EX-10.2






EXHIBIT 10.2

NOTE AGREEMENT

among




ENDEAVOUR INTERNATIONAL CORPORATION




The GUARANTORS from time to time party hereto




The NOTEHOLDERS referred to herein




Dated as of November 17, 2009




Relating to 12% Senior Subordinated Notes Due 2014




Table of Contents




	 	 	 
	SCHEDULES	 	 
	Schedule 2.1

	 	Noteholders






	 	 	 
	EXHIBITS	 	 
	Exhibit A

	 	Form of Note
	Exhibit B

	 	Form of Assignment and Acceptance
	Exhibit C

	 	Form of Compliance Certificate






Exhibit D Form of Subsidiary Joinder



NOTE AGREEMENT




NOTE AGREEMENT, dated as of November 17, 2009, among ENDEAVOUR INTERNATIONAL CORPORATION, a
Nevada corporation (the “Company”), the Guarantors listed on the signature pages hereof and
each of the Persons identified on Schedule 3.1 hereto as the initial noteholders of the Notes (as
defined below) (collectively, the “Initial Noteholders”).



RECITALS




WHEREAS, simultaneously herewith, each of the Initial Noteholders is entering into a separate
stock redemption agreement with the Company pursuant to which the Company has agreed to redeem from
the Initial Noteholders shares of Series C Preferred Stock, $0.001 par value, of the Company (the
“Series C Preferred Stock” and such stock redemption agreements with the Initial
Noteholders being collectively referred to as the “Stock Redemption Agreements”).



WHEREAS, upon the terms and subject to the conditions set forth in, the Stock Redemption
Agreements and this Agreement, as partial consideration for the shares of Series C Preferred Stock
being redeemed by the Company, the Company is issuing to the Initial Noteholders an aggregate of
$50,000,000 in original principal amount of Notes in the form of Exhibit A hereto.



WHEREAS, it is the intention of the parties hereto that the Notes shall be subordinated in
right of payment to certain senior secured credit facilities of the Company, but shall rank pari
passu with respect to all other senior indebtedness of the Company, all as further described
herein.



WHEREAS, the Notes are to be guaranteed by all present and future, direct and indirect U.S.
Subsidiaries of the Company (collectively, the “Guarantors”) pursuant to Section 13
hereof.



NOW, THEREFORE, the parties hereto agree as follows:



Article I

DEFINITIONS




1.1 Definitions. The following terms shall have the following meanings:



“Affiliate”: means, as applied to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person. For the purposes of this
definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled
by” and “under common control with”), as applied to any Person, means the possession, directly or
indirectly, of the power to vote ten percent (10%) or more of the Securities having voting power
for the election of directors of such specified Person or otherwise to direct or cause the
direction of the management and policies of such specified Person, whether through the ownership of
voting Securities or by contract or otherwise.



“Agreement”: means this Note Agreement, as modified, supplemented, amended, restated
(including any amendment and restatement hereof), extended or renewed, from time to time.



“Applicable Law”: includes statutes and rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other regulatory body or
official charged with the administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time heretofore or hereafter made upon or
otherwise issued to any Noteholder by any central bank or other fiscal, taxation, monetary or other
authority.



“Authorized Officer”: means, with respect to any Note Party, the chief executive
officer, chief administrative officer, chief financial officer, vice president of financial
compliance and reporting or chief accounting officer or other officer with similar responsibility
designated by the Board of Directors or similar governing body of such Note Party.



“Bankruptcy Code”: means the provisions of Title 11 of the United States
Code, 11 U.S.C. §§101 et seq., as amended from time to time, and
any successor statute.



“Business Day”: means a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.



“Capitalized Interest”: has the meaning assigned to that term in Section
6.1(a).



“Capital Stock”: means, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all equivalent
ownership interests in a Person (other than a corporation) and any and all warrants, rights or
options to purchase any of the foregoing.



“Change of Control”: means the occurrence of any of the following events:




(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act 1934, as amended (the “Exchange Act”), acquires the
beneficial ownership (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that such Person shall be deemed to have “beneficial ownership” of all securities that such
Person has the right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, through a purchase, merger or other
acquisition transaction, of 50% or more of the total voting power of the total outstanding
Capital Stock of the Company entitled to vote other than acquisition by the Company, any of
its Subsidiaries or any employee benefit plans of the Company;




(b) the Company and/or its Subsidiaries, directly or indirectly, sell, convey,
transfer, lease or otherwise dispose of all or substantially all of the assets of the
Company and its Subsidiaries to any Person or Persons;




(c) the Company consolidates with, or merges with or into, another Person, or any
Person consolidates with or mergers with or into the Company (any such transaction, a
“Company Merger”) other than:




(A) any Company Merger (1) that does not result in any reclassification,
conversion exchange or cancellation of outstanding shares of the common stock (other
than the cancellation and exchange of such shares solely into shares of common stock
or equivalent equity security of a successor entity) and (2) pursuant to which
holders of the common stock of the Company immediately prior to the transaction are
entitled to exercise, immediately after the transaction, more than 50% of the total
voting power of all shares of the capital stock of a successor entity entitled to
vote generally in the election of directors of the successor entity; or




(B) any merger solely for the purpose of changing the Company’s jurisdiction of
incorporation and resulting in the conversion or exchange of outstanding shares of
common stock solely into shares of common stock of the surviving corporation in such
merger; or




(d) a majority of the seats (other than the vacant seats) on the board of directors of
the Company shall at any time be occupied by Persons who were not nominated by the board of
directors of the Company (it being understood that Persons nominated by the board of
directors of the Company after such Persons were proposed or nominated by a Person or group
indicating an intention to solicit proxies or engage in an election contest shall not be
treated as having been nominated by the board of directors of the Company for this purpose);
or




(e) the stockholders of the Company pass a special resolution approving a plan of
liquidation or dissolution and no additional approvals of the Company’s stockholders are
required under applicable law to cause a liquidation or dissolution.



“Closing”: has the meaning assigned to that term in Section 3.2.



“Closing Date”: has the meaning assigned to that term in Section 3.2.



“Code”: means the Internal Revenue Code of 1986, as amended from time to time.



“Company”: has the meaning assigned to that term in the preamble to this Agreement.



“Contractual Obligation”: means, as applied to any Person, any provision of any
securities issued by that Person or any indenture, mortgage, deed of trust, security agreement,
pledge agreement, guaranty, contract, undertaking, agreement or instrument to which that Person is
a party or by which it or any of its properties is bound, or to which it or any of its properties
is subject.



“Co-Sale Notice”: has the meaning assigned to that term in Section 6.7(b).



“Co-Sale Offer”: has the meaning assigned to that term in Section 6.7(b).



“Co-Sale Seller”: has the meaning assigned to that term in Section 6.7(b).



“Default”: means an event which, with the giving of notice or the lapse of time or
both, would constitute an Event of Default.



“Default Rate”: means 14 percent per annum.



“Disregarded Notes”: has the meaning assigned to that term in Section 1.6.



“Dollars” and “$”: means lawful currency of the United States of America.



“Event of Default”: has the meaning assigned to that term in Article XI.



“Fiscal Year”: means any of the annual accounting periods of the Company ending on
December 31 of each year.



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



“Governing Documents”: means any document or provision thereof, comprising the
certificate of incorporation, partnership agreement, limited liability company agreement, by-laws
or other organizational or constitutive instruments of the Company or any of its Subsidiaries.



“Governmental Authority”: means any nation or government, any federal, state,
provincial, city, town, municipality, county, local or other political subdivision thereof or
thereto and any department, commission, board, bureau, instrumentality, agency or other entity
exercising executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.



“Guarantors”: means, collectively, each U.S. Subsidiary which guarantees, pursuant to
this Agreement or otherwise, all or any part of the Note Party Obligations.



“Indebtedness”: means, with respect to any Person, (a) the principal of, and any
capitalized interest, fees or charges in respect of, (i) indebtedness of such Person for money
borrowed and (ii) indebtedness evidenced by notes, debentures, bonds (other than performance or
similar bonds) or other similar instruments for the payment of which such Person is liable; (b) the
face amounts of all obligations of such Person for the reimbursement of any obligor on any letter
of credit, banker’s acceptance or similar credit transaction; (c) that portion of obligations with
respect to capital leases that is properly classified as a liability on a balance sheet in
conformity with GAAP; (d) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any mandatorily redeemable equity; (e) all obligations
of such Person under interest rate protection agreements or similar agreements, or foreign currency
or commodity hedge, exchange or similar agreements of such Person; (f) all guarantees of
Indebtedness by such Person; and (g) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of such Person and all
obligations of such Person under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business and guarantees thereof and installment
obligations arising in the ordinary course of business consistent with past practice).



“Indemnified Liabilities”: has the meaning assigned to that term in
Section 14.5(a).



“Indemnitees”: has the meaning assigned to that term in Section 14.5(a).



“Initial Noteholders”: means each of the Noteholders on the Closing Date as identified
on Schedule 2.1.



“IRS”: means the United States Internal Revenue Service.



“Lien”: means any mortgage, deed of trust, pledge, hypothecation, assignment,
conditional sale agreement, deposit arrangement, security interest, encumbrance, lien (statutory or
other), preference, priority or other security agreement or preferential arrangement of any kind or
nature whatsoever in respect of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a capital lease or under any financing lease
having substantially the same economic effect as any of the foregoing and the filing of any
financing statement or similar notice (other than a financing statement filed by a “true” lessor
pursuant to § 9-505 of the UCC, naming the owner of such property as debtor, under the UCC, or
other comparable law of any jurisdiction.



“Material Adverse Effect”: means a material adverse effect on (a) the
properties, assets, financial condition, results of operations, business or business prospects of
the Company and its Subsidiaries taken as a whole or (b) the ability of any Note Party to
perform any of its obligations under the Subordinated Debt Documents to which it is a party, or
(c) the rights of or benefits available to any Noteholder under the Subordinated Debt
Documents.



“Maturity Date”: has the meaning assigned to that term in Section 6.2(a).



“Note Guaranteed Obligations”: has the meaning assigned to that term in
Article XIII.



“Noteholder(s)”: means each holder or holders from time to time of the Notes.



“Note Parties”: means, collectively, the Company and the Guarantors.



“Note Party Obligations”: means all loans, advances, debts, liabilities and
obligations for the performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or such amounts are liquidated or
determinable) owing by any Note Party to any Noteholder, 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, in each case, arising under this Agreement or any of the other
Subordinated Debt Documents. This term includes, without limitation all principal, interest
(including all interest that accrues after the commencement of any case or proceeding by or against
any Note Party in bankruptcy, whether or not allowed in such case or proceeding), fees, charges,
expenses, attorneys’ fees and any other sum chargeable to any Note Party under this Agreement or
any of the other Subordinated Debt Documents.



“Note Register”: has the meaning assigned to that term in Section 6.5.



“Notes”: has the meaning assigned to that term in Section 2.1.



“Person”: means an individual, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.



“Proposed Purchase”: has the meaning assigned to that term in Section 6.7(b).



“Quarterly Payment Date”: means each March 31, June 30, September 30 and December 31
occurring after the Closing Date.



“Requirements of Law”: means, as to any Person, the charter and by-laws or other
organizational or Governing Documents of such Person, and any law, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or any of its
property is subject.



“Requisite Holders”: means, at any time, the Noteholders holding at least a majority
of the principal amount of all Notes (including Capitalized Interest) then outstanding, subject to
Section 1.6.



“Securities”: means any stock, shares, voting trust certificates, bonds, debentures,
notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or any certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire
any of the foregoing.



“Senior Indebtedness”: means the Company’s 6% Senior Notes due 2012 issued pursuant to
the Indenture dated January 20, 2005 and all other Indebtedness of the Company or any of its
Subsidiaries that it is not Subordinated Indebtedness of the Company or any of its Subsidiaries.



“Senior Secured Indebtedness”: means any Indebtedness of the Company and/or one or
more of its Subsidiaries to the extent such Indebtedness is at all times secured by a Lien on all
or substantially all of the assets of the Subsidiaries of the Company that are borrowers,
guarantors or otherwise obligors of or under such Indebtedness.



“Series C Preferred Stock”: has the meaning assigned to that term in the recitals to
this Agreement.



“Solvent”: means, with respect to any Person on a particular date, that on such date
such Person (i) has sufficient working capital and other property remaining as a result of
the transaction to carry on its business as currently being conducted and as contemplated to be
conducted in the future, (ii) has the ability to pay existing indebtedness as it matures
and does not intend to or believes that it will incur debts beyond its ability to pay as such debts
mature in the future, and (iii) is “solvent” within the meaning given that term and similar
terms under Applicable Laws relating to fraudulent transfers and conveyances.



“Stock Redemption Agreements”: has the meaning assigned to that term in the recitals
to this Agreement.



“Subordinated Debt Documents”: means this Agreement, the Notes and any Subsidiary
Joinder.



“Subordinated Indebtedness”: means any Indebtedness of the Company or any of its
Subsidiaries that is by its terms subordinated to any other Indebtedness of the Company or any of
its Subsidiaries.



“Subsidiary”: means, with respect to any Person at any date, any corporation, limited
or general partnership, limited liability company, trust, association or other entity
(i) the accounts of which would be consolidated with those of such Person in such Person’s
consolidated financial statements if such financial statements were prepared in accordance with
GAAP or (ii) of which more than 50% of (A) the outstanding Capital Stock having (in
the absence of contingencies) ordinary voting power to elect a majority of the board of directors
of such corporation, (B) the interest in the capital or profits of such partnership or
limited liability company or (C) the beneficial interest in such trust or estate is, at the
time of determination, owned or controlled directly or indirectly through one or more
intermediaries, by such Person.



“Subsidiary Joinder”: has the meaning ascribed to such term in Section 8.12.



“United States” and “U.S.”: each mean the United States of America.



“U.S. Subsidiary”: means each direct or indirect Subsidiary of the Company
incorporated or otherwise organized in a jurisdiction in the United States of America.



“Voluntary Prepayment”: has the meaning assigned to that term in Section 6.2
(b)



1.2 Other Interpretive Provisions. With reference to this Agreement and each other
Subordinated Debt Document, unless otherwise specified herein or in such other Subordinated Debt
Document:




The definitions of terms herein shall apply equally to the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase
“without limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires otherwise,
(i) any definition of or reference to any agreement, instrument or other document
(including any Organizational Document) shall be construed as referring to such agreement,
instrument or any other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or modifications set
forth herein or in any other Subordinated Debt Document), (ii) any reference herein
to any Person shall be construed to include such Person’s successors and assigns,
(iii) the words “herein,” “hereof” and “hereunder” and
words of similar import when used in any Subordinated Debt Document shall be construed to
refer to such Subordinated Debt Document in its entirety and not to any particular provision
thereof, (iv) all references in a Subordinated Debt Document to Articles and
Sections of, and Exhibits and Schedules to, the Subordinated Debt Document in which such
references appear, (v) any reference to any law shall include all statutory and
regulatory provisions consolidating, amending, replacing or interpreting such law and any
reference to any law or regulation shall, unless otherwise specified, refer to such law or
regulation as amended, modified or supplemented from time to time and (vi) the words
“asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts and contract rights.




In the computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including;” the words “to” and
“until” each mean “to but excluding;” and the word “through” means
“to and including.”




Section headings herein and in the other Subordinated Debt Documents are included for
convenience of reference only and shall not affect the interpretation of this Agreement or
any other Subordinated Debt Document.



1.3 Accounting Terms, Etc. All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data required to be submitted
pursuant to this Agreement shall be prepared in conformity with, GAAP.



1.4 Times of Day. Unless otherwise specified, all references herein to times of day shall
be references to Eastern time (daylight or standard, as applicable).



1.5 Headings. Article, Section and Subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this Agreement for any
other purpose.



1.6 Disregarded Notes. Any Notes owned by the Company or any of its Affiliates,
(collectively, “Disregarded Notes”), shall be disregarded for purposes of, and no holder of
any Disregarded Note shall have the right to make or participate in, any request, demand,
authorization, direction, notice, vote, nomination, consent, waiver or amendment under or in
connection with this Agreement or any other Subordinated Debt Document. Any request, demand,
authorization, direction, notice, vote, nomination, consent, waiver or amendment consented to by
the requisite quorum of holders of Notes (other than Disregarded Notes) shall be binding upon the
Disregarded Notes.



Article II

AUTHORIZATION




2.1 The Notes. The Company has authorized the issuance to the Initial Noteholders of its
12% Senior Subordinated Notes due November 17, 2014 in the aggregate original principal amount of
$50,000,000. The 12% Senior Subordinated Notes shall be in the form set forth as Exhibit A
attached hereto and are referred to individually as a “Note” and collectively as the
“Notes,” which terms shall also include any notes delivered in exchange or replacement
therefor.



Article III

ISSUANCE OF THE NOTES




3.1 Issuance of the Notes. Pursuant to the terms and conditions set forth in the Stock
Redemption Agreement with each Initial Noteholder, the Company has agreed to issue to each such
Initial Noteholder, a Note in the principal amount set forth opposite such Initial Noteholder’s
name on Schedule 3.1 attached hereto.



3.2 Closing. The closing and issuance of Notes to the Initial Noteholders (the
“Closing”) shall take place at the offices Vinson & Elkins LLP, 666 Fifth Avenue, 26th
Floor, New York, New York simultaneously with the execution and delivery of this Agreement (the
“Closing Date”).



Article IV

[INTENTIONALLY OMITTED]

Article V

REPRESENTATIONS AND WARRANTIES




5.1 Representations and Warranties of the Note Parties. In order to induce each of the
Initial Noteholders to acquire the Notes, pursuant to this Agreement and the Stock Redemption
Agreement with such Initial Noteholder, each of the Note Parties, jointly and severally, makes the
following representations and warranties, in each case as of the Closing Date and after giving
effect to the Transaction, all of which shall survive the execution and delivery of this Agreement
and the Notes:




(a) Organization, Good Standing, Etc. Such Note Party (i) is a
corporation, limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization, and
(ii) has all requisite power and authority, in the case of the Company, to issue the
Notes hereunder, and to execute and deliver each Subordinated Debt Document to which it is a
party, and to consummate the transactions contemplated thereby.




(b) Authorization, Etc. The execution, delivery and performance by such Note
Party of each Subordinated Debt Document to which it is or will be a party and the
transactions contemplated thereunder, (i) have been or, with respect to the U.S.
Subsidiaries of such Note Party formed or acquired hereafter, will be, duly authorized by
all necessary corporate, limited liability company or partnership action, as applicable,
(ii) do not and will not contravene its Governing Documents (iii) do not and
will not violate any Requirements of Law or any material Contractual Obligation of such Note
Party binding on or otherwise affecting it or any of its properties, and (iv) do not
and will not result in or require the creation of any Lien upon or with respect to any of
its properties. Such Note Party has the requisite corporate, limited liability company or
partnership power and authority, as applicable, to execute, deliver and perform each of the
Subordinated Debt Documents to which it is a party.




(c) Governmental Approvals. No authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority that has not been obtained is
required in connection with the due execution, delivery and performance by such Note Party
of each Subordinated Debt Document to which it is a party.




(d) Enforceability of Subordinated Debt Documents. Each of the Subordinated
Debt Documents to which such Note Party is a party has been duly executed and delivered by
such Note Party and constitutes the legal, valid and binding obligation of such Note Party,
enforceable against such Note Party in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, or
by general principles of equity (regardless of whether enforcement is sought in a proceeding
at law or in equity).




(e) Litigation. There is no pending or, to the knowledge of such Note Party,
threatened action, suit or proceeding affecting such Note Party or any of its Subsidiaries
or any of their respective properties or assets before any court or other Governmental
Authority or any arbitrator that in each case relates to this Agreement or any other
Subordinated Debt Document or any transaction contemplated hereby or thereby.




(f) Margin Regulations. Such Note Party is not nor will it be engaged in the
business of extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations T, U or X).




(g) No Default. No Default or Event of Default has occurred, or would result
from the issuance of the Notes on the Closing Date.



5.2 Representations and Warranties of the Noteholders. In order to induce the Company to
issue the Notes and the Guarantors to guarantee the Notes, pursuant to this Agreement and the Stock
Redemption Agreements of each Initial Noteholder, each Initial Noteholder, severally and only with
respect to itself, makes the following representations and warranties, as of the Closing Date and
after giving effect to the Transaction, all of which shall survive the execution and delivery of
this Agreement and the Notes:




(a) Investment. Such Initial Noteholder is acquiring its Note solely for its
own account, for investment purposes, with no intention of distributing or reselling such
Note except in accordance with applicable Law. Such Initial Noteholder acknowledges and
agrees that its  Note has not been registered under the Securities Act of 1933 (as amended
from time to time, the “Securities Act”), or the securities laws of any state, and
it may not be sold or otherwise transferred in the absence of an effective registration
thereunder unless an exemption from registration is available.




(b) Accredited Investor. Such Initial Noteholder is an “accredited investor”
as that term is defined in Regulation D under the Securities Act.




(c) Knowledge and Experience.  Such Initial Noteholder (a) has such knowledge
and experience in financial and business matters, including the oil and gas industry, as to
enable it to evaluate the merits and risks of entering into this Agreement, including
the acceptance of its Note, and (b) is able to bear the economic risk of this transaction.



Article VI

TERMS OF NOTES




6.1 Interest.



(a) Interest Rate; Payment. The Notes shall bear interest (based on a 360-day year
of twelve 30-day months) on the unpaid principal amount thereof until due at the rate of 12% per
annum, of which (a) 10% per annum shall be payable in cash quarterly in arrears on each
Quarterly Payment Date in each year, commencing with the next Quarterly Payment Date following the
Closing Date, and (b) 2% per annum shall be added to the principal amount of the Notes on
each Quarterly Payment Date in each year (such interest “Capitalized Interest”).



(b) Default Rate of Interest. If any amount of principal, interest or other amount
payable by the Company or any Note Party under this Agreement or any other Subordinated Debt
Documents is not paid when due (without regard to any applicable grace periods), whether at stated
maturity, by acceleration or otherwise, such amount shall thereafter bear interest at the Default
Rate to the fullest extent permitted by all Applicable Law.



(c) Maximum Legal Rate of Interest. Nothing in this Agreement or in the Notes shall
require the Company to pay interest at a rate in excess of the highest rate permitted by Applicable
Law. In the event that a Noteholder receives interest in an amount in excess of the maximum amount
allowed by Applicable Law, any excess portion of such interest that may have been paid shall be
applied to the principal of the Note, or if it exceeds such unpaid principal, shall be refunded to
the Company.



6.2 Repayment; Repurchase.



(a) Scheduled Repayment of Notes. The Company will repay the principal of the Notes
in quarterly installments on the dates and in the respective amounts set forth in the table below:



	 	 	 	 	 
	Principal Repayment Date
	 	Amount of Repayment
	 
	 	 	 	 
	March 31, 2011
	 	$	5,000,000	 
	 
	 	 	 	 
	June 30, 2011
	 	$	5,000,000	 
	 
	 	 	 	 
	September 30, 2011
	 	$	5,000,000	 
	 
	 	 	 	 
	December 31, 2011
	 	$	5,000,000	 
	 
	 	 	 	 
	March 31, 2012
	 	$	2,500,000	 
	 
	 	 	 	 
	June 30, 2012
	 	$	2,500,000	 
	 
	 	 	 	 
	September 30, 2012
	 	$	2,500,000	 
	 
	 	 	 	 
	December 31, 2012
	 	$	2,500,000	 
	 
	 	 	 	 
	March 31, 2013
	 	$	2,500,000	 
	 
	 	 	 	 
	June 30, 2013
	 	$	2,500,000	 
	 
	 	 	 	 
	September 30, 2013
	 	$	2,500,000	 
	 
	 	 	 	 
	December 31, 2013
	 	$	2,500,000	 
	 
	 	 	 	 
	March 31, 2014
	 	$	2,500,000	 
	 
	 	 	 	 
	June 30, 2014
	 	$	2,500,000	 
	 
	 	 	 	 
	September 30, 2014
	 	$	2,500,000	 
	 
	 	 	 	 
	November 17, 2014 (the Maturity Date)
	 	$	2,500,000	 
	 
	 	 	 	 
	Total of All Scheduled Repayments:
	 	$	50,000,000	 
	 
	 	 	 	 






All outstanding principal of the Notes (including, all Capitalized Interest) together with all
accrued but unpaid interest and fees thereon shall be payable in full on [November][      ], 2014
(the “Maturity Date”). On the Maturity Date or upon any earlier acceleration of the
maturity of the Notes, the Company shall repay all outstanding principal of the Notes (including
all Capitalized Interest) together with all accrued and unpaid interest and fees thereon. No
repayment of less than all of the Notes shall affect the obligation of the Company to make the
repayment required by this subsection.



(b) Voluntary Prepayments. The Company shall have the right at any time after the
Closing Date, upon not less than five (5) Business Days prior written notice sent to each
Noteholder, to prepay the Notes in whole or in part, in an amount specified in such notice, by
payment of the principal amount of the Notes (or portion thereof in a minimum amount of
$5,000,000 and integral multiples of $500,000 in excess of such amount) to be
redeemed, plus accrued and unpaid interest and fees thereon through the date of such prepayment.
Once a notice has been delivered pursuant to this Section 6.2.(b), the aggregate principal
amount of the Notes to be prepaid stated in such notice, together with the accrued and unpaid
interest thereon, shall become due and payable on the payment date specified therein. Each
prepayment of Notes in accordance with this Section 6.2.(b)  shall be applied first, to
accrued and unpaid interest on the amount of principal being prepaid as of such date of prepayment,
second to Capitalized Interest outstanding on the amount of principal being prepaid as of such date
of prepayment and, third, to the principal repayment installments thereof as set forth in
Section 6.2(a) pro rata in accordance with the principal payment installments in
Section 6.2(a), in each case, in accordance with Section 6.3.



(c) Offer to Repurchase In Connection With Change of Control.



(x) Not less than 10 nor more than 60 days prior to the occurrence of a Change of
Control, the Company shall send to each Noteholder written notice setting forth in reasonable
detail the facts and circumstances underlying such Change of Control, including the estimated date
from which such Change of Control will have effect. Pursuant to such notice, the Company shall
make an irrevocable offer to repurchase all, but not less than all, of the Notes held by such
Noteholder, at a purchase price equal to the aggregate outstanding principal amount (including
Capitalized Interest) of such Notes to be so repurchased, plus all accrued and unpaid interest on
the amount so repurchased through the date of repurchase.



(y) Following receipt of any offer to repurchase Notes under Section 6.2.(c)(x), each
Noteholder shall advise the Company, by written notice, no later than either (i) three (3) Business
Days prior to consummation of such Change of Control or (ii) seven (7) days after written notice
was given pursuant to Section 6.2(c)(x), whichever is later, as to whether it desires to
sell all or any portion of the Notes held by it, specifying the principal amount of Notes to be
sold by it. If a Noteholder accepts such offer but does not specify an amount it wishes to
receive, it will be deemed to have elected to sell all of the Notes held by it. If a Noteholder
fails to respond to such offer by the Company in accordance with the foregoing, such Noteholder
shall be deemed to have accepted the offer contained therein. Any payment in respect of such
repurchased Notes, or portion thereof, shall be paid to each participating Noteholder concurrently
with the consummation of the Change of Control or two (2) days after the offer to repurchase has
been accepted by such Noteholder, whichever is later.



(d) No Re-issuance. The Company shall not re-issue any Notes which have been
repurchased pursuant to this Section 6.2.



6.3 Payments. Payments of principal, interest and other amounts, if any, on or in respect
of the Notes and the Subordinated Debt Documents shall be made (a) without setoff or
counterclaim, (b) directly by wire transfer to an account designated in writing by each
Noteholder, and (c) without any presentment or notation of payment. Any payment to be made
to the Noteholders hereunder shall be deemed to have been made on the Business Day that such
payment actually becomes available at such Noteholder’s bank prior to the close of business of such
bank; provided, that interest for one day shall be due on the amount of any such payment
that actually becomes available to such Noteholder at such Noteholder’s bank after
2:00 P.M. (New York local time). Whenever any payment to be made shall be due on a day
which is not a Business Day, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment of interest due.
Each repayment or repurchase of Notes pursuant to Sections 6.2 (a), 6.2(b), and
6.2(c), and, except as otherwise provided herein, all other payments of principal
(including Capitalized Interest) shall be made pro rata, based on the principal amount then
outstanding and held by each Noteholder who is the holder thereof except in the case of Section
6.2(c) which such payments shall be made pro rata among the participating Noteholders only.



6.4 Certain Provisions Relating to Taxes.



(a) Each Noteholder that is not a “United States person” within the meaning of
Section 7701(a)(30) of the Code (a “Foreign Noteholder”) shall deliver to each Note Party
on the date hereof, or upon accepting an assignment of an interest in a Note: two duly signed
completed copies of IRS Form W-8BEN, W-8IMY, or W-8ECI, as applicable with respect to such Foreign
Noteholder, or any successor form thereto (entitling it to an exemption from, or reduction of,
withholding tax on all payments to be made to such Foreign Noteholder by the Note Parties on or
with respect to the Notes), or any other information as the Company may reasonably request with
respect to whether such Foreign Noteholder is entitled to an exemption from, or reduction of,
United States withholding tax, including any exemption pursuant to Section 881(c) of the Code;
provided, however, that if any Foreign Noteholder provides an IRS Form W-8BEN
claiming a “portfolio interest” exemption from United States withholding taxes pursuant to Code
Section 871(h) or Code Section 881(c), then such Foreign Noteholder also shall provide each of the
Note Parties with a certificate representing that it, or, if applicable, the equity owner of such
Foreign Noteholder to which such Form W-8BEN relates, (w) is not a “bank” for purposes of
Section 881(c)(3) and Section 581 of the Code, (x) has not been, on or prior to
the date hereof, subject to any regulatory or other legal requirements as a bank in any
jurisdiction in which it transacts business and has not been, on or prior to the date hereof,
treated as a bank for purposes of any tax, securities law or other filing or submission made to any
Governmental Authority, any application made to a rating agency or any qualification for exemption
from any tax, securities laws or other legal requirements, (y) does not currently own, or
own unrestricted options to purchase, 10% or more of the Capital Stock of the Company or any of its
Subsidiaries, and (z) is not a controlled foreign corporation related to the Company or any
of its Subsidiaries (within the meaning of Section 864(d)(4) of the Code). Thereafter and from
time to time, each Foreign Noteholder shall (A) promptly submit to the Note Parties such
additional duly completed and signed copies of one of such forms (or such successor forms as shall
be adopted from time to time by the relevant United States taxing authorities) as may then be
available under then current United States laws and regulations to avoid, or such evidence as is
reasonably satisfactory to the Note Parties of any available exemption from or reduction of, United
States withholding taxes in respect of all payments to be made to such Foreign Noteholder by a Note
Party under, or in respect of, any Note, and (B) promptly notify the Note Parties of any
change in circumstances which would modify or render invalid any claimed exemption or reduction. If
a Foreign Noteholder fails to deliver the appropriate forms as described in this Section
6.4(a), then the Note Parties may withhold from any payment to such Foreign Noteholder an
amount equivalent to the appropriate withholding tax imposed by the Code, without reduction.



(b) Each Noteholder that is a “United States person” within the meaning of
Section 7701(a)(30) of the Code shall deliver to the Note Parties two duly signed completed copies
of IRS Form W-9. If such Noteholder fails to deliver such forms, then the Note Parties may
withhold from any payment to such Noteholder an amount equivalent to the applicable back-up
withholding tax imposed by the Code, without reduction.



(c) If a Noteholder fails to deliver the forms referred to in Sections 6.4(a)
or 6.4(b), as applicable, then and only then may the Note Parties withhold from any payment
to such Noteholder in accordance with applicable law.



6.5 Transfer and Exchange of Notes. The Company shall keep a register which shall provide
for the registration of the Notes and the registration of transfers of Notes (the “Note
Register”). The principal amount of and stated rate of interest on the Notes, the names and
addresses of the Noteholders holding the Notes, the transfer of the Notes, and the names and
addresses of the transferees of the Notes shall be registered in the Note Register. Any Noteholder
may transfer its Notes subject to compliance with this Section 6.5. No Note may be
transferred unless such transfer is recorded in the Note Register, and the transferee thereof has
assumed such Noteholder’s rights and obligations hereunder by executing an Assignment and
Acceptance in substantially the form of Exhibit B. Each such transfer shall be in a
minimum amount of and integral multiples of $250,000 (except in the case of a Note for the
aggregate amount or the balance of the Note or Notes so transferred). The Noteholder holding any
Note or Notes may, prior to maturity or prepayment thereof, surrender such Note or Notes at the
principal office of the Company for transfer or exchange. Any Noteholder desiring to transfer or
exchange any Note shall first notify the Company in writing at least one Business Day in advance of
such transfer or exchange. Within three (3) Business days after such notice to the Company from a
Noteholder of its intention to make such transfer or exchange and without expense to such
Noteholder, the Company shall:




(a) acknowledge such transfer or exchange by executing an Assignment and Acceptance;




(b) record such transfer or exchange in the Note Register, effective as of the date of
such Assignment and Acceptance; and




(c) issue in exchange therefor another Note or Notes, in denominations of at least
$250,000 (except in the case of a transfer of the aggregate amount or the remaining
balance of a Note), all as requested by the Noteholder, for the same aggregate principal
amount, as of the date of such issuance, as the unpaid principal amount of the Note or Notes
so surrendered, and having the same maturity and rate of interest, containing the same
provisions and subject to the same terms and conditions as the Note or Notes so surrendered
(provided, that no minimum shall apply to a liquidating distribution of Notes to
investors in a Noteholder and any Notes so distributed may be subsequently transferred by
such investor and its successors in the original denomination thereof without restriction
under this sentence). Each new Note shall be made payable to such Person or Persons, or
permitted assigns, as the Noteholder holding such surrendered Note or Notes may designate,
and such transfer or exchange shall be made in such a manner that no gain or loss of
principal or interest shall result therefrom. The Company shall have no obligation
hereunder or under any Note to any Person other than the Noteholder that is the registered
holder of each such Note.



6.6 Replacement of Notes. Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of any Note and, if requested in the case of any such
loss, theft or destruction, upon delivery of an indemnity bond or other agreement or security
reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and
cancellation of such Note, the Company will issue a new Note, of like tenor and amount and dated
the date to which interest has been paid, in lieu of such lost, stolen, destroyed or mutilated
Note; provided, however, that if any Note held by a Noteholder that is an
investment fund or an institutional investor is lost, stolen or destroyed, the affidavit of an
authorized partner or officer of the Noteholder setting forth the circumstances with respect to
such loss, theft or destruction shall be accepted as satisfactory evidence thereof, and no
indemnification bond or other security shall be required as a condition to the execution and
delivery by the Company of a new Note in replacement of such lost, stolen or destroyed Note, other
than such Noteholder’s written agreement to indemnify the Company.



6.7 Equal Treatment.



(a) The Company shall not, nor shall it permit any of its Subsidiaries or Affiliates to (x)
enter into any agreement, arrangement or understanding (whether or not the subject of a binding
agreement) with any of the Noteholders relating to any of the Notes unless the Company or such
Subsidiary or Affiliate, as applicable, offers to enter into an agreement (on the same terms and at
substantially the same time) with the other Noteholders; (y) repurchase or otherwise acquire any
Note other than in accordance with paragraph (b) of this Section 6.7 or otherwise in accordance
with this Agreement; or (z) 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 Noteholder of Notes as consideration for or as an amendment of any of the provisions hereof or
of the Notes unless such remuneration is concurrently paid, or security is concurrently granted, on
the same terms, ratably to the Noteholders of all Notes then outstanding.



(b) If the Company or any of its Subsidiaries agrees or intends to agree with any Noteholder
(the “Co-Sale Seller”) to purchase or otherwise acquire all or a portion of any Notes (the
“Proposed Purchase”), then the Company shall offer (the “Co-Sale Offer”) to include in the
Proposed Purchase the Notes owned and designated by the other Noteholders according to the
remaining terms of this Section 6.7(b). The Company shall give written notice to each of  the
Noteholders (the “Co-Sale Notice”) at least seven (7) business days prior to the scheduled closing
of the Proposed Purchase. The Sale Notice shall specify the aggregate outstanding principal
amount of Notes proposed to be purchased or acquired, the amount and type of consideration to
be paid therefor, the date on which the Proposed Purchase is to be consummated, and the aggregate
outstanding principal amount of Notes such Noteholder shall be entitled to include in the Proposed
Purchase .  Each Noteholder shall have the right to include in the Proposed Purchase, and sell to
the Company on the same terms as any other seller of Notes, up to an aggregate outstanding
principal amount of Notes equal to the aggregate outstanding principal amount of all Notes be
purchased or acquired in the Proposed Purchase, multiplied by a fraction, the numerator of which
shall be the aggregate outstanding principal amount of Notes held by such Noteholder and the
denominator of which shall be the aggregate outstanding. If a Noteholder wishes to accept the
Co-Sale Offer, it must, within five (5) business days following the date the Company gives the
Co-Sale Notice, deliver to the Company a notice designating the aggregate outstanding principal
amount of Notes it wishes to sell.  The purchase of the Notes so designated shall take place as
part of the Proposed Purchase.



Article VII

RANKING AND SUBORDINATION




7.1 Senior Indebtedness.The Note Party Obligations and the rights and remedies of the
Noteholders under the Subordinated Debt Documents shall rank pari passu in right of payment with
all Senior Indebtedness of any of the Note Parties.



7.2 Senior Secured Indebtedness.Each of the Noteholders hereby agrees for itself and for
its successors and assigns that the Note Party Obligations are, to the extent and in the manner set
forth in this Article VII, expressly subordinated and junior in right of payment to the prior
payment in full of any Senior Secured Indebtedness incurred by a Note Party, provided, the
Note Party Obligations shall not be subordinated and junior in right of payment to (and Section 7.3
shall not apply to) any Senior Secured Indebtedness of the Company that is not secured by a Lien on
all or substantially all of the assets of the Company.



7.3 Subordination.In the event of any insolvency, bankruptcy, receivership, liquidation,
reorganization or other similar proceedings relative to any Note Party, or of any proceedings for
voluntary liquidation, dissolution or winding up of any Note Party, whether or not involving
insolvency or bankruptcy proceedings, such Note Party’s obligations in respect of the then
outstanding Senior Secured Indebtedness of such Note Party shall first be paid in full in cash,
Securities or other property before any payment in cash, Securities or other property is made by
such Note Party on account of the Note Party Obligations of such Note Party, and in any such
proceedings, any payment or distribution of any kind or character, whether in cash, Securities or
other property (except payment in Securities which are subordinate and junior to the payment of
such Senior Secured Indebtedness in accordance with the provisions of this Article VII), that the
Noteholders would have received from such Note Party if the Note Party Obligations of such Note
Party were not subordinated to such Senior Secured Indebtedness as set forth in this Article VII,
shall be paid by the liquidating trustee or other person making such payment or distribution, or by
any Noteholder if received by it, directly to the holders of such Senior Secured Indebtedness to
the extent necessary to make payment in full in cash of such Note Party’s obligation in respect of
such Senior Secured Indebtedness, after giving effect to any concurrent payment or distribution to
or for the holders of such Senior Secured Indebtedness.



7.4 Payments under the Notes. Subject to the rights, if any, of the holders of the Senior
Secured Indebtedness under this Article VII to receive cash, Securities or other properties
otherwise payable or deliverable to the Noteholders, nothing contained in this Article VII
shall affect or limit the obligation of the Note Parties, subject to the terms and conditions of
this Agreement, to pay to the Noteholders the Note Party Obligations as and when the same become
due and payable, including, without limitation, scheduled payments of interest on and principal of
the Notes and required repurchases of the Notes, or shall prevent any Noteholder upon any Default
or Event of Default from exercising all rights, powers and remedies otherwise provided in this
Agreement or any other Subordinated Debt Document or by applicable law.



7.5 Subrogation. Subject to the payment in full of a Note Party’s obligations on all Senior
Secured Indebtedness of such Note Party and until the Note Party Obligations shall be paid in full,
each of the Noteholders shall be subrogated to the rights of the holders of such Senior Secured
Indebtedness (to the extent of payments or distributions previously made to such holders of Senior
Secured Indebtedness pursuant to the provisions of Section 7.2 above) to receive payments
or distributions of any cash, Securities or other property of such Note Party applicable to such
Senior Secured Indebtedness. No such payments or distributions applicable to such Senior Secured
Indebtedness shall, as between such Note Party and its creditors, other than the holders of such
Senior Secured Indebtedness and the Noteholders, be deemed to be a payment by such Note Party to or
on account of the Note Party Obligations; and for the purposes of such subrogation, no payments or
distributions to the holders of any such Senior Secured Indebtedness to which the Noteholders would
be entitled except for the provisions of this Article VII shall, as between such Note Party
and its creditors, other than the holders of such Senior Secured Indebtedness and the Noteholders,
be deemed to be a payment by the Company to or on account of any such Senior Secured Indebtedness.



Article VIII

REPORTING COVENANTS




The Company covenants and agrees that, for so long as any of the Notes are outstanding, it
shall, and shall cause each of its Subsidiaries to, observe and abide by each of the covenants and
agreements contained in this Article VIII.



8.1 Financial Statements.The Company and each of its Subsidiaries shall maintain a system
of accounting established and administered in accordance with sound business practices to permit
preparation of consolidated financial statements in conformity with GAAP, and each of the financial
statements described below shall be prepared from such system and records. The Company shall
deliver or cause to be delivered to the Noteholders:




(a) Quarterly Reports. As soon as practicable and in any event no later than
the day that a Form 10-Q is required to be filed by the Company with the Securities and
Exchange Commission following each quarterly period (other than the last quarterly period)
in each Fiscal Year, consolidated statements of operations and cash flows of the Company for
the period from the beginning of the then current Fiscal Year to the end of such quarterly
period, and a consolidated balance sheet of the Company as of the end of such quarterly
period setting forth in each case in comparative form figures for the corresponding period
or date in the preceding Fiscal Year, together with a certificate from an Authorized Officer
of the Company to the effect that such financial statements have been prepared in accordance
with GAAP consistently applied during the periods involved (subject to year-end adjustments)
and that such financial statements fairly present the results of operations and changes in
financial position, cash flows and financial position of the Company as of and for the
period then ended; and




(b) Annual Reports. As soon as practicable and in any event no later than the
day that a Form 10-K is required to be filed by the Company with the Securities and Exchange
Commission following the end of each Fiscal Year, a consolidated balance sheet of the
Company as of the end of such Fiscal Year and the related consolidated statements of
operations, statements of stockholders’ equity and cash flows for such Fiscal Year, setting
forth in each case in comparative form the corresponding figures from the preceding Fiscal
Year, together with the audit report of independent public accountants of recognized
standing selected by the Company.




(c) Officer’s Certificate. Together with each delivery or deemed delivery of
any financial statements for periods ending June 30 pursuant to subsection (a) and
any financial statement pursuant to subsection (b) of this Section 8.1, an
Officer’s Certificate substantially in the form of Exhibit C attached hereto and
made a part hereof, stating that the Authorized Officer signatory thereto has reviewed the
terms of the Subordinated Debt Documents, and has made, or caused to be made under his
supervision, a review in reasonable detail of the transactions and consolidated financial
condition of the Company and its consolidated Subsidiaries during the accounting periods
covered by such financial statements, that such review has not disclosed the existence
during or at the end of such accounting period, and that such officer does not have
knowledge of the existence as at the date of such Officer’s Certificate, of any condition or
event which constitutes an Event of Default or Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof and what action the
Company has taken, is taking and proposes to take with respect thereto.



(d) Delivery. The quarterly and annual reports set forth in subsections (a)
and (b) of this Section 8.1 shall be deemed to have been delivered to the
Noteholders when filed with the Securities and Exchange Commission.



8.2 Other Financial Information.



(a) The Company shall deliver to the Noteholders such other information, with respect to the
Company’s and its Subsidiaries’ business, financial condition, results of operations, properties,
business or business prospects as any Noteholder may, from time to time, reasonably request;
provided, however, that the Company shall not be required to deliver any material
non-public information pursuant to this Section 8.2(a) to any Noteholder that has not executed a
confidentiality agreement, in form and substance reasonably satisfactory to the Company, in respect
of such information.



(b) The Company shall deliver to the Noteholders copies of all documents and financial
statements, reports and notices, if any, sent or made available generally by the Company to the
holders of its Securities, the Senior Secured Indebtedness (other than routine documents or
notices) or to a trustee under any indenture or filed with the Securities and Exchange Commission,
and promptly upon their becoming available, copies of all press releases and other statements made
available by the Company to the public concerning material developments in the business of such the
Company or any of its Subsidiaries and materials, information, reports, notices and proxy
statements sent or made available by the Company to its security holders generally in their
capacities as such; provided, however, that the Company shall not be required to
deliver any material non-public information pursuant to this Section 8.2(b) to any Noteholder that
has not executed a confidentiality agreement, in form and substance reasonably satisfactory to the
Company, in respect of such information.



8.3 Events of Default. Upon the Company obtaining knowledge, (i) of any condition
or event which constitutes an Event of Default or Default, or becoming aware that any Noteholder
has given any notice with respect to a claimed Event of Default or Default under this Agreement, or
(ii) that any Person has given any notice to the Company or taken any other action with
respect to a claimed default or event or condition of the type referred to in
Section 11.1(d), the Company shall deliver (in the case of clause (i), promptly after
obtaining such knowledge and in the case of clause (ii) within three (3) Business Days after
obtaining such knowledge) to the Noteholders an Officer’s Certificate specifying (A) the
nature and period of existence of any such claimed default, Event of Default, Default, condition or
event, (B) the notice given or action taken by such Person in connection therewith and
(C) what action such Note Party has taken, is and proposes to take with respect thereto.



8.4 Lawsuits. Promptly upon the Company obtaining knowledge of the institution of, or
written threat of, any action, suit, proceeding or arbitration against or affecting any Note Party
or any asset of any Note Party which action, suit, proceeding or arbitration could be reasonably
likely to result in a Material Adverse Effect, the Company shall give written notice thereof to
each of the Noteholders, unless the contents of such notice would be deemed to constitute ”material
non-public information” and such Noteholder shall have notified the Company in writing that it does
not wish to receive any material non-public information.



Article IX

AFFIRMATIVE COVENANTS




The Note Parties jointly and severally covenant and agree that, for so long as any of the
Notes are outstanding, each of the Note Parties shall, and shall cause each of its Subsidiaries to,
observe and abide by each of the covenants and agreements contained in this Article IX.



9.1 Existence, etc. Such Note Party shall, and shall cause each of its Subsidiaries to, at
all times maintain its existence and preserve and keep, or cause to be preserved and kept, in full
force and effect its rights material to its businesses except where the loss or termination of such
rights does not have or is not likely to have a Material Adverse Effect.



9.2 Powers; Conduct of Business. Such Note Party shall, and shall cause each of its
Subsidiaries to, qualify and remain qualified to do business in each jurisdiction in which the
nature of its business requires it to be so qualified except for those jurisdictions where failure
to so qualify does not have or would not reasonably be expected to have a Material Adverse Effect.



9.3 Compliance with Laws, etc. Such Note Party shall, and shall cause each of its
Subsidiaries to, comply with all Requirements of Law applicable to such Person or the business,
property, assets or operations of such person, except in the case where noncompliance does not have
or is not reasonably likely to have a Material Adverse Effect.



9.4 Books and Records. The Note Parties shall keep and maintain in all material respects
complete and correct books of record and account in which entries in conformity with GAAP shall be
made of all dealings and transactions in relation to their respective businesses and activities.



9.5 Further Assurances. Such Note Party shall take such action and execute, acknowledge
and deliver, and cause each of its Subsidiaries to take such action and execute, acknowledge and
deliver, at its sole cost and expense, such agreements, instruments or other documents as the
Noteholders may reasonably require from time to time in order to carry out more effectively the
purposes of this Agreement and the other Subordinated Debt Documents.



9.6 Additional Guaranties. Such Note Party shall cause each of its U.S. Subsidiaries not
in existence on the Closing Date to execute and deliver to the Noteholders within five (5) Business
Days of the formation, acquisition or change thereof a subsidiary joinder in the form attached
hereto as Exhibit D (each, a “Subsidiary Joinder”) to become a Note Party.



9.7 Punctual Payment. The Note Parties will duly and punctually pay or cause to be paid
the principal and interest on the Notes, and the Note Parties will duly and punctually pay or cause
to be paid all other amounts required to be paid to the Noteholders pursuant to this Agreement or
the other Subordinated Debt Documents, in accordance with the terms of this Agreement or such other
Subordinated Debt Documents, as the case may be.



Article X

NEGATIVE COVENANTS




Each of the Note Parties covenants and agrees, for so long as any of the Notes are
outstanding, to observe and abide by each of the covenants and agreements contained in this
Article X.



10.1 Fundamental Changes and Asset Sales. The Company will not consolidate with or merge
with any other Person or convey, transfer or lease all or substantially all of its assets in a
single transaction or series of transactions to any Person or Persons unless:




(a) the successor formed by such consolidation or the survivor of such merger or the
Person or Persons that acquire or acquires by conveyance, transfer or lease all or
substantially all of the assets of the Company, as the case may be, shall be a Solvent
corporation or limited liability company organized and existing under the laws of the United
States or any State thereof (including the District of Columbia), and, if the Company is not
such corporation or limited liability company, (i) such corporation or limited liability
company shall have executed and delivered to each holder of any Notes its assumption of the
due and punctual performance and observance of each covenant and condition of this Agreement
and the Notes and (ii) such corporation or limited liability company shall have caused to be
delivered to each holder of any Notes an opinion of nationally recognized independent
counsel, or other independent counsel reasonably satisfactory to the Required Holders, to
the effect that all agreements or instruments effecting such assumption are enforceable in
accordance with their terms and comply with the terms hereof; and




(b) immediately before and immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing.



No such conveyance, transfer or lease of substantially all of the assets of the Company shall have
the effect of releasing the Company or any successor corporation or limited liability company that
shall theretofore have become such in the manner prescribed in this Section 10.1 from its
liability under this Agreement or the Notes.



10.2 Common Stock Repurchase. The Company shall not purchase, redeem or otherwise acquire
any shares of the common stock, par value $0.001 per share, of the Company at a price per share
greater than the Current Market Price (as defined in the Certificate of Designations of Series C
Preferred Stock of the Company filed October 20, 2006, as amended).



10.3 Transactions with Affiliates. Such Note Party shall not, and shall not permit any of
its Subsidiaries to enter into directly or indirectly any transaction or 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 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.



10.4 Investment Company Act of 1940. Such Note Party shall not, and shall not permit its
Subsidiaries to, engage in any business, enter into any transaction, use any securities or take any
other action that would cause it or any of its Subsidiaries to become subject to the registration
requirements of the Investment Company Act of 1940, as amended, by virtue of being an “investment
company” or a company “controlled” by an “investment company” not entitled to an exemption within
the meaning of such Act.



10.5 Limitations on Prepayment of Indebtedness. The Company shall not, nor shall it permit
any of its Subsidiaries to prepay, redeem, purchase, acquire, defease or otherwise satisfy prior to
the scheduled maturity date thereof in any manner, any Indebtedness (excluding (x) Indebtedness
that constitutes preferred equity, which shall be subject to Section 10.8 below, (y)
Indebtedness described in clause (c) of the definition thereof and (z) Indebtedness described in
clause (e) of the definition thereof and incurred in the ordinary course of business) other
than (a) permitted prepayments of (i) the Notes and (ii) Senior Secured Indebtedness, in each
case in accordance with the terms hereof or thereof, as applicable; (b) regularly scheduled
payments of interest and principal or required repayments or redemptions, each in accordance with
its terms, of such Indebtedness; (c) any purchase, redemption or other acquisition of such
Indebtedness outstanding where the consideration for such purchase, redemption or other acquisition
is 75% or less than the outstanding principal amount and accrued interest, of such Indebtedness on
the date of purchase, redemption or other acquisition; (d) any refinancing in full of an issue,
class or series of such Indebtedness outstanding solely with the proceeds from newly issued debt
securities or equity securities of the Company, but only if the earliest date upon which any
portion of such debt or equity securities is required to be repaid, repurchased, redeemed, defeased
or otherwise satisfied by the Company or any of its Subsidiaries (absent an event of default, in
the case of debt securities, or a change of control, in the case of equity securities) is later
than the earlier of 91 days after the Maturity Date and the latest date upon which the Company or
one of its Subsidiaries would have been required to repay, redeem or repurchase in full all of the
refinanced Indebtedness in accordance with the terms thereof or (e) other repayments of
Indebtedness permitted to be incurred hereunder in an aggregate principal amount of up to
$25,000,000 for all such Indebtedness incurred after the date hereof. The Company shall not, nor
shall it permit any of its Subsidiaries to modify the terms of any Indebtedness to avoid or modify
its obligations under this Section 10.5.



10.6 Limitation on Subsidiary Indebtedness. Each Note Party, other than the Company, shall
not, nor shall any Note Party permit any of its Subsidiaries to, incur or permit to exist any
Indebtedness other than (i) Indebtedness described in clause (c) of the definition thereof, (ii)
Indebtedness described in clause (e) of the definition thereof and incurred in the ordinary course
of business, (iii) Senior Secured Indebtedness, (iv) Indebtedness incurred by a Subsidiary of the
Company, if such Subsidiary (x) is established solely for the purpose of the incurrence of such
Indebtedness and (y) does not have any interest in any assets or property (other than de minimis
assets or property) and provided, that such Indebtedness is not guaranteed by any other
Subsidiary of the Company unless such Indebtedness constitutes Senior Secured Indebtedness, (v)
guarantees by the Guarantors of high-yield debt securities issued by the Company provided, that, if
the terms, of any such guarantee are more favorable in any respect to the holders of such
high-yield debt securities than the guarantee provided by the Guarantors in favor of the
Noteholders pursuant to Article XIII hereof, such more favorable terms shall automatically
and with no further action by any of the parties hereto be deemed to apply to and incorporated into
this Agreement mutatis mutandis, and (vi) obligations for the reimbursement of letters of credit
issued at the request of a Subsidiary of the Company in the ordinary course of business of that
Subsidiary with a face amount not exceeding $10,000,000 in the aggregate for all such obligations
outstanding at any time.



10.7 U.S. Subsidiary Assets.



The Company shall not permit any of its Subsidiaries, other than U.S. Subsidiaries, to own or
acquire (including by merger, consolidation, acquisition of stock or assets, license or lease) any
business, corporation, limited liability company, partnership, association or other business
organization or division thereof, or any other asset, located primarily or primarily conducted in
the United Sates.



10.8 Preferred Equity Redemptions.



The Company shall not, nor shall it permit any of its Subsidiaries to repay, purchase, redeem,
acquire, defease or otherwise satisfy any preferred equity, including, without limitation, the
Series C Preferred Stock other than (a) regularly scheduled dividend payments or required
repayments or redemptions, each in accordance with its terms, of such preferred equity; (b) any
purchase, redemption or other acquisition of shares of preferred stock where the consideration for
such purchase, redemption or other acquisition is 75% or less than the liquidation preference plus
accrued dividends on the date of such purchase, redemption or other acquisition, (c) any
refinancing in full of an issue, class or series of preferred equity solely with the proceeds from
newly issued debt securities or equity securities of the Company, but only if the earliest date
upon which any portion of such debt or equity securities is required to be repaid, repurchased,
redeemed, acquired, defeased or otherwise satisfied by the Company or any of its Subsidiaries
(absent an event of default, in the case of debt securities, or a change of control, in the case of
equity securities) is later than the earlier of 91 days after the Maturity Date and the latest date
upon which the Company or one of its Subsidiaries would have been required to redeem in full all
of such preferred equity in accordance with the terms thereof, or (d) any purchase, redemption or
other acquisition in full of all of the shares of Series B Preferred Stock, par value $0.001 per
share, of the Company then outstanding (provided that no additional shares thereof are issued after
the date hereof) where the consideration for such purchase, redemption or other acquisition is not
more than 100% of the liquidation preference plus accrued dividends of such shares on the date of
such purchase, redemption or other acquisition . The Company shall not, nor shall it permit any of
its Subsidiaries to, modify the terms of any preferred equity to avoid or modify its obligations
under this Section 10.8.



Article XI

EVENTS OF DEFAULT




11.1 Events of Default. The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an “Event of Default” hereunder:




	 	(a)	 	Failure to Make Payments When Due. The Note
Parties shall fail to pay any amount of any Note (whether principal,
reimbursement obligations, repurchase amount, interest, fees, expenses,
indemnities or other obligations) when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); and in connection
with any default in the payment when due of any such amount other than
principal of the Notes or repurchase amount in respect thereof, such
default shall continue for three (3) Business Days.






	 	(b)	 	Breach of Representation or Warranty. Any
representation or warranty made or deemed made by or on behalf of any Note
Party or by any officer of the foregoing in this Agreement, or under or in
connection with any other Subordinated Debt Document or any Stock
Redemption Agreement or under or in connection with any report,
certificate, or other document delivered to the Requisite Holders or any
Noteholder pursuant to any Subordinated Debt Document or any Stock
Redemption Agreement shall have been incorrect or misleading in any
material respect when made or deemed made.






	 	(c)	 	Breach of Certain Covenants. Any Note Party
shall fail to perform or comply with any covenant or agreement contained in
Sections 6.2(c), 6.7, 8.1(a), 8.1(b), 8.3, 9.1, 9.6 or
Article X under this Agreement.






	 	(d)	 	Other Defaults. Any Note Party shall fail to
perform or comply with any other covenant or agreement under this Agreement
or contained in any other Subordinated Debt Document or under any Stock
Redemption Agreement and such failure continues for a period of thirty (30)
days.






	 	(e)	 	Default as to Other Indebtedness. (i) any Note
Party shall fail to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) with
respect to any Indebtedness of such Note Party (other than the Note Party
Obligations) if the aggregate amount of such Indebtedness is in excess of
$5,000,000 and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Indebtedness; or (ii) any Indebtedness (other than the Note Party
Obligations) if the aggregate amount of such Indebtedness is in excess of
$5,000,000 shall be declared due and payable (by acceleration or otherwise)
by a Person (other than a Note Party) as a result of a breach, default or
event of default by a Note Party, or required to be prepaid, redeemed or
otherwise repurchased by any Note Party (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof.






	 	(f)	 	Voluntary Bankruptcy Proceeding. 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.






	 	(g)	 	Involuntary Bankruptcy Proceeding. 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.






	 	(h)	 	Invalidity of Documents. Any provision of any
Subordinated Debt Document shall at any time for any reason (other than
pursuant to the express terms thereof) cease to be valid and binding on or
enforceable against a Note Party intended to be a party thereto; or the
validity or enforceability thereof shall be contested by any party thereto;
or a proceeding shall be commenced by a Note Party or any Governmental
Authority having jurisdiction over any of them, seeking to establish the
invalidity or unenforceability thereof; or a Note Party shall deny in
writing that it has any liability or obligation purported to be created
under any Subordinated Debt Document.






	 	(i)	 	Judgments. A final judgment or judgments for
the payment of money aggregating in excess of $10,000,000 are rendered
against one or more of the Company and its Subsidiaries and which 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.





Article XII

ACCELERATION; REMEDIES ON DEFAULT




12.1 Acceleration. If any Event of Default has occurred, the Requisite Holders may, by
notice to the Company, declare the entire unpaid principal amount of the Notes (including
Capitalized Interest) plus all interest accrued and unpaid thereon and all other amounts
payable under this Agreement, to be forthwith due and payable, whereupon the Notes, all such
accrued interest and all such other amounts shall become and be forthwith due and payable (unless
there shall have occurred an Event of Default under Sections 11.1(f) or 11.1(g)
with respect to any Note Party, in which case all such amounts shall automatically become due and
payable), without presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Note Parties.



12.2 Other Remedies. In case any one or more of the Events of Default under
Article XI shall have occurred and be continuing, and whether or not the Noteholders shall
have accelerated the maturity of the Notes pursuant to Section 12.1, each Noteholder, if
owed any amount with respect to the Notes, may proceed to protect and enforce its rights by suit in
equity, action at law or other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Agreement and the other Subordinated Debt Documents or any
instrument pursuant to which the Note Party Obligations to such Noteholder are evidenced, including
as permitted by Applicable Law, the obtaining of the ex parte appointment of a receiver, and, if
such amount shall have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of such Noteholder; provided,
however, that no acceleration of the unpaid principal amount of the Notes may be made
except in accordance with the terms of Section 12.1. In case of an Event of Default under
Article XI, the Note Parties shall pay to each Noteholder such further amount as shall be
sufficient to cover the reasonable costs and expenses of collection, including, without limitation,
reasonable attorneys’ fees, expenses and disbursements. No remedy herein conferred upon any
Noteholder is intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or any other provision of law.



12.3 Distribution of Proceeds. In the event that following the occurrence or during the
continuance of any Default or Event of Default, any Noteholder receives any monies with respect to
the amounts due hereunder, such monies shall be distributed for application as follows:




(a) First, to the payment of, or (as the case may be) the reimbursement of the
Noteholders for or in respect of all costs, expenses, disbursements and losses which shall
have been incurred or sustained by the Noteholders in connection with the collection of such
monies by the Noteholders, for the exercise, protection or enforcement by the Noteholders of
all or any of the rights, remedies, powers and privileges of the Noteholders under this
Agreement or any of the other Subordinated Debt Documents pro rata based on
the relative amount so incurred or sustained;




(b) Second, to all other Note Party Obligations in such order or preference as the
Noteholders may determine; provided, however, that distributions shall be
made among the Noteholders pro rata; and




(c) Third, the excess, if any, shall be returned to the Company or to such other
Persons as are entitled thereto.



12.4 Annulment of Defaults. Section 12.1 and Article XI are
subject to the condition that, if at any time after the principal of any of the Notes shall have
become due and payable, and before any judgment or decree for the payment of the moneys so due, or
any portion thereof, shall have been entered, then and in every such case the Requisite Holders
may, by written instrument filed with the Company, rescind and annul such declaration and its
consequences; provided, however, that (a) all arrears of interest upon all
of the Notes and all of the other sums payable hereunder and under the Notes (except any principal
of, or interest or other amount due and payable on the Notes by reason of such declaration) shall
have been duly paid; (b) each and every other Default and Event of Default shall have been
waived pursuant to Section 12.5 or otherwise made good or cured and (c) no
judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this
Agreement, and provided, further, that no such rescission or annulment shall extend
to or affect any subsequent Default or Event of Default or impair any right consequent thereon.



12.5 Waiver. Except as otherwise provided for in this Agreement or by Applicable Law, each
Note Party waives: (a) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any Notes at any time held by
any Noteholder on which the Note Parties may in any way be liable, and (b) the benefit of
all valuation, appraisal, marshaling and exemption laws.



Article XIII

CROSS-GUARANTY




13.1 Cross-Guaranty. Each Guarantor unconditionally guarantees, as a primary obligor and
not merely as a surety, jointly and severally with each other Guarantor, the due and punctual
payment of the principal of, and interest on, each of the Notes when and as due, whether at
maturity, by acceleration, by notice of prepayment or otherwise and the due and punctual payment of
all other Note Party Obligations with respect to the Notes (the “Note Guaranteed
Obligations”). Each Guarantor further agrees that the Note Guaranteed Obligations may be
amended, modified, extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guaranty notwithstanding any extension or renewal
of any Note Guaranteed Obligations.



13.2 Guaranty Absolute. The obligations of each Guarantor hereunder shall be unconditional
and shall not be subject to any reduction, limitation, impairment or termination for any reason,
including, without limitation, any claim of waiver, release, settlement, surrender, alteration or
compromise, and shall not be subject to any defense or set off, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or unenforceability of the Note
Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder with respect to any of the Note Guaranteed Obligations
shall not be discharged or impaired or otherwise affected by and no Guarantor shall be entitled to
raise as a defense the failure of any Noteholder to assert any claim or demand or to enforce any
remedy under this Agreement, the Notes, or under any other guaranty or any other agreement, by any
waiver or modification of any provision thereof, by any default, failure or delay, willful or
otherwise, in the performance of any Note Guaranteed Obligations, or by any other act or omission
which may or might otherwise in any manner or to any extent vary the risk or reduce or extinguish
the liability of such Guarantor or otherwise operate as a discharge of such Guarantor as a matter
of law or equity.



Each Guarantor further agrees that its guaranty shall be a continuing guaranty and shall stand
as a guaranty of full and final payment and performance of all Note Guaranteed Obligations
hereunder from time to time and shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, of principal or interest on any of the Note
Guaranteed Obligations is rescinded or must otherwise be returned by the Noteholders upon the
bankruptcy or reorganization of any Note Party or otherwise.



13.3 Waiver. Each Guarantor unconditionally waives (a) notice of any of the
matters referred to in Section 13.2, (b) notice to such Guarantor of the incurrence
of any of the Note Guaranteed Obligations, notice to such Guarantor of any breach or default by any
Guarantor with respect to any of the Note Guaranteed Obligations or any other notice that may be
required, by statute, rule of law or otherwise, to preserve any rights of any Noteholder holding
any of the Notes against such Guarantor, (c) presentment to or demand of payment from any
other Guarantor with respect to any Note or protest for nonpayment or dishonor, (d) any
right to the enforcement, assertion, exercise or exhaustion by any Noteholder holding any of the
Notes of any right, power, privilege or remedy conferred in this Agreement, the Notes or any other
Subordinated Debt Documents or otherwise, (e) any requirement of diligence on the part of
any Noteholder holding any of the Notes, (f) any requirement to mitigate the damages
resulting from any default under this Agreement, the Notes or any other Subordinated Debt
Documents, (g) any notice of any sale, transfer or other disposition of any right, title or
interest to or in this Agreement, the Notes or any other Subordinated Debt Documents,
(h) any release of any Guarantor from its obligations hereunder resulting from any loss by
it of its rights of subrogation hereunder and (i) any other circumstance whatsoever which
might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or
surety or which might otherwise limit recourse against such Guarantor.



13.4 Subrogation. Each Guarantor hereby subordinates in favor of the Noteholders all
rights of subrogation against or in respect of each other Guarantor and its respective properties
and all rights of indemnification, contribution and reimbursement from each other Guarantor and
their respective properties, in each case in connection with this guaranty and any payments made
hereunder, and regardless of whether such rights arise by operation of law, pursuant to contract or
otherwise until such time as the obligations hereunder have been fully and finally performed and
paid.



13.5 Limitation on Liability. Each Guarantor acknowledges that it will derive substantial
economic and other benefits from the issuance of the Notes, and that the incurrence of the Note
Party Obligations is in the best interests of each Guarantor. If, in any action to enforce this
guaranty or any proceeding to allow or adjudicate a claim under this guaranty, a court of competent
jurisdiction shall determine that enforcement of this guaranty against any Guarantor for the full
amount of the obligations hereunder is not lawful under, or would be subject to avoidance under,
Section 548 of the Bankruptcy Code or any applicable provision of comparable state law,
the liability of such Guarantor under this guaranty shall be limited to the maximum amount lawful
and not subject to avoidance under such law.



Article XIV

MISCELLANEOUS




14.1 Amendments; Actions by the Noteholders; Solicitation of the Noteholders.



(a) No amendment, alteration, modification or waiver of any term or provision of this
Agreement, the Notes or the other Subordinated Debt Documents, nor consent to any departure by any
Note Party therefrom, shall in any event be effective unless the same shall be in writing and
signed by Noteholders holding at least two-thirds of the principal amount of all Notes (including
Capitalized Interest) then outstanding, subject to Section 1, and then such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such amendment, alteration, modification or
waiver shall be effective to reduce or to postpone the date fixed for the payment of the principal
or interest payable on any Note or any fees or other amounts payable hereunder, or to alter or
amend any provisions relating to required prepayment or repurchase of the Notes, or to alter or
amend the provisions of Section 6.7, or to alter or amend the consent mechanism provided
for under Section 12.4 or this Section 14.1 without the consent
of all of the Noteholders holding Notes then outstanding. Any waiver or consent may be given
subject to satisfaction of conditions stated therein. Written notice of any waiver or consent
affected under this subsection shall be promptly delivered by the Company to any Noteholders that
did not execute the same.



(b) The Company will provide each Noteholder (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 Noteholder 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, correct and complete copies of each amendment, waiver or
consent effected pursuant to the provisions of this Section 14.1 to each
Noteholder promptly following the date on which it is executed and delivered by, or receives the
consent or approval of, the Requisite Holders.



(c) Any amendment or waiver made pursuant to this Section 14.1 by a
Noteholder of Notes that has transferred or has agreed to transfer its Notes to any of the Note
Parties or any of their Subsidiaries or Affiliates and has provided or has agreed to provide such
amendment or waiver as a condition to such transfer shall be void and of no force and effect except
solely as to such Noteholder, and any amendments effected or waivers granted that would not have
been or would not be so effected or granted but for such amendment or waiver (and the amendments or
waivers of all other Noteholders of Notes that were acquired under the same or similar conditions)
shall be void and of no force and effect, retroactive to the date such amendment or waiver
initially took or takes effect, except solely as to such Noteholder.



(d) Except as otherwise stated in paragraph (a) above and Articles XI and XII,
wherever in this Agreement action is required or permitted to be taken by, or consent is required
of, or a matter requires the satisfaction of, the Noteholders, such action may be taken by, and/or
such consent may be obtained from, and/or such satisfaction may be expressed by, the Requisite
Holders.



14.2 Addresses for Notices, Etc. All notices, requests, demands and other communications
provided for hereunder shall be in writing and mailed (by first class registered or certified mail,
postage prepaid), sent by express overnight courier service or facsimile transmission, or delivered
to the applicable party at the addresses indicated below:




If to the Note Parties:




Endeavour International Corporation


1001 Fannin, Suite 1600


Houston, Texas 77002


Telephone: (713) 307-8700


Facsimile: (713) 307-8794


Attention: Chief Financial Officer




If to any Initial Noteholder:




At such Initial Noteholder’s address for notice as set forth in Schedule 3.1
hereto;




If to any other Noteholder:




At such Noteholder’s address for notice as set forth in the transfer records
of the Company



or, as to each of the foregoing, at such other address as shall be designated by such Person in a
written notice to the other party complying as to delivery with the terms of this Section (such
designation, if made by a Noteholder holding Notes, to be recorded by the Company in the Note
Register). All such notices, requests, demands and other communications shall be deemed to have
been validly served, given or delivered (a) in the case of communications to the
Noteholders in respect of any matter contemplated by Section 6.2(c) , when
received, and (b) in the case of all other communications, (i) upon the earlier of
actual receipt and three days after deposit in the United States mail, registered or certified
mail, return receipt requested, with proper postage paid, (ii) upon transmission, when sent
by telecopy or other similar facsimile transmission and confirmed by telephone, (iii) one
Business Day after deposit with a reputable overnight courier with all charges prepaid or
(iv) when delivered, if hand delivered by messenger.



14.3 No Waiver; Cumulative Remedies. No failure or delay on the part of any Noteholder, in
exercising any right, power or remedy hereunder shall operate as a suspension or waiver thereof;
nor shall any single or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy hereunder. The
remedies herein provided are cumulative and not exclusive of any remedies provided by law.



14.4 Costs, Expenses and Taxes. The Company agrees to promptly pay following demand
therefor (i) all reasonable out-of-pocket costs and expenses of the Noteholders in
connection with the administration, modification and amendment of this Agreement, the Notes, the
other Subordinated Debt Documents and other instruments and documents to be delivered hereunder
(including, without limitation, the reasonable fees and expenses of counsel for the Noteholders),
(ii) all reasonable out-of-pocket costs and expenses of each Noteholder in connection with
the enforcement of this Agreement, the Notes, the other Subordinated Debt Documents and other
instruments and documents to be delivered hereunder (including, without limitation, with respect to
enforcement of rights under this Section 14.4 and Section 14.5), whether
in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding
affecting creditors’ rights generally (including, without limitation, the reasonable fees and
expenses of counsel for all Noteholders with respect thereto) (including, without limitation, with
respect to enforcement of rights under this Section 14.4 and
Section 14.5), (iii) any and all stamp, registration, documentary and other similar
taxes (expressly excluding income and capital gain taxes) payable or determined to be payable in
connection with the execution, delivery, performance and enforcement of this Agreement, the Notes,
the other Subordinated Debt Documents, and the other instruments and documents to be delivered
hereunder or thereunder and (iv) the expenses of preparing Notes from time to time in
connection with exchanges and transfers of Notes, and the Note Parties agrees to save each
Noteholder harmless from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and filing fees.



14.5 Indemnification; Limitation of Liability.



In addition to the payment of expenses pursuant to Section 14.4, whether or not the
transactions contemplated hereby shall be consummated, each Note Party agrees, jointly and
severally, to indemnify, pay and hold each Noteholder and the partners, members, officers,
directors, employees, Affiliates and agents of each Noteholder (collectively, the
“Indemnitees”) harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, interest and penalties with respect
thereto and out-of-pocket expenses and the fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial proceedings, whether or not such
Indemnitees shall be designated a party thereto), whether absolute, accrued, conditional or
otherwise and whether or not resulting from third party claims, which may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or arising out of
(i) the Subordinated Debt Documents and all other matters related thereto or in connection
therewith, (ii) the Noteholders’ agreement to acquire the Notes, (iii) the
violation of any securities law by any Note Party, or (iv) the failure of any of the
parties (other than the Noteholders) to the Subordinated Debt Documents to comply with any law,
rule or regulation applicable to the transactions contemplated thereby (the “Indemnified
Liabilities”); provided that no Note Party shall have any obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are
determined by a final and non-appealable decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Indemnitee; provided,
further, that the Note Parties shall not be required to reimburse the legal fees and
expenses of more than one outside counsel (in addition to up to one local counsel in each
applicable local jurisdiction) for all Indemnitees under this Section 14.5 unless, in the
written opinion of outside counsel reasonably satisfactory to the Company, representation of all
such indemnified persons would be inappropriate due to the existence of an actual or potential
conflict of interest. Notwithstanding any thing to the contrary set forth herein, the agreements
and obligations of the Note Parties contained in this Section 14.5 shall survive
the payment in full of principal, interest and all other amounts payable hereunder and under any of
the other Subordinated Debt Documents.



No Noteholder shall have any liability to any Note Party (whether in tort, contract, or
otherwise) for consequential damages suffered by such Note Party in connection with, arising out
of, or in any way related to, the transactions or relationships contemplated by the Subordinated
Debt Documents, or any act, omission or event occurring in connection therewith, or for any
special, exemplary or punitive damages, and each Note Party hereby waives, to the maximum extent
not prohibited by law, any right it may have to claim or recover any of the foregoing.



14.6 Successors and Assigns; No Third-Party Beneficiaries. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the Company and each of the Noteholders and
their respective successors and assigns and, in particular, shall inure to the benefit of and be
enforceable by any Noteholder or Noteholders holding the Notes from time to time, except that no
Note Party shall have the right to assign its rights hereunder or any interest therein without the
prior written consent of the Noteholders and Noteholders shall have the right to transfer Notes in
accordance with Section 6.5. Any such purported assignment by a Note Party without the
prior written consent of the Noteholders shall be null and void ab initio. Except as expressly set
forth herein, nothing in this Agreement shall confer any claim, right, interest or remedy on any
third party or inure to the benefit of any third party.



14.7 Survival of Agreements; Representations and Warranties. All agreements,
representations and warranties contained in this Agreement, the Notes, the other Subordinated Debt
Documents or any other instrument or document delivered in connection herewith or therewith, or
made in writing by or on behalf of any of the Note Parties in connection herewith or therewith,
shall survive the execution and delivery hereof and thereof, regardless of any investigation made
by the Noteholders or on behalf of the Noteholders. All statements in any certificate or other
instrument delivered by or on behalf of any of the Note Parties pursuant to the terms of this
Agreement shall constitute warranties and representations hereunder. All obligations hereunder
(other than payment of the Notes, but including, without limitation, reimbursement obligations in
respect of costs, expenses and fees) shall survive the payment of the Notes and the termination
hereof.



14.8 Prior Agreements. Except as stated in Section 14.7, this Agreement
constitutes the entire agreement between the parties and supersedes any prior understandings or
agreements, written or oral, concerning the subject matter hereof.



14.9 Severability. If any provision of this Agreement is held to be invalid or
unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the
intent of the parties hereto to the maximum extent possible. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.



14.10 GOVERNING LAW. THIS AGREEMENT AND (UNLESS OTHERWISE EXPRESSLY PROVIDED) ALL
AMENDMENTS AND SUPPLEMENTS TO, AND ALL CONSENTS AND WAIVERS PURSUANT TO, THIS AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS RULES THEREOF TO THE EXTENT THEY ARE NOT
MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAW OF ANOTHER
JURISDICTION.



14.11 Consent to Jurisdiction.



Each Note Party irrevocably submits to the non-exclusive jurisdiction of any state or federal
court sitting in the County of New York over any suit, action or proceeding arising out of or
relating to this Agreement, the Notes or any of the other Subordinated Debt Documents. To the
fullest extent it may effectively do so under Applicable Law, each Note Party irrevocably waives
and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not
subject to the jurisdiction of any such court, any objection that it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.



Each Note Party agrees, to the fullest extent it may effectively do so under Applicable Law,
that a judgment in any suit, action or proceeding of the nature referred to in paragraph (a) above
brought in any court referred to therein shall, subject to such rights of appeal on issues other
than jurisdiction as may be available to such Note Party, be conclusive and binding upon such Note
Party and may be enforced in the courts of the United States of America or the State of New York
(or any other courts to the jurisdiction of which such Note Party is or may be subject) by a suit
upon such judgment.



14.12 WAIVER OF JURY TRIAL. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER SUBORDINATED DEBT DOCUMENT, OR THE BREACH, TERMINATION OR
VALIDITY OF THIS AGREEMENT, OR ANY OTHER SUBORDINATED DEBT DOCUMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER,
(B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION 14.12.



14.13 Service of Process. Each Note Party consents to service of process in any suit,
action or proceeding of the nature referred to in Section 14.11 by actual receipt
of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to
the address of such Note Party specified in or designated pursuant to Section 14.2. Each
Note Party agrees that such service (i) shall be deemed in every respect effective service
of process upon such Note Party in any such suit, action or proceeding and (ii) shall, to
the fullest extent permitted by law, be taken and held to be valid personal service upon and
personal delivery to such Note Party. Nothing in this Agreement shall affect the right of any
Noteholder to serve process in any manner permitted by law, or limit any right that any Noteholder
may have against any of the Note Parties to bring proceedings against the Note Parties in the
courts of any jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.



14.14 Further Assurances. From and after the date of this Agreement, upon the request of
the Noteholders, each Note Party shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of the Subordinated Debt Documents.



14.15 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 any Noteholder at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information previously or
hereafter furnished to any Noteholder, may be reproduced by any Noteholder by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar process and such
Noteholder may destroy any original document so reproduced. The Company agrees and stipulates
that, to the fullest extent permitted by Applicable Law, any such reproduction shall be admissible
in 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 such Noteholder in the
regular course of business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. This Section 14.15 shall
not prohibit the Company or any other Noteholder 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.



14.16 Counterparts. This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and each of the parties hereto
may execute this Agreement by signing any such counterpart. Delivery of an executed counterpart of
this Agreement or any of the other Subordinated Debt Documents (except the Notes) by telecopy shall
have the same force and effect as the delivery of an original executed counterpart of this
Agreement or any of such other Subordinated Debt Documents. Any party delivering an executed
counterpart of any such agreement by telecopy shall also deliver an original executed counterpart,
but the failure to do so shall not affect the validity, enforceability or binding effect of such
agreement.



[The remainder of this page has been left blank intentionally]




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



	 	 	 	 	 
	COMPANY:	 	ENDEAVOUR INTERNATIONAL CORPORATION
	 	 	By:
	 	/s/ J. Michael Kirksey

	 	 	 	 	 

	 	 	 	 	Name: J. Michael Kirksey

Title: Executive Vice President and

Chief Financial Officer







1




	 	 	 	 	 
	COMPANY:	 	ENDEAVOUR INTERNATIONAL CORPORATION
	NOTEHOLDERS:
	 	KINGS ROAD INVESTMENTS

By:
	 	LTD.

/s/ Brandon Jones

	 	 	 	 	 








	 	 	Name: Brandon Jones






Title: Authorized Signatory



2



	 	 	 
	ETON PARK FUND, L.P.
	By:

	 	/s/ Marcy Engel
	
 
	 	 







	 	 	Name: Marcy Engel

Title: Chief Operating Officer and General

Counsel





	 	 	 
	ETON PARK MASTER FUND, L.P.
	By:

	 	/s/ Marcy Engel
	
 
	 	 







	 	 	Name: Marcy Engel

Title: Chief Operating Officer and General

Counsel




3









	 	 	 
	TPG-AXON PARTNERS, L.P.
	By:

	 	/s/ Mary Lee
	
 
	 	 







	 	 	Name: Mary Lee

Title: Chief Legal Officer





	 	 	 
	TPG-AXON PARTNERS (OFFSHORE), LTD.
	By:

	 	/s/ Mary Lee
	
 
	 	 







	 	 	Name: Mary Lee

Title: Chief Legal Officer




4









	 	 	 
	MAGNETAR CAPITAL MASTER FUND, LTD.
	By:

	 	/s/ Doug Litowitz
	
 
	 	 







	 	 	Name: Doug Litowitz

Title: Counsel




5










GOLDMAN, SACHS INVESTMENT PARTNERS MASTER FUND, L.P.



By: /s/ Raanan Agus

Name: Raanan Agus

Title: Managing Director




6



	 	 	 
	HIGHBRIDGE INTERNATIONAL LLC
	By:

	 	/s/ Mark Vanacole
	
 
	 	 







	 	 	Name: Mark Vanacole

Title: Managing Director




7









	 	 	 
	CAPITAL VENTURES INTERNATIONAL
	By:

	 	/s/ Michael Spolan
	
 
	 	 







	 	 	Name: Michael Spolan

Title: General Counsel




8









	 	 	 
	PROFESSIONAL LIFE & CASUALTY
	By:

	 	/s/ R. Jeffrey Bruce
	
 
	 	 







	 	 	Name: R. Jeffrey Bruce

Title: Vice President




9









	 	 	 
	HBK MASTER FUND, L.P.
	By:

	 	/s/ Kevin O’Neal
	
 
	 	 







	 	 	Name: Kevin O’Neal

Title: Authorized Signatory





Schedule 2.1

Initial Noteholders




	 
	Kings Road Investments Ltd.

	Eton Park Fund, L.P.

	Eton Park Master Fund, Ltd.

	TPG-Axon Partners, L.P.

	TPG-Axon Partners (Offshore), Ltd.

	Magnetar Capital Master Fund, Ltd.

	Goldman, Sachs Investment Partners Master Fund, L.P.

	Highbridge International LLC

	Capital Ventures International

	Professional Life & Casualty

	HBK Master Fund, L.P.







10




EXHIBIT A




[FORM OF NOTE]

SENIOR SUBORDINATED NOTE

ENDEAVOUR INTERNATIONAL CORPORATION




12.00% Senior Subordinated Note Due 2014




THIS NOTE IS SUBORDINATED TO THE COMPANY’S AND EACH GUARANTOR’S OBLIGATIONS TO CERTAIN HOLDERS OF
SENIOR SECURED DEBT, AS MORE FULLY DESCRIBED IN THE NOTE AGREEMENT DATED NOVEMBER [l], 2009,
AMONG ENDEAVOUR INTERNATIONAL CORPORATION, THE GUARANTORS PARTY THERETO AND THE NOTEHOLDERS NAMED
THEREIN, AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME.



11



	 	 	 
	Number: [ ]

$     

	 	[• ]

New York, New York






FOR VALUE RECEIVED, the undersigned, Endeavour International Corporation, a Nevada corporation
(the “Company”), HEREBY PROMISES TO PAY TO        (the “Noteholder”), or
its registered assigns, the principal sum of $      together with interest on such
principal amount. This Note shall bear interest (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid principal amount at the rate of 12.00% per annum of which 10.00% per
annum shall be payable in cash quarterly in arrears on each Quarterly Payment Date in each year,
commencing with the next Quarterly Payment Date following the Closing Date and 2.00% per annum
shall be added to the principal amount of this Note on each Quarterly Payment Date in each year
(such interest added to principal, “Capitalized Interest”). The Company shall make
scheduled quarterly installments of principal repayments on this Note as set forth in Section 6.2
of the Note Agreement (as defined below). The outstanding principal balance of this Note
(including all Capitalized Interest) together with all accrued but unpaid interest thereon shall be
payable in full on November [      ], 2014.



In addition to the payment of interest as provided above, if any amount of principal, interest
or other amount payable under this Note is not paid when due, the Company shall pay interest on
such unpaid amount at the default rate of interest set forth in the Note Agreement, to the fullest
extent permitted by applicable law.



This Note is one of the “Notes” referred to in the Note Agreement dated as of November [      ],
2009 (as the same may be amended, modified or supplemented from time to time, the “Note
Agreement”) by and among the Company, the Guarantors from time to time party thereto and the
Noteholders named therein. Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Note Agreement. The registered holder of this Note is entitled to the
benefits of the Note Agreement and may enforce the agreements of the Company and the other Note
Parties contained therein and exercise the remedies provided thereby or otherwise available in
respect thereof. The terms of the Note Agreement are hereby incorporated by reference herein as if
set forth herein in their entirety. In the event of any conflict between the terms of this Note
and the Note Agreement, the terms of the Note Agreement shall govern.



The Company shall have the right to voluntarily repay all or any part of the outstanding
principal amount of this Note, subject to the provisions of the Note Agreement. In addition, the
Company is required under certain circumstances to make certain mandatory offers to repurchase all
or a portion of this Note as provided in the Note Agreement.



Whenever any payment to be made shall be due on a day which is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest due.



This Note is a registered note and, as provided in the Note Agreement, no Note may be
transferred unless such transfer is recorded in the Note Register. The terms of this Note are
subject to amendments only in the manner provided in the Note Agreement.



The registered holder of this Note is entitled to all the benefits and rights of a Noteholder
under the Note Agreement to which reference is hereby made for a statement of the terms and
conditions under which the entire unpaid balance of this Note, or any portion thereof, shall become
immediately due and payable.



The occurrence and continuance of an Event of Default under the Note Agreement which has not
been waived in accordance with the terms thereof, shall constitute a default hereunder and shall
entitle the holder of this Note to exercise the rights and remedies as and in the manner specified
in the Note Agreement.



Time is of the essence of this Note. The Company hereby waives demand, presentment, protest,
notice of nonpayment and other demands and notices in connection with the delivery, acceptance or
enforcement of this Note.



No delay or omission on the part of the holder of this Note in exercising any right hereunder
shall operate as a waiver of such right or of any other right under this Note, and a waiver, delay
or omission on any one occasion shall not be construed as a bar to or waiver of any such right on
any future occasion.



[The remainder of this page has been left blank intentionally]




THIS NOTE SHALL BE DEEMED TO BE UNDER SEAL, AND ALL RIGHTS AND OBLIGATIONS HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS RULES THEREOF TO THE EXTENT
THEY ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE
LAW OF ANOTHER JURISDICTION.



THIS NOTE PROVIDES FOR A PORTION OF THE INTEREST TO BE CAPITALIZED, WHICH MAY BE DEEMED TO BE
AN ISSUANCE OF THIS NOTE WITH “ORIGINAL ISSUE DISCOUNT.” UPON REQUEST BY A NOTEHOLDER, WHICH
REQUEST MAY BE PROVIDED IN WRITING TO “ATTN: CHIEF FINANCIAL OFFICER” AT THE FOLLOWING ADDRESS:
ENDEAVOR INTERNATIONAL CORPORATION, 1001 FANNIN, SUITE 1600, HOUSTON, TEXAS 77702, THE COMPANY WILL
PROMPTLY PROVIDE, WITH RESPECT TO THIS NOTE, THE TOTAL AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE
PRICE, THE ISSUE DATE, AND THE YIELD TO MATURITY.




ENDEAVOUR INTERNATIONAL CORPORATION




By:

Name:

Title:




•[Form of Assignment and Acceptance]

ASSIGNMENT AND ACCEPTANCE




This Assignment and Acceptance (this “Assignment”) is dated as of the Effective Date set
forth below and is entered into by and between [      ] (the “Assignor”) and
[      ] (the “Assignee”). Capitalized terms used but not defined herein shall have
the meanings given to them in that certain Note Agreement dated as of November [      ], 2009 (as the
same may be amended, modified or supplemented from time to time, the “Note Agreement”) by
and among Endeavour International Corporation (the “Company”), certain subsidiaries of the Company
as Guarantors and the persons named therein as Noteholders, receipt of a copy of which is hereby
acknowledged by the Assignee.



Assignor hereby irrevocably assigns, without recourse, to the Assignee, and the Assignee hereby
irrevocably assumes, without recourse, from the Assignor, as of the Effective Date as set forth
below $[      ]1 principal amount of the Notes issued pursuant to the Note Agreement
(the “Assigned Interest”) and all of the Assignor’s rights and obligations under the Note
Agreement and the other Subordinated Debt Documents to which the Assignor is a party to the extent
of the Assigned Interest. The attached schedule hereto contains all contact information, address,
account and other administrative information relating to the Assignee.



This Assignment shall be binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. This Assignment may be executed in any number of counterparts,
which together shall constitute one instrument. Delivery of an executed counterpart of a signature
page of this Assignment by telecopy shall be effective as delivery of a manually executed
counterpart of this Assignment. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT
TO ANY CONFLICT OF LAWS RULES THEREOF TO THE EXTENT THEY ARE NOT MANDATORILY APPLICABLE BY STATUTE
AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.



Effective Date: [      ]




	1	 	Minimum amount and multiples of $250,000.




12









IN WITNESS WHEREOF, the undersigned has caused this Assignment and Acceptance to be duly executed
and delivered by its officer thereunto duly authorized as of [      ].



[      ] [      ]


as Assignor as Assignee



By:       By:       



	 	 	 
	Name

	 	Name:
	Title:

	 	Title:






Acknowledged by:



ENDEAVOUR INTERNATIONAL CORPORATION



By:       

Name:

Title:




Date:       



13



SCHEDULE



Name and Address of Assignee




	 	 	 	 	 
	[      ]
	 	(1	)	 	All payments by wire transfer of immediately available funds

to:

	 	 	 	 	[      ]

	 	(2	)	 	All notices of payments and written

confirmations of such wire transfers to:

	 	 	 	 	[      ]

	 	(3	)	 	All other communications:

	 	 	 	 	[      ]







•• COMPLIANCE CERTIFICATE




THE UNDERSIGNED HEREBY CERTIFIES OF BEHALF OF ENDEAVOUR INTERNATIONAL CORPORATION AS FOLLOWS:



1. I am the [Chief Financial Officer] of ENDEAVOUR INTERNATIONAL CORPORATION, a Nevada
corporation (the “Company”).



I have reviewed the terms of that certain Note Agreement, dated as of November [l], 2009
(as it may be amended, supplemented, restated or otherwise modified, the “Note Agreement”;
the terms defined therein and not otherwise defined herein being used herein as therein defined),
by and among the Company, certain subsidiaries of the Company, as Guarantors, and the persons named
therein as the Noteholders and each of the other Subordinated Debt Documents (as defined in the
Note Agreement) and I have made, or caused to be made under my supervision, a review in reasonable
detail of the transactions and the consolidated financial condition of the Company and its
Subsidiaries during the accounting period covered by the attached financial statement.



2. The examination described in paragraph 1 above did not disclose, and I have no knowledge as
of the date hereof of, the existence of any condition or event which constitutes an Event of
Default or Default during or at the end of the accounting periods covered by the attached financial
statements or as of the date of this Certificate, except as set forth in a separate attachment, if
any, to this Certificate, describing in reasonable detail, the nature of the condition or event,
the period during which it has existed and the action which Borrower has taken, is taking, or
proposes to take with respect to each such condition or event.



The foregoing certifications and the financial statements delivered with and attached as Annex
A to this Certificate, or deemed delivered under Section 8.1(d) of the Note Agreement, in support
hereof, are made and delivered or deemed delivered on [mm/dd/yy] pursuant to Section 8.1(c) (and,
if applicable Section 8.1(d)) of the Note Agreement.




ENDEAVOUR INTERNATIONAL CORPORATION



By:

Name:

Title:




14



ANNEX A TO


COMPLIANCE CERTIFICATE



[FINANCIALS]




• SUBSIDIARY JOINDER AGREEMENT




SUBSIDIARY JOINDER AGREEMENT dated as of [      ] (this “Agreement”), by
[      ], a [      ] corporation (the “Guarantor”)
for the benefit of the Noteholders referred to below.



WHEREAS, Endeavor International Corporation (the “Company”) is a party to that certain
Note Agreement dated November [      ], 2009 among the Company, certain subsidiaries of the Company as
Guarantors, and the person named therein as Noteholders (as amended, supplemented or otherwise
modified from time to time, the “Note Agreement”);



WHEREAS, the Guarantor desires to become a party to the Note Agreement as a Guarantor
thereunder; and



WHEREAS, terms defined in the Note Agreement and not otherwise defined herein have, as used
herein, the respective meanings provided for therein;



NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees as follows:



1. Guarantee. The Guarantor unconditionally guarantees, as primary obligor and not
merely as surety, jointly and severally with each other Guarantor, the Note Guaranteed Obligations.
The Guarantor acknowledges that, by execution and delivery of this Agreement, the Guarantor
becomes a “Guarantor” and “Note Party” for all purposes of the Note Agreement and that its
obligations under the foregoing guarantee are subject to all the provisions of the Note Agreement
(including, without limitation, those set forth in Article XIII thereof) applicable to the
obligations of a Guarantor thereunder.




2. Party to Note Agreement. By execution and delivery of this Agreement, the Guarantor
is hereby a party to the Note Agreement and will hereafter have all the rights and
obligations of a Guarantor and a Note Party thereunder and be bound by all the provisions
thereof as fully as if the Guarantor were one of the original parties thereto.



3. Representations and Warranties. The Guarantor hereby represents and warrants that
each of the representations and warranties set forth in Article V of the Note Agreement, that are
applicable to the Guarantor, is true and correct both before and after giving effect to this
Agreement, except to the extent any such representation and warranty relates solely to any earlier
date, in which case such representation and warranty is true and correct as of such earlier date.
For purposes of the foregoing sentence, references in said Sections to a “Guarantor” or a “Note
Party” shall be deemed to include a reference to the Guarantor.



5. Governing Law. This Agreement shall be construed in accordance with and governed by the
laws of the State of New York.



15



IN WITNESS WHEREOF, the party hereto has caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.



	 	 	 
	[      ]
	By:
	 	


	 	 	Name:

	 	 	Title:








16