Subordinated Debt;
 
(iii)         change or supplement any of the terms or provisions of any of the
representations and warranties, covenants, indemnities, cost and expense
reimbursement provisions, defaults or events of default thereunder in any manner
that makes them more restrictive or burdensome on the Borrower;
 
(iv)         increase materially any of the other obligations or liabilities of
the Borrower thereunder;
 
(v)          change to an earlier date any date on which any payment of
principal, interest or other amount of any Subordinated Debt is required to be
made; or
 
(vi)         otherwise be materially adverse to the rights and interests of the
Senior Creditor; or
 
(c)           contest, challenge, disrupt, interfere with or otherwise impair,
or support any other Person in contesting, challenging, disrupting, interfering
with or otherwise impairing, in each case in any claim, action or proceeding
(including, without limitation, any Insolvency Proceeding), (i) any of the
Senior Debt, the validity, enforceability, perfection or priority of any Senior
Loan Document or any Liens or guarantees created thereunder, (ii) any right,
title or interest of the Senior Creditor in, to, or under any of the Collateral,
or any claim, right, remedy, motion, objection, or proceeding relating to or in
respect of the Borrower any modification or relief from automatic stay, adequate
protection, cash Collateral or post-petition interest, fees or expenses, under
11 U.S.C. §§ 361, 362, 363 or 364, or any other provision of the Bankruptcy
Code, applicable law, or otherwise, or (iii) any other claim, right, remedy,
power or privilege asserted, exercised, enforced or pursued by the Senior
Creditor at any time and from time to time in respect of any of the Senior Debt
or under or in connection with the Borrower or any Insolvency Proceeding of or
involving the Borrower or any Senior Loan Document.
 
Section 11.     Enforcement Actions.
 
(a)           Notwithstanding any term or provision in any Subordinated Loan
Document, the Subordinated Creditor shall not, at any time and for any reason,
unless and until all of the Senior Debt shall have been indefeasibly paid and
performed in full, and only except to the extent expressly permitted in this
Section 11(b), (i) accelerate the scheduled maturity of or otherwise declare to
be due and payable any of the Subordinated Debt prior to the Subordinated Debt
Maturity Date, (ii) commence or join with any other creditor in commencing an
Insolvency Proceeding against the Borrower, or (iii) continue or take any other
Enforcement Action or other action to collect or receive, or enforce any right
or remedy to collect or receive, any payment or distribution of, on, in
satisfaction of or on account of any of the Subordinated Debt, including,
without limitation, the exercise of any right or remedy available to the
Subordinated Creditor under any Subordinated Loan Document, applicable law or
otherwise, if and for so long as any Senior Default has occurred and is
continuing or if a Senior Default would in the determination of the Senior
Creditor result from the taking of any such Enforcement Action.

 
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(b)           Notwithstanding Section 11(a) above, if an Event of Default (as
defined in the Subordinated Note) occurs and is continuing at any time as a
result of any failure on the part of the Borrower to make any payment when due
on the Subordinated Debt to the Subordinated Creditor or for any other reason
(each, a "Subordinated Default"), the Subordinated Creditor shall promptly
provide written notice of such Subordinated Default to the Senior Creditor
(which notice shall describe such Subordinated Default in reasonable detail)
(each, a "Subordinated Default Notice") and shall take no Enforcement Action or
any other action in respect of the payment or collection of any Senior Debt or
with respect to any Subordinated Loan Document until the occurrence of the date
which is 180 days after the later to occur of the date of (i) delivery by the
Senior Lender to the Subordinated Creditor of the most recent Senior Default
Notice identifying any Senior Default or (ii) delivery by the Subordinated
Creditor to the Senior Creditor of such Subordinated Default Notice (such
180-day period, the "Standstill Period") make a written demand to the Borrower
for payment of that portion of the Subordinated Debt which is then due and
payable (any such written demand, a "Permitted Enforcement Action"); and
provided further that any such Standstill Period (x) shall be tolled during any
Insolvency Proceeding involving the Borrower of which the Subordinated Creditor
has received notice and (y) shall be tolled for a period not to exceed 180 days
during which no Insolvency Proceeding involving the Borrower exists but due to
other circumstances the Senior Creditor reasonably believes that it is prevented
by applicable law (including, for the avoidance of doubt, judicial ruling) from
exercising its enforcement rights and remedies against all or any part of the
Collateral, provided that in the case of this clause (y) the Senior Creditor is
diligently attempting in good faith to obtain relief from such applicable law
and is not so prevented by applicable law because of action taken by the Senior
Creditor in violation of applicable law and provided that the Subordinated
Creditor has received notice of such circumstances from the Senior Creditor.
 
(c)           Notwithstanding the foregoing, the Subordinated Creditor may
receive and retain payments on the Subordinated Debt as and to the extent
expressly permitted under Section 2 of this Agreement and may file a proof of
claim in any Insolvency Proceeding instituted by another Person and may vote
such claim in any manner which is permitted hereunder and is not inconsistent
with the terms hereof.
 
(d)           If the Subordinated Creditor takes or attempts to take any such
action which the Senior Creditor determines is in violation of or inconsistent
with the terms of this Agreement, the Senior Creditor may at any time and from
time to time in its sole discretion, in accordance with and pursuant to the
terms hereof, object to, interfere with, impose upon and take any action to
prevent such action, either in its own name, in the name of the Borrower or any
other Loan Party or otherwise.
 
Section 12.     Reinstatement.  The provisions of this Agreement shall continue
to be effective or be reinstated, as the case may be, if at any time any payment
in respect of the Senior Debt is rescinded, avoided or must otherwise be
returned by the Senior Creditor thereof upon the filing by or against the
Borrower or Subordinated Creditor of any Insolvency Proceeding or otherwise, all
as if such payment had never been made.
 
Section 13.     Provisions Applicable After Insolvency Proceeding.  The
provisions of this Agreement shall continue in full force and effect
notwithstanding the occurrence of any event or proceeding contemplated under the
definition of "Insolvency Proceeding".

 
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Section 14.     Permitted Equity Conversion.  Notwithstanding any other term or
provision to the contrary in this Agreement, the Subordinated Creditor and the
Borrower may at any time upon ten (10) business days' prior written notice to
the Senior Creditor, effect and consummate a Permitted Equity Conversion,
provided that the consummation of any such Permitted Equity Conversion would not
in the determination of the Senior Creditor give rise to a Default or an Event
of Default or violate or otherwise conflict with any term or provision contained
in the Senior Credit Agreement or any other Senior Loan Document.
 
Section 15.     Validity of Senior Debt and Senior Loan Documents.  Each of the
Borrower and Subordinated Creditor acknowledges and agrees that (a) the Borrower
is or will be indebted to the Senior Creditor for all of the Senior Debt,
without any right of rescission, cross complaint, claim, demand, defense,
counterclaim or offset of any kind or nature whatsoever that can be asserted to
reduce or eliminate all or any part of the Senior Debt, and (b) neither the
Borrower nor the Subordinated Creditor has as of the date hereof any claim,
right or cause of action of any kind or nature against Senior Creditor as a
result of or in connection with the Senior Debt, and any of the Senior Loan
Documents, or the transactions contemplated hereby or thereby.
 
Section 16.     Interpretation.  If any term or provision of this Agreement
requires judicial or other interpretation, the Parties hereby agree that any
court or any other Person interpreting or construing the same shall not apply a
presumption that the terms hereof shall be more strictly construed against any
Party by reason of the rule of construction that a document is to be construed
more strictly against the Party who itself or through its agent prepared the
same.
 
Section 17.     Expenses; Indemnification.
 
(a)           The Borrower shall pay and reimburse to the Senior Creditor, upon
demand any and all fees, costs and expenses (including, without limitation, all
attorneys' fees and disbursements) paid or incurred by the Senior Creditor from
time to time, as a result of, or in connection with the preparation,
negotiation, execution, delivery, performance, amendment, waiver, collection or
enforcement of this Agreement.
 
(b)           The Borrower shall indemnify and hold the Senior Creditor and each
of its respective partners, members, shareholders, officers, managers,
directors, employees, attorneys, agents and other representatives (each an
"Indemnitee") harmless from and against any and all claims, losses, damages,
actions, causes of action, liabilities, obligations, costs and expenses, suits
and proceedings (including, without limitation, reasonable attorneys' fees and
disbursements) of any kind or nature whatsoever, threatened or brought against
or incurred by the Senior Creditor, in any manner and for any reason, directly
or indirectly arising from, out of, as a result of, relating to or in connection
with this Agreement; provided, however, that the Borrower shall not be obligated
to indemnify any Indemnitee for any acts or omissions of the Senior Creditor in
connection with matters described in this Section 17 arising directly from the
gross negligence or willful misconduct of the Senior Creditor, as determined by
a court of competent jurisdiction in a final, non-appealable judgment.  WITHOUT
LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS INTENTION OF THE
PARTIES HERETO THAT EACH INDEMNITEE SHALL BE INDEMNIFIED AND HELD HARMLESS FROM
AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, ACTIONS, CAUSES OF ACTION,
LIABILITIES, PENALTIES, SUITS, PROCEEDINGS, JUDGMENTS, DISBURSEMENTS, COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, FEES AND EXPENSES OF COUNSEL) ARISING
OUT OF OR CAUSED IN WHOLE OR PART BY THE ORDINARY NEGLIGENCE OF ANY SUCH
INDEMNITEE.  THE AGREEMENTS IN THIS SECTION 17 SHALL SURVIVE REPAYMENT OF THE
SENIOR DEBT.

 
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(c)           All obligations and liabilities of the Borrower under this Section
17 shall survive the termination of the Senior Loan Documents, and shall be in
addition to and shall supplement the obligations and liabilities of the Borrower
and each other Loan Party under any of the Senior Loan Documents.
 
Section 18.     Term.  This Agreement shall become effective when executed by
each of Borrower, Subordinated Creditor, and Senior Creditor, and, when so
accepted, shall constitute a continuing agreement, and shall remain in effect
until the earlier to occur of (i) the indefeasible payment and performance in
full of all of the Senior Debt and the termination of all of the Senior Loan
Documents or (ii) the termination of this Agreement pursuant to the payment and
performance in full of all of the Subordinated Debt in accordance with the terms
hereof.
 
Section 19.     Further Assurances.  Each of the Borrower and the Subordinated
Creditor, at its own respective cost and expense and at any time and from time
to time, shall promptly and duly execute and deliver any further agreements,
documents and instruments and to take such other actions as may be reasonably
requested, directed or instructed by Senior Creditor to effect the purpose of
obtaining or preserving the full benefits of this Agreement and the rights and
powers granted herein, all as and when requested, directed or instructed by the
Senior Creditor.
 
Section 20.     Powers Coupled with an Interest.  All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until the Senior Debt is indefeasibly paid and performed in full and
all of the Senior Loan Documents are terminated.
 
Section 21.     Notices.  All notices, requests and other communications
hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given to the relevant Party at its address provided on the
signature page hereto, or as to each such party at such other address as such
party shall designate in a written notice to the other parties.  Each such
notice, request or other communication shall be effective (a) on the earlier of
the date of receipt or the date three (3) Business Days after deposit of such
notice in the United States mail, if sent postage prepaid, certified mail,
return receipt requested or (b) when actually received, if personally delivered.
 
Section 22.     No Duties of Senior Creditor.  The rights and remedies of the
Senior Creditor under this Agreement are solely for its protection and nothing
herein contained shall create or impose on the Senior Creditor any duties of any
kind with respect to any property either of the Borrower or of the Subordinated
Creditor heretofore or hereafter received by the Senior Creditor.

 
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Section 23.     Entire Agreement.  This Agreement constitutes and expresses the
entire understanding between the Parties with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, inducements or
conditions, whether express or implied, oral or written.
 
Section 24.     Loan Document.  This Agreement shall constitute a Loan Document
(as defined in the Senior Credit Agreement) in all respects and for all
purposes.
 
Section 25.     Amendments.  Neither this Agreement nor any portion or provision
hereof may be amended, modified, supplemented or waived in any manner other than
by an agreement in writing signed by the all of the Parties.
 
Section 26.     Governing Law; Consent to Jurisdiction.
 
(a)           THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF TEXAS.
 
(b)           EACH OF THE BORROWER AND THE SUBORDINATED CREDITOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS SITTING IN HARRIS COUNTY, TEXAS
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF TEXAS AND
ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER SENIOR LOAN DOCUMENT OR SUBORDINATED
LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF
THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
TEXAS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH
FEDERAL COURT.
 
(c)           EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER SENIOR LOAN DOCUMENT OR
SUBORDINATED LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE SENIOR CREDITOR MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OTHER SENIOR LOAN DOCUMENT OR SUBORDINATED LOAN DOCUMENT AGAINST THE
BORROWER OR THE SUBORDINATED CREDITOR OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.

 
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(d)           EACH OF THE BORROWER AND THE SUBORDINATED CREDITOR IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER SENIOR
LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION
26.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
 
Section 27.     Successors and Assigns.  This Agreement shall be binding upon
and inure to the benefit of the Subordinated Creditor and the Borrower and each
of their respective successors and permitted assigns, and inure to the benefit
of the Senior Creditor and its successors and assigns; provided that (a) neither
the Borrower nor the Subordinated Creditor may assign or transfer any of its
rights, interest or obligations under this Agreement or any interest herein or
delegate any of its or his obligations or duties hereunder to any other Person
(except by the Subordinated Creditor to a Permitted Transferee in accordance
with Section 10(a) of this Agreement) without the prior written consent of the
Senior Creditor and (b) the Senior Creditor may assign any of its rights and
interests under this Agreement to any other Person in its sole discretion.
 
Section 28.     Severability.  The provisions of this Agreement are independent
of and separable from each other.  If any provision hereof shall for any reason
be held invalid or unenforceable, it is the intent of the parties that such
invalidity or unenforceability shall not affect the validity or enforceability
of any other provision hereof, and that this Agreement shall be construed as if
such invalid or unenforceable provision had never been contained herein.
 
Section 29.     Execution in Counterparts.  This Agreement may be executed by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.  Delivery of an executed counterpart of
this Agreement by telecopier or in PDF format via electronic mail shall be
effective as delivery of an original counterpart of this Agreement.
 
Section 30.     No Waiver; Cumulative Remedies; Enforcement.  Except as
expressly set forth herein, no failure to exercise and no delay in exercising,
on the part of the Senior Creditor, any right, remedy, power or privilege
hereunder or under the other Senior Loan Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.  The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
 
Section 31.     Independence of Covenants.  All covenants and agreements
hereunder and under the Senior Loan Documents with respect to the Borrower shall
be given independent effect so that if a particular action or condition on the
part of the Borrower is not permitted by any of such covenants or agreements,
the fact that it would be permitted by an exception to, or would otherwise be
within the limitations of, another covenant or agreement, shall not avoid the
occurrence of a Senior Default or a violation of this Agreement (as applicable)
if such action is taken or such condition exists.

 
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Section 32.     Termination.  This Agreement shall terminate with respect to the
Parties upon the delivery of written notice by the Senior Creditor to each other
Party of the termination of this Agreement.
 
Section 33.     Definitions. In addition to such other terms as are elsewhere
defined herein, as used in this Agreement the following terms shall have the
following meanings:
 
"Bankruptcy Code" means Title 11 of the United States Code, as in effect from
time to time.
 
"Collateral" has the meaning specified in the Guarantee and Security Agreement.
 
"Enforcement Action" means any action, claim or proceeding of any kind or
character to (i) collect, enforce payment of or preserve or protect or
accelerate any of the Subordinated Debt or (ii) exercise any other right or
remedy (including commencing, prosecuting, or participating in any private,
judicial, or administrative action) on or in respect of payment or collection of
the Subordinated Debt, or any Subordinated Loan Document, applicable law, or
otherwise, in respect of any of the Subordinated Debt.
 
"Governmental Authority" means any government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative functions of or pertaining to government.
 
"Guarantee and Security Agreement" means that certain Guarantee and Security
Agreement, dated as of May [__], 2009, among the Senior Creditor, the Borrower
and the other signatories thereto, as amended, restated, supplemented, renewed,
replaced or otherwise modified from time to time.
 
"Guarantor"  means each Guarantor (as such term is defined in the Guarantee and
Security Agreement).
 
"Insolvency Proceeding" means (i) the Borrower commencing any case, proceeding
or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or the
Borrower making a general assignment for the benefit of its creditors; or (ii)
there being commenced against the Borrower any case, proceeding or other action
of a nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
being commenced against the Borrower any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) the Borrower taking any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii) or (iii) above; or (v) the Borrower generally not paying, or
being unable to pay, or admitting in writing its inability to pay, its debts as
they become due.

 
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"Loan Party" means the Subordinated Creditor and each Guarantor.
 
"Permitted Equity Conversion" means the conversion at any time and from time to
time by the Subordinated Creditor and the Borrower of all or any portion of the
Subordinated Debt into equity interests of the Borrower.
 
"Person" means any individual, partnership, firm, corporation, association,
joint venture, limited liability company, trust or other entity, or any
governmental authority.
 
[Signatures on following page]

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

FREDERIC M. EDELMAN
     
By:
  
 
Name:
  
     
ADDRESS:
     
[__________]
Attention: [___________]
Telephone: [___________]
     
SANDERS MORRIS HARRIS GROUP INC.
     
By:
  
 
Name:
  
 
Title:
  
     
ADDRESS:
     
600 Travis Street, Suite 5800
Houston, Texas  77002
Attention:      Rick Berry, Chief Financial Officer
Telephone:    (713) 993-4614
     
PROSPERITY BANK
     
By:
  
 
Name:
  
 
Title:
  
     
ADDRESS:
 
777 Walker Street, L140
Houston, Texas  77002
Attention:      Randall R. Reeves, President
 Houston Area
Telephone: (713) 693-9251

 
 

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