Exhibit 10.139

 

NOTE PURCHASE AGREEMENT
dated September 12, 2007

 

 

FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.

 

 

12.75% Senior Subordinated Notes due September 12, 2017

 

 

14.75% Senior Subordinated Paid-In-Kind Notes due September 12, 2017

 

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TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

Article I

Authorization of Notes

1

Article II

Sale and Purchase of Notes; Guaranty Agreement

1

Section 2.1

Sale and Purchase of Notes

1

Section 2.2

Guaranty Agreement

2

Article III

Closing

2

Section 3.1

Senior Subordinated Notes

2

Section 3.2

Senior Subordinated PIK Notes

2

Article IV

Conditions to Closing

3

Section 4.1

Representations and Warranties

3

Section 4.2

Performance; No Default

3

Section 4.3

Compliance Certificates

3

Section 4.4

Opinions of Counsel

4

Section 4.5

Purchase Permitted By Applicable Law, etc

4

Section 4.6

Reserved

4

Section 4.7

Payment of Fees

4

Section 4.8

Reserved

4

Section 4.9

Changes in Corporate Structure

4

Section 4.10

Proceedings and Documents

4

Section 4.11

Guaranty Agreement

5

Section 4.12

Junior Debt

5

Article V

Representations and Warranties of the Company

5

Section 5.1

Organization; Power and Authority

5

Section 5.2

Authorization, etc

5

Section 5.3

Disclosure

5

Section 5.4

Organization and Ownership of Shares of Subsidiaries; Affiliates

6

Section 5.5

Financial Statements

7

Section 5.6

Compliance with Laws, Other Instruments, etc

7

Section 5.7

Governmental Authorizations, etc

7

Section 5.8

Litigation; Observance of Agreements, Statutes and Orders

7

Section 5.9

Taxes

8

Section 5.10

Title to Property; Leases

8

Section 5.11

Licenses, Permits, etc

8

Section 5.12

Compliance with ERISA

9

Section 5.13

Private Offering by the Company

9

Section 5.14

Use of Proceeds; Margin Regulations

10

Section 5.15

Existing Indebtedness; Future Liens

10

Section 5.16

Foreign Assets Control Regulations, etc.

10

Section 5.17

Status under Certain Statutes

11

Section 5.18

Environmental Matters

11

Article VI

Representations of the Purchaser

11

Section 6.1

Purchase for Investment

11

Section 6.2

Source of Funds

12

Article VII

Information as to Company

13

 

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Section 7.1

Financial and Business Information

13

Section 7.2

Officer’s Certificate

15

Section 7.3

Inspection

15

Article VIII

Prepayment of the Notes

16

Section 8.1

Required Prepayments

16

Section 8.2

Optional Prepayments

16

Section 8.3

Allocation of Partial Prepayments

16

Section 8.4

Maturity; Surrender, etc.

17

Section 8.5

Purchase of Notes

17

Article IX

Affirmative Covenants

17

Section 9.1

Compliance with Law

17

Section 9.2

Insurance

17

Section 9.3

Maintenance of Properties

18

Section 9.4

Payment of Taxes and Claims

18

Section 9.5

Corporate Existence, etc.

18

Section 9.6

Guaranty Agreement

18

Section 9.7

Financial Statement; Other Information

20

Section 9.8

Ranking of Notes

20

Section 9.9

Use of Proceeds

20

Article X

Negative Covenants

20

Section 10.1

Transactions with Affiliates

20

Section 10.2

Merger, Consolidation, etc.

20

Section 10.3

Liens

21

Section 10.4

Financial Covenants

22

Section 10.5

Debt

22

Section 10.6

Sale of Assets, etc.

23

Section 10.7

Dividends, Distributions and Stock Repurchases

23

Section 10.8

Reserved

24

Section 10.9

Nature of Business

24

Section 10.10

Restrictions on Guarantors

24

Section 10.11

Limitation on Issuance of Capital Stock

24

Section 10.12

Limitation on Transfer of Capital Stock

25

Section 10.13

Junior Debt

25

Section 10.14

Subordination of Intercompany Debt

25

Article XI

Events of Default

26

Article XII

Remedies on Default, etc.

28

Section 12.1

Acceleration

28

Section 12.2

Other Remedies

29

Section 12.3

Rescission

29

Section 12.4

No Waivers or Election of Remedies, Expenses, etc.

29

Article XIII

Registration; Exchange; Substitution of Notes

30

Section 13.1

Registration of Notes

30

Section 13.2

Transfer and Exchange of Notes

30

Section 13.3

Replacement of Notes

31

Article XIV

Payments on Notes

31

 

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Section 14.1

Place of Payment

31

Section 14.2

Home Office Payment

31

Article XV

Expenses, etc.

32

Section 15.1

Transaction Expenses

32

Section 15.2

Survival

32

Article XVI

Survival of Representations and Warranties; Entire Agreement

32

Article XVII

Amendment and Waiver

33

Section 17.1

Requirements

33

Section 17.2

Solicitation of Holders of Notes

33

Section 17.3

Binding Effect, etc.

33

Section 17.4

Notes held by Company, etc.

34

Article XVIII

Notices

34

Article XIX

Reproduction of Documents

34

Article XX

Confidential Information

35

Article XXI

Substitution of Purchaser

36

Article XXII

Miscellaneous

36

Section 22.1

Successors and Assigns

36

Section 22.2

Payments Due on Non-Business Days

36

Section 22.3

Severability

36

Section 22.4

Construction

37

Section 22.5

Counterparts

37

Section 22.6

Governing Law

37

Article XXIII

Subordination

37

Section 23.1

Agreement to Subordinate

37

Section 23.2

General Subordination to Senior Debt

37

Section 23.3

Amendments and Exchanges of Subordinated Debt

37

Section 23.4

Payments Received in Contravention of Subordination Provisions

38

Section 23.5

Subrogation

38

Section 23.6

Relative Rights

38

Section 23.7

Reliance on Judicial Order or Decree or Senior Debtholder Certificate

39

Section 23.8

Proof of Claim

39

 

Schedules and Exhibits

 

SCHEDULE A

 

—

 

Information Relating to Purchasers

SCHEDULE B

 

—

 

Defined Terms

EXHIBIT 1

 

—

 

Form of Senior Subordinated Note

EXHIBIT 2

 

—

 

Form of Senior Subordinated Paid-In-Kind Note

EXHIBIT 3

 

—

 

Form of Guaranty Agreement

EXHIBIT 4.4

 

—

 

Form of Opinion of Special Counsel for the Company

 

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September 12, 2007

 

TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:

 

Ladies and Gentlemen:

 

First Investors Financial Services Group, Inc., a Texas corporation (the
“Company”), agrees with you as follows:

 

ARTICLE I

AUTHORIZATION OF NOTES

 

The Company will authorize the issue and sale of its 12.75% Senior Subordinated
Notes in the aggregate principal amount of $5,000,000 due September 12, 2017
(the “Senior Subordinated Notes,” such term to include any such notes issued in
substitution therefor pursuant to Article XIII of this Agreement or the Other
Agreements (as hereinafter defined)), and may authorize the issue and sale from
time to time of its 14.75% Senior Subordinated Paid-In-Kind Notes in the
aggregate principal amount of up to $318,750 due September 12, 2017 (the “Senior
Subordinated PIK Notes,” such term to include any such notes issued in
substitution therefor pursuant to Article XIII of this Agreement, and together
with the Senior Subordinated Notes, the “Notes”).  The Senior Subordinated Notes
shall be substantially in the form set out in Exhibit 1, with such changes
therefrom, if any, as may be approved by you and the Company.  The Senior
Subordinated PIK Notes shall be substantially in the form set out in Exhibit 2,
with such changes therefrom, if any, as may be approved by you and the Company. 
Certain capitalized terms used in this Agreement are defined in Schedule B;
references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement.

 

ARTICLE II

SALE AND PURCHASE OF NOTES; GUARANTY AGREEMENT

 

SECTION 2.1            SALE AND PURCHASE OF NOTES.

 

Subject to the terms and conditions of this Agreement, the Company will issue
and sell to you and you will purchase from the Company, at the Closing provided
for in Section 3.1, Senior Subordinated Notes in the principal amount specified
opposite your name in Schedule A at the purchase price of 100% of the principal
amount thereof.  Subject to the terms and conditions of this Agreement, the
Company may issue and sell to you and you will purchase from the Company, at par
at each PIK Closing provided for in Section 3.2, Senior Subordinated PIK Notes
in the principal amount specified in the applicable Senior Subordinated PIK
Note.

 

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SECTION 2.2            GUARANTY AGREEMENT.

 

The obligations of the Company hereunder and under the Notes are absolutely,
unconditionally and irrevocably guaranteed by the Company’s Subsidiaries (other
than the Insurance Subsidiary and any Securitization Subsidiary) and each other
Company Subsidiary from time to time required to guaranty the Notes pursuant to
Section 9.6 (each a “Guarantor” and, collectively, the “Guarantors”), pursuant
to that certain Subsidiary Guaranty Agreement dated as of September 12, 2007 (as
the same may be amended, supplemented, restated or otherwise modified from time
to time, the “Guaranty Agreement”) substantially in the form of Exhibit 3.

 

ARTICLE III

CLOSING

 

SECTION 3.1            SENIOR SUBORDINATED NOTES.

 

The sale and purchase of the Senior Subordinated Notes to be purchased by you
shall occur at the offices of Hunton & Williams LLP, 101 South Tryon Street,
Suite 3500, Charlotte, North Carolina 28280, at 10:00 a.m., Charlotte time, at a
closing (the “Closing”) on September 12, 2007 or on such other Business Day
thereafter on or prior to September 30, 2007 as may be agreed upon by the
Company and you.  At the Closing the Company will deliver to you the Senior
Subordinated Notes to be purchased by you in the form of a single Senior
Subordinated Note (or such greater number of Senior Subordinated Notes in
denominations of at least $100,000 as you may request) dated the date of the
Closing and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately available funds in
the amount of the purchase price therefor by wire transfer of immediately
available funds for the account of the Company to account number 1294161139 at
Bank of America, N.A., ABA Number 111222212, Account Name-First Investors
Financial Services-Holding Company Operating Account.  If at the Closing the
Company shall fail to tender such Senior Subordinated Notes to you as provided
above in this Section 3.1, or any of the conditions specified in Section 4 shall
not have been fulfilled to your satisfaction, you shall, at your election, be
relieved of all further obligations under this Agreement, without thereby
waiving any rights you may have by reason of such failure or such
nonfulfillment.

 

SECTION 3.2            SENIOR SUBORDINATED PIK NOTES.

 

Each sale and purchase of the Senior Subordinated PIK Notes to be purchased by
you shall occur at the offices of Hunton & Williams LLP, 101 South Tryon Street,
Suite 3500, Charlotte, North Carolina 28280, at 10:00 a.m., Charlotte time, at a
closing (each, a “PIK Closing”) on a date on which an interest payment is due
under the Senior Subordinated Notes, provided that there shall not be more than
six PIK Closings and the aggregate amount of Senior Subordinated PIK Notes
issued on at any PIK Closing shall not exceed one month’s accrued interest on
the Senior Subordinated Notes.  The Company will give you not less than five
(5) Business Days prior written notice of each PIK Closing.  At each PIK Closing
the Company will deliver to you the Senior Subordinated PIK Notes to be
purchased by you in the form of a single Senior Subordinated Note (or such
greater number of Senior Subordinated Notes in

 

2

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denominations of at least $25,000 as you may request) dated the date of the PIK
Closing and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately available funds in
the amount of the purchase price therefor to be applied to the payment of
interest accrued and unpaid interest then due on the Senior Subordinated Notes. 
If at the PIK Closing the Company shall fail to tender such Senior Subordinated
PIK Notes to you as provided above in this Section 3.2, or any of the conditions
specified in Sections 4.1, 4.2 or 4.5, shall not have been fulfilled to your
satisfaction with respect to such PIK Closing,  you shall, at your election, be
relieved of all further obligations under this Agreement, without thereby
waiving any rights you may have by reason of such failure or such
nonfulfillment.

 

ARTICLE IV

CONDITIONS TO CLOSING

 

Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:

 

SECTION 4.1            REPRESENTATIONS AND WARRANTIES.

 

The representations and warranties of the Company in this Agreement shall be
correct when made and at the time of the Closing.  The representations and
warranties of each Obligated Party in the Guaranty Agreement shall be correct
when made and at the time of the Closing.

 

SECTION 4.2            PERFORMANCE; NO DEFAULT.

 

The Company and each Obligated Party shall have performed and complied with all
agreements and conditions contained in this Agreement and the Guaranty Agreement
required to be performed or complied with by it prior to or at the Closing or
the applicable PIK Closing and after giving effect to the issue and sale of the
Notes (and the application of the proceeds thereof as contemplated by Schedule
5.14) no Default or Event of Default shall have occurred and be continuing. 
Neither the Company nor any Subsidiary shall have entered into any transaction
since the date of the Memorandum that would have been prohibited by Sections
10.1, 10.3, 10.5, and 10.7 hereof had such Sections applied since such date.

 

SECTION 4.3            COMPLIANCE CERTIFICATES.

 

(A)           OFFICER’S CERTIFICATE.  THE COMPANY SHALL HAVE DELIVERED TO YOU AN
OFFICER’S CERTIFICATE, DATED THE DATE OF THE CLOSING CERTIFYING THAT THE
CONDITIONS SPECIFIED IN SECTIONS 4.1, 4.2 AND 4.9 HAVE BEEN FULFILLED.

 

(B)           SECRETARY’S CERTIFICATE.  AT THE CLOSING, THE COMPANY SHALL HAVE
DELIVERED TO YOU A CERTIFICATE CERTIFYING AS TO THE RESOLUTIONS ATTACHED THERETO
AND OTHER CORPORATE PROCEEDINGS RELATING TO THE AUTHORIZATION, EXECUTION AND
DELIVERY OF THE NOTES, THE GUARANTY AGREEMENT AND THIS AGREEMENT.

 

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SECTION 4.4            OPINIONS OF COUNSEL.

 

At the Closing, you shall have received an opinion in form and substance
satisfactory to you dated the date of the Closing from Thompson & Knight LLP,
outside counsel for the Company, covering the matters set forth in Exhibit 4.4
and covering such other matters incident to the transactions contemplated hereby
as you or your counsel may reasonably request (and the Company hereby instructs
its counsel to deliver such opinion to you).

 

SECTION 4.5            PURCHASE PERMITTED BY APPLICABLE LAW, ETC.

 

On the date of the Closing your purchase of Notes shall (i) be permitted by the
laws and regulations of each jurisdiction to which you are subject, (ii) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof.  If requested by you, you shall have received an Officer’s
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.

 

SECTION 4.6            RESERVED.

 

SECTION 4.7            PAYMENT OF FEES.

 

Without limiting the provisions of Section 15.1, the Company shall have paid on
or before the Closing the fees, charges and disbursements of your special
counsel referred to in Section 4.4 to the extent reflected in a statement of
such counsel rendered to the Company at least one Business Day prior to the
Closing or the applicable PIK Closing.  Furthermore, the Company shall have paid
all other fees and expenses of you required to be paid as a condition to the
purchase of any Notes, including, without limitation, any fees described in the
Fee Letter.

 

SECTION 4.8            RESERVED.

 

SECTION 4.9            CHANGES IN CORPORATE STRUCTURE.

 

Except as specified in Schedule 4.9, the Company shall not have changed its
jurisdiction of incorporation or been a party to any merger or consolidation or
other transaction pursuant to which it shall have succeeded to any Material
liabilities of any other entity at any time following the date of the most
recent financial statements referred to in Schedule 5.5.

 

SECTION 4.10         PROCEEDINGS AND DOCUMENTS.

 

All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.

 

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SECTION 4.11         GUARANTY AGREEMENT.

 

The Guaranty Agreement shall have been duly authorized, executed and delivered
by each Guarantor and shall be in full force and effect and the purchaser hereof
shall have received a duly executed copy thereof.

 

SECTION 4.12         JUNIOR DEBT.

 

The Company shall provide to the Purchaser evidence that the Junior Debt has a
maturity date of not earlier than three (3) years from the date of the Closing
or PIK Closing, as applicable.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to you that:

 

SECTION 5.1            ORGANIZATION; POWER AND AUTHORITY.

 

The Company is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Notes and to perform the provisions hereof and
thereof.

 

SECTION 5.2            AUTHORIZATION, ETC.

 

This Agreement and the Notes have been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement constitutes, and
upon execution and delivery thereof each Note will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors’ rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

 

SECTION 5.3            DISCLOSURE.

 

The Company has delivered to you a copy of a Confidential Information
Memorandum, dated May 2007, as supplemented June 2007 (collectively, the
“Memorandum”), relating to the Company’s intention to raise additional capital. 
The Memorandum fairly describes, in all material respects, the general nature of
the business and principal properties of the Company and its Subsidiaries. 
Except as disclosed in Schedule 5.3, this Agreement, the Memorandum (except for
the financial projections contained therein, as to which no representation is
made herein), the documents, certificates or other writings delivered to you by
or on behalf of the Company in

 

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connection with the transactions contemplated hereby and the financial
statements listed in Schedule 5.5, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made.  Except as disclosed in the Memorandum or as expressly
described in Schedule 5.3, or in one of the documents, certificates or other
writings identified therein, or in the financial statements listed in Schedule
5.5, since April 30, 2007, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect.  Other than conditions affecting the
financial markets and consumer finance industry generally, there is no fact
known to the Company that could reasonably be expected to have a Material
Adverse Effect that has not been set forth herein or in the Memorandum or in the
other documents, certificates and other writings delivered to you by or on
behalf of the Company specifically for use in connection with the transactions
contemplated hereby.

 

SECTION 5.4            ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES;
AFFILIATES.

 

(A)           SCHEDULE 5.4 CONTAINS (EXCEPT AS NOTED THEREIN) COMPLETE AND
CORRECT LISTS (I) OF THE COMPANY’S SUBSIDIARIES, SHOWING, AS TO EACH SUBSIDIARY,
THE CORRECT NAME THEREOF, THE JURISDICTION OF ITS ORGANIZATION, AND THE
PERCENTAGE OF SHARES OF EACH CLASS OF ITS CAPITAL STOCK OR SIMILAR EQUITY
INTERESTS OUTSTANDING OWNED BY THE COMPANY AND EACH OTHER SUBSIDIARY, (II) OF
THE COMPANY’S AFFILIATES, OTHER THAN SUBSIDIARIES, AND (III) OF THE COMPANY’S
DIRECTORS AND SENIOR OFFICERS.

 

(B)           ALL OF THE OUTSTANDING SHARES OF CAPITAL STOCK OR SIMILAR EQUITY
INTERESTS OF EACH SUBSIDIARY SHOWN IN SCHEDULE 5.4 AS BEING OWNED BY THE COMPANY
AND ITS SUBSIDIARIES HAVE BEEN VALIDLY ISSUED, ARE FULLY PAID AND NONASSESSABLE
AND ARE OWNED BY THE COMPANY OR ANOTHER SUBSIDIARY FREE AND CLEAR OF ANY LIEN
(EXCEPT AS OTHERWISE DISCLOSED IN SCHEDULE 5.4).

 

(C)           EACH SUBSIDIARY IDENTIFIED IN SCHEDULE 5.4 IS A CORPORATION OR
OTHER LEGAL ENTITY DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER
THE LAWS OF ITS JURISDICTION OF ORGANIZATION, AND IS DULY QUALIFIED AS A FOREIGN
CORPORATION OR OTHER LEGAL ENTITY AND IS IN GOOD STANDING IN EACH JURISDICTION
IN WHICH SUCH QUALIFICATION IS REQUIRED BY LAW, OTHER THAN THOSE JURISDICTIONS
AS TO WHICH THE FAILURE TO BE SO QUALIFIED OR IN GOOD STANDING COULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT.  EACH SUCH SUBSIDIARY HAS THE CORPORATE OR OTHER POWER AND
AUTHORITY TO OWN OR HOLD UNDER LEASE THE PROPERTIES IT PURPORTS TO OWN OR HOLD
UNDER LEASE AND TO TRANSACT THE BUSINESS IT TRANSACTS AND PROPOSES TO TRANSACT,
AND IN THE CASE OF EACH SUBSIDIARY THAT IS AN OBLIGATED PARTY, TO EXECUTE AND
DELIVER THE GUARANTY AGREEMENT AND TO PERFORM THE PROVISIONS THEREOF.

 

(D)           NO GUARANTOR IS A PARTY TO, OR OTHERWISE SUBJECT TO ANY LEGAL
RESTRICTION OR ANY AGREEMENT (OTHER THAN THIS AGREEMENT, THE AGREEMENTS LISTED
ON SCHEDULE 5.4 AND CUSTOMARY LIMITATIONS IMPOSED BY CORPORATE LAW STATUTES)
RESTRICTING THE ABILITY OF SUCH GUARANTOR TO PAY DIVIDENDS OUT OF PROFITS OR
MAKE ANY OTHER SIMILAR DISTRIBUTIONS OF PROFITS TO THE COMPANY OR EACH OTHER
GUARANTOR THAT OWNS OUTSTANDING SHARES OF CAPITAL STOCK OR SIMILAR EQUITY
INTERESTS OF SUCH GUARANTOR.

 

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SECTION 5.5            FINANCIAL STATEMENTS.

 

The Company has delivered to each you copies of the financial statements of the
Company and its Subsidiaries listed on Schedule 5.5.  All of said financial
statements (including in each case the related schedules and notes) fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).

 

SECTION 5.6            COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.

 

The execution, delivery and performance by the Company of this Agreement and the
Notes and the execution, delivery and performance by each Obligated Party of the
Guaranty Agreement will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (ii) conflict with or result in
a breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary or (iii) violate any provision of any statute
or other rule or regulation of any Governmental Authority applicable to the
Company or any Subsidiary.

 

SECTION 5.7            GOVERNMENTAL AUTHORIZATIONS, ETC.

 

Except for routine filings in connection with exemptions from registration under
blue sky laws and federal securities laws applicable to the offer and sale of
the Notes and the Guaranty Agreement, no consent, approval or authorization of,
or registration, filing or declaration with, any Governmental Authority is
required in connection with the execution, delivery or performance (a) by the
Company of this Agreement or the Notes or (b) by any Obligated Party of the
Guaranty Agreement.

 

SECTION 5.8            LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND
ORDERS.

 

(A)           EXCEPT AS DISCLOSED IN SCHEDULE 5.8, THERE ARE NO ACTIONS, SUITS
OR PROCEEDINGS PENDING OR, TO THE KNOWLEDGE OF THE COMPANY, THREATENED AGAINST
OR AFFECTING THE COMPANY OR ANY SUBSIDIARY OR ANY PROPERTY OF THE COMPANY OR ANY
SUBSIDIARY IN ANY COURT OR BEFORE ANY ARBITRATOR OF ANY KIND OR BEFORE OR BY ANY
GOVERNMENTAL AUTHORITY THAT, INDIVIDUALLY OR IN THE AGGREGATE, COULD REASONABLY
BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

(B)           NEITHER THE COMPANY NOR ANY SUBSIDIARY IS IN DEFAULT UNDER ANY
TERM OF ANY AGREEMENT OR INSTRUMENT TO WHICH IT IS A PARTY OR BY WHICH IT IS
BOUND, OR ANY ORDER, JUDGMENT, DECREE OR RULING OF ANY COURT, ARBITRATOR OR
GOVERNMENTAL AUTHORITY OR IS IN VIOLATION OF ANY APPLICABLE LAW, ORDINANCE,
RULE OR REGULATION (INCLUDING WITHOUT LIMITATION ENVIRONMENTAL LAWS)

 

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OF ANY GOVERNMENTAL AUTHORITY, WHICH DEFAULT OR VIOLATION, INDIVIDUALLY OR IN
THE AGGREGATE, COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

SECTION 5.9            TAXES.

 

The Company and its Subsidiaries have filed all tax returns that are required to
have been filed in any jurisdiction, and have paid all taxes shown to be due and
payable on such terms and all other taxes and assessments levied upon them or
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not individually
or in the aggregate Material or (ii) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP.  The Company knows of no
basis for any other tax or assessment that could reasonably be expected to have
a Material Adverse Effect.  The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of Federal, state or other taxes for
all fiscal periods are adequate.

 

SECTION 5.10         TITLE TO PROPERTY; LEASES.

 

The Company and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement.  All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.

 

SECTION 5.11         LICENSES, PERMITS, ETC.

 

Except as disclosed in Schedule 5.11,

 

(A)           THE COMPANY AND ITS SUBSIDIARIES OWN OR POSSESS ALL LICENSES,
PERMITS, FRANCHISES, AUTHORIZATIONS, PATENTS, COPYRIGHTS, SERVICE MARKS,
TRADEMARKS AND TRADE NAMES, OR RIGHTS THERETO, THAT INDIVIDUALLY OR IN THE
AGGREGATE ARE MATERIAL, WITHOUT KNOWN CONFLICT WITH THE RIGHTS OF OTHERS;

 

(B)           TO THE BEST KNOWLEDGE OF THE COMPANY, NO PRODUCT OF THE COMPANY
INFRINGES IN ANY MATERIAL RESPECT ANY LICENSE, PERMIT, FRANCHISE, AUTHORIZATION,
PATENT, COPYRIGHT, SERVICE MARK, TRADEMARK, TRADE NAME OR OTHER RIGHT OWNED BY
ANY OTHER PERSON; AND

 

(C)           TO THE BEST KNOWLEDGE OF THE COMPANY, THERE IS NO MATERIAL
VIOLATION BY ANY PERSON OF ANY RIGHT OF THE COMPANY OR ANY OF ITS SUBSIDIARIES
WITH RESPECT TO ANY PATENT, COPYRIGHT, SERVICE MARK, TRADEMARK, TRADE NAME OR
OTHER RIGHT OWNED OR USED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES.

 

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SECTION 5.12         COMPLIANCE WITH ERISA.

 

(A)           THE COMPANY AND EACH ERISA AFFILIATE HAVE OPERATED AND
ADMINISTERED EACH PLAN IN COMPLIANCE WITH ALL APPLICABLE LAWS EXCEPT FOR SUCH
INSTANCES OF NONCOMPLIANCE AS HAVE NOT RESULTED IN AND COULD NOT REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.  NEITHER THE COMPANY NOR ANY
ERISA AFFILIATE HAS INCURRED ANY LIABILITY PURSUANT TO TITLE I OR IV OF ERISA OR
THE PENALTY OR EXCISE TAX PROVISIONS OF THE CODE RELATING TO EMPLOYEE BENEFIT
PLANS (AS DEFINED IN SECTION 3 OF ERISA), AND NO EVENT, TRANSACTION OR CONDITION
HAS OCCURRED OR EXISTS THAT COULD REASONABLY BE EXPECTED TO RESULT IN THE
INCURRENCE OF ANY SUCH LIABILITY BY THE COMPANY OR ANY ERISA AFFILIATE, OR IN
THE IMPOSITION OF ANY LIEN ON ANY OF THE RIGHTS, PROPERTIES OR ASSETS OF THE
COMPANY OR ANY ERISA AFFILIATE, IN EITHER CASE PURSUANT TO TITLE I OR IV OF
ERISA OR TO SUCH PENALTY OR EXCISE TAX PROVISIONS OR TO SECTION 401(A)(29) OR
412 OF THE CODE, OTHER THAN SUCH LIABILITIES OR LIENS AS WOULD NOT BE
INDIVIDUALLY OR IN THE AGGREGATE MATERIAL.

 

(B)           THE PRESENT VALUE OF THE AGGREGATE BENEFIT LIABILITIES UNDER EACH
OF THE PLANS (OTHER THAN MULTIEMPLOYER PLANS), DETERMINED AS OF THE END OF SUCH
PLAN’S MOST RECENTLY ENDED PLAN YEAR ON THE BASIS OF THE ACTUARIAL ASSUMPTIONS
SPECIFIED FOR FUNDING PURPOSES IN SUCH PLAN’S MOST RECENT ACTUARIAL VALUATION
REPORT, DID NOT EXCEED THE AGGREGATE CURRENT VALUE OF THE ASSETS OF SUCH PLAN
ALLOCABLE TO SUCH BENEFIT LIABILITIES. THE TERM “BENEFIT LIABILITIES” HAS THE
MEANING SPECIFIED IN SECTION 4001 OF ERISA AND THE TERMS “CURRENT VALUE” AND
“PRESENT VALUE” HAVE THE MEANING SPECIFIED IN SECTION 3 OF ERISA.

 

(C)           THE COMPANY AND ITS ERISA AFFILIATES HAVE NOT INCURRED WITHDRAWAL
LIABILITIES (AND ARE NOT SUBJECT TO CONTINGENT WITHDRAWAL LIABILITIES) UNDER
SECTION 4201 OR 4204 OF ERISA IN RESPECT OF MULTIEMPLOYER PLANS THAT
INDIVIDUALLY OR IN THE AGGREGATE ARE MATERIAL.

 

(D)           THE EXPECTED POST-RETIREMENT BENEFIT OBLIGATION (DETERMINED AS OF
THE LAST DAY OF THE COMPANY’S MOST RECENTLY ENDED FISCAL YEAR IN ACCORDANCE WITH
FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 106, WITHOUT REGARD TO
LIABILITIES ATTRIBUTABLE TO CONTINUATION COVERAGE MANDATED BY SECTION 4980B OF
THE CODE) OF THE COMPANY AND ITS SUBSIDIARIES IS NOT MATERIAL.

 

(E)           THE EXECUTION AND DELIVERY, OF THIS AGREEMENT AND THE ISSUANCE AND
SALE OF THE NOTES HEREUNDER WILL NOT INVOLVE ANY TRANSACTION THAT IS SUBJECT TO
THE PROHIBITIONS OF SECTION 406 OF ERISA OR IN CONNECTION WITH WHICH A TAX COULD
BE IMPOSED PURSUANT TO SECTION 4975(C)(1)(A)-(D) OF THE CODE.  THE
REPRESENTATION BY THE COMPANY IN THE FIRST SENTENCE OF THIS SECTION 5.12(E) IS
MADE IN RELIANCE UPON AND SUBJECT TO (I) THE ACCURACY OF YOUR REPRESENTATION IN
SECTION 6.2 AS TO THE SOURCES OF THE FUNDS USED TO PAY THE PURCHASE PRICE OF THE
NOTES TO BE PURCHASED BY YOU AND (II) THE ASSUMPTION, MADE SOLELY FOR THE
PURPOSE OF MAKING SUCH REPRESENTATION, THAT DEPARTMENT OF LABOR INTERPRETIVE
BULLETIN 75-2 WITH RESPECT TO PROHIBITED TRANSACTIONS REMAINS VALID IN THE
CIRCUMSTANCES OF THE TRANSACTIONS CONTEMPLATED HEREIN.

 

SECTION 5.13         PRIVATE OFFERING BY THE COMPANY.

 

Neither the Company nor anyone acting on its behalf has offered the Notes, the
Guaranty Agreement or any similar securities for sale to, or solicited any offer
to buy any of the same

 

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from, or otherwise approached or negotiated in respect thereof with, any person
other than you, and not more than 10 other Institutional Investors, each of
which has been offered the Notes and the Guaranty Agreement at a private sale
for investment.  Neither the Company nor anyone acting on its behalf has taken,
or will take, any action that would subject the issuance or sale of the Notes or
the Guaranty Agreement to the registration requirements of Section 5 of the
Securities Act.

 

SECTION 5.14         USE OF PROCEEDS; MARGIN REGULATIONS.

 

The Company will apply the proceeds of the sale of the Notes as set forth in
Schedule 5.14.  No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220).  Margin
stock does not constitute more than 25% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 25% of the value of such
assets. As used in this Section, the terms “margin stock” and “purpose of buying
or carrying” shall have the meanings assigned to them in said Regulation G.

 

SECTION 5.15         EXISTING INDEBTEDNESS; FUTURE LIENS.

 

(A)           EXCEPT AS DESCRIBED THEREIN, SCHEDULE 5.15 SETS FORTH A COMPLETE
AND CORRECT LIST OF ALL OUTSTANDING DEBT OF THE COMPANY AND ITS SUBSIDIARIES AS
OF JULY 31, 2007, SINCE WHICH DATE THERE HAS BEEN NO MATERIAL CHANGE IN THE
AMOUNTS, INTEREST RATES, SINKING FUNDS, INSTALLMENT PAYMENTS OR MATURITIES OF
THE INDEBTEDNESS OF THE COMPANY OR ITS SUBSIDIARIES.  NEITHER THE COMPANY NOR
ANY SUBSIDIARY IS IN DEFAULT AND NO WAIVER OF DEFAULT IS CURRENTLY IN EFFECT, IN
THE PAYMENT OF ANY PRINCIPAL OR INTEREST ON ANY INDEBTEDNESS OF THE COMPANY OR
SUCH SUBSIDIARY AND NO EVENT OR CONDITION EXISTS WITH RESPECT TO ANY
INDEBTEDNESS OF THE COMPANY OR ANY SUBSIDIARY THAT WOULD PERMIT (OR THAT WITH
NOTICE OR THE LAPSE OF TIME, OR BOTH, WOULD PERMIT) ONE OR MORE PERSONS TO CAUSE
SUCH INDEBTEDNESS TO BECOME DUE AND PAYABLE BEFORE ITS STATED MATURITY OR BEFORE
ITS REGULARLY SCHEDULED DATES OF PAYMENT.

 

(B)           EXCEPT AS DISCLOSED IN SCHEDULE 5.15, NEITHER THE COMPANY NOR ANY
GUARANTOR HAS AGREED OR CONSENTED TO CAUSE OR PERMIT IN THE FUTURE (UPON THE
HAPPENING OF A CONTINGENCY OR OTHERWISE) ANY OF ITS PROPERTY, WHETHER NOW OWNED
OR HEREAFTER ACQUIRED, TO BE SUBJECT TO A LIEN NOT PERMITTED BY SECTION 10.3.

 

SECTION 5.16         FOREIGN ASSETS CONTROL REGULATIONS, ETC.

 

Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Anti-Terrorism Order, the Patriot Act, 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.

 

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SECTION 5.17         STATUS UNDER CERTAIN STATUTES.

 

Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Interstate Commerce Act, as
amended, or the Federal Power Act, as amended.

 

SECTION 5.18         ENVIRONMENTAL MATTERS.

 

Neither the Company nor any Subsidiary has knowledge of any claim or has
received any notice of any claim, and no proceeding has been instituted raising
any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.  Except as otherwise disclosed
to you in writing,

 

(A)           NEITHER THE COMPANY NOR ANY SUBSIDIARY HAS KNOWLEDGE OF ANY FACTS
WHICH WOULD GIVE RISE TO ANY CLAIM, PUBLIC OR PRIVATE, OF VIOLATION OF
ENVIRONMENTAL LAWS OR DAMAGE TO THE ENVIRONMENT EMANATING FROM, OCCURRING ON OR
IN ANY WAY RELATED TO REAL PROPERTIES NOW OR FORMERLY OWNED, LEASED OR OPERATED
BY ANY OF THEM OR TO OTHER ASSETS OR THEIR USE, EXCEPT, IN EACH CASE, SUCH AS
COULD NOT REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT;

 

(B)           NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS STORED ANY
HAZARDOUS MATERIALS ON REAL PROPERTIES NOW OR FORMERLY OWNED, LEASED OR OPERATED
BY ANY OF THEM AND HAS NOT DISPOSED OF ANY HAZARDOUS MATERIALS IN A MANNER
CONTRARY TO ANY ENVIRONMENTAL LAWS IN EACH CASE IN ANY MANNER THAT COULD
REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT; AND

 

(C)           ALL BUILDINGS ON ALL REAL PROPERTIES NOW OWNED, LEASED OR OPERATED
BY THE COMPANY OR ANY OF ITS SUBSIDIARIES ARE IN COMPLIANCE WITH APPLICABLE
ENVIRONMENTAL LAWS, EXCEPT WHERE FAILURE TO COMPLY COULD NOT REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

 

ARTICLE VI

REPRESENTATIONS OF THE PURCHASER

 

SECTION 6.1            PURCHASE FOR INVESTMENT.

 

You represent that (i) you are purchasing the Notes for your own account or for
one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof, and
(ii) your ability to transfer the Notes is restricted pursuant to Section 13.2
of this Agreement.  You understand that the Notes have not been registered under
the Securities Act and may be resold only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration is
available, except under circumstances where neither such registration nor such
an exemption is required by law, and that the Company is not required to
register the Notes.

 

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SECTION 6.2            SOURCE OF FUNDS.

 

You represent that at least one of the following statements is an accurate
representation as to each source of funds (a “Source”) to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:

 

(A)           IF YOU ARE AN INSURANCE COMPANY, THE SOURCE DOES NOT INCLUDE
ASSETS ALLOCATED TO ANY SEPARATE ACCOUNT MAINTAINED BY YOU IN WHICH ANY EMPLOYEE
BENEFIT PLAN (OR ITS RELATED TRUST) HAS ANY INTEREST, OTHER THAN A SEPARATE
ACCOUNT THAT IS MAINTAINED SOLELY IN CONNECTION WITH YOUR FIXED CONTRACTUAL
OBLIGATIONS UNDER WHICH THE AMOUNTS PAYABLE, OR CREDITED, TO SUCH PLAN AND TO
ANY PARTICIPANT OR BENEFICIARY OF SUCH PLAN (INCLUDING ANY ANNUITANT) ARE NOT
AFFECTED IN ANY MANNER BY THE INVESTMENT PERFORMANCE OF THE SEPARATE ACCOUNT; OR

 

(B)           THE SOURCE IS EITHER (I) AN INSURANCE COMPANY POOLED SEPARATE
ACCOUNT, WITHIN THE MEANING OF PROHIBITED TRANSACTION EXEMPTION (“PTE”) 90-1
(ISSUED JANUARY 29, 1990), OR (II) A BANK COLLECTIVE INVESTMENT FUND, WITHIN THE
MEANING OF THE PTE 91-38 (ISSUED JULY 12, 1991) AND, EXCEPT AS YOU HAVE
DISCLOSED TO THE COMPANY IN WRITING PURSUANT TO THIS PARAGRAPH (B), NO EMPLOYEE
BENEFIT PLAN OR GROUP OF PLANS MAINTAINED BY THE SAME EMPLOYER OR EMPLOYEE
ORGANIZATION BENEFICIALLY OWNS MORE THAN 10% OF ALL ASSETS ALLOCATED TO SUCH
POOLED SEPARATE ACCOUNT OR COLLECTIVE INVESTMENT FUND; OR

 

(C)           THE SOURCE CONSTITUTES ASSETS OF AN “INVESTMENT FUND” (WITHIN THE
MEANING OF PART V OF THE QPAM EXEMPTION) MANAGED BY A “QUALIFIED PROFESSIONAL
ASSET MANAGER” OR “QPAM” (WITHIN THE MEANING OF PART V OF THE QPAM EXEMPTION),
NO EMPLOYEE BENEFIT PLAN’S ASSETS THAT ARE INCLUDED IN SUCH INVESTMENT FUND,
WHEN COMBINED WITH THE ASSETS OF ALL OTHER EMPLOYEE BENEFIT PLANS ESTABLISHED OR
MAINTAINED BY THE SAME EMPLOYER OR BY AN AFFILIATE (WITHIN THE MEANING OF
SECTION V(C)(1) OF THE QPAM EXEMPTION) OF SUCH EMPLOYER OR BY THE SAME EMPLOYEE
ORGANIZATION AND MANAGED BY SUCH QPAM, EXCEED 20% OF THE TOTAL CLIENT ASSETS
MANAGED BY SUCH QPAM, THE CONDITIONS OF PART I(C) AND (G) OF THE QPAM EXEMPTION
ARE SATISFIED, NEITHER THE QPAM NOR A PERSON CONTROLLING OR CONTROLLED BY THE
QPAM (APPLYING THE DEFINITION OF “CONTROL” IN SECTION V(E) OF THE QPAM
EXEMPTION) OWNS A 5% OR MORE INTEREST IN THE COMPANY AND (I) THE IDENTITY OF
SUCH QPAM AND (II) THE NAMES OF ALL EMPLOYEE BENEFIT PLANS WHOSE ASSETS ARE
INCLUDED IN SUCH INVESTMENT FUND HAVE BEEN DISCLOSED TO THE COMPANY IN WRITING
PURSUANT TO THIS PARAGRAPH (C); OR

 

(D)           THE SOURCE IS A GOVERNMENTAL PLAN; OR

 

(E)           THE SOURCE IS ONE OR MORE EMPLOYEE BENEFIT PLANS, OR A SEPARATE
ACCOUNT OR TRUST FUND COMPRISED OF ONE OR MORE EMPLOYEE BENEFIT PLANS, EACH OF
WHICH HAS ‘ BEEN IDENTIFIED TO THE COMPANY IN WRITING PURSUANT TO THIS PARAGRAPH
(E); OR

 

(F)            THE SOURCE DOES NOT INCLUDE ASSETS OF ANY EMPLOYEE BENEFIT PLAN,
OTHER THAN A PLAN EXEMPT FROM THE COVERAGE OF ERISA.

 

As used in this Section 6.2, the terms “employee benefit plan”, “governmental
plan”, “party in interest” and “separate account” shall have the respective
meanings assigned to such terms in Section 3 of ERISA.

 

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ARTICLE VII

INFORMATION AS TO COMPANY

 

SECTION 7.1            FINANCIAL AND BUSINESS INFORMATION.

 

The Company shall deliver to each holder of Notes:

 

(A)           QUARTERLY STATEMENTS.  WITHIN 60 DAYS AFTER THE END OF EACH
QUARTERLY FISCAL PERIOD IN EACH FISCAL YEAR OF THE COMPANY (OTHER THAN THE LAST
QUARTERLY FISCAL PERIOD OF EACH SUCH FISCAL YEAR), DUPLICATE COPIES OF,

 

(I)            A CONSOLIDATED BALANCE SHEET OF THE COMPANY AND ITS SUBSIDIARIES
AS AT THE END OF SUCH QUARTER, AND

 

(II)           CONSOLIDATED STATEMENTS OF INCOME, CHANGES IN SHAREHOLDERS’
EQUITY AND CASH FLOWS OF THE COMPANY AND ITS SUBSIDIARIES, FOR SUCH QUARTER AND
(IN THE CASE OF THE SECOND AND THIRD QUARTERS) FOR THE PORTION OF THE FISCAL
YEAR ENDING WITH SUCH QUARTER, SETTING FORTH IN EACH CASE IN COMPARATIVE FORM
THE FIGURES FOR THE CORRESPONDING PERIODS IN THE PREVIOUS FISCAL YEAR, ALL IN
REASONABLE DETAIL, PREPARED IN ACCORDANCE WITH GAAP APPLICABLE TO QUARTERLY
FINANCIAL STATEMENTS GENERALLY, AND CERTIFIED BY A SENIOR FINANCIAL OFFICER AS
FAIRLY PRESENTING, IN ALL MATERIAL RESPECTS, THE FINANCIAL POSITION OF THE
COMPANIES BEING REPORTED ON AND THEIR RESULTS OF OPERATIONS AND CASH FLOWS,
SUBJECT TO CHANGES RESULTING FROM YEAR-END ADJUSTMENTS, PROVIDED THAT DELIVERY
WITHIN THE TIME PERIOD SPECIFIED ABOVE OF COPIES OF THE COMPANY’S QUARTERLY
REPORT ON FORM 10-Q PREPARED IN COMPLIANCE WITH THE REQUIREMENTS THEREFOR AND
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION SHALL BE DEEMED TO SATISFY THE
REQUIREMENTS OF THIS SECTION 7.1(A);

 

(B)           ANNUAL STATEMENTS.  WITHIN 120 DAYS AFTER THE END OF EACH FISCAL
YEAR OF THE COMPANY, DUPLICATE COPIES OF,

 

(I)            A CONSOLIDATED BALANCE SHEET OF THE COMPANY AND ITS SUBSIDIARIES,
AS AT THE END OF SUCH YEAR, AND

 

(II)           CONSOLIDATED STATEMENTS OF INCOME, CHANGES IN SHAREHOLDERS’
EQUITY AND CASH FLOWS OF THE COMPANY AND ITS SUBSIDIARIES, FOR SUCH YEAR,

 

setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall state that such financial
statements present fairly, in all material respects, the financial position of
the companies being reported upon and their results of operations and cash flows
and have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances, provided that
the delivery within the time period specified above of the Company’s Annual
Report on Form 10-K for such fiscal year (together with the Company’s annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in

 

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accordance with the requirements therefor and filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
Section 7.1(b);

 

(C)           SEC AND OTHER REPORTS.  PROMPTLY UPON THEIR BECOMING AVAILABLE,
ONE COPY OF EACH FINANCIAL STATEMENT, REPORT, NOTICE OR PROXY STATEMENT SENT BY
THE COMPANY OR ANY SUBSIDIARY TO PUBLIC SECURITIES HOLDERS GENERALLY, AND
(II)EACH REGULAR OR PERIODIC REPORT, EACH REGISTRATION STATEMENT (WITHOUT
EXHIBITS EXCEPT AS EXPRESSLY REQUESTED BY SUCH HOLDER), AND EACH PROSPECTUS AND
ALL AMENDMENTS THERETO FILED BY THE COMPANY OR ANY SUBSIDIARY WITH THE
SECURITIES AND EXCHANGE COMMISSION AND OF ALL PRESS RELEASES AND OTHER
STATEMENTS MADE AVAILABLE GENERALLY BY THE COMPANY OR ANY SUBSIDIARY TO THE
PUBLIC CONCERNING DEVELOPMENTS THAT ARE MATERIAL;

 

(D)           NOTICE OF DEFAULT OR EVENT OF DEFAULT.  PROMPTLY, AND IN ANY EVENT
WITHIN FIVE DAYS AFTER A RESPONSIBLE OFFICER BECOMING AWARE OF THE EXISTENCE OF
ANY DEFAULT OR EVENT OF DEFAULT OR THAT ANY PERSON HAS GIVEN ANY NOTICE OR TAKEN
ANY ACTION WITH RESPECT TO A CLAIMED DEFAULT HEREUNDER OR THAT ANY PERSON HAS
GIVEN ANY NOTICE OR TAKEN ANY ACTION WITH RESPECT TO A CLAIMED DEFAULT OF THE
TYPE REFERRED TO IN ARTICLE XI(F), A WRITTEN NOTICE SPECIFYING THE NATURE AND
PERIOD OF EXISTENCE THEREOF AND WHAT ACTION THE COMPANY IS TAKING OR PROPOSES TO
TAKE WITH RESPECT THERETO;

 

(E)           ERISA MATTERS.  PROMPTLY, AND IN ANY EVENT WITHIN FIVE (5) DAYS
AFTER A RESPONSIBLE OFFICER BECOMING AWARE OF ANY OF THE FOLLOWING, A WRITTEN
NOTICE SETTING FORTH THE NATURE THEREOF AND THE ACTION, IF ANY, THAT THE COMPANY
OR AN ERISA AFFILIATE PROPOSES TO TAKE WITH RESPECT THERETO:

 

(I)            WITH RESPECT TO ANY PLAN, ANY REPORTABLE EVENT, AS DEFINED IN
SECTION 4043(B) OF ERISA AND THE REGULATIONS THEREUNDER, FOR WHICH NOTICE
THEREOF HAS NOT BEEN WAIVED PURSUANT TO SUCH REGULATIONS AS IN EFFECT ON THE
DATE HEREOF; OR

 

(II)           THE TAKING BY THE PBGC OF STEPS TO INSTITUTE, OR THE THREATENING
BY THE PBGC OF THE INSTITUTION OF, PROCEEDINGS UNDER SECTION 4042 OF ERISA FOR
THE TERMINATION OF, OR THE APPOINTMENT OF A TRUSTEE TO ADMINISTER, ANY PLAN, OR
THE RECEIPT BY THE COMPANY OR ANY ERISA AFFILIATE OF A NOTICE FROM A
MULTIEMPLOYER PLAN THAT SUCH ACTION HAS BEEN TAKEN BY THE PBGC WITH RESPECT TO
SUCH MULTIEMPLOYER PLAN; OR

 

(III)          ANY EVENT, TRANSACTION OR CONDITION THAT COULD RESULT IN THE
INCURRENCE OF ANY LIABILITY BY THE COMPANY OR ANY ERISA AFFILIATE PURSUANT TO
TITLE I OR IV OF ERISA OR THE PENALTY OR EXCISE TAX PROVISIONS OF THE CODE
RELATING TO EMPLOYEE BENEFIT PLANS, OR IN THE IMPOSITION OF ANY LIEN ON ANY OF
THE RIGHTS, PROPERTIES OR ASSETS OF THE COMPANY OR ANY ERISA AFFILIATE PURSUANT
TO TITLE I OR IV OF ERISA OR SUCH PENALTY OR EXCISE TAX PROVISIONS, IF SUCH
LIABILITY OR LIEN, TAKEN TOGETHER WITH ANY OTHER SUCH LIABILITIES OR LIENS THEN
EXISTING, COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT;

 

(F)            NOTICES FROM GOVERNMENTAL AUTHORITY.  PROMPTLY, AND IN ANY EVENT
WITHIN 30 DAYS OF RECEIPT THEREOF, COPIES OF ANY NOTICE TO THE COMPANY OR ANY
SUBSIDIARY FROM ANY FEDERAL OR STATE GOVERNMENTAL AUTHORITY RELATING TO ANY
ORDER, RULING, STATUTE OR OTHER LAW OR REGULATION THAT COULD REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; AND

 

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(G)           REQUESTED INFORMATION.  WITH REASONABLE PROMPTNESS, SUCH OTHER
DATA AND INFORMATION RELATING TO THE BUSINESS, OPERATIONS, AFFAIRS, FINANCIAL
CONDITION, ASSETS OR PROPERTIES OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR
RELATING TO THE ABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS HEREUNDER AND
UNDER THE NOTES AS FROM TIME TO TIME MAY BE REASONABLY REQUESTED BY ANY SUCH
HOLDER OF NOTES.

 

SECTION 7.2            OFFICER’S CERTIFICATE.

 

Each set of financial statements delivered to a holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of
a Senior Financial Officer setting forth:

 

(A)           COVENANT COMPLIANCE.  THE INFORMATION (INCLUDING REASONABLY
DETAILED CALCULATIONS) REQUIRED IN ORDER TO ESTABLISH WHETHER THE COMPANY WAS IN
COMPLIANCE WITH THE REQUIREMENTS OF SECTION 10.4(A) THROUGH
SECTION 10.4(C) HEREOF, INCLUSIVE, DURING THE QUARTERLY OR ANNUAL PERIOD COVERED
BY THE STATEMENTS THEN BEING FURNISHED (INCLUDING WITH RESPECT TO EACH SUCH
SECTION, WHERE APPLICABLE, THE CALCULATIONS OF THE MAXIMUM OR MINIMUM AMOUNT,
RATIO OR PERCENTAGE, AS THE CASE MAY BE, PERMISSIBLE UNDER THE TERMS OF SUCH
SECTIONS, AND THE CALCULATION OF THE AMOUNT, RATIO OR PERCENTAGE THEN IN
EXISTENCE); AND

 

(B)           EVENT OF DEFAULT.  A STATEMENT THAT SUCH OFFICER HAS REVIEWED THE
RELEVANT TERMS HEREOF AND HAS MADE, OR CAUSED TO BE MADE, UNDER HIS OR HER
SUPERVISION, A REVIEW OF THE TRANSACTIONS AND CONDITIONS OF THE COMPANY AND ITS
SUBSIDIARIES FROM THE BEGINNING OF THE QUARTERLY OR ANNUAL PERIOD COVERED BY THE
STATEMENTS THEN BEING FURNISHED TO THE DATE OF THE CERTIFICATE AND THAT SUCH
REVIEW SHALL NOT HAVE DISCLOSED THE EXISTENCE DURING SUCH PERIOD OF ANY
CONDITION OR EVENT THAT CONSTITUTES A DEFAULT OR AN EVENT OF DEFAULT OR, IF ANY
SUCH CONDITION OR EVENT EXISTED OR EXISTS (INCLUDING, WITHOUT LIMITATION, ANY
SUCH EVENT OR CONDITION RESULTING FROM THE FAILURE OF THE COMPANY OR ANY
SUBSIDIARY TO COMPLY WITH ANY ENVIRONMENTAL LAW), SPECIFYING THE NATURE AND
PERIOD OF EXISTENCE THEREOF AND WHAT ACTION THE COMPANY SHALL HAVE TAKEN OR
PROPOSES TO TAKE WITH RESPECT THERETO.

 

SECTION 7.3            INSPECTION.

 

The Company shall permit the representatives of each holder of Notes:

 

(A)           NO DEFAULT.  IF NO DEFAULT OR EVENT OF DEFAULT THEN EXISTS, AT THE
EXPENSE OF SUCH HOLDER AND UPON REASONABLE PRIOR NOTICE TO THE COMPANY, TO VISIT
THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY, TO DISCUSS THE AFFAIRS, FINANCES
AND ACCOUNTS OF THE COMPANY AND ITS SUBSIDIARIES WITH THE COMPANY’S OFFICERS,
AND (WITH THE CONSENT OF THE COMPANY, WHICH CONSENT WILL NOT BE UNREASONABLY
WITHHELD) ITS INDEPENDENT PUBLIC ACCOUNTANTS, AND (WITH THE CONSENT OF THE
COMPANY, WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD) TO VISIT THE OTHER
OFFICES AND PROPERTIES OF, THE COMPANY AND EACH SUBSIDIARY, ALL AT SUCH
REASONABLE TIMES AND AS OFTEN AS MAY BE REASONABLY REQUESTED IN WRITING; AND

 

(B)           DEFAULT.  IF A DEFAULT OR EVENT OF DEFAULT THEN EXISTS, AT THE
EXPENSE OF THE COMPANY TO VISIT AND INSPECT ANY OF THE OFFICES OR PROPERTIES OF
THE COMPANY OR ANY SUBSIDIARY, TO EXAMINE ALL THEIR RESPECTIVE BOOKS OF ACCOUNT,
RECORDS, REPORTS AND OTHER PAPERS, TO MAKE COPIES AND EXTRACTS THEREFROM, AND TO
DISCUSS THEIR RESPECTIVE AFFAIRS, FINANCES AND ACCOUNTS WITH

 

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THEIR RESPECTIVE OFFICERS AND INDEPENDENT PUBLIC ACCOUNTANTS (AND BY THIS
PROVISION THE COMPANY AUTHORIZES SAID ACCOUNTANTS TO DISCUSS THE AFFAIRS,
FINANCES AND ACCOUNTS OF THE COMPANY AND ITS SUBSIDIARIES), ALL AT SUCH
REASONABLE TIMES AND AS OFTEN AS MAY BE REASONABLY REQUESTED IN WRITING.

 

ARTICLE VIII

PREPAYMENT OF THE NOTES

 

SECTION 8.1            REQUIRED PREPAYMENTS.

 

The Company shall prepay the Notes, at the election of the any holder thereof,
at a redemption price equal to the full principal amount of the Notes times the
applicable Redemption Price Percentage set forth below, plus all accrued and
unpaid interest thereon, upon the earlier to occur of the following:  a Change
in Control of the Company, a sale of a Material portion of the assets of the
Company (excluding a sale pursuant to any whole loan sale arrangement with you,
any other holder of the Notes or any of their respective Affiliates), or an
Event of Default which results in the acceleration of the Notes as set forth in
Section 12.1.

 

Years from Closing

 

Redemption Price Percentage

 

Less than or equal to 1

 

 

106

%

Greater than 1 and less than or equal to 2

 

 

104

%

Greater than 2 and less than or equal to 3

 

 

102

%

Greater than three and less than or equal to 5

 

 

101

%

Thereafter

 

 

100

%

 

SECTION 8.2            OPTIONAL PREPAYMENTS.

 

The Company may, at its option, upon notice as provided below, prepay at any
time all, or from time to time any part of, the Notes, in an amount equal to the
principal amount of such Notes being prepaid, whether in all or in part, times
the applicable Redemption Price Percentage set forth in Section 8.1 above, plus
all accrued and unpaid interest thereon.  The Company will give each holder of
Notes written notice of each optional prepayment under this Section 8.2 not less
than 30 days and not more than 60 days prior to the date fixed for such
prepayment.  Each such notice shall specify such date, the aggregate principal
amount of the Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid (determined in accordance with
Section 8.3), and the interest to be paid on the prepayment date with respect to
such principal amount being prepaid.

 

SECTION 8.3            ALLOCATION OF PARTIAL PREPAYMENTS.

 

In the case of each partial prepayment of the Notes, the principal amount of the
Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.

 

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SECTION 8.4            MATURITY; SURRENDER, ETC.

 

In the case of each prepayment of Notes pursuant to this Article VIII, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date.  From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
interest on such principal amount shall cease to accrue.  Any Note paid or
prepaid in full shall be surrendered to the Company and cancelled and shall not
be reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.

 

SECTION 8.5            PURCHASE OF NOTES.

 

The Company will not and will not permit any Affiliate to purchase, redeem,
prepay or otherwise acquire, directly or indirectly, any of the outstanding
Notes except upon the payment or prepayment of the Notes in accordance with the
terms of this Agreement and the Notes.  The Company will promptly cancel all
Notes acquired by it or any Affiliate pursuant to any payment, prepayment or
purchase of Notes pursuant to any provision of this Agreement and no Notes may
be issued in substitution or exchange for any such Notes.

 

ARTICLE IX

AFFIRMATIVE COVENANTS

 

The Company covenants that so long as any of the Notes are outstanding:

 

SECTION 9.1            COMPLIANCE WITH LAW.

 

The Company will and will cause each of its Subsidiaries to comply with all
laws, ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

SECTION 9.2            INSURANCE.

 

The Company shall maintain the insurance coverages described on Schedule 9.2,
and the Company shall not make any changes to reduce such coverages or to
increase the deductibles, or co-insurance thereunder.  In addition, the Company
will and will cause each of its Subsidiaries to maintain, with financially sound
and reputable insurers, such additional insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as the Required Holders may reasonably require, to the extent
that such additional insurance is customary in the case of

 

17

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entities of established reputations engaged in the same or a similar business
and similarly situated.

 

SECTION 9.3            MAINTENANCE OF PROPERTIES.

 

The Company will and will cause each of its Subsidiaries to maintain and keep,
or cause to be maintained and kept, their respective properties in good repair,
working order and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

SECTION 9.4            PAYMENT OF TAXES AND CLAIMS.

 

The Company will and will cause each of its Subsidiaries to file all tax returns
required to be filed in any jurisdiction and to pay and discharge all taxes
shown to be due and payable on such returns and all other taxes, assessments,
governmental charges, or levies imposed on them or any of their properties,
assets, income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent and all claims for
which sums have become due and payable that have or might become a Lien on
properties or assets of the Company or any Subsidiary, provided that neither the
Company nor any Subsidiary need pay any such tax or assessment or claims if
(i) the amount, applicability or validity thereof is contested by the Company or
such Subsidiary on a timely basis in good faith and in appropriate proceedings,
and the Company or a Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Company or such Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate could not
reasonably be expected to have a Material Adverse Effect.

 

SECTION 9.5            CORPORATE EXISTENCE, ETC.

 

The Company will at all times preserve and keep in full force and effect its
corporate existence.  Subject to Sections 10.2 and 10.6, the Company will at all
times preserve and keep in full force and effect the corporate existence of each
of its Subsidiaries (unless merged into the Company or a Subsidiary) and all
rights and franchises of the Company and its Subsidiaries unless, in the good
faith judgment of the Company, the termination of or failure to preserve and
keep in full force and effect such corporate existence, right or franchise could
not, individually or in the aggregate, have a Material Adverse Effect.

 

SECTION 9.6            GUARANTY AGREEMENT.

 

(A)           (1)           CONCURRENTLY WITH THE FORMATION OR ACQUISITION OF
ANY SUBSIDIARY (OTHER THAN A SECURITIZATION SUBSIDIARY), THE COMPANY SHALL CAUSE
SUCH SUBSIDIARY TO EXECUTE AND DELIVER A SUPPLEMENT TO THE GUARANTY AGREEMENT (A
“SUPPLEMENT”) IN THE FORM OF EXHIBIT A TO THE GUARANTY AGREEMENT.

 

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(2)           CONCURRENTLY WITH THE DELIVERY BY ANY SUBSIDIARY OF A SUPPLEMENT
PURSUANT TO SECTION 9.6(A)(1), THE COMPANY SHALL CAUSE SUCH SUBSIDIARY TO
DELIVER TO EACH HOLDER OF NOTES (I) SUCH DOCUMENTS AND EVIDENCE WITH RESPECT TO
SUCH SUBSIDIARY AS ANY HOLDER MAY REASONABLY REQUEST IN ORDER TO ESTABLISH THE
EXISTENCE AND GOOD STANDING OF SUCH SUBSIDIARY AND EVIDENCE THAT THE BOARD OF
DIRECTORS OF SUCH SUBSIDIARY HAS ADOPTED RESOLUTIONS AUTHORIZING THE EXECUTION
AND DELIVERY OF SUCH SUPPLEMENT AND THE GUARANTY OF THE NOTES, (II) EVIDENCE OF
COMPLIANCE WITH SUCH SUBSIDIARY’S OUTSTANDING DEBT INSTRUMENTS IN THE FORM OF
(A) A COMPLIANCE CERTIFICATE FROM SUCH SUBSIDIARY TO THE EFFECT THAT SUCH
SUBSIDIARY IS IN COMPLIANCE WITH ALL TERMS AND CONDITIONS OF ITS OUTSTANDING
DEBT INSTRUMENTS, (B) CONSENTS OR APPROVALS OF THE HOLDER OR HOLDERS OF ANY
EVIDENCE OF DEBT OR SECURITY, AND/OR (C) AMENDMENTS OF AGREEMENTS PURSUANT TO
WHICH ANY EVIDENCE OF DEBT OR SECURITY MAY HAVE BEEN ISSUED, ALL AS MAY BE
REASONABLY DEEMED NECESSARY BY THE HOLDERS OF NOTES TO PERMIT THE EXECUTION AND
DELIVERY OF SUCH SUPPLEMENT BY SUCH SUBSIDIARY, (III) AN OPINION OF COUNSEL TO
THE EFFECT THAT (A) SUCH SUBSIDIARY IS A CORPORATION OR OTHER BUSINESS ENTITY,
DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING, IF APPLICABLE, UNDER THE
LAWS OF ITS JURISDICTION OF ORGANIZATION, HAS THE CORPORATE OR OTHER POWER AND
THE AUTHORITY TO EXECUTE AND DELIVER SUCH SUPPLEMENT AND TO PERFORM THE GUARANTY
AGREEMENT, (B) THE EXECUTION AND DELIVERY OF SUCH SUPPLEMENT AND PERFORMANCE OF
THE GUARANTY AGREEMENT HAS BEEN DULY AUTHORIZED BY ALL NECESSARY ACTION ON THE
PART OF SUCH SUBSIDIARY, SUCH SUPPLEMENT HAS BEEN DULY EXECUTED AND DELIVERED BY
SUCH SUBSIDIARY AND THE GUARANTY AGREEMENT CONSTITUTES THE LEGAL, VALID AND
BINDING CONTRACT OF SUCH SUBSIDIARY ENFORCEABLE AGAINST SUCH SUBSIDIARY IN
ACCORDANCE WITH ITS TERMS, SUBJECT TO BANKRUPTCY, INSOLVENCY, FRAUDULENT
CONVEYANCE OR SIMILAR LAWS AFFECTING CREDITORS’ RIGHTS GENERALLY, AND GENERAL
PRINCIPLES OF EQUITY (REGARDLESS OF WHETHER THE APPLICATION OF SUCH PRINCIPLES
IS CONSIDERED IN A PROCEEDING IN EQUITY OR AT LAW), (C) THE EXECUTION AND
DELIVERY OF SUCH SUPPLEMENT AND THE PERFORMANCE BY SUCH SUBSIDIARY OF THE
GUARANTY AGREEMENT DO NOT CONFLICT WITH OR RESULT IN ANY BREACH OF ANY OF THE
PROVISIONS OF OR CONSTITUTE A DEFAULT UNDER OR RESULT IN THE CREATION OF A LIEN
UPON ANY OF THE PROPERTY OF SUCH SUBSIDIARY PURSUANT TO THE PROVISIONS OF ANY
APPLICABLE LAW, ORDER, RULE OR REGULATION, ITS CHARTER DOCUMENTS OR ANY
AGREEMENT OR OTHER INSTRUMENT KNOWN TO SUCH COUNSEL TO WHICH SUCH SUBSIDIARY IS
A PARTY TO OR BY WHICH SUCH SUBSIDIARY MAY BE BOUND AND (D) NO APPROVAL, CONSENT
OR WITHHOLDING OF OBJECTION ON THE PART OF, OR FILING, REGISTRATION OR
QUALIFICATION WITH, ANY APPLICABLE GOVERNMENTAL AUTHORITY, FEDERAL OR STATE, IS
NECESSARY IN CONNECTION WITH THE LAWFUL EXECUTION AND DELIVERY OF SUCH
SUPPLEMENT BY SUCH SUBSIDIARY OR THE PERFORMANCE OF THE GUARANTY AGREEMENT BY
SUCH SUBSIDIARY, WHICH OPINION MAY CONTAIN SUCH ASSUMPTIONS AND QUALIFICATIONS
AS ARE REASONABLY ACCEPTABLE TO THE REQUIRED HOLDERS AND (IV) ALL OTHER
DOCUMENTS AND SHOWINGS REASONABLY REQUESTED BY THE HOLDERS OF NOTES IN
CONNECTION WITH THE EXECUTION AND DELIVERY OF SUCH SUPPLEMENT, WHICH DOCUMENTS
SHALL BE REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO SUCH HOLDERS AND THEIR
SPECIAL COUNSEL, AND EACH HOLDER OF NOTES SHALL HAVE RECEIVED A COPY (EXECUTED
OR CERTIFIED AS MAY BE APPROPRIATE) OF ALL OF THE FOREGOING LEGAL DOCUMENTS.

 

(B)           THE COMPANY AGREES THAT IT WILL NOT, NOR WILL IT PERMIT ANY
SUBSIDIARY OR AFFILIATE TO, DIRECTLY OR INDIRECTLY, PAY OR CAUSE TO BE PAID ANY
CONSIDERATION OR REMUNERATION, WHETHER BY WAY OF SUPPLEMENTAL OR ADDITIONAL
INTEREST, FEE OR OTHERWISE, TO ANY CREDITOR OF THE COMPANY, OF ANY GUARANTOR OR
ANY AFFILIATE AS CONSIDERATION FOR OR AS AN INDUCEMENT TO THE ENTERING INTO BY
ANY SUCH CREDITOR OF ANY RELEASE OR DISCHARGE OF ANY GUARANTOR WITH RESPECT TO
ANY LIABILITY OF SUCH GUARANTOR AS AN OBLIGOR OR GUARANTOR UNDER OR IN RESPECT
OF DEBT OF THE COMPANY, UNLESS SUCH CONSIDERATION OR REMUNERATION IS
CONCURRENTLY PAID, ON THE SAME TERMS, RATABLY TO EACH OF THE HOLDERS OF THE
NOTES.

 

19

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SECTION 9.7            FINANCIAL STATEMENT; OTHER INFORMATION.

 

The Company will deliver to the holders of the Notes the financial information
set forth in Section 5.5 and Section 7.1, other financial information reasonably
requested by the holders of the Notes and any financial material and minutes
prepared for meetings of the Board of Directors of the Company.

 

SECTION 9.8            RANKING OF NOTES.

 

The Notes and all other obligations of the Company and the Guarantors under this
Agreement and the Guaranty Agreement shall be subordinated to the Senior Debt,
on the terms set forth herein, shall be at least pari passu with the Junior
Debt, and shall be senior to all other Debt of the Company and the Guarantors.

 

SECTION 9.9            USE OF PROCEEDS.

 

The Company will use not more than $2,500,000 of the proceeds of the sale of the
Notes to purchase outstanding common equity of the Company.

 

ARTICLE X

NEGATIVE COVENANTS

 

The Company covenants that so long as any of the Notes are outstanding:

 

SECTION 10.1         TRANSACTIONS WITH AFFILIATES.

 

The Company will not and will not permit any Subsidiary to enter into directly
or indirectly any Material transaction or Material group of related transactions
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company’s or such
Subsidiary’s business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm’s-length transaction with a Person not an Affiliate.

 

SECTION 10.2         MERGER, CONSOLIDATION, ETC.

 

The Company shall not, and shall not permit any Subsidiary to, become a party to
a merger or consolidation, or purchase or otherwise acquire all or a substantial
part of the business or Property of any Person or all or a substantial part of
the business or Property of a division or branch of a Person or a majority
interest in the Capital Stock of any Person, or wind up, dissolve, or liquidate
itself; provided that as long as no Default or Event of Default exists or would
result therefrom and provided the Company gives you prior written notice:

 

(A)           A SUBSIDIARY OF THE COMPANY MAY WIND-UP, DISSOLVE, OR LIQUIDATE IF
ITS PROPERTY IS TRANSFERRED TO THE COMPANY OR A WHOLLY-OWNED SUBSIDIARY OF THE
COMPANY; AND

 

20

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(B)           ANY SUBSIDIARY OF THE COMPANY MAY MERGE OR CONSOLIDATE WITH THE
COMPANY (PROVIDED THE COMPANY IS THE SURVIVING ENTITY) OR WITH ANY WHOLLY-OWNED
SUBSIDIARY OF THE COMPANY (PROVIDED THE WHOLLY OWNED SUBSIDIARY IS THE SURVIVING
ENTITY).

 

SECTION 10.3         LIENS.

 

The Company shall not, and shall not permit any of the Guarantors to, incur,
create, assume, or permit to exist any Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired, except the following
(“Permitted Liens”):

 

(A)           LIENS DESCRIBED ON SCHEDULE 10.3 HERETO OR SECURING SENIOR DEBT,
AND ANY EXTENSIONS, RENEWALS, OR REFINANCINGS OF THE DEBT SECURED BY SUCH LIENS,
PROVIDED THAT (I) NO SUCH LIEN IS EXPANDED TO COVER ANY ADDITIONAL PROPERTY
(OTHER THAN AFTER ACQUIRED TITLE IN OR ON SUCH PROPERTY AND PROCEEDS OF THE
EXISTING COLLATERAL) AFTER THE CLOSING AND (II) NO SUCH LIEN IS SPREAD TO SECURE
ANY ADDITIONAL DEBT AFTER THE CLOSING;

 

(B)           LIENS IN FAVOR OF THE FOR THE EQUAL AND RATABLE BENEFIT OF THE
HOLDERS OF THE NOTES;

 

(C)           ENCUMBRANCES CONSISTING OF EASEMENTS, ZONING RESTRICTIONS, OR
OTHER RESTRICTIONS ON THE USE OF REAL PROPERTY THAT DO NOT (INDIVIDUALLY OR IN
THE AGGREGATE) MATERIALLY DETRACT FROM THE VALUE OF THE REAL PROPERTY ENCUMBERED
THEREBY;

 

(D)           LIENS FOR TAXES, ASSESSMENTS, OR OTHER GOVERNMENTAL CHARGES (BUT
EXCLUDING LIENS UNDER ERISA OR ENVIRONMENTAL LAWS) THAT ARE NOT DELINQUENT OR
WHICH ARE BEING CONTESTED IN GOOD FAITH AND FOR WHICH ADEQUATE RESERVES HAVE
BEEN ESTABLISHED IN ACCORDANCE WITH GAAP;

 

(E)           LIENS OF MECHANICS, MATERIALMEN, WAREHOUSEMEN, CARRIERS,
LANDLORDS, OR OTHER SIMILAR STATUTORY LIENS SECURING OBLIGATIONS THAT ARE NOT
OVERDUE OR ARE BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS
DILIGENTLY PURSUED AND FOR WHICH ADEQUATE RESERVES HAVE BEEN ESTABLISHED IN
ACCORDANCE WITH GAAP AND ARE INCURRED IN THE ORDINARY COURSE OF BUSINESS;

 

(F)            LIENS RESULTING FROM DEPOSITS TO SECURE PAYMENTS OF WORKER’S
COMPENSATION, UNEMPLOYMENT INSURANCE OR OTHER SOCIAL SECURITY PROGRAMS OR TO
SECURE THE PERFORMANCE OF TENDERS, STATUTORY OBLIGATIONS, LEASES, INSURANCE
CONTRACTS, SURETY AND APPEAL BONDS, BIDS, AND OTHER CONTRACTS INCURRED IN THE
ORDINARY COURSE OF BUSINESS (OTHER THAN FOR PAYMENT OF DEBT);

 

(G)           LIENS FOR PURCHASE MONEY OBLIGATIONS AND LIENS SECURING CAPITAL
LEASE OBLIGATIONS; PROVIDED THAT: (I) THE DEBT SECURED BY ANY SUCH LIEN IS
PERMITTED UNDER SECTION 10.5(D) HEREOF; AND (II) ANY SUCH LIEN ENCUMBERS ONLY
THE PROPERTY SO PURCHASED OR LEASED;

 

(H)           ANY INTEREST OR TITLE OF A LICENSOR, LESSOR, OR SUBLESSOR UNDER
ANY LICENSE OR LEASE ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS;

 

(I)            LIENS AGAINST EQUIPMENT ARISING FROM PRECAUTIONARY UCC FINANCING
STATEMENT FILINGS REGARDING OPERATING LEASES ENTERED INTO BY THE COMPANY OR A
SUBSIDIARY IN THE ORDINARY COURSE OF BUSINESS;

 

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(J)            NONCONSENSUAL LIENS IN FAVOR OF BANKING INSTITUTIONS ARISING AS A
MATTER OF LAW AND ENCUMBERING THE DEPOSITS (INCLUDING THE RIGHT OF SET-OFF) HELD
BY SUCH BANKING INSTITUTIONS IN THE ORDINARY COURSE OF BUSINESS; AND

 

(K)           LIENS SECURING DEBT ARISING UNDER SWAPS PERMITTED UNDER
SECTION 10.5(G) HEREOF.

 

Notwithstanding the foregoing Permitted Liens or any other provision in this
Agreement or any other Transaction Document to the contrary, the Company shall
not enter into, and the Company shall not permit any of the Guarantors to enter
into, any agreement that (i) prohibits the creation or assumption of any Lien
upon, or the pledge, hypothecation or encumbrance of, any Property of the
Company or such Guarantor in favor of any Person, or (ii) requires any
obligation of the Company, or such Subsidiary to be secured in favor of another
Person if any Debt of the Company is so secured.

 

SECTION 10.4         FINANCIAL COVENANTS.

 

(A)           MINIMUM SHAREHOLDERS’ EQUITY.  AT THE END OF ANY FISCAL QUARTER,
THE COMPANY SHALL NOT PERMIT ITS SHAREHOLDERS’ EQUITY TO BE LESS THAN THE SUM OF
(I) $27,000,000 AND (II) 50% OF THE AGGREGATE OF THE NET INCOME OF THE COMPANY
(DETERMINED IN ACCORDANCE WITH GAAP AND WITHOUT DEDUCTION FOR ANY NET LOSSES)
FOR SUCH FISCAL QUARTER AND ALL PRIOR FISCAL QUARTERS ENDING AFTER APRIL 30,
2007.

 

(B)           MINIMUM SHAREHOLDERS’ EQUITY TO RECEIVABLES RATIO.  AS OF THE END
OF ANY FISCAL QUARTER, THE COMPANY SHALL NOT PERMIT THE SUM OF ITS SHAREHOLDERS’
EQUITY PLUS ANY OUTSTANDING PRINCIPAL AMOUNTS OF THE JUNIOR DEBT AND THE NOTES,
AS A PERCENTAGE OF MANAGED ASSETS, TO BE LESS THAN 7.0%

 

(C)           MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE RATIO.  AS OF THE END
OF ANY FISCAL QUARTER, THE COMPANY SHALL NOT PERMIT THE RATIO OF (I) EBITDA PLUS
RENTAL EXPENSE OF THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES FOR THE PRIOR
FOUR FISCAL QUARTERS TO (II) THE SUM OF (A) INTEREST EXPENSE FOR SUCH FISCAL
QUARTERS, PLUS (B) RENTAL EXPENSE FOR SUCH FISCAL QUARTERS, TO BE LESS THAN 1.10
TO 1.00.

 

SECTION 10.5         DEBT.

 

The Company will not, and shall not permit any Guarantor to, incur, create,
assume, or permit to exist any Debt, except:

 

(A)           DEBT DESCRIBED ON SCHEDULE 10.5 OR IN THIS SECTION 10.5 (A), AND
ANY EXTENSIONS, RENEWALS, OR REFINANCINGS OF SUCH EXISTING DEBT SO LONG AS
(A) THE PRINCIPAL AMOUNT OF SUCH DEBT AFTER SUCH RENEWAL, EXTENSION, OR
REFINANCING SHALL NOT EXCEED THE PRINCIPAL AMOUNT OF SUCH DEBT WHICH WAS
OUTSTANDING IMMEDIATELY PRIOR TO SUCH RENEWAL, EXTENSION, OR REFINANCING AND
(B) SUCH DEBT SHALL NOT BE SECURED BY ANY ASSETS OTHER THAN ASSETS SECURING SUCH
DEBT, IF ANY, PRIOR TO SUCH RENEWAL, EXTENSION, OR REFINANCING;

 

(B)           DEBT OF A GUARANTOR, OTHER THAN ANY SUCH DEBT INCURRED IN THE
ORDINARY COURSE OF BUSINESS, OWED TO THE COMPANY OR ANOTHER GUARANTOR PROVIDED
THAT SUCH DEBT IS ON TERMS SATISFACTORY TO YOU IN YOUR SOLE DISCRETION;

 

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(C)           CONTINGENT OBLIGATIONS AND OTHER DEBT INCURRED IN THE ORDINARY
COURSE OF BUSINESS WITH RESPECT TO RECEIVABLES PURCHASE COMMITMENTS, OR A
RECEIVABLES PORTFOLIO PURCHASE, REINSURANCE OBLIGATIONS, SURETY AND APPEAL BONDS
AND PERFORMANCE AND RETURN-OF-MONEY BONDS;

 

(D)           DEBT OF THE COMPANY OR ANY GUARANTOR CONSTITUTING PURCHASE MONEY
DEBT (INCLUDING, WITHOUT LIMITATION, CAPITAL LEASE OBLIGATIONS) INCURRED AFTER
THE CLOSING NOT TO EXCEED $500,000 IN THE AGGREGATE AT ANY TIME OUTSTANDING
SECURED BY PURCHASE MONEY LIENS CONSTITUTING PERMITTED LIENS;

 

(E)           DEBT CONSTITUTING OBLIGATIONS TO REIMBURSE WORKER’S COMPENSATION
INSURANCE COMPANIES FOR CLAIMS PAID BY SUCH COMPANIES ON THE COMPANY’S OR ANY OF
ITS SUBSIDIARIES’ BEHALF IN ACCORDANCE WITH THE POLICIES ISSUED TO THE COMPANY
OR SUCH SUBSIDIARY OF THE COMPANY;

 

(F)            DEBT SECURED BY THE PERMITTED LIENS;

 

(G)           DEBT ARISING UNDER, CREATED BY AND CONSISTING OF SWAPS, PROVIDED,
(I) SUCH SWAPS SHALL HAVE BEEN ENTERED INTO FOR THE PURPOSE OF HEDGING ACTUAL
RISK AND NOT FOR SPECULATIVE PURPOSES AND (II) THAT EACH COUNTERPARTY TO SUCH
SWAP SHALL BE WACHOVIA BANK, NATIONAL ASSOCIATION OR ONE OF ITS AFFILIATES OR
SHALL BE RATED IN ONE OF THE TWO HIGHEST RATING CATEGORIES OF S&P OR MOODY’S;
AND

 

(H)           INTERCOMPANY OBLIGATIONS AMONG THE COMPANY AND THE GUARANTORS FOR
REASONABLE NET RENT ALLOCATION, REASONABLE MANAGEMENT FEES, DIVIDENDS DECLARED,
EQUITY INVESTMENTS AND INTERCOMPANY DEBT SERVICE.

 

SECTION 10.6         SALE OF ASSETS, ETC.

 

The Company shall not, and shall not permit any Subsidiary to, sell, lease,
assign, transfer, or otherwise voluntarily dispose of: (a) any of its
Receivables other than the transfer and assignment of Receivables (i) to FIRC
(directly or through any Wholly-Owned Subsidiary) pursuant to the FIRC Purchase
Agreement, (ii) to FIARC pursuant to the FIARC Purchase Agreement, and (iii) to
any Wholly-Owned Subsidiary (directly or through any Wholly-Owned Subsidiary)
for inclusion in a Securitization program pursuant to which such Wholly-Owned
Subsidiary transfers directly or indirectly all of its subordinated and residual
interests in such Securitization to the issuer in any Securitization; (b) any
substantial portion of the consolidated assets of the Company or such
Subsidiary; or (c) any other property other than dispositions of inventory and
equipment in the ordinary course of business and sales of charged off deficiency
balances in the ordinary course of business generating aggregate Net Proceeds
not in excess of $500,000 in any calendar year.

 

SECTION 10.7         DIVIDENDS, DISTRIBUTIONS AND STOCK REPURCHASES.

 

The Company shall not, and shall not permit any Subsidiary to, directly or
indirectly declare, order, pay, make, or set apart any sum for (a) any dividend
or other distribution, direct or indirect, on account of any shares of any class
of Capital Stock of such Person now or hereafter outstanding; (b) any
redemption, conversion, exchange, retirement, sinking fund, or similar payment,
purchase, or other acquisition for value, direct or indirect, of any shares of
any class of

 

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Capital Stock of Person now or hereafter outstanding; or (c) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options, or
other rights to acquire shares of any class of Capital Stock of such Person now
or hereafter outstanding except:

 

(A)           SUBSIDIARIES OF THE COMPANY MAY MAKE, DECLARE, AND PAY DIVIDENDS
AND MAKE OTHER DISTRIBUTIONS WITH RESPECT TO THEIR CAPITAL STOCK TO THE COMPANY;

 

(B)           THE COMPANY MAY DECLARE AND PAY DIVIDENDS ON ANY CLASS OF ITS
CAPITAL STOCK PAYABLE SOLELY IN SHARES OF CAPITAL STOCK OF THE COMPANY;

 

(C)           THE COMPANY MAY ACQUIRE OR REDEEM CAPITAL STOCK OF THE COMPANY
HELD BY ANY FORMER OFFICER, DIRECTOR, OR EMPLOYEE OF THE COMPANY OR
BENEFICIARIES OF ANY SUCH PERSON’S ESTATE OR TRUSTS CREATED BY OR FOR THE
BENEFIT OF ANY SUCH PERSON OR THEIR BENEFICIARIES; AND

 

(D)           IF NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING,
OR WOULD OCCUR AFTER GIVING EFFECT THERETO, THE COMPANY MAY ACQUIRE OR REDEEM
CAPITAL STOCK OF THE COMPANY FROM ANY STOCKHOLDER OF THE COMPANY IN AN AGGREGATE
AMOUNT NOT TO EXCEED $2,500,000 DURING THE TERM OF THIS AGREEMENT.

 

SECTION 10.8         RESERVED.

 

SECTION 10.9         NATURE OF BUSINESS.

 

The Company shall not, and shall not permit any Subsidiary to, engage in any
business if, as a result thereof, the general nature of the business, which
would then be engaged in by the Company and its Subsidiaries taken as a whole
would be substantially changed from the general nature of the business engaged
in by the Company and its Subsidiaries on the date of the Closing.

 

SECTION 10.10       RESTRICTIONS ON GUARANTORS.

 

Other than as required pursuant to the terms of any Senior Debt Documents, the
Company shall not, and shall not permit any Guarantor to, enter into or assume
any material agreement (other than the Transaction Documents) prohibiting the
creation or assumption of any Lien upon its material properties or assets,
whether now owned or hereafter acquired.  Except as provided herein, the Company
shall not, and shall not permit any Guarantor to, directly or indirectly create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of the Company or any of
the Guarantors to:  (a) pay dividends or make any other distribution on any of
such Guarantor’s Capital Stock owned by the Company or any of its Affiliates;
(b) pay any Debt owed to any Person; (c) make loans or advances to any Person;
or (d) transfer any of its Property to any Person, except pursuant to
non-assignment provisions of licenses and leases entered into in the ordinary
course of business.

 

SECTION 10.11       LIMITATION ON ISSUANCE OF CAPITAL STOCK.

 

The Company shall not permit any Subsidiary to, at any time issue, sell, assign,
or otherwise dispose of, except to the Company, a Subsidiary of the Company, or
a newly created Wholly-Owned Subsidiary of the Company, (i) any of its Capital
Stock, (ii) any securities

 

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exchangeable for or convertible into or carrying any rights to acquire any of
its Capital Stock, or (iii) any option, warrant, or other right to acquire any
of its Capital Stock.

 

SECTION 10.12       LIMITATION ON TRANSFER OF CAPITAL STOCK.

 

The Company shall not transfer, sell, assign, grant a security interest in, or
transfer any other interest into or under any Capital Stock of any Subsidiary
owned by it or in any rights represented by such Capital Stock.

 

SECTION 10.13       JUNIOR DEBT.

 

The Company shall not permit the outstanding principal balance of the Junior
Debt to be less than $2,500,000 at any time or to have a maturity date of less
than three (3) years.

 

SECTION 10.14       SUBORDINATION OF INTERCOMPANY DEBT.

 

The Company and, by execution of the Guaranty Agreement, each Obligated Party,
agrees that the Subordinated Intercompany Indebtedness (as defined below) shall
be subordinate and junior in right of payment to, inter alia, the prior payment
in full of all obligations, indebtedness and liabilities of the Obligated
Parties to the holders of Notes under this Agreement and the Guaranty Agreement 
(the “Obligated Party Obligations”) as herein provided.

 

(A)           PAYMENT SUBORDINATION.  THE SUBORDINATED INTERCOMPANY INDEBTEDNESS
SHALL NOT BE PAYABLE, AND NO PAYMENT OF PRINCIPAL, INTEREST OR OTHER AMOUNTS ON
ACCOUNT THEREOF, AND NO PROPERTY OR GUARANTEE OF ANY NATURE TO SECURE OR PAY THE
SUBORDINATED INTERCOMPANY INDEBTEDNESS SHALL BE MADE OR GIVEN, DIRECTLY OR
INDIRECTLY BY OR ON BEHALF OF ANY OBLIGATED PARTY OR RECEIVED, ACCEPTED,
RETAINED OR APPLIED BY THE COMPANY UNLESS AND UNTIL THE OBLIGATED PARTY
OBLIGATIONS SHALL HAVE BEEN PAID IN FULL IN CASH; PROVIDED THAT PRIOR TO THE
OCCURRENCE AND CONTINUANCE OF AN EVENT OF DEFAULT, THE COMPANY SHALL HAVE THE
RIGHT TO RECEIVE PAYMENTS ON THE SUBORDINATED INTERCOMPANY INDEBTEDNESS MADE IN
THE ORDINARY COURSE OF BUSINESS.  AFTER THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT, NO PAYMENTS MAY BE MADE OR GIVEN, DIRECTLY
OR INDIRECTLY, BY OR ON BEHALF OF ANY OBLIGATED PARTY OR RECEIVED, ACCEPTED,
RETAINED OR APPLIED BY THE COMPANY UNLESS AND UNTIL THE OBLIGATED PARTY
OBLIGATIONS SHALL HAVE BEEN PAID IN FULL IN CASH.  IF ANY SUMS SHALL BE PAID TO
THE COMPANY BY ANY OBLIGATED PARTY OR ANY OTHER PERSON ON ACCOUNT OF THE
SUBORDINATED INTERCOMPANY INDEBTEDNESS WHEN SUCH PAYMENT IS NOT PERMITTED
HEREUNDER, SUCH SUMS SHALL BE HELD IN TRUST BY THE COMPANY FOR THE BENEFIT OF
HOLDERS OF THE NOTES AND THE OBLIGATED PARTIES.  THE TERM “SUBORDINATED
INTERCOMPANY INDEBTEDNESS” SHALL MEAN ALL INDEBTEDNESS, LIABILITIES, AND
OBLIGATIONS OF ANY OBLIGATED PARTY TO THE COMPANY, WHETHER SUCH INDEBTEDNESS,
LIABILITIES, AND OBLIGATIONS NOW EXIST OR ARE HEREAFTER INCURRED OR ARISE, OR
ARE DIRECT, INDIRECT, CONTINGENT, PRIMARY, SECONDARY, SEVERAL, JOINT AND
SEVERAL, OR OTHERWISE, AND IRRESPECTIVE OF WHETHER SUCH INDEBTEDNESS,
LIABILITIES, OR OBLIGATIONS ARE EVIDENCED BY A NOTE, CONTRACT, OPEN ACCOUNT, OR
OTHERWISE, AND IRRESPECTIVE OF THE PERSON OR PERSONS IN WHOSE FAVOR SUCH
INDEBTEDNESS, OBLIGATIONS, OR LIABILITIES MAY, AT THEIR INCEPTION, HAVE BEEN, OR
MAY HEREAFTER BE CREATED, OR THE MANNER IN WHICH THEY HAVE BEEN OR MAY HEREAFTER
BE ACQUIRED BY THE COMPANY.

 

(B)           LIEN SUBORDINATION; REMEDY STANDSTILL.  THE COMPANY AGREES THAT
ANY AND ALL LIENS (INCLUDING ANY JUDGMENT LIENS), UPON ANY OBLIGATED PARTY’S
ASSETS SECURING PAYMENT OF ANY

 

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SUBORDINATED INTERCOMPANY INDEBTEDNESS SHALL BE AND REMAIN INFERIOR AND
SUBORDINATE TO ANY AND ALL LIENS UPON ANY OBLIGATED PARTY’S ASSETS SECURING
PAYMENT OF THE OBLIGATED PARTY OBLIGATIONS OR ANY PART THEREOF, REGARDLESS OF
WHETHER SUCH LIENS IN FAVOR OF THE COMPANY, A HOLDER OF NOTES, ANOTHER CREDITOR
OF THE COMPANY OR AN OBLIGATED PARTY.  WITHOUT THE PRIOR WRITTEN CONSENT OF THE
REQUIRED HOLDERS, THE COMPANY SHALL NOT (1) FILE SUIT AGAINST ANY OBLIGATED
PARTY OR EXERCISE OR ENFORCE ANY OTHER CREDITOR’S RIGHT IT MAY HAVE AGAINST ANY
OBLIGATED PARTY, OR (2) FORECLOSE, REPOSSESS, SEQUESTER, OR OTHERWISE TAKE STEPS
OR INSTITUTE ANY ACTION OR PROCEEDINGS (JUDICIAL OR OTHERWISE, INCLUDING WITHOUT
LIMITATION THE COMMENCEMENT OF, OR JOINDER IN, ANY LIQUIDATION, BANKRUPTCY,
REARRANGEMENT, DEBTOR’S RELIEF OR INSOLVENCY PROCEEDING) TO ENFORCE ANY
OBLIGATIONS OF ANY OBLIGATED PARTY TO THE COMPANY OR ANY LIENS HELD BY THE
COMPANY ON ASSETS OF ANY OBLIGATED PARTY.

 

(C)           BANKRUPTCY PROCEEDINGS.  IN THE EVENT OF ANY RECEIVERSHIP,
BANKRUPTCY, REORGANIZATION, REARRANGEMENT, DEBTOR’S RELIEF, OR OTHER INSOLVENCY
PROCEEDING INVOLVING ANY OBLIGATED PARTY AS DEBTOR, HOLDERS OF NOTES SHALL HAVE
THE RIGHT TO PROVE AND VOTE ANY CLAIM UNDER THE SUBORDINATED INTERCOMPANY
INDEBTEDNESS AND TO RECEIVE DIRECTLY FROM THE RECEIVER, TRUSTEE OR OTHER COURT
CUSTODIAN ALL DIVIDENDS, DISTRIBUTIONS, AND PAYMENTS MADE IN RESPECT OF THE
SUBORDINATED INTERCOMPANY INDEBTEDNESS UNTIL THE OBLIGATED PARTY OBLIGATIONS
HAVE BEEN PAID IN FULL IN CASH.

 

ARTICLE XI

EVENTS OF DEFAULT

 

An “Event of Default” shall exist if any of the following conditions or events
shall occur and be continuing:

 

(A)           THE COMPANY DEFAULTS IN THE PAYMENT OF ANY PRINCIPAL ON ANY NOTE
WHEN THE SAME BECOMES DUE AND PAYABLE, WHETHER AT MATURITY OR AT A DATE FIXED
FOR PREPAYMENT OR BY DECLARATION OR OTHERWISE; OR

 

(B)           THE COMPANY DEFAULTS IN THE PAYMENT OF ANY INTEREST ON ANY NOTE
FOR MORE THAN FIVE BUSINESS DAYS AFTER THE SAME BECOMES DUE AND PAYABLE; OR

 

(C)           THE COMPANY DEFAULTS IN THE PERFORMANCE OF OR COMPLIANCE WITH ANY
TERM CONTAINED IN SECTIONS 7.1(D) AND 9.5 OR ARTICLE X; OR

 

(D)           THE COMPANY DEFAULTS IN THE PERFORMANCE OF OR COMPLIANCE WITH ANY
TERM CONTAINED HEREIN (OTHER THAN THOSE REFERRED TO IN PARAGRAPHS (A), (B) AND
(C) OF THIS ARTICLE XI) AND SUCH DEFAULT IS NOT REMEDIED WITHIN 30 DAYS AFTER
THE EARLIER OF (I) A RESPONSIBLE OFFICER OBTAINING ACTUAL KNOWLEDGE OF SUCH
DEFAULT AND (II) THE COMPANY RECEIVING WRITTEN NOTICE OF SUCH DEFAULT FROM ANY
HOLDER OF A NOTE (ANY SUCH WRITTEN NOTICE TO BE IDENTIFIED AS A “NOTICE OF
DEFAULT” AND TO REFER SPECIFICALLY TO THIS PARAGRAPH (D) OF ARTICLE XI); OR

 

(E)           ANY REPRESENTATION OR WARRANTY MADE IN WRITING BY OR ON BEHALF OF
THE COMPANY OR ANY OBLIGATED PARTY BY ANY OFFICER OF THE COMPANY OR ANY
OBLIGATED PARTY IN THIS AGREEMENT, IN THE GUARANTY AGREEMENT, IN ANY OTHER
AGREEMENT OR IN ANY WRITING FURNISHED IN CONNECTION WITH

 

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THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY PROVES TO HAVE BEEN FALSE OR
INCORRECT IN ANY MATERIAL RESPECT ON THE DATE AS OF WHICH MADE; OR

 

(F)            (I) THE COMPANY OR ANY SUBSIDIARY IS IN DEFAULT (AS PRINCIPAL OR
AS GUARANTOR OR OTHER SURETY) IN THE PAYMENT OF ANY PRINCIPAL OF OR PREMIUM OR
INTEREST ON ANY INDEBTEDNESS, WITH THE EXCEPTION OF THE SENIOR DEBT, THAT IS
OUTSTANDING IN AN AGGREGATE PRINCIPAL AMOUNT OF AT LEAST $1,000,000 BEYOND ANY
PERIOD OF GRACE PROVIDED WITH RESPECT THERETO, OR (II) THE COMPANY OR ANY
SUBSIDIARY IS IN DEFAULT IN THE PERFORMANCE OF OR COMPLIANCE WITH ANY TERM OF
ANY EVIDENCE OF ANY INDEBTEDNESS, WITH THE EXCEPTION OF THE SENIOR DEBT, IN AN
AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF AT LEAST $1,000,000 OR OF ANY
MORTGAGE, INDENTURE OR OTHER AGREEMENT RELATING THERETO OR ANY OTHER CONDITION
EXISTS, AND AS A CONSEQUENCE OF SUCH DEFAULT OR CONDITION SUCH INDEBTEDNESS HAS
BECOME, OR HAS BEEN DECLARED (OR ONE OR MORE PERSONS ARE ENTITLED TO DECLARE
SUCH INDEBTEDNESS TO BE), DUE AND PAYABLE BEFORE ITS STATED MATURITY OR BEFORE
ITS REGULARLY SCHEDULED DATES OF PAYMENT, OR (III) AS A CONSEQUENCE OF THE
OCCURRENCE OR CONTINUATION OF ANY EVENT OR CONDITION (OTHER THAN THE PASSAGE OF
TIME OR THE FIGHT OF THE HOLDER OF INDEBTEDNESS TO CONVERT SUCH INDEBTEDNESS
INTO EQUITY INTERESTS), (X) THE COMPANY OR ANY SUBSIDIARY HAS BECOME OBLIGATED
TO PURCHASE OR REPAY INDEBTEDNESS, WITH THE EXCEPTION OF THE SENIOR DEBT, BEFORE
ITS REGULAR MATURITY OR BEFORE ITS REGULARLY SCHEDULED DATES OF PAYMENT IN AN
AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF AT LEAST $1,000,000, OR (Y) ONE OR
MORE PERSONS HAVE THE RIGHT TO REQUIRE THE COMPANY OR ANY SUBSIDIARY SO TO
PURCHASE OR REPAY SUCH INDEBTEDNESS, WITH THE EXCEPTION OF THE SENIOR DEBT; OR

 

(G)           THE COMPANY OR ANY SUBSIDIARY (I) IS GENERALLY NOT PAYING, OR
ADMITS IN WRITING ITS INABILITY TO PAY, ITS DEBTS AS THEY BECOME DUE,
(II) FILES, OR CONSENTS BY ANSWER OR OTHERWISE TO THE FILING AGAINST IT OF, A
PETITION FOR RELIEF OR REORGANIZATION OR ARRANGEMENT OR ANY OTHER PETITION IN
BANKRUPTCY, FOR LIQUIDATION OR TO TAKE ADVANTAGE OF ANY BANKRUPTCY, INSOLVENCY,
REORGANIZATION, MORATORIUM OR OTHER SIMILAR LAW OF ANY JURISDICTION, (III) MAKES
AN ASSIGNMENT FOR THE BENEFIT OF ITS CREDITORS, (IV) CONSENTS TO THE APPOINTMENT
OF A CUSTODIAN, RECEIVER, TRUSTEE OR OTHER OFFICER WITH SIMILAR POWERS WITH
RESPECT TO IT OR WITH RESPECT TO ANY SUBSTANTIAL PART OF ITS PROPERTY, (V) IS
ADJUDICATED AS INSOLVENT OR TO BE LIQUIDATED, OR (VI) TAKES CORPORATE ACTION FOR
THE PURPOSE OF ANY OF THE FOREGOING; OR

 

(H)           A COURT OR GOVERNMENTAL AUTHORITY OF COMPETENT JURISDICTION ENTERS
AN ORDER APPOINTING, WITHOUT CONSENT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES,
A CUSTODIAN, RECEIVER, TRUSTEE OR OTHER OFFICER WITH SIMILAR POWERS WITH RESPECT
TO IT OR WITH RESPECT TO ANY SUBSTANTIAL PART OF ITS PROPERTY, OR CONSTITUTING
AN ORDER FOR RELIEF OR APPROVING A PETITION FOR RELIEF OR REORGANIZATION OR ANY
OTHER PETITION IN BANKRUPTCY OR FOR LIQUIDATION OR TO TAKE ADVANTAGE OF ANY
BANKRUPTCY OR INSOLVENCY LAW OF ANY JURISDICTION, OR ORDERING THE DISSOLUTION,
WINDING-UP OR LIQUIDATION OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, OR ANY SUCH
PETITION SHALL BE FILED AGAINST THE COMPANY OR ANY OF ITS SUBSIDIARIES AND SUCH
PETITION SHALL NOT BE DISMISSED WITHIN 60 DAYS; OR

 

(I)            A FINAL JUDGMENT OR JUDGMENTS FOR THE PAYMENT OF MONEY
AGGREGATING IN EXCESS OF $1,000,000 (EXCLUDING FOR THE PURPOSES OF SUCH
CALCULATION THE $450,000 PAID BY THE COMPANY WITH RESPECT TO THE SETTLEMENT OF
THE JUDGMENT RELATING TO THE KUDLICKI LAWSUIT) DURING ANY SINGLE FISCAL YEAR ARE
RENDERED AGAINST ONE OR MORE OF THE COMPANY AND ITS SUBSIDIARIES AND WHICH

 

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JUDGMENTS ARE NOT, WITHIN 60 DAYS AFTER ENTRY THEREOF, BONDED, DISCHARGED OR
STAYED PENDING APPEAL, OR ARE NOT DISCHARGED WITHIN 60 DAYS AFTER THE EXPIRATION
OF SUCH STAY; OR

 

(J)            IF (I) ANY PLAN SHALL FAIL TO SATISFY THE MINIMUM FUNDING
STANDARDS OF ERISA OR THE CODE FOR ANY PLAN YEAR OR PART THEREOF OR A WAIVER OF
SUCH STANDARDS OR EXTENSION OF ANY AMORTIZATION PERIOD IS SOUGHT OR GRANTED
UNDER SECTION 412 OF THE CODE, (II) A NOTICE OF INTENT TO TERMINATE ANY PLAN
SHALL HAVE BEEN OR IS REASONABLY EXPECTED TO BE FILED WITH THE PBGC OR THE PBGC
SHALL HAVE INSTITUTED PROCEEDINGS UNDER ERISA SECTION 4042 TO TERMINATE OR
APPOINT A TRUSTEE TO ADMINISTER ANY PLAN OR THE PBGC SHALL HAVE NOTIFIED THE
COMPANY OR ANY ERISA AFFILIATE THAT A PLAN MAY BECOME A SUBJECT OF ANY SUCH
PROCEEDINGS, (III) THE AGGREGATE “AMOUNT OF UNFUNDED BENEFIT LIABILITIES”
(WITHIN THE MEANING OF SECTION 4001(A)(18) OF ERISA) UNDER ALL PLANS, DETERMINED
IN ACCORDANCE WITH TITLE IV OF ERISA, SHALL EXCEED $1,000,000, (IV)THE COMPANY
OR ANY ERISA AFFILIATE SHALL HAVE INCURRED OR IS REASONABLY EXPECTED TO INCUR
ANY LIABILITY PURSUANT TO TITLE I OR IV OF ERISA OR THE PENALTY OR EXCISE TAX
PROVISIONS OF THE CODE RELATING TO EMPLOYEE BENEFIT PLANS, (V) THE COMPANY OR
ANY ERISA AFFILIATE WITHDRAWS FROM ANY MULTIEMPLOYER PLAN, OR (VI) THE COMPANY
OR ANY SUBSIDIARY ESTABLISHES OR AMENDS ANY EMPLOYEE WELFARE BENEFIT PLAN THAT
PROVIDES POST-EMPLOYMENT WELFARE BENEFITS IN A MANNER THAT WOULD INCREASE THE
LIABILITY OF THE COMPANY OR ANY SUBSIDIARY THEREUNDER; AND ANY SUCH EVENT OR
EVENTS DESCRIBED IN CLAUSES (I) THROUGH (VI) ABOVE, EITHER INDIVIDUALLY OR
TOGETHER WITH ANY OTHER SUCH EVENT OR EVENTS, COULD REASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT; OR

 

(K)           (1) DEFAULT SHALL OCCUR UNDER THE GUARANTY AGREEMENT AND SUCH
DEFAULT SHALL CONTINUE BEYOND THE PERIOD OF GRACE, IF ANY, ALLOWED WITH RESPECT
THERETO OR (2) THE GUARANTY AGREEMENT SHALL CEASE TO BE IN FULL FORCE AND EFFECT
FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT LIMITATION, A DETERMINATION BY ANY
GOVERNMENTAL AUTHORITY OR COURT THAT SUCH AGREEMENT IS INVALID, VOID OR
UNENFORCEABLE OR ANY GUARANTOR SHALL CONTEST OR DENY IN WRITING THE VALIDITY OR
ENFORCEABILITY OF THE GUARANTY AGREEMENT.

 

As used in Article XI(j), the terms “employee benefit plan” and “employee
welfare benefit plan” shall have the respective meanings assigned to such terms
in Section 3 of ERISA.

 

ARTICLE XII

REMEDIES ON DEFAULT, ETC

 

SECTION 12.1         ACCELERATION.

 

(A)           IF AN EVENT OF DEFAULT WITH RESPECT TO THE COMPANY DESCRIBED IN
PARAGRAPH (G) OR (H) OF ARTICLE XI (OTHER THAN AN EVENT OF DEFAULT DESCRIBED IN
CLAUSE (I) OF PARAGRAPH (G) OR DESCRIBED IN CLAUSE (VI) OF PARAGRAPH (G) BY
VIRTUE OF THE FACT THAT SUCH CLAUSE ENCOMPASSES CLAUSE (I) OF PARAGRAPH (G)) HAS
OCCURRED, ALL THE NOTES THEN OUTSTANDING SHALL AUTOMATICALLY BECOME IMMEDIATELY
DUE AND PAYABLE.

 

(B)           IF ANY OTHER EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, ANY
HOLDER OR HOLDERS OF MORE THAN 51% IN PRINCIPAL AMOUNT OF THE NOTES AT THE TIME
OUTSTANDING MAY AT ANY TIME AT ITS OR THEIR OPTION, BY NOTICE OR NOTICES TO THE
COMPANY, DECLARE ALL THE NOTES THEN OUTSTANDING TO BE IMMEDIATELY DUE AND
PAYABLE.

 

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(C)           IF ANY EVENT OF DEFAULT DESCRIBED IN PARAGRAPH (A) OR (B) OF
ARTICLE XI HAS OCCURRED AND IS CONTINUING, ANY HOLDER OR HOLDERS OF NOTES AT THE
TIME OUTSTANDING AFFECTED BY SUCH EVENT OF DEFAULT MAY AT ANY TIME, AT ITS OR
THEIR OPTION, BY NOTICE OR NOTICES TO THE COMPANY, DECLARE ALL THE NOTES HELD BY
IT OR THEM TO BE IMMEDIATELY DUE AND PAYABLE.

 

Upon and during the continuance of a Default or Event of Default, the Notes
shall bear interest at a default rate of 16% per annum payable monthly as set
forth in the Notes.  Notwithstanding the foregoing, upon any Notes becoming due
and payable under this Section 12.1, whether automatically or by declaration,
such Notes will forthwith mature and the entire unpaid principal, which will be
equal to the full principal amount of such Notes times the applicable Redemption
Price Percentage set forth in Section 8.1, plus all accrued and unpaid interest
thereon, shall all be immediately due and payable, in each and every case
without presentment, demand, protest or further notice, all of which are hereby
waived.  The Company acknowledges, and the parties hereto agree, that each
holder of a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for).

 

SECTION 12.2         OTHER REMEDIES.

 

If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.

 

SECTION 12.3         RESCISSION.

 

At any time after any Notes have been declared due and payable pursuant to
clause (b) or (c) of Section 12.1, the holders of not less than 51% in principal
amount of the Notes then outstanding, by written notice to the Company, may
rescind and annul any such declaration and its consequences if (a) the Company
has paid all overdue interest on the Notes, all principal on any Notes that are
due and payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal, and (to the extent permitted by applicable
law) any overdue interest in respect of the Notes, at the Default Rate, (b) all
Events of Default and Defaults, other than non-payment of amounts that have
become due solely by reason of such declaration, have been cured or have been
waived pursuant to Article XVII, and (c) no judgment or decree has been entered
for the payment of any monies due pursuant hereto or to the Notes.  No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.

 

SECTION 12.4         NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.

 

No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder’s rights, powers or remedies.  No right, power
or remedy conferred by this Agreement or by any Note or the Guaranty Agreement
upon any holder thereof shall be exclusive of any other right,

 

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power or remedy referred to herein or therein or now or hereafter available at
law, in equity, by statute or otherwise. Without limiting the obligations of the
Company under Article XV, the Company will pay to the holder of each Note on
demand such further amount as shall be sufficient to cover all costs and
expenses of such holder incurred in any enforcement or collection under this
Article XII, including, without limitation, reasonable attorneys’ fees, expenses
and disbursements.

 

ARTICLE XIII

REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES

 

SECTION 13.1   REGISTRATION OF NOTES.

 

The Company shall keep at its principal executive office a register for the
registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.

 

SECTION 13.2   TRANSFER AND EXCHANGE OF NOTES.

 

Notes shall not be transferable by you to a Competitor prior to an Event of
Default. Upon surrender of any Note at the principal executive office of the
Company for registration of a permitted transfer or exchange (and in the case of
a surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company’s expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such permitted
transferee as such holder may request and shall be substantially in the form of
Exhibit 1. Each such new Note shall be dated and bear interest from the date to
which interest shall have been paid on the surrendered Note or dated the date of
the surrendered Note if no interest shall have been paid thereon. The Company
may require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $25,000, provided that if necessary to
enable the registration of transfer by a holder of its entire holding of Notes,
one Note may be in a denomination of less than $25,000. Any transferee, by its
acceptance of a Note registered in its name (or the name of its nominee), shall
be deemed to have made the representation set forth in Section 6.2.

 

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SECTION 13.3   REPLACEMENT OF NOTES.

 

Upon receipt by the Company of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of any Note (which
evidence shall be, in the case of an Institutional Investor, notice from such
Institutional Investor of such ownership and such loss, theft, destruction or
mutilation), and

 

(A)      IN THE CASE OF LOSS, THEFT OR DESTRUCTION, OF INDEMNITY REASONABLY
SATISFACTORY TO IT (PROVIDED THAT IF THE HOLDER OF SUCH NOTE IS, OR IS A NOMINEE
FOR, YOU OR ANOTHER HOLDER OF A NOTE WITH A MINIMUM NET WORTH OF AT LEAST
$50,000,000, SUCH PERSON’S OWN UNSECURED AGREEMENT OF INDEMNITY SHALL BE DEEMED
TO BE SATISFACTORY), OR

 

(B)      IN THE CASE OF MUTILATION, UPON SURRENDER AND CANCELLATION THEREOF, THE
COMPANY AT ITS OWN EXPENSE SHALL EXECUTE AND DELIVER, IN LIEU THEREOF, A NEW
NOTE, DATED AND BEATING INTEREST FROM THE DATE TO WHICH INTEREST SHALL HAVE BEEN
PAID ON SUCH LOST, STOLEN. DESTROYED OR MUTILATED NOTE OR DATED THE DATE OF SUCH
LOST, STOLEN, DESTROYED OR MUTILATED NOTE IF NO INTEREST SHALL HAVE BEEN PAID
THEREON.

 

ARTICLE XIV

PAYMENTS ON NOTES

 

SECTION 14.1   PLACE OF PAYMENT.

 

Subject to Section 14.2, payments of principal, and interest becoming due and
payable on the Notes shall be made in Charlotte, North Carolina at the principal
office of Wachovia Bank, National Association in such jurisdiction. The Company
may at any time, by notice to each holder of a Note, change the place of payment
of the Notes so long as such place of payment shall be either the principal
office of the Company in such jurisdiction or the principal office of a bank or
trust company in such jurisdiction.

 

SECTION 14.2   HOME OFFICE PAYMENT.

 

So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.l or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
and interest by the method and at the address specified for such purpose below
your name in Schedule A, or by such other method or at such other address as you
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, you shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at its principal executive office or at
the place of payment most recently designated by the Company pursuant to Section
14.1. Prior to any sale or other disposition of any Note held by you or your
nominee you will, at your election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid thereon
or surrender such Note to the Company in exchange for a new Note or Notes
pursuant to Section 13.2. The Company will afford the benefits of this Section
14.2 to any Institutional Investor that is the direct or indirect transferee of
any Note

 

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purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.

 

ARTICLE XV

EXPENSES, ETC.

 

SECTION 15.1   TRANSACTION EXPENSES.

 

Whether or not the transactions contemplated hereby are consummated, the Company
will pay all costs and expenses (including reasonable attorneys’ fees of a
special counsel and, if reasonably required, local or other counsel) incurred by
you in connection with such transactions up to $25,000 in the aggregate, as well
as all costs and expenses reasonably incurred by you (including reasonable
attorneys’ fees of a special counsel and, if reasonably required, local or other
counsel) in connection with any amendments, waivers or consents under or in
respect of this Agreement or the Notes or the Guaranty Agreement (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement
or the Notes or the Guaranty Agreement or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement or the Notes or the Guaranty Agreement, or by reason of being a holder
of any Note, and (b) the costs and expenses, including financial advisors’ fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).

 

SECTION 15.2   SURVIVAL.

 

The obligations of the Company under this Article XV will survive the payment or
transfer of any Note, the enforcement, amendment or waiver of any provision of
this Agreement or the Notes or the Guaranty Agreement, and the termination of
this Agreement.

 

ARTICLE XVI

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT

 

All representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the Notes, the purchase or transfer by you of
any Note or portion thereof or interest therein and the payment of any Note, and
may be relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other holder of a
Note. All statements contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this Agreement. Subject to
the preceding sentence, this Agreement and the Notes embody the entire agreement
and understanding between you and the Company and supersede all prior agreements
and understandings relating to the subject matter hereof.

 

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ARTICLE XVII

AMENDMENT AND WAIVER

 

SECTION 17.1   REQUIREMENTS.

 

This Agreement and the Notes may be amended, and the observance of any term
hereof or of the Notes may be waived (either retroactively or prospectively),
with (and only with) the written consent of the Company and the Required
Holders, except that (a) no amendment or waiver of any of the provisions of 
Articles I, II, III, IV, V, VI or XXI hereof, or any defined term (as it is used
therein), will be effective as to you unless consented to by you in writing, and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Article XII relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of (ii) change the
percentage of the principal amount of the Notes the holders of which are
required to consent to any such amendment or waiver, or (iii) amend any of
Articles VIII, XI(a), XI(b), XII, XVII or XX.

 

SECTION 17.2   SOLICITATION OF HOLDERS OF NOTES.

 

(A)      SOLICITATION. THE COMPANY WILL PROVIDE EACH HOLDER OF THE NOTES
(IRRESPECTIVE OF THE AMOUNT OF NOTES THEN OWNED BY IT) WITH SUFFICIENT
INFORMATION, SUFFICIENTLY FAR IN ADVANCE OF THE DATE A DECISION IS REQUIRED, TO
ENABLE SUCH HOLDER TO MAKE AN INFORMED AND CONSIDERED DECISION WITH RESPECT TO
ANY PROPOSED AMENDMENT, WAIVER OR CONSENT IN RESPECT OF ANY OF THE PROVISIONS
HEREOF OR OF THE NOTES. THE COMPANY WILL DELIVER EXECUTED OR TRUE AND CORRECT
COPIES OF EACH AMENDMENT, WAIVER OR CONSENT EFFECTED PURSUANT TO THE PROVISIONS
OF THIS ARTICLE XVII TO EACH HOLDER OF OUTSTANDING NOTES PROMPTLY FOLLOWING THE
DATE ON WHICH IT IS EXECUTED AND DELIVERED BY, OR RECEIVES THE CONSENT OR
APPROVAL OF, THE REQUISITE HOLDERS OF NOTES.

 

(B)      PAYMENT. THE COMPANY WILL NOT DIRECTLY OR INDIRECTLY PAY OR CAUSE TO BE
PAID ANY REMUNERATION, WHETHER BY WAY OF SUPPLEMENTAL OR ADDITIONAL INTEREST,
FEE OR OTHERWISE, OR GRANT ANY SECURITY, TO ANY HOLDER OF NOTES AS CONSIDERATION
FOR OR AS AN INDUCEMENT TO THE ENTERING INTO BY ANY HOLDER OF NOTES OR ANY
WAIVER OR AMENDMENT OF ANY OF THE TERMS AND PROVISIONS HEREOF UNLESS SUCH
REMUNERATION IS CONCURRENTLY PAID, OR SECURITY IS CONCURRENTLY GRANTED, ON THE
SAME TERMS, RATABLY TO EACH HOLDER OF NOTES THEN OUTSTANDING EVEN IF SUCH HOLDER
DID NOT CONSENT TO SUCH WAIVER OR AMENDMENT.

 

SECTION 17.3   BINDING EFFECT, ETC.

 

Any amendment or waiver consented to as provided in this Article XVII applies
equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has
been marked to indicate such amendment or waiver. No such amendment or waiver
will extend to or affect any obligation, covenant, agreement, Default or Event
of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
“this Agreement” and

 

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references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.

 

SECTION 17.4   NOTES HELD BY COMPANY, ETC.

 

Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.

 

ARTICLE XVIII

NOTICES

 

All notices and communications provided for hereunder shall be in writing and
sent (a) by telecopy if the sender on the same day sends a confirming copy of
such notice by a recognized overnight delivery service (charges prepaid), or (b)
by registered or certified mail with return receipt requested (postage prepaid),
or (c) by a recognized overnight delivery service (with charges prepaid). Any
such notice must be sent:

 

(A)      IF TO YOU OR YOUR NOMINEE, TO YOU OR IT AT THE ADDRESS SPECIFIED FOR
SUCH COMMUNICATIONS IN SCHEDULE A, OR AT SUCH OTHER ADDRESS AS YOU OR IT SHALL
HAVE SPECIFIED TO THE COMPANY IN WRITING,

 

(B)      IF TO ANY OTHER HOLDER OF ANY NOTE, TO SUCH HOLDER AT SUCH ADDRESS AS
SUCH OTHER HOLDER SHALL HAVE SPECIFIED TO THE COMPANY IN WRITING, OR

 

(C)      IF TO THE COMPANY, TO THE COMPANY AT ITS ADDRESS SET FORTH AT THE
BEGINNING HEREOF TO THE ATTENTION OF BENNIE H. DUCK, EXECUTIVE VICE PRESIDENT,OR
AT SUCH OTHER ADDRESS AS THE COMPANY SHALL HAVE SPECIFIED TO THE HOLDER OF EACH
NOTE IN WRITING.

 

Notices under this Article XVIII will be deemed given only when actually
received.

 

ARTICLE XIX

REPRODUCTION OF DOCUMENTS

 

This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in

 

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evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Article XIX shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.

 

ARTICLE XX

CONFIDENTIAL INFORMATION

 

For the purposes of this Article XX, “Confidential Information” means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i)your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Article XX, (iii) any other holder of any Note, (iv) any Institutional Investor
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Article
XX), (v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Article XX), (vi) pursuant to
the specific request of any federal or state regulatory authority having
jurisdiction over you, (vii) the National Association of Insurance Commissioners
or any similar organization, or any nationally recognized rating agency that
requires access to information about your investment portfolio or (viii) any
other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation or order
applicable to you, (x) in response to any subpoena or other legal process, (y)
in connection with any litigation to which you are a party or (z) if an Event of
Default has occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of a Note, will be
deemed to have agreed to be bound by and to be entitled to the benefits of this
Article XX as though it were a party to this Agreement. On reasonable request by
the Company in connection with the delivery to any holder of a Note of
information required to be delivered to such holder

 

35

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under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Article XX.

 

ARTICLE XXI

SUBSTITUTION OF PURCHASER

 

You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate’s agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Article XI. Upon receipt
of such notice, wherever the word “you” is used in this Agreement (other than in
this Article XXI), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word “you” is used in this Agreement (other than in this Article
XXI), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.

 

ARTICLE XXII

MISCELLANEOUS

 

SECTION 22.1   SUCCESSORS AND ASSIGNS.

 

All covenants and other agreements contained in this Agreement by or on behalf
of any of the parties hereto bind and inure to the benefit of their respective
successors and assigns (including, without limitation, any subsequent holder of
a Note) whether so expressed or not.

 

SECTION 22.2   PAYMENTS DUE ON NON-BUSINESS DAYS.

 

Anything in this Agreement or the Notes to the contrary notwithstanding, any
payment of principal or interest on any Note that is due on a date other than a
Business Day shall be made on the next succeeding Business Day without including
the additional days elapsed in the computation of the interest payable on such
next succeeding Business Day.

 

SECTION 22.3   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 (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

 

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SECTION 22.4   CONSTRUCTION.

 

Each covenant contained herein shall be construed (absent express provision to
the contrary) as being independent of each other covenant contained herein, so
that compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other covenant. Where any
provision herein refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such Person.

 

SECTION 22.5   COUNTERPARTS.

 

This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one instrument.
Each counterpart may consist of a number of copies hereof, each signed by less
than all, but together signed by all, of the parties hereto.

 

SECTION 22.6   GOVERNING LAW.

 

This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York
without reference to its conflict of laws provisions (other than Section 5-1401
of New York General Obligations Law).

 

ARTICLE XXIII

SUBORDINATION

 

SECTION 23.1   AGREEMENT TO SUBORDINATE.

 

The Company and, by execution of the Guaranty Agreement, each Obligated Party,
and each holder of the Notes, by acceptance of a Note, covenant and agree that
the Senior Subordinated Debt shall, to the extent and in the manner set forth
herein, be subordinated in right of payment to the prior payment by the Company
and the Guarantors of the Senior Debt, whether now outstanding or hereafter
created, incurred, assumed or guaranteed.

 

SECTION 23.2   GENERAL SUBORDINATION TO SENIOR DEBT.

 

Until the Senior Debt is repaid in full in cash or cash equivalents and all
commitments to extend Senior Debt have been terminated, no payment or
distribution of assets of the Company or any other Obligated Party of any kind
or character shall be made by the Company for or on account of the Senior
Subordinated Debt or any principal, interest, fees or judgment related thereto,
or on account of the purchase or redemption or other acquisition of Senior
Subordinated Debt, other than payment of interest on the Notes as described
therein.

 

SECTION 23.3   AMENDMENTS AND EXCHANGES OF SUBORDINATED DEBT.

 

Without the prior written consent of the Requisite Senior Debtholders, but
without limiting the obligations of the Company and the other Obligated Parties
to the Senior Debtholders with regard thereto under the Senior Debt Documents,
the Company, the Obligated

 

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Parties and the holders of the Notes  shall not amend, supplement or otherwise
modify the terms of the Senior Subordinated Debt if the effect of such
amendment, supplement or other modification is to  (a) change (to earlier dates)
any dates upon which payments of principal or interest are due on such Senior
Subordinated Debt, (b) cause any Liens to be taken in any property of the
Company other than as expressly set forth herein, (c) change any affirmative or
negative covenant in any significant respect, (d) change the redemption or
prepayment provisions thereof or change any of the subordination provisions
thereof (including, without limitation, subordinating the Senior Subordinated
Debt to any other debt) or (e) increase materially the obligations of the
obligor thereunder or to confer any additional rights on the holders of the
Notes (or a trustee or other representative on their behalf) which would be
adverse to any Senior Debtholder. Notwithstanding any other term or provision of
this Agreement (including Section 17.1), no amendment, modification, termination
or waiver of any material term or provision of this Article XXIII, or of any
definitions used herein, or of the form of any Note issued hereunder, shall be
effective without the express written consent of the Requisite Senior
Debtholders.

 

SECTION 23.4   PAYMENTS RECEIVED IN CONTRAVENTION OF SUBORDINATION PROVISIONS.

 

If any holder of a Note receives any payment or distribution of assets in
violation of this Article XXIII, such holder shall receive such payment or
distribution of assets in trust for the Senior Debtholders’ benefit and shall
forthwith remit such payment or distribution of assets, as the case may be, to
the Senior Debtholders in the form in which it was received, together with such
endorsements or documents as may be necessary to effectively negotiate or
transfer the same (but without recourse and without representation or warranty).

 

SECTION 23.5   SUBROGATION.

 

After all Senior Debt of the Company has been paid in full in cash or cash
equivalents and until the Notes are paid in full in cash or Cash Equivalents,
the holders of the Notes shall be subrogated to any rights of the Senior
Debtholders to receive payments or distributions of assets applicable to such
Senior Debt to the extent that payments or distributions otherwise payable to
the holders of the Notes have been applied to the payment of such Senior Debt. A
distribution made under this Article XXIII to the Senior Debtholders that
otherwise would have been made to the holders of the Notes is not, as between
the Company and the holders of the Notes, a payment by the Company on its Senior
Debt.

 

SECTION 23.6   RELATIVE RIGHTS.

 

This Article XXIII defines the relative rights of holders of the Notes and
Senior Debtholders and this Article XXIII shall constitute a continuing offer to
all persons who become holders of, or continue to hold, Senior Debt. Nothing in
this Article XXIII or elsewhere in this Agreement or any Note is intended to or
shall:

 

(A)       IMPAIR, AS BETWEEN THE COMPANY, THE OTHER OBLIGATED PARTIES AND THE
HOLDERS OF THE NOTES, THE COMPANY’S OBLIGATIONS, WHICH ARE ABSOLUTE AND
UNCONDITIONAL, TO PAY PRINCIPAL OF, AND PREMIUM, IF ANY, AND INTEREST ON, THE
NOTES IN ACCORDANCE WITH THEIR TERMS;

 

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(B)       AFFECT THE RELATIVE RIGHTS OF THE HOLDERS OF THE NOTES AND THE
CREDITORS OF THE COMPANY AND THE OTHER OBLIGATED PARTIES OTHER THAN THE RIGHTS
OF THE HOLDERS OF THE NOTES IN RELATION TO THE SENIOR DEBTHOLDERS; OR

 

(C)       PREVENT THE HOLDERS OF THE NOTES FROM ACCELERATING THE SENIOR
SUBORDINATED DEBT IN ACCORDANCE WITH SECTION 12.1 AND EXERCISING THEIR AVAILABLE
REMEDIES UPON A DEFAULT OR EVENT OF DEFAULT, AFTER THE SENIOR DEBT HAS BEEN PAID
IN FULL AND THE SENIOR DEBT DOCUMENTS HAVE BEEN TERMINATED.

 

The failure to make a payment on account of principal of, or interest on, the
Notes by reason of any provision of this Article XXIII shall not be construed as
preventing the occurrence of an Event of Default under Article XI(a).

 

SECTION 23.7   RELIANCE ON JUDICIAL ORDER OR DECREE OR SENIOR DEBTHOLDER
CERTIFICATE.

 

The holders of the Notes shall be entitled to rely upon any order or decree of
any court of competent jurisdiction or any certificate of any Senior Debtholder
ascertaining any amount to be paid or distributed to such Senior Debtholders and
all other facts pertinent to such payment or distribution or to this Article
XXIII, provided that, in the case of any such order or decree, such court has
been fully apprised of the provisions of, or the order or decree makes reference
to, the provisions of this Article XXIII.

 

SECTION 23.8   PROOF OF CLAIM.

 

In the event that, while any Senior Debt is outstanding, any bankruptcy or
insolvency proceeding is commenced by or against the Company, any Obligated
Party or any property of the Company or any Obligated Party and the holders of
the Notes have not filed appropriate proofs of claim as of the tenth business
day preceding the bar date therefor, the Senior Debtholders will be irrevocably
authorized and empowered (in its own name or otherwise), but shall have no
obligation, to file appropriate proofs of claim for the exercise or enforcement
of any of the rights or interests of the holders of the Notes with respect to
the Senior Subordinated Debt in such proceeding. Notwithstanding the foregoing,
no Senior Debtholder shall have any right whatsoever to vote any claim that any
holder of a Note may have in such proceeding to accept or reject any plan of
partial or complete liquidation, reorganization, arrangement, composition or
extension.

 

[SIGNATURE PAGE FOLLOWS]

 

39

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If you are in agreement with the foregoing, please sign the form of agreement on
the accompanying counterpart of this Agreement and return it to the Company,
whereupon the foregoing shall become a binding agreement between you and the
Company.

 

 

 

Very truly yours,

 

 

 

 

 

FIRST INVESTORS FINANCIAL SERVICES,
GROUP, INC., a Texas corporation

 

 

 

 

 

By:

 

 

 

 

Bennie H. Duck

 

 

 

Executive Vice President

 

The foregoing is hereby

agreed to as of the date

thereof.

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

a national banking association

 

By:

 

 

Name:

 

 

Title:

 

 

 

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SCHEDULE A

 

INFORMATION RELATING TO PURCHASERS

 

Principal Amount of

 

Name and Address of Purchaser              Notes to be Purchased

 

Wachovia Bank, National
Association                                  $5,000,000.00
301 S. College Street
Charlotte, North Carolina  28288-0610

 

(1)           All payments by wire transfer

of immediately available funds to:

 

Wachovia Bank, National Association

ABA 053 000219

Acct# 1459160104880

Ref: First Investors Subordinated Debt

Attn: Weatherly McGowan

 

with sufficient information to

identify the source and application

of such funds.

 

(2)           All notices of payments and

written confirmations of such wire

transfers:

 

Weatherly McGowan

201 S. College St., NC0820

Charlotte, NC

P: (704)715-4125

F: (704)715-1823

 

[CONTINUES ON FOLLOWING PAGE]

 

A-1

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(3)           All other communications:

 

Wachovia Bank, National Association

Attn: Curt Sidden

301 S. College St., NC0610

Charlotte, NC 28288-0610

P: (704)715-6030

F: (704)383-9106

 

A-2

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SCHEDULE B

 

DEFINED TERMS

 

As used herein, the following terms have the respective meanings set forth below
or set forth in the Section hereof following such term:

 

“Adjusted Net Income” means, for any period and any Person, such Person’s
consolidated net income (or loss) determined in accordance with GAAP, but
excluding: (a) the income of any other Person (other than its Subsidiaries) in
which such Person or any of its Subsidiaries has an ownership interest, unless
received by such Person or its Subsidiary in a cash distribution; (b) any
after-tax gains or losses attributable to an asset disposition other than in the
ordinary course of business; and (c) to the extent not included in clause (a)
and clause (b) above, any after-tax extraordinary, non-cash or nonrecurring
gains or losses.

 

“Affiliate” means, at any time, and with respect to any Person, (a) any other
Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, “Control” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an “Affiliate”
is a reference to an Affiliate of the Company.

 

“Anti-Terrorism Order” shall mean Executive Order No. 13,224 66 Fed Reg. 49,079
(2001) issued by the President of the United States of America (Executive Order
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism).

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which
commercial banks in Charlotte, North Carolina, New York, New York or Houston,
Texas are required or authorized to be closed.

 

“Capital Lease” means, at any time, a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

 

“Capital Lease Obligations” shall mean, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person according to GAAP. For purposes of this Agreement, the
amount of such Capital Lease Obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.

 

B-1

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“Capital Stock” shall mean corporate stock and any and all shares, partnership
interests, membership interests, equity interests, rights, securities, or other
equivalent evidences of ownership, or any options, warrants, voting trust
certificates, or other instruments evidencing an ownership interest or a right
to acquire an ownership interest in a Person (however designated) issued by any
entity (whether a corporation, partnership, limited liability company, limited
partnership, or other type of entity).

 

“Cash Equivalents” shall mean (a) direct obligations of the United States of
America and agencies thereof and (b) obligations fully guaranteed by the United
States of America, provided that, in each case, such obligations mature within
90 days from the date of acquisition thereof.

 

“Closing” is defined in Section 3.1.

 

“Change in Control” shall mean the occurrence of one or more of the following
events: (a) any sale, lease, exchange or other transfer (in a single transaction
or a series of related transactions) of all or substantially all of the assets
of the Company to any Person or “group” (within the meaning of the Securities
Exchange Act of 1934 and the rules of the Securities and Exchange Commission
thereunder in effect on the date hereof), (b) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or “group”
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof)
of 50.1% or more of the outstanding shares of the voting stock of the Company;
or (c) occupation of a majority of the seats (other than vacant seats) on the
board of directors of the Company by Persons who were neither (i) nominated by
the current board of directors or (ii) appointed by directors so nominated.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.

 

“Company” means First Investors Financial Services Group, Inc., a Texas
corporation.

 

“Competitor”  means a Person engaged primarily in the business of retail auto
finance, provided that any of such Person’s Affiliates shall not be deemed a
Competitor hereunder if such Affiliate is not primarily engaged , directly or
indirectly, in the business of retail auto finance.

 

“Confidential Information” is defined in Article XX.

 

“Contingent Obligations” shall mean, with respect to any Person, any obligation
or arrangement of such Person to guarantee or intended to guarantee any Debt,
leases, dividends or other payment obligations (“primary obligations”) of any
other Person (the “primary obligor”) in any manner, whether directly or
indirectly, including, without limitation, (a) the direct or indirect guarantee,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of a primary obligor, (b) the obligation to make
take-or-pay or similar payments, if required, regardless of nonperformance by
any other party or parties to an agreement or (c) any obligation of such 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 (A) for the purchase or payment of any such primary obligation or
(B) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the

 

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primary obligor, (iii) to purchase property, assets, 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 holder of such primary
obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made (or, if less, the maximum amount of such primary obligation for which
such Person may be liable pursuant to the terms of the instrument evidencing
such Contingent Obligation) or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder), as determined by such Person in good faith.

 

“Debt” shall mean, as to any Person at any time (without duplication): (a) all
obligations of such Person for borrowed money; (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments; (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable of such Person arising in the ordinary
course of business that are not past due by more than ninety (90) days or that
are being contested in good faith by appropriate proceedings diligently pursued
and for which adequate reserves have been established to the reasonable
satisfaction of the Required Holders; (d) all Capital Lease Obligations of such
Person; (e) all Contingent Obligations of such Person; (f) all obligations
secured by a Lien existing on property owned by such Person, whether or not the
obligations secured thereby have been assumed by such Person or are non recourse
to the credit of such Person; provided, however, that the amount of such Debt of
any Person described in this clause (f) shall, for purposes of this Agreement,
be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such
Debt or (ii) the fair market value of the property or asset encumbered, as
determined by the Required Holders in their reasonable discretion; (g) all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers’ acceptances, surety or other bonds, and
similar instruments; (h) all liabilities of such Person in respect of unfunded
vested benefits under any Plan (excluding obligations to deliver stock in
respect of stock options or stock ownership plans); and (i) all vested
obligations of such Person for the payment of money under any noncompete,
consulting, or similar arrangements providing for the deferred payment of the
purchase price for an acquisition consummated prior to the date hereof to the
extent that any such obligations are, according to GAAP, reflected as a
capitalized liability on a balance sheet of such Person.

 

“Default” means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.

 

“Default Rate” means that rate of interest that is the greater of (i) 16% or
(ii) 3% over the rate of interest publicly announced by Wachovia Bank, National
Association in Charlotte, North Carolina as its “base” or “prime” rate.

 

 “EBITDA” shall mean for any period and any Person, the total of the following
calculated without duplication for such Person on a consolidated basis for such
period: (a) Adjusted Net Income; plus (b) any provision for (or less any benefit
from) income or franchise taxes deducted in determining Adjusted Net Income;
plus (c) Interest Expense deducted in determining Adjusted Net Income; plus (d)
amortization and depreciation expense deducted in determining

 

B-3

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Adjusted Net Income; plus (e) other noncash charges deducted in determining
Adjusted Net Income and not already deducted in accordance with clause (d) above
or clause (b) and clause (c) of the definition of Adjusted Net Income; minus (f)
noncash credits included in determining consolidated Adjusted Net Income and not
already excluded in accordance with the definition of Adjusted Net Income.

 

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) that
is treated as a single employer together with the Company under section 414 of
the Code.

 

“Event of Default” is defined in Article XI.

 

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

 

“Fee Letter” means the letter dated September 12, 2007, between the Company and
you.

 

“FIARC” means First Investors Auto Receivables Corp., a Delaware corporation.

 

“FIARC Purchase Agreement” means that certain Purchase Agreement, dated as of
October 22, 1996, as amended, between the Company and FIARC, as the same may
hereafter be amended, restated, modified, renewed or extended from time to time

 

“FIRC Agreement” means the Amended and Restated Purchase Agreement, dated as of
October 30, 1996, between the Company and FIRC, as the same has been and may
hereafter be amended, restated, modified, renewed or extended from time to time.

 

“FIRF” means First Investors Residual Funding LP, a Delaware limited
partnership.

 

“FIRF Agreement” means the Note Purchase Agreement, dated as of December 6,
2001, between FIRF, the note investors identified therein, Variable Funding
Capital Corporation, First Union Securities, Inc., as deal agent, and First
Union National Bank, as liquidity agent, as the same has been and may hereafter
be amended, restated, modified, renewed or extended from time to time.

 

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States of America.

 

“Governmental Authority” means

 

B-4

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(a)      the government of

 

(i)       the United States of America or any State or other political
subdivision thereof, or

 

(ii)      any jurisdiction in which the Company or any Subsidiary conducts all
or any part of its business, or which asserts jurisdiction over any properties
of the Company or any Subsidiary, or

 

(b)      any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.

 

“Guarantor” is defined in Section 2.2.

 

“Guaranty Agreement” is defined in Section 2.2.

 

“Hazardous Material” means any and all pollutants, toxic or hazardous wastes or
any other substances that might pose a hazard to health or safety, the removal
of which may be required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage, or filtration of which is or
shall be restricted, prohibited or penalized by any applicable law (including,
without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).

 

“holder” means, with respect to any Note, the Person in whose name such Note is
registered in the register maintained by the Company pursuant to Section 13.1.

 

“Institutional Investor” means (a) any original purchaser of a Note, (b) any
holder of a Note holding more than 10% of the aggregate principal amount of the
Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.

 

“Insurance Subsidiary” means First Investors Insurance Company, an insurance
company organized under the laws of the State of Vermont.

 

“Interest Expense” shall mean for any period and for any Person, the sum of (a)
interest expense of such Person calculated without duplication on a consolidated
basis for such period in accordance with GAAP, plus (b) expenses paid under
Swaps during such period, minus (c) payments received under Swaps during such
period.

 

“Junior Debt” means that certain promissory note issued to Walter A. Stockard
L.P. in the original principal amount of $2,500,000, dated December 6, 2004
including all amendments and extensions thereto.

 

“Lien” means, with respect to any Person, any mortgage, lien, pledge, charge,
security interest or other encumbrance, or any interest or title of any vendor,
lessor, lender or other secured party to or of such Person under any conditional
sale or other title retention agreement or

 

B-5

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Capital Lease, upon or with respect to any property or asset of such Person
(including in the case of stock, stockholder agreements, voting trust agreements
and all similar arrangements).

 

“Managed Assets” means “Receivables Held for Investment” as determined
historically for inclusion under such item in the consolidated balance sheet of
the Company provided that such term shall: (i) not be adjusted for any changes
in GAAP; and (ii) include Receivables of the Company and its Subsidiaries that
have been included in an off-balance sheet Securitization program created by the
Company or such Subsidiaries after the Closing.

 

“Material” means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company and its
Subsidiaries taken as a whole.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Company
and its Subsidiaries taken as a whole, or (b) the ability of the Company to
perform its obligations under this Agreement and the Notes, or (c) the validity
or enforceability of this Agreement or the Notes.

 

“Memorandum” is defined in Section 5.3.

 

“Moody’s” shall mean Moody’s Investors Service, Inc., and, if such corporation
shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, “Moody’s” shall be deemed to refer to any other
nationally recognized securities rating agency designated by you.

 

“Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term
is defined in section 4001(a)(3) of ERISA).

 

“Net Proceeds” means (i) in connection with any disposition of assets of the
Company or any Subsidiary (or the assets of any direct or indirect Subsidiary of
the Company or any Subsidiary), the cash proceeds received by such the Company
or Subsidiary from such disposition (including, without limitation, payments
under notes or other debt securities received in connection with any such
disposition, but only as and when received) net of (a) the costs of such
disposition (including reasonable, out-of-pocket professional fees and expenses,
investment banking fees, financial advisory fees, taxes, notarial fees, survey
costs, title insurance premiums, required escrow deposits, and purchase price
adjustments and other customary fees and expenses, in each case attributable to
and actually paid in connection with such disposition), and (b) amounts applied
to repayment of Debt secured by a lien, security interest, claim or encumbrance
on the asset or property disposed and (ii) in connection with issuance of any
equity Securities, the cash proceeds received from such issuance, net of all
costs of such issuance (including, without limitation, reasonable, out-of-pocket
professional fees and expenses, notarial fees, underwriting discounts and
commissions, and other customary fees and expenses) actually paid.

 

“Notes” is defined in Article I.

 

“Obligated Parties” means any Person (other than the Company) who is or becomes
a party to any agreement that guarantees or secures payment and performance of
this Agreement or the Notes or any part thereof.

 

B-6

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“Officer’s Certificate” means a certificate of a Senior Financial Officer or of
any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.

 

“Patriot Act” shall mean Public Law 107-56 of the United States of America,
United and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of 2001.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA or any successor thereto.

 

“Permitted Lien” is defined in Section  10.3.

 

“Person” means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.

 

“PIK Closing” is defined in Section 3.2.

 

“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA)
that is or, within the preceding five years, has been established or maintained,
or to which contributions are or, within the preceding five years, have been
made or required to be made, by the Company or any ERISA Affiliate or with
respect to which the Company or any ERISA Affiliate may have any liability.

 

“Preferred Stock” means any class of capital stock of a corporation that is
preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.

 

“property” or “properties” means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or inchoate.

 

“QPAM Exemption” means Prohibited Transaction Class Exemption 84-14 issued by
the United States Department of Labor.

 

“Receivables” shall mean at any date of determination thereof, each and every
present and future right to payment under any retail installment sales contract
or installment note and related security agreement, arising from the sale of a
motor vehicle or the refinancing thereof.

 

“Rental Expense” shall mean for any period and for any Person, the rental or
lease expense of such Person under operating leases calculated without
duplication on a consolidated basis for such period as determined in accordance
with GAAP.

 

“Required Holders” means, at any time, the holders of at least 51% in principal
amount of the Notes at the time outstanding (exclusive of Notes then owned by
the Company or any of its Affiliates).

 

“Requisite Senior Debtholders” means, with respect to any action which may be
taken by the Senior Debtholders in connection with any term of this Agreement,
the Senior Debtholder or

 

B-7

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Senior Debtholders necessary to approve or consent to such action pursuant to
the terms of the Senior Debt Documents.

 

“Responsible Officer” means any Senior Financial Officer and any other officer
of the Company with responsibility for the administration of the relevant
portion of this agreement.

 

“S&P” means Standard & Poor’s, a division of McGraw-Hill, Inc., a corporation
organized and existing under the laws of the State of New York, its successors
and assigns, and, if such corporation shall be dissolved or liquidated or shall
no longer perform the functions of a securities rating agency, “S&P” shall be
deemed to refer to any other nationally recognized securities rating agency
designated by you.

 

“Securities Act” means the Securities Act of 1933, as amended from time to time.

 

“Securitization” shall mean the Receivables warehouse line provided by the FIRC
Agreement, the commercial paper facility provided by Variable Funding Capital
Company to FIARC, the residual funding facility provided by the FIRF Agreement,
and any securitization occurring after the Closing of the Company’s or any of
its Affiliates’ Receivables through the issuance of asset-backed securities
(including First Investors Auto Owner Trust 2005-A and First Investors Auto
Owner Trust 2006-A).

 

“Securitization Subsidiary” shall mean a Subsidiary that is the issuer in (or
has been formed for the sole purpose of engaging in) a Securitization.

 

“Senior Debt” means (i) any Secured Debt of the Company in an aggregate
principal amount not in excess of $1,000,000 at any time outstanding which by
its express terms states that it is “Senior” to the Notes, and (ii) Debt of the
Company approved by each holder of the Notes, in such holder’s sole and absolute
discretion, as Debt to which the Notes shall be subordinated in accordance with
the terms of this Agreement. Senior Debt includes all principal, interest, fees,
expenses, attorneys’ fees and any other sum chargeable to the Company under the
Senior Debt Documents, together with, subject to the last sentence hereof, (a)
all complete or partial refinancings of the Senior Debt, (b) any amendments,
modifications, renewals or extensions of any of the foregoing and (c) any
interest accruing on the foregoing after the commencement of any bankruptcy,
insolvency or similar proceeding, without regard to whether or not such interest
accrues in any such proceeding or is an allowed claim in any such proceeding.
Senior Debt shall be considered to be outstanding whenever any loan commitment
under any of the Senior Debt Documents is outstanding.

 

“Senior Debt Documents” means all agreements, instruments and documents that
govern, evidence or secure the Senior Debt and shall include all agreements,
instruments and documents that govern, evidence or secure any amendment,
modification, renewal or extension of any of the foregoing.

 

“Senior Debtholder” means a holder of Senior Debt.

 

“Senior Financial Officer” means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.

 

B-8

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“Senior Subordinated Debt” means all debts, liabilities and obligations, for the
performance of covenants, tasks or duties or for the payment of monetary amounts
(whether or not such performance is then required or contingent, or amounts are
liquidated or determinable) owing by the Company or its subsidiaries to the
purchaser hereunder under this Agreement and the Notes, and all covenants and
duties regarding such amounts, of any kind or nature, present or future, whether
or not evidenced by any note, agreement or other instrument, arising under this
Agreement and the Notes. Senior Subordinated Debt includes all principal,
interest, fees, expenses, attorneys’ fees, indemnification and any other sum
chargeable to the Company under this Agreement and the Notes, together with,
subject to the last sentence hereof, (a) any amendments, modifications, renewals
or extensions of any of the foregoing and (b) any interest accruing on the
foregoing after the commencement of any bankruptcy, insolvency or similar
proceeding, without regard to whether or not such interest accrues in any such
proceeding or is an allowed claim in any such proceeding.

 

“Shareholder’s Equity” means, on any date with respect to (a) the Company, an
amount equal to the Total Assets less the Total Debt and (b) any Person other
than the Company such Person’s shareholder’s equity determined in accordance
with GAAP, consistently applied.

 

“Subordinated Debt” means, on any date, the aggregate principal amount of any
outstanding non-recourse, unsecured subordinated debt owing by the Company
(including, but not limited to, any shareholder’s loans) that matures more than
eighteen (18) months after such date, but excluding the Notes.

 

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

 

“Swaps” means, with respect to any Person, payment obligations with respect to
interest rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency. For the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof as of the end
of the then most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal quarter, and
in making such determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.

 

“Total Assets” means, on any date, an amount equal to the sum of (i) the
aggregate amount of assets of the Company on such date, determined in accordance
with GAAP and (ii) to

 

B-9

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the extent not included in clause (i), the aggregate amount of Subordinated Debt
of the Company on such date.

 

“Total Debt” means, with respect to the Company on any date, an amount equal to
the sum of (i) the aggregate amount of liabilities of the Company on such date,
determined in accordance with GAAP, less (ii) the aggregate amount of
Subordinated Debt of the Company on such date.

 

 “Wholly-Owned Subsidiary” means, at any time, any Subsidiary one hundred
percent (100%) of all of the equity interests (except directors’ qualifying
shares) and voting interests of which are owned by any one or more of the
Company and the Company’s other Wholly-Owned Subsidiaries at such time.

 

B-10

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EXHIBIT 1

 

FORM OF SENIOR SUBORDINATED NOTE

 

FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.

 

12.75% SENIOR SUBORDINATED NOTE DUE SEPTEMBER 12, 2017

 

No. [      ]

 

[Date]

$[           ]

 

PPN [             ]

 

FOR VALUE RECEIVED, the undersigned, FIRST INVESTORS FINANCIAL SERVICES GROUP,
INC. (herein called the “Company”), a corporation organized and existing under
the laws of the State of Texas, hereby promises to pay to
[                    ], or registered assigns, the principal sum of
[                           ] DOLLARS on                          , 2017, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 12.75% per annum from the date
hereof, payable monthly in arrears, with the first installment being payable on
the first (1st ) day of October, 2007, and subsequent installments being payable
on the first (1st) day of each succeeding month, until the principal hereof
shall have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal and any overdue
payment of interest, payable monthly as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to 16.00%.

 

Payments of principal of, interest on this Note are to be made in lawful money
of the United States of America at [                       ] or at such other
place as the Company shall have designated by written notice to the holder of
this Note as provided in the Note Purchase Agreements referred to below.

 

This Note is one of a series of Senior Subordinated Notes (herein called the
“Notes”) issued pursuant to separate Note Purchase Agreements, dated as of
                     , 2007 (as from time to time amended, the “Note Purchase
Agreements”), between the Company and the respective purchasers named therein
and is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements, (ii) to have
made the representation set forth in Section 6.2 of the Note Purchase
Agreements, and (iii) to abide by the transfer restrictions set forth in Section
13.2 of the Note Purchase Agreements.

 

This Note is a registered Note and, as provided in the Note Purchase Agreements,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.

 

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[The Company will make required prepayments of principal on the dates and in the
amounts specified in the Note Purchase Agreements.] [This Note is [also] subject
to [optional] prepayment, in whole or from time to time in part, at the times
and on the terms specified in the Note Purchase Agreements, but not otherwise.]

 

If an Event of Default, as defined in the Note Purchase Agreements, occurs and
is continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner, at the price and with the effect provided in the
Note Purchase Agreements.

 

[Add governing law clause conforming to that of the Note Purchase Agreements]

 

 

 

FIRST INVESTORS SERVICES GROUP, INC., a

 

 

Texas corporation

 

 

 

 

 

By:

 

 

 

            [Name]

 

 

            [Title]

 

1-2

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EXHIBIT 2

 

FORM OF SENIOR SUBORDINATED PAID-IN-KIND NOTE

 

FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.

 

14.75% SENIOR SUBORDINATED PAID-IN-KIND NOTE DUE SEPTEMBER 12, 2017

 

No. [      ]

 

[Date]

$[           ]

 

PPN [             ]

 

FOR VALUE RECEIVED, the undersigned, FIRST INVESTORS FINANCIAL SERVICES GROUP,
INC. (herein called the “Company”), a corporation organized and existing under
the laws of the State of Texas, hereby promises to pay to
[                    ], or registered assigns, the principal sum of
[                           ] DOLLARS on                       , 2017, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 14.75% per annum from the date
hereof, payable monthly in arrears, with the first installment being payable on
the first (1st ) day of                   , 200  , and subsequent installments
being payable on the first (1st) day of each succeeding month, until the
principal hereof shall have become due and payable, and (b) to the extent
permitted by law on any overdue payment (including any overdue prepayment) of
principal and any overdue payment of interest, payable monthly as aforesaid (or,
at the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to 16.00%.

 

Payments of principal of, interest on this Note are to be made in lawful money
of the United States of America at [                ] or at such other place as
the Company shall have designated by written notice to the holder of this Note
as provided in the Note Purchase Agreements referred to below.

 

This Note is one of a series of Senior Subordinated Paid-In-Kind Notes (herein
called the “Notes”) issued pursuant to separate Note Purchase Agreements, dated
as of                        , 2007 (as from time to time amended, the “Note
Purchase Agreements”), between the Company and the respective purchasers named
therein and is entitled to the benefits thereof. Each holder of this Note will
be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements, (ii) to have
made the representation set forth in Section 6.2 of the Note Purchase
Agreements, and (iii) to abide by the transfer restrictions set forth in Section
13.2 of the Note Purchase Agreements.

 

This Note is a registered Note and, as provided in the Note Purchase Agreements,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.

 

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[The Company will make required prepayments of principal on the dates and in the
amounts specified in the Note Purchase Agreements.] [This Note is [also] subject
to [optional] prepayment, in whole or from time to time in part, at the times
and on the terms specified in the Note Purchase Agreements, but not otherwise.]

 

If an Event of Default, as defined in the Note Purchase Agreements, occurs and
is continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner, at the price and with the effect provided in the
Note Purchase Agreements.

 

[Add governing law clause conforming to that of the Note Purchase Agreements]

 

 

 

FIRST INVESTORS SERVICES GROUP, INC., a

 

 

Texas corporation

 

 

 

 

 

By:

 

 

 

            [Name]

 

 

            [Title]

 

2-2

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EXHIBIT 3

 

FORM OF GUARANTY AGREEMENT

 

See attached.

 

3-1

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EXHIBIT 4.4

 

FORM OF OPINION OF SPECIAL COUNSEL
TO THE COMPANY

 

Matters To Be Covered In
Opinion of Special Counsel To the Company

 

1.             Each of the Company and its Subsidiaries being duly incorporated,
validly existing and in good standing and having requisite corporate power and
authority to issue and sell the Notes and to execute and deliver the documents.

 

2.             Each of the Company and its Subsidiaries being duly qualified and
in good standing as a foreign corporation in jurisdictions identified to such
counsel as necessitating such qualification.

 

3.             Due authorization and execution of the documents and such
documents being legal, valid, binding and enforceable.

 

4.             No conflicts with charter documents, laws customarily governing
transactions of the type represented by the Notes or agreements known to such
counsel.

 

5.             All governmental and corporate consents or approvals required to
issue and sell the Notes and to execute and deliver the documents having been
obtained.

 

6.             No litigation known to such counsel questioning validity of
documents.

 

7.             The Notes not requiring registration under the Securities Act of
1933, as amended; no need to qualify an indenture under the Trust Indenture Act
of 1939, as amended.

 

8.             No violation of Regulations G, T or X of the Federal Reserve
Board.

 

9.             Company not an “investment company”, or a company “controlled” by
an “investment company”, under the Investment Company Act of 1940, as amended.

 

4.4-1

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