Unassociated Document


    
      EXECUTION
VERSION


    

    PLAN SUPPORT
AGREEMENT

     

    This PLAN
SUPPORT AGREEMENT, dated as of September 3, 2009 (this “Agreement”), is
entered into by and among:

     

    (A)           the
undersigned holders (collectively, the “Senior Noteholders”)
of 11-3⁄4% senior notes due 2011 (the “Senior Notes”) of
Haights Cross Operating Company (“HCOC”) issued
pursuant to the Senior Note Indenture;

     

    (B)           the
undersigned holders (collectively, the “Senior Discount
Noteholders” and, together with the Senior Noteholders, the “Noteholders”) of
12-1⁄2% senior discount notes due 2011 (the “Senior Discount
Notes”) of Haights Cross Communications, Inc. (“HCC”) issued pursuant
to the Senior Discount Note Indenture;

     

    (C)           each
of the lenders under that certain Credit Agreement, dated as of August 15,
2008 (as amended, restated, supplemented or otherwise modified from time to
time, the “Credit
Agreement”), by and among HCOC, as borrower, the guarantors party
thereto, including HCC, and DDJ Capital Management, LLC, as administrative agent
on behalf of the lenders party thereto from time to time (collectively, the
“Credit Agreement
Lenders” and, together with the Noteholders, the “Plan Support
Parties”); and

     

    (D)           HCC,
HCOC and all of its direct and indirect U.S. subsidiaries party to Prepetition
Indebtedness, Triumph Learning, LLC, SNEP, LLC and Recorded Books, LLC
(collectively, the “Company”).

     

    WHEREAS:

     

    A.           The
Company and the Plan Support Parties have discussed consummating a financial
restructuring (the “Restructuring”) of
the Senior Notes, the Senior Discount Notes and the Credit Agreement Loans
(collectively, the “Prepetition
Indebtedness”) on substantially the terms set forth in the term sheet
attached hereto as Exhibit A (the “Term
Sheet”).

     

    B.           The
Credit Agreement Lenders have agreed to extend the Forbearance Agreement
pursuant to the Extension Letter.

     

    C.           The
Company and each Plan Support Party (each a “Party” and
collectively, the “Parties”) anticipate
that the Restructuring will be implemented either (1) through a
solicitation of votes for a “prepackaged” plan of reorganization (a “Prepackaged Case”)
pursuant to a transaction exempt from registration under the Securities Act of
1933, as amended (the “Securities Act”), and
sections 1125 and 1145 of chapter 11 of title 11 of the United
States Code, 11 U.S.C. §§101 et seq. (as may be amended
from time to time, the “Bankruptcy Code”) or
(2) through a “prenegotiated” plan of reorganization (a “Prenegotiated Case”),
whereby the Definitive Documents will be finalized prior to the Petition Date,
and votes on the Plan will be solicited during the Chapter 11 Cases, in
either event involving chapter 11 proceedings commenced in either the
United States Bankruptcy Court for the Southern District of New York or the
District of Delaware, as determined by the Company and the Requisite Plan
Support Parties (the “Bankruptcy
Court”).


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    NOW, THEREFORE, in
consideration of the covenants and agreements contained herein, and for other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each Party, intending to be legally bound hereby, agrees as
follows:

     

    SECTION
1. Definitions.  The
following terms shall have the following definitions:

     

    “Administrative Expense
Claims” has the meaning set forth in the Term Sheet.

     

    “Agent” has the
meaning set forth in the Credit Agreement.

     

    “Agreement” has the
meaning set forth in the preamble hereto.

     

    “Agreement Effective
Date” has the meaning set forth in Section 2 hereof.

     

    “Assumption Agreement”
has the meaning set forth in Section 6 hereof.

     

    “Ballot” means the
ballot distributed with the Disclosure Statement for voting on the
Plan.

     

    “Bankruptcy Code” has
the meaning set forth in the recitals hereto.

     

    “Bankruptcy Court” has
the meaning set forth in the recitals hereto.

     

    “Bankruptcy Court
Filing” has the meaning set forth in Section 8 hereof.

     

    “Business Day” means a
day (other than a Saturday or Sunday) on which banks are open for general
business in New York City.

     

    “Cash Collateral
Stipulation” means a stipulation between the Credit Agreement Lenders,
the Agent and the Filing Entities providing for the use of Cash Collateral
during the pendency of the Chapter 11 Cases and the provision of “adequate
protection” for the benefit of the Credit Agreement Lenders, in form and
substance reasonably satisfactory to the Credit Agreement Lenders and the
Company.

     

    “Cash Collateral”
means all cash in which the Filing Entities have an interest that is “cash
collateral,” within the meaning of section 363(a) of the Bankruptcy Code,
of the Credit Agreement Lenders.

     

    “Chapter 11
Cases” means the voluntary chapter 11 proceedings to be commenced in
the Bankruptcy Court by the Filing Entities for the purpose of consummating the
Transactions.

     

    “Company” has the
meaning set forth in the preamble hereto.

     

    “Credit Agreement” has
the meaning set forth in the preamble hereto.

     

    “Credit Agreement
Lenders” has the meaning set forth in the preamble
hereto.


    
      
         


      

      
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    “Credit Agreement
Loans” means the loans made under the Credit Agreement.

     

    “Credit Parties” has
the meaning set forth in the Credit Agreement.

     

    “DDJ” means DDJ
Capital Management, LLC.

     

    “Definitive Documentation
Completion Date” has the meaning set forth in Section 4(a)(iii)(B)(1)
hereof.

     

    “Definitive Documents”
means the First Day Papers, the Disclosure Statement, the Plan, the
Intercreditor Agreement, the Cash Collateral Stipulation, the indentures with
respect to the New First Lien Notes and New Second Lien Notes, the Exit
Warrants, the shareholders agreement among the holders of the Reorganized HCC
Common Stock, and all related documents, exhibits, annexes and schedules, in the
respective forms attached to the IC Acknowledgment (to the extent applicable),
as such documents may be amended, modified or supplemented from time to time in
accordance with the terms hereof and thereof and with such immaterial
clarifications and grammatical changes as may be necessary.

     

    “Disclosure Statement”
means the solicitation and disclosure statement describing, among other things,
the Plan and the Restructuring contemplated by the Term Sheet, in the form
attached to the IC Acknowledgement.

     

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

     

    “Exit Warrants” means
the warrants described in Schedule 3 to the Term Sheet.

     

    “Extension Letter”
means that certain letter agreement, dated as of the date hereof, by and among
the Credit Parties, the Agent and the Credit Agreement Lenders party thereto, as
such letter agreement may be modified from time to time.

     

    “Filing Entities”
means HCC, HCOC, and any direct or indirect U.S. subsidiaries.

     

    “Financing Commitment”
means a commitment letter from one or more financial institutions, reasonably
acceptable in form and substance to the Requisite Plan Support Parties and the
Company, committing such financial institutions to provide $100 million of debt
financing to the Reorganized Company, on terms and conditions reasonably
acceptable to the Requisite Plan Support Parties and the Company and, in any
event, not on terms and conditions less favorable than the New First Lien Notes
(as reasonably determined by the Requisite Plan Support Parties and the
Company).

     

    “First Day Papers”
means any and all “first day” motions to be filed in connection with the Chapter
11 Cases (and all exhibits, supplements or annexes thereto), including, without
limitation, for approval of the Cash Collateral Stipulation.


    
      
         


      

      
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    “Forbearance
Agreement” means that certain Fourth Forbearance Agreement and Amendment
No. 1 to Credit Agreement, dated as of May 7, 2009, as amended by that certain
(i) letter agreement, dated as of June 5, 2009, by and among the Credit Parties,
the Agent and the Credit Agreement Lenders party thereto, (ii) letter agreement,
dated as of July 16, 2009, by and among the Credit Parties, the Agent and the
Credit Agreement Lenders party thereto, (iii) letter agreement, dated as of July
30, 2009, by and among the Credit Parties, the Agent and the Credit Agreement
Lenders party thereto, (iv) letter agreement, dated as of August 7, 2009, by and
among the Credit Parties, the Agent and the Credit Agreement Lenders party
thereto, (v) letter agreement, dated as of August 20, 2009, by and among the
Credit Parties, the Agent and the Credit Agreement Lenders party thereto and
(vi) the Extension Letter, as such agreement may be further modified or amended
from time to time.

     

    “HCC” has the meaning
set forth in the preamble hereto.

     

    “HCOC” has the meaning
set forth in the preamble hereto.

     

    “IC Acknowledgment”
has the meaning set forth in Section 10 hereof.

     

    “Indentures” means,
collectively, the Senior Note Indenture and the Senior Discount Note
Indenture.

     

    “Informal Committee of Senior
Notes” means the informal committee consisting of DDJ, Bennett Management
Corporation, AIG Global Investment Corp. and GoldenTree Asset Management, in
each case on behalf of certain funds and accounts, so long as (a) the funds
and/or accounts such firms manage and/or advise continue to hold Prepetition
HCOC Indebtedness and (b) such firms have not resigned from such
committee.

     

    “Intercreditor
Agreement” has the meaning set forth in the Term Sheet.

     

    “Material Adverse
Change” has the meaning set forth in Section 5(f)(vi)
hereof.

     

    “New Event of Default”
means any “Event of Default” under Sections 8.1(a) (payment default), 8.1(b)
(representations), 8.1(f) (cross-default) (so long as any notice or grace period
relating to any applicable “Material Indebtedness” or “Material Rental
Obligation” has expired, and provided that in no event shall any “Event of
Default” arising from or relating to any breach or violation of the Indentures
constitute a “New Event of Default”), 8.1(j) (certain judgments), 8.1(k)
(certain ERISA events), 8.1(l) (change of control), 8.1(m) (validity of Liens of
Credit Agreement Lenders), 8.1(n) (certain uninsured losses) and/or 8.1(o)
(challenge to Credit Agreement or related loan documents by Guarantors) of the
Credit Agreement, except that “New Event of Default”: shall not include any
Event of Default that is the subject of a Specified Forbearance
Item.

     

    “New First Lien Notes”
means the notes described in Schedule 1 to the Term Sheet.

     

    “New Second Lien
Notes” means the notes described in Schedule 2 to the Term
Sheet.

     

    “Noteholders” has the
meaning set forth in the preamble hereto.


    
      
         


      

      
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    “Outside Date” means
November 3, 2009, as may be extended in accordance with the terms
hereof.

     

    “Party” has the
meaning set forth in the recitals hereto.

     

    “Person” means and
includes an individual, a partnership, a joint venture, a limited liability
company, a corporation, a trust, an unincorporated organization, a group or any
legal entity or association.

     

    “Petition Date” means,
with respect to each Filing Entity, the date on which it commences a
Chapter 11 Case.

     

    “Plan Effective Date”
means the date on which the Plan becomes effective in accordance with the terms
thereof.

     

    “Plan Support Party”
has the meaning set forth in the recitals hereto.

     

    “Plan” means the
Filing Entities’ joint “prepackaged” or “prenegotiated” plan of reorganization,
in respect of the Chapter 11 Cases, as applicable, including all exhibits and
supplements thereto, the terms of which are consistent with the Term Sheet, and
in the form attached to the IC Acknowledgement.

     

    “PPS Completion Date”
has the meaning set forth in Section 4(a)(iii)(A)(3) hereof.

     

    “Prenegotiated Case”
has the meaning set forth in the recitals hereto.

     

    “Prepackaged Case” has
the meaning set forth in the recitals hereto.

     

    “Prepackaged
Solicitation” means a prepetition solicitation of votes on the Plan in a
manner exempt from registration under the Securities Act.

     

    “Prepetition HCOC
Indebtedness” means, collectively, the Senior Notes and the Credit
Agreement Loans.

     

    “Prepetition
Indebtedness” has the meaning set forth in the recitals
hereto.

     

    “Priority Tax Claims”
has the meaning set forth in the Term Sheet.

     

    “Qualifying Committee
Member” means any member of the Informal Committee of Senior Notes
holding an aggregate principal amount of at least $35 million in Prepetition
HCOC Indebtedness.

     

    “Representative”
means, with respect to any Party, such Party’s affiliates and its and their
directors, officers, employees, agents and advisors (including, without
limitation, financial advisors, counsel and accountants).

     

    “Reorganized Company”
means, collectively, the Filing Entities as reorganized pursuant to the
Plan.

     


    
      
         


      

      
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    “Reorganized HCC”
means HCC as reorganized pursuant to the Plan.

     

    “Reorganized HCC Common
Stock” has the meaning set forth in the Term Sheet.

     

    “Reorganized HCOC”
means HCOC as reorganized pursuant to the Plan.

     

    “Requisite Plan Support
Parties” means all of the members of the Informal Committee of Senior
Notes that are Qualifying Committee Members, and any assignee (pursuant to
Section 6 hereof) of the Prepetition HCOC Indebtedness so long as such assignee
holds (a) at least $35 million in aggregate principal amount of Prepetition HCOC
Indebtedness and (b) less than $15 million in aggregate principal amount of
Senior Discount Notes; provided, however, that for purposes of
Section 5(f)(i) hereof, solely the Plan Support Parties that are in compliance
with the terms of Section 3(c) and (d) hereof shall be considered in the use of
this term.

     

    “Restructuring” has
the meaning set forth in the recitals hereto.

     

    “Rights Offering” has
the meaning set forth in the Term Sheet.

     

    “Rights Offering
Proceeds” has the meaning set forth in the Term Sheet.

     

    “Senior Discount Note
Indenture” means the indenture governing the Senior Discount Notes, among
HCC as obligor and Wells Fargo Bank Minnesota, N.A. as trustee, dated as of
February 2, 2004, as subsequently amended, modified or supplemented, and
the agreements entered into and documents delivered in connection
therewith.

     

    “Senior Discount
Noteholders” has the meaning set forth in the preamble
hereto.

     

    “Senior Discount
Notes” has the meaning set forth in the preamble hereto.

     

    “Senior Note
Indenture” means the indenture governing the Senior Notes, among HCOC as
obligor, HCC as parent guarantor, the subsidiary guarantors named therein, and
Wells Fargo Bank Minnesota, N.A. as trustee, dated as of August 20, 2003,
as subsequently amended, modified or supplemented, and the agreements entered
into and documents delivered in connection therewith.

     

    “Senior Noteholders”
has the meaning set forth in the preamble hereto.

     

    “Senior Notes” has the
meaning set forth in the preamble hereto.

     

    “Solicitation Period”
means the period during which votes to accept or reject the Plan are being
solicited.

     

    “Specified Forbearance
Item” has the meaning set forth in the Forbearance Agreement, as modified
by the Extension Letter.


    
      
         


      

      
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    “Superior Proposal”
means either (a) a bona fide written proposal for a transaction or series of
transactions that the Board of Directors of the Company determines (after
consultation with its legal and financial advisors) in good faith (i) is
reasonably likely to be consummated in a timely manner, taking into account all
factors deemed relevant by such Board of Directors and (ii) if consummated
would, taking into account all factors deemed relevant by such Board of
Directors, result in a cash payment (upon the closing of the transaction or
series of transactions contemplated in such proposal) to or for the benefit of
the holders of the Prepetition HCOC Indebtedness of all amounts due and owing on
account thereof (including postpetition interest, if any) or (b) any proposal
for a transaction or series of transactions with respect to which the Required
Plan Support Parties provide written consent to have treated as a “Superior
Proposal” hereunder.

     

    “Target Commencement
Date” means October 15, 2009.

     

    “Term Sheet” has the
meaning set forth in the recitals hereto.

     

    “Termination Date” has
the meaning set forth in Section 5 hereof.

     

    “Termination Event”
has the meaning set forth in Section 5 hereof.

     

    “Transactions” means,
collectively, the transactions contemplated in this Agreement, the Plan and the
Term Sheet (and all exhibits, supplements or annexes thereto).

     

    “Transfer” has the
meaning set forth in Section 6 hereof.

     

    “Transferee” has the
meaning set forth in Section 6 hereof.

     

    Capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Term Sheet.

     

    SECTION
2. Agreement Effective
Date; Conditions Precedent.  This Agreement shall be effective
at 12:01 a.m. prevailing Eastern Time on the date on which the following
conditions have been satisfied (the “Agreement Effective
Date”):

     

    (a)           the
Company shall have executed and delivered counterpart signature pages to this
Agreement to counsel to the Informal Committee of Senior Notes;

     

    (b)           the
Requisite Plan Support Parties shall have delivered to the Company counterpart
signature pages to this Agreement; and

     

    (c)           the
Informal Committee of Senior Notes shall have determined that, except for
ordinary course claims for professionals, employees, and the lease of HCC
headquarters, substantially all of which are for the benefit of HCOC and its
direct and indirect subsidiaries and for which HCC receives reimbursement from
HCOC, no claims exist against HCC as of the date hereof, and no such claims are
expected to exist as of the filing of the Chapter 11 Cases, other than
claims (A) representing or in connection with (i) the Senior Discount Notes,
(ii) the guaranty under the Credit Agreement, (iii) the guaranty under the
Senior Note Indenture and (iv) the equity of HCC or (B) in an amount and of a
priority reasonably acceptable to the Requisite Plan Support
Parties.


    
      
         


      

      
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    SECTION
3. Commitment of Plan
Support Parties. Subject to the
occurrence of the Agreement Effective Date and prior to the occurrence of the
Termination Date (if applicable), each Plan Support Party shall:

     

    (a)           vote
(or cause or instruct any custodian, nominee or other agent to timely vote) all
Prepetition Indebtedness beneficially owned by such Plan Support Party or for
which it is the nominee, investment manager or advisor for beneficial holders
thereof in favor of the Plan in accordance with the applicable procedures set
forth in the Disclosure Statement and accompanying voting materials, and timely
return a duly-executed Ballot in connection therewith no later than the tenth
(10th)
Business Day following the date of commencement of the Solicitation Period (in
either a Prepackaged Case, Prenegotiated Case or otherwise);

     

    (b)           not
withdraw or revoke its tender, consent or vote, except to the extent that the
terms of the related plan of reorganization are inconsistent with the terms of
the Definitive Documents;

     

    (c)           with
respect to all Senior Notes or Senior Discount Notes held by such Plan Support
Party, forbear from exercising any rights or remedies it may have in respect of
such notes in accordance with the terms and conditions contained in the
Forbearance Agreement, as if (i) such Plan Support Party were party to the
Forbearance Agreement in its capacity of a holder of such notes and (ii) the
Forbearance Agreement specifically referenced and related to the exercise of
rights and remedies under any and all documents relating to such
notes;

     

    (d)           forbear
from exercising any rights or remedies it may have in respect of the Credit
Agreement in accordance with the terms and conditions contained in the
Forbearance Agreement;

     

    (e)           following
the commencement of the Chapter 11 Cases, not (i) object, on any
grounds, to the terms, conditions, nature or amount of the Filing Entities’
proposed use of Cash Collateral, except to the extent that such terms are
inconsistent with the terms contained in the Definitive Documents,
(ii) object, on any grounds, to confirmation of the Plan (without limiting
any right to object to a plan of reorganization containing terms that are
inconsistent with the terms of the Definitive Documents), or (iii) directly
or indirectly seek, solicit, support, vote for, agree to, accept or encourage
(x) any objection to the Plan or (y) any other plan of reorganization
or liquidation or any sale process with respect to the Company (or any of its
business units), including any sale under section 363 of the Bankruptcy
Code;

     

    (f)           not
take any other action, including, without limitation, initiating any legal
proceeding that is inconsistent with, or that would be reasonably likely to
interfere with, delay or impede, directly or indirectly, with the consummation
of the Restructuring and the Transactions;


    
      
         


      

      
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    (g)           use
its commercially reasonable efforts to work with the Company in its efforts to
satisfy the relevant timeline set forth in Section 4(a)(iii) hereof and to
provide the IC Acknowledgment as soon as practicable;

     

    (g)           permit
the filing of this Agreement with the Bankruptcy Court and as an exhibit to the
Plan; provided, that unless required by the Bankruptcy Court, the portions of
the signature pages reflecting the holdings of Prepetition Indebtedness of the
Plan Support Parties shall be redacted from any such filing; and

     

    (h)           not
raise any objection and not support any objection to any retention by the
Company of:  (a) Brown Rudnick LLP as its legal counsel; and/or (b)
Houlihan Lokey, as its financial advisor, so long as such retention is based on
terms and conditions that are substantially the same as were disclosed to the
Plan Support Parties prior to the date hereof.

     

    Notwithstanding
the foregoing, nothing in this Agreement shall be construed as to prohibit any
Party from appearing as a party-in-interest in any matter to be adjudicated in
the Chapter 11 Cases so long as such appearance and the positions advocated
in connection therewith are not materially inconsistent with the terms contained
herein or in the Definitive Documents and are not for the purpose of hindering,
delaying or preventing the consummation of the Transactions.

     

    SECTION
4. The Company
Commitment and Covenants.  (a)
The Company agrees:

     

    (i)           to
support and use its commercially reasonable efforts to complete the
Restructuring;

     

    (ii)           to
use its commercially reasonable best efforts to obtain a Financing Commitment
and consummate the transactions contemplated thereunder in sufficient time so as
not to delay the consummation of the Plan;

     

    (iii)           (A)  in
the event of a Prepackaged Case, to use its commercially reasonable efforts
to:

     

    (1)           commence
the Prepackaged Solicitation on or prior to the Target Commencement
Date;

     

    (2)           complete
the Prepackaged Solicitation on or prior to the twentieth (20th)
Business Day after the actual date on which the Prepackaged Solicitation is
commenced;

     

    (3)           commence
the Prepackaged Case on or prior to the fifth (5th)
Business Day after the completion of the Prepackaged Solicitation (the date of
such completion, the “PPS Completion
Date”);

     

    (4)           take
all steps reasonably necessary and desirable to obtain an order of the
Bankruptcy Court confirming the Plan on or prior to the forty-fifth (45th)
Business Day after the PPS Completion Date; and


    
      
         


      

      
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    (5)           take
all steps reasonably necessary and desirable to cause the effective date of the
Plan to occur on or prior to the fifty-fifth (55th)
Business Day after the PPS Completion Date, and

     

    (B)           in
the event of a Prenegotiated Case, to use its commercially reasonable efforts
to:

     

    (1)           finalize
the Definitive Documents on or prior to Target Commencement Date (the date on
which the Definitive Documents are finalized, the “Definitive Documentation
Completion Date”);

     

    (2)           commence
the Prenegotiated Case on or prior to the fifth (5th)
Business Day after the Definitive Documentation Completion Date;

     

    (3)           take
all steps reasonably necessary and desirable to cause the hearing to approve the
Disclosure Statement to be held on or prior to the fiftieth (50th) day
after the Definitive Documentation Completion Date;

     

    (4)           take
all steps reasonably necessary and desirable to obtain an order of the
Bankruptcy Court confirming the Plan on or prior to the
eighty-fifth (85th) day
after the Definitive Documentation Completion Date; and

     

    (5)           take
all steps reasonably necessary and desirable to cause the effective date of the
Plan to occur on or prior to the one hundredth (100th) day
after the Definitive Documentation Completion Date, and

     

    (iv)           to
take commercially reasonable efforts to do all things reasonably necessary and
appropriate in furtherance of the Restructuring, including, without limitation,
contesting  and immediately seeking to dismiss any involuntary chapter
11 proceeding, receivership, or other insolvency proceeding involuntarily
commenced against the Company, or converting such proceeding into a chapter 11
proceeding consistent with the terms of this Agreement;

     

    (v)           to
take commercially reasonable efforts to obtain any and all required and material
regulatory and/or third-party approvals for the Restructuring;

     

    (vi)           not
to commence, with respect to a Prepackaged Case, the Prepackaged Solicitation,
and with respect to a Prenegotiated Case, the Chapter 11 Cases, prior to
execution and delivery of the IC Acknowledgment by the Requisite Plan Support
Parties; and

     

    (vii)           within
four (4) Business Days of the Agreement Effective Date, file with the Securities
and Exchange Commission (a) a Form 8-K disclosing the material terms of the
Restructuring, in form and substance reasonably satisfactory to the Company and
the Requisite Plan Support Parties and (b) a Form 15 Notice of Suspension of
Duty to File Reports under the Exchange Act.


    
      
         


      

      
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    (b)           On
or prior to the tenth (10th)
Business Day prior to the Target Commencement Date, the Company and the
Requisite Plan Support Parties shall determine (which determination shall be
recorded in writing) whether to effectuate the Restructuring through a
Prepackaged Case or a Prenegotiated Case.

     

    (c)           The
Company shall pay (i) all reasonable fees and out-of-pocket expenses of the
financial adviser, if any (subject to a written fee agreement setting forth the
terms of such engagement, which shall be reasonably satisfactory to the
Company), and the legal advisers (including local counsel) to the Informal
Committee of Senior Notes, in the case of Shearman & Sterling LLP, in
accordance with the terms of that certain fee letter between HCOC and Shearman
& Sterling LLP, dated August 14, 2009, as may be amended from time to
time and (ii) all reasonable fees and out-of-pocket expenses of advisers to the
Agent and Credit Agreement Lenders.

     

    (d)           Nothing
in this Agreement shall be deemed to prevent the Company from taking, or
refraining from taking, any action that it is obligated to take, or refrain from
taking, in the performance of any fiduciary or similar duty which the Board of
Directors of the Company owes to any other person, so long as such action (or
inaction) is in response to, or in connection with, a Superior
Proposal.  The Company, upon the decision of its Board of Directors to
take, or refrain from taking, any action, which action or inaction would be
contrary to the terms hereof, shall promptly deliver to the counsel to the
Informal Committee of Senior Notes a written notice that the Company has elected
to exercise its “fiduciary out” rights under this Section 4(d).

     

    (e)           The
Company shall cause WF Howes Limited to comply with the terms and conditions
contained in this Agreement as if such entity were party hereto.

     

    SECTION
5. Termination.

     

    (a)           This
Agreement shall terminate at 10:00 p.m. prevailing Eastern Time on the
Outside Date if: (i) a determination has been made pursuant to Section 4(b)
to effectuate the Restructuring through a Prepackaged Case and the Prepackaged
Solicitation has not been commenced on or before the Outside Date or (ii) a
determination has been made pursuant to Section 4(b) to effectuate the
Restructuring through a Prenegotiated Case and the IC Acknowledgement for the
Definitive Documents has not been finalized on or before the Outside
Date.

     

    (b)           Automatic Termination in
respect of a Prepackaged Case.  If the Prepackaged Solicitation
is commenced on or prior to the Outside Date, the occurrence of any of the
following events also shall be a “Termination
Event”:

     

    (i)           if
the Prepackaged Solicitation has not been concluded by 11:59 p.m.
prevailing Eastern Time on the twenty-fifth (25th)
Business Day after the Outside Date;


    
      
         


      

      
        11

        
          

        

      

      
         


      

    

     

    (ii)           if
the Company fails to commence the Prepackaged Case by 11:59 p.m. prevailing
Eastern Time on the twenty-eighth (28th)
Business Day after the Outside Date;

     

    (iii)           if
the effective date of the Plan does not occur by 11:59 p.m. prevailing
Eastern Time on the seventieth (70th)
Business Day after the Outside Date;

     

    (iv)           if
the Company without the consent of the Requisite Plan Support Parties
(1) withdraws from or takes any action materially inconsistent with the
Plan or the Restructuring (which withdrawal or action, if capable of being
reversed, has not been reversed within five (5) days of the giving of written
notice by the Requisite Plan Support Parties to the Company), (2) without the
consent of the Requisite Plan Support Parties, supports any plan of
reorganization other than the Plan or supports any sale process with respect to
the Company (or any of its business units), including any sale under section 363
of the Bankruptcy Code, (3) moves to dismiss any of the Chapter 11
Cases, (4) moves for conversion of any of the Chapter 11 Cases to
cases under chapter 7 of the Bankruptcy Code, (5) moves for
appointment of a trustee or an examiner with expanded powers pursuant to
section 1104 of the Bankruptcy Code in any of the Chapter 11 Cases,
(6) breaches any material term contained in the Cash Collateral Stipulation
(subject to any applicable cure periods) or (7) seeks to reject or otherwise
invalidate, in whole or in part, this Agreement; or

     

    (v)           if
(1) a trustee or an examiner with expanded powers is appointed in any of
the Chapter 11 Cases, (2) any of the Chapter 11 Cases is
converted to a case under chapter 7 of the Bankruptcy Code or (3) any of
the Chapter 11 Cases is dismissed.

     

    (c)           Automatic Termination in
respect of a Prenegotiated Case.  If the IC Acknowledgement is
duly executed and delivered by the Company and the Requisite Plan Support
Parties on or prior to the Outside Date, the occurrence of any of the following
events shall be a Termination Event:

     

    (i)           if
the Company fails to commence the Prenegotiated Case by 11:59 p.m.
prevailing Eastern Time on the second (2nd)
Business Day after the Outside Date;

     

    (ii)           if
the Bankruptcy Court does not approve the Disclosure Statement and permit
solicitation of the Plan by 11:59 p.m. prevailing Eastern Time on the
fifty-fifth (55th) day
after the Outside Date;

     

    (iii)           if
the Bankruptcy Court does not confirm the Plan by 11:59 p.m. prevailing
Eastern Time on the ninety-fifth (95th) day
after the Outside Date;

     

    (iv)           if
the effective date of the Plan does not occur by 11:59 p.m. prevailing
Eastern Time on the hundred tenth (110th) day
after the Outside Date;


    
      
         


      

      
        12

        
          

        

      

      
         


      

    

     

    (v)           if
the Company without the consent of the Requisite Plan Support Parties
(1) withdraws from or takes any action materially inconsistent with the
Plan or the Restructuring (which withdrawal or action, if capable of being
reversed, has not been reversed within five (5) days of the giving of written
notice by the Requisite Plan Support Parties to the Company), (2) without the
consent of the Requisite Plan Support Parties, supports any plan of
reorganization other than the Plan or supports any sale process with respect to
the Company (or any of its business units), including any sale under section 363
of the Bankruptcy Code, (3) moves to dismiss any of the Chapter 11
Cases, (4) moves for conversion of any of the Chapter 11 Cases to
cases under chapter 7 of the Bankruptcy Code, (5) moves for
appointment of a trustee or an examiner with expanded powers pursuant to
section 1104 of the Bankruptcy Code in any of the Chapter 11 Cases,
(6) breaches any material term contained in the Cash Collateral Stipulation
(subject to any applicable cure periods) or (7) seeks to reject or otherwise
invalidate, in whole or in part, this Agreement; or

     

    (vi)           if
(1) a trustee or an examiner with expanded powers is appointed in any of
the Chapter 11 Cases, (2) any of the Chapter 11 Cases is
converted to a case under chapter 7 of the Bankruptcy Code or (3) any of
the Chapter 11 Cases is dismissed.

     

    (d)           This
Agreement shall terminate upon the earlier of (i) the date of receipt of any
notice delivered pursuant to Section 4(d) hereof and (ii) the date upon which
any action is taken or not taken by the Company, which action or inaction is
contrary to the terms of this Agreement, in reliance upon Section 4(d)
hereof.

     

    (e)           Notwithstanding
any provision in this Agreement to the contrary, upon the written consent of the
Requisite Plan Support Parties and the Company, (i) the dates set forth in
Sections 5(b)(i) through (iii) or 5(c)(i) through (iv) may be extended
prior to or upon each such date and such later dates agreed to in lieu thereof
and shall be of the same force and effect as the dates provided herein; and
(ii) the automatic termination of this Agreement pursuant to
Sections 5(b)(iv) through (v), 5(c)(v) through (vi) and 5(d) may be
reversed by a written notice of the Required Plan Support Parties within three
Business Days of the occurrence of any event described therein (in which case
the terms of this Agreement shall be reinstated in full as if no such
termination had occurred; provided, however, that no Plan Support Party shall be
deemed to be in breach of this Agreement as a result of any actions taken (or
not taken) between the time of such automatic termination and the delivery of
such notice).

     

    (f)           Termination Contingent Upon
Vote by the Requisite Plan Support Parties.  This Agreement
shall terminate and be of no further force or effect upon written notice to the
Company from the Requisite Plan Support Parties that:


    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    (i)           the
trustee under any of the Indentures, or holders of more than 50% of the face
amount of Senior Discount Notes or the Senior Notes, as the case may be (A) have
commenced any action or proceeding to collect or recover any amount that is or
may become due and payable with respect to such notes in which the movant or
movants seeks or seek a judgment lien, a prejudgment lien or attachment or any
form of equitable relief (including any injunctive relief) and the Company had
not filed for protection under chapter 11 of the Bankruptcy Code as of the date
and time of such written notice of termination  or (B) have commenced
any other action or proceeding to collect or recover any amount that is or may
become due and payable with respect to such notes and an order granting the
relief requested in such action or proceeding has been entered by the applicable
court; for the avoidance of doubt, issuance of a default letter or reservation
of rights letter and/or charging the default rate applicable to the Senior Notes
or Senior Discount Notes shall not constitute or be deemed to be an action or
proceeding under the immediately preceding provision;

     

    (ii)           there
has occurred and is continuing any New Event of Default that is not waived by
the requisite Credit Agreement Lenders and two (2) Business Days shall have
elapsed since Agent’s delivery of written notice to the Company with respect
thereto;

     

    (iii)           any
court of competent jurisdiction or other competent governmental or regulatory
authority issues an order making illegal or otherwise restricting, preventing or
prohibiting the consummation of the Restructuring contemplated
hereby;

     

    (iv)           either
(1) a filing or commencement by any Filing Entity of (x) any motion,
application, adversary proceeding or cause of action challenging the validity,
enforceability, perfection or priority of or seeking avoidance of the liens
securing the obligations referred to in the Credit Agreement, and related
agreements (collectively, the “Secured Obligations”)
or (y) any other motion, application, adversary proceeding or cause of action
challenging the validity, enforceability, perfection or priority of or seeking
the avoidance of the Secured Obligations, or that is adversarial to the Agent or
any of the Credit Agreement Lenders (or if the Filing Entities support any such
motion, application or adversary proceeding commenced by any third party or
consent to the standing of any such third party) or (2) the entry of an order of
the Bankruptcy Court providing relief against the interests of any Credit
Agreement Lender with respect to any of the foregoing causes of action or
proceedings;

     

    (v)           a
filing by any Filing Entity of any motion, application or adversary proceeding
seeking to invalidate or disallow in any respect the claims in respect of the
Senior Notes or the Senior Discount Notes;


    
      
         


      

      
        14

        
          

        

      

      
         


      

    


    (vi)           there
occurs any change, effect, event, occurrence, development, circumstance or state
of facts which has or would reasonably be expected to have a materially adverse
effect on the business, properties, operations, financial condition or results
of operations of the Company (including its foreign subsidiaries and their
respective businesses), taken as a whole or which materially impair the
Company’s ability to perform its obligations under this Agreement or have a
materially adverse effect on or prevent or materially delay the consummation of
the transactions contemplated by this Agreement; provided that in no
event shall any of the following, alone or in combination, be taken into account
in determining whether there has been or would reasonably likely be, a material
adverse effect:  (i) any effect directly resulting from the
public announcement of and compliance with the terms and conditions of this
Agreement or the transactions contemplated hereby; or (ii) any effect that
results from events, circumstances or situations affecting general worldwide
economic or capital market conditions, including acts of war, acts of terrorism
or natural disasters, so long as such effect does not disproportionately affect
the Company (a “Material Adverse
Change”); or

     

    (vii)           the
Company has materially breached any representation, warranty, covenant or
agreement contained in this Agreement, which breach (if capable of being cured)
has not been cured within five (5) days after the giving of written
notice by the Requisite Plan Support Parties to the Company of such
breach.

     

    (g)           Termination Contingent Upon
Determination by the Company.  This Agreement shall terminate
and be of no further force or effect upon written notice to the Plan Support
Parties from the Company that:

     

    (i)           any
court of competent jurisdiction or other competent governmental or regulatory
authority issues an order making illegal or otherwise restricting, preventing or
prohibiting the consummation of the Restructuring contemplated
hereby;

     

    (ii)           any
of the Plan Support Parties has materially breached any representation,
warranty, covenant or agreement contained in this Agreement, which breach (if
capable of being cured) has not been cured within five (5) days after the
giving of written notice by the Company to the Plan Support Parties of such
breach; or

     

    (iii)           the
Company has received, and has accepted, a Superior Proposal.

     

    Any
termination of this Agreement pursuant to this Section 5 shall constitute a
“Termination
Event”.  The date on which a Termination Event occurs shall be
referred to as the “Termination
Date”.  Upon termination of this Agreement, the parties’
respective obligations hereunder shall cease to exist and the parties shall all
be restored to the same position that they were in, and shall have the same
legal rights that they possessed, immediately prior to their execution and
delivery hereof; provided, however, that, no such termination shall relieve any
party from liability for its breach or non-performance of its obligations
hereunder prior to the date of such termination.  It is expressly
agreed that Sections 5, 13, 21, 24, 26, 30 and the second sentence of 27
shall survive termination of this Agreement.


    
      
         


      

      
        15

        
          

        

      

      
         


      

    


    SECTION
6. Transfer of
Prepetition Indebtedness.  If,
following execution of this Agreement by a Plan Support Party, such Plan Support
Party hypothecates, pledges, conveys, transfers, assigns or sells (each, a
“Transfer”) all
or a part of the Prepetition Indebtedness held by such Plan Support Party to any
Person (each such Person, a “Transferee”), such
Transferee must, as a condition precedent to such Transfer, execute an
assumption in substantially the form set forth hereto as Exhibit B (the
“Assumption
Agreement”), a fully executed copy of which shall be delivered to the
Company and Shearman & Sterling LLP, counsel to the Informal Committee of
Senior Notes.  Any Transfer that is made in violation of the
immediately preceding sentence shall be null and void.  A Plan Support
Party shall notify the Company in writing of any Transfer by it of any
Prepetition Indebtedness within five Business Days of the execution of an
agreement (or trade confirmation) in respect of such Transfer.

     

    SECTION
7. Plan Support Party
Representations.  Each
Plan Support Party represents and warrants to each other Party
that:

     

    (a)           as
of the date of this Agreement, it is the beneficial owner of the face amount of
the Prepetition Indebtedness, or is the nominee, investment manager or advisor
for beneficial holders of the Prepetition Indebtedness in the principal amount
set forth on its signature page hereto;

     

    (b)           subject
to Section 28(b) hereof, there is no Prepetition Indebtedness of which it or any
affiliate is the beneficial owner, or is the nominee, investment manager or
advisor for beneficial holders thereof, that are not set forth on the signature
page hereto;

     

    (c)           other
than pursuant to this Agreement, such Prepetition Indebtedness is free and clear
of any pledge, lien, security interest, charge, claim, equity, option, proxy,
voting restriction, right of first refusal or other limitation on disposition or
encumbrances of any kind, that would adversely affect in any way such Plan
Support Party’s performance of its obligations contained in this Agreement at
the time such obligations are required to be performed;

     

    (d)           as
of the date of this Agreement, such Party is duly organized, validly existing,
and in good standing under the laws of the state of its organization (to the
extent applicable to such type of organization), and has all requisite
corporate, partnership, or limited liability company power and authority to
enter into this Agreement and to carry out the transactions contemplated by, and
perform its respective obligations under, this Agreement; and

     

    (e)           assuming
the due execution and delivery of this Agreement by the Company, this Agreement
is the legally valid and binding obligation of it, enforceable against it in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
or similar laws, or by equitable principles relating to or limiting creditors’
rights generally.


    
      
         


      

      
        16

        
          

        

      

      
         


      

    

    SECTION
8. Cooperation of the
Parties.  The
Informal Committee of Senior Notes is hereby authorized by each Plan Support
Party to continue to pursue and negotiate the terms of the Restructuring and the
Definitive Documents containing terms substantially in accordance with the terms
set forth in the Term Sheet.  Subject to the occurrence of the
Agreement Effective Date and until the occurrence of the Termination Date (if
applicable), the Parties will (x) negotiate in good faith the definitive
documentation necessary to implement the Restructuring, which shall be, in all
material respects, substantially in accordance with the terms and conditions
contained in the Term Sheet, and (y) act in good faith to support the
implementation and documentation of the Restructuring.  Without
limiting the generality of the foregoing, prior to the commencement of and
during the Chapter 11 Cases, the Company shall use its commercially
reasonable efforts to provide advance draft copies of all substantive motions or
applications, requests for relief, objections, responses, replies and other
documents the Company intends to file with the Bankruptcy Court (each a “Bankruptcy Court
Filing”) to counsel for the Informal Committee of Senior Notes at least
three (3) Business Days prior to the date when the Company intends to file any
such document, and one (1) Business Day prior to the date when the Company
intends to file any procedural motions, and shall consult in good faith with
counsel to the Informal Committee of Senior Notes regarding the form and
substance of any such proposed filing with the Bankruptcy Court, and shall
refrain from making public or filing with a Bankruptcy Court any Bankruptcy
Court Filing without the prior consent of the Requisite Plan Support Parties,
which consent will not be unreasonably withheld, conditioned or delayed;
provided, that if the Company cannot meet its obligations to provide such
advance notice, it shall use commercially reasonable efforts to provide as much
notice as possible.

     

    SECTION
9. Service on Official
Committee.  Notwithstanding
anything herein to the contrary, if a Plan Support Party is appointed to and
serves on an official committee in the Chapter 11 Cases, the terms of this
Agreement shall not be construed to limit such Plan Support Party’s exercise of
its fiduciary duties in its role as a member of such committee, and any exercise
of such fiduciary duties shall not be deemed to constitute a breach of the terms
of this Agreement; provided, however, that serving
as a member of such committee shall not relieve the Plan Support Party of any
obligations to vote in favor of the Plan; provided further that nothing
in this Agreement shall be construed as requiring any Plan Support Party to
serve on any official committee in the Chapter 11 Cases.

     

    SECTION
10. Certification of
Definitive Documents.  Prior
to the commencement of the Prepackaged Solicitation, or prior to the final
agreement of the Definitive Documents, in the event of a Prenegotiated Case,
upon the agreement of the Company and the Requisite Plan Support Parties that
the Definitive Documents are in final form, the Company and the Requisite Plan
Support Parties shall enter into a written intercreditor acknowledgment
substantially in the form attached hereto as Exhibit C (the “IC Acknowledgment”),
confirming that the documents attached thereto are in final form and are
consistent with the terms set forth in the Term Sheet.  Such
determination and delivery of the IC Acknowledgment by the Parties shall not be
unreasonably withheld, conditioned or delayed by any of the
Parties.

     

    SECTION
11. Exclusivity.  Except
as expressly set forth herein (including, without limitation, under Section 4(d)
hereof), neither the Company nor any of its Representatives will, other
than to, from or with respect to the Informal Committee of Senior
Notes:  (x) solicit, initiate, encourage or accept any inquiries,
proposals or offers from any Person (i) relating to financial restructuring
of the Company or any of its subsidiaries or the debt thereof or (ii) enter
into any other extraordinary business transaction involving or otherwise
relating to the Company; or (y) participate in any discussions,
conversations, negotiations or other communications with any other Person
regarding, or furnish to any other Person any information with respect to, or
otherwise cooperate in any way, assist or participate in, facilitate or
encourage any effort or attempt by any Person to seek to do any of the
foregoing.


    
      
         


      

      
        17

        
          

        

      

      
         


      

    


    SECTION
12. The Company
Representations.  The
Company represents to each other Party that:

     

    (a)           as
of the date of this Agreement, it is duly organized, validly existing, and in
good standing under the laws of the state of its organization, and has all
requisite corporate, partnership, or limited liability company power and
authority to enter into this Agreement and to carry out the transactions
contemplated by, and perform its respective obligations under, this
Agreement;

     

    (b)           assuming
the due execution and delivery of this Agreement by the Plan Support Parties,
this Agreement is the legally valid and binding obligation of it, enforceable
against it in accordance with its terms, except as may be limited by bankruptcy,
insolvency, or similar laws, or by equitable principles relating to or limiting
creditors’ rights generally;

     

    (c)           as
of the date of this Agreement, it is not aware of any event that, due to any
fiduciary or similar duty to any other person, is reasonably expected to prevent
it from taking any action required of it under this Agreement;

     

    (d)           as
of the date of this Agreement, it is not aware of any “Event of Default” under
the Credit Agreement that is not the subject of a Specified Forbearance Item;
and

     

    (e)           as
of the date of this Agreement, it is not aware of any event or circumstance that
is reasonably expected to (including with the passage of time) give rise to a
termination of, or the ability to terminate, this Agreement under Sections
5(b)(iv), (v), 5(c)(v), (vi) or 5(f) hereof.

     

    SECTION
13. Entire Agreement;
Conflict.  This
Agreement, including schedules and annexes, constitutes the entire agreement of
the Parties with respect to the subject matter of this Agreement, and supersedes
all other prior negotiations, agreements and understandings, whether written or
oral, among the Parties with respect to the subject matter of this Agreement;
provided, however, that any
confidentiality agreement executed by any Plan Support Party shall survive this
Agreement and shall continue to be in full force and effect, in accordance with
the terms thereof, irrespective of the terms hereof; provided further that the
Parties shall enter into various Definitive Documents to give effect to the
transactions contemplated in this Agreement.  Notwithstanding the
foregoing, nothing in this Agreement shall be deemed a waiver of any obligations
of the Company under the covenants set forth in the Prepetition Indebtedness
documents.  In the event that any terms hereof conflict with the terms
contained in the Credit Agreement or any of the Indentures, this Agreement shall
govern.

     

    SECTION
14. Survival of
Agreement.  Each
of the Parties acknowledges and agrees: (a) that this Agreement is being
executed in connection with negotiations concerning a possible financial
restructuring of the Company and in contemplation of the Chapter 11 Cases; and
(b) it is the intention of the Parties that, to the fullest extent permitted
under applicable law, the rights granted in this Agreement are enforceable by
each signatory hereto without approval of the Bankruptcy Court.


    
      
         


      

      
        18

        
          

        

      

      
         


      

    


    SECTION
15. Acquisition of
Additional Debt.  This
Agreement shall in no way be construed to preclude any Plan Support Party from
acquiring additional Prepetition Indebtedness; provided, however, that any
such additional Prepetition Indebtedness automatically shall be deemed to be
subject to the terms of this Agreement and the representation contained in
Section 7 hereof shall be deemed to have been made with respect to any
Prepetition Indebtedness acquired by a Plan Support Party after the date
hereof.  A Plan Support Party shall notify the Company and counsel for
the Informal Committee of Senior Notes, in writing, of any Prepetition
Indebtedness acquired by it within five (5) Business Days of the execution of an
agreement (or trade confirmation) in respect of such acquisition.

     

    SECTION
16. Public
Announcements.  Except
as required by applicable law or regulation, or the rules of any applicable
stock exchange or regulatory body, or in filings to be made with the Bankruptcy
Court (which shall be governed by Section 8 of this Agreement), neither the
Company nor the Plan Support Parties shall, nor shall they permit any of their
respective affiliates to, make any public announcement or otherwise communicate
with any news media in respect of this Agreement or the transactions
contemplated hereby or by the Definitive Documents without the prior written
consent of such parties (which consent shall not be unreasonably withheld or
delayed); provided, however, that
notwithstanding the foregoing, the Company may issue one or more press releases
or filings with the Securities and Exchange Commission related to the execution
and delivery of this Agreement and the transactions contemplated hereby and
shall provide a draft copy thereof at least one (1) Business Day prior to
its dissemination or release and reasonably consult with counsel to the Informal
Committee of Senior Notes with respect to the text thereof.  The
foregoing shall not prohibit the Company from disclosing the existence of this
Agreement or the approximate aggregate holdings of Prepetition Indebtedness by
the Plan Support Parties as a group.

     

    SECTION
17. Waiver.  If
the transactions contemplated herein are not consummated, or following the
occurrence of the Termination Date, if applicable, nothing shall be construed
herein as a waiver by any Party of any or all of such Party’s rights and the
Parties expressly reserve any and all of their respective
rights.  Pursuant to Federal Rule of Evidence 408 and any other
applicable rules of evidence, this Agreement and all negotiations relating
hereto shall not be admissible into evidence in any proceeding other than a
proceeding to enforce its terms.

     

    SECTION
18. Counterparts.  This
Agreement may be executed in one or more counterparts, each of which, when so
executed, shall constitute the same instrument and the counterparts may be
delivered by facsimile transmission or by electronic mail in portable document
format (.pdf).

     

    SECTION
19. Amendments. Except
as otherwise provided herein, this Agreement may not be modified, amended or
supplemented without the prior written consent of the Company and the Requisite
Plan Support Parties.

     

    SECTION
20. Headings.  The
headings of the sections, paragraphs, subsections and subparagraphs of this
Agreement are inserted for convenience only and shall not affect the
interpretation hereof.


    
      
         


      

      
        19

        
          

        

      

      
         


      

    


    SECTION
21. Specific
Performance.  It
is understood and agreed by the Parties that money damages would be an
insufficient remedy for any breach of this Agreement by any Party and each
non-breaching Party shall be entitled to specific performance and injunctive or
other equitable relief as a remedy of any such breach, including, without
limitation, an order of the Bankruptcy Court or other court of competent
jurisdiction requiring any Party to comply promptly with any of its obligations
hereunder.

     

    SECTION
22. Relationship Among
Parties.  Notwithstanding
anything herein to the contrary, the duties and obligations of the Plan Support
Parties under this Agreement shall be several, not
joint.  Furthermore, it is understood and agreed that no Plan Support
Party has any duty of trust or confidence in any form with any other Plan
Support Party, and there are no commitments among or between them.  In
this regard, it is understood and agreed that any Plan Support Party may trade
in the Prepetition Indebtedness or other debt or equity securities of the
Company without the consent of the Company or any other Plan Support Party,
subject to applicable securities laws and Sections 6 and 15 of this
Agreement.  No Plan Support Party shall have any responsibility for
any such trading by any other entity by virtue of this Agreement.  No
prior history, pattern or practice of sharing confidences among or between Plan
Support Parties shall in any way affect or negate this understanding and
agreement.

     

    SECTION
23. Severability.  Wherever
possible, each provision of this Agreement shall be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

     

    SECTION
24. Governing Law,
Consent to Jurisdiction; and Waiver of Jury Trial.

     

    (a)           This
Agreement will be governed by, and construed in accordance with, the laws of the
State of New York.  By its execution and delivery of this Agreement,
the Parties irrevocably and unconditionally agree that any legal action, suit or
proceeding against it with respect to any matter arising under or arising out of
or in connection with this Agreement or for recognition or enforcement of any
judgment rendered in any such action, suit or proceeding, may be brought in the
United States District Court for the Southern District of New York, and by
execution and delivery of this Agreement, the Parties irrevocably accept and
submit themselves to the exclusive jurisdiction of such court, generally and
unconditionally, with respect to any such action, suit or
proceeding.  Notwithstanding the foregoing consent to New York
jurisdiction, if the Chapter 11 Cases are commenced, the Parties agree that
the Bankruptcy Court will have exclusive jurisdiction of all matters arising out
of or in connection with this Agreement.

     

    (b)           THE
PARTIES IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT HEREOF.


    
      
         


      

      
        20

        
          

        

      

      
         


      

    

     

    SECTION
25. Notices.  All
notices, requests and other communications hereunder must be in writing and will
be deemed to have been duly given only if delivered personally or by facsimile
transmission or mailed (first class postage prepaid) to the parties at the
following addresses or facsimile numbers:

     

    If to a
Plan Support Party, to the address set forth beneath such Plan Support Party’s
name below, with a copy to:

     

    If to the
Informal Committee of Senior Noteholders:

     

    Shearman
& Sterling LLP

    599
Lexington Avenue

    New York,
NY 10022

    Attn:       Andrew
V. Tenzer, Esq.

    Michael H. Torkin, Esq.

    Telephone:  (212)
848-4000

    Facsimile:  (212)
848-7179

     

    If to
Agent under the Credit Agreement:

     

    David
Ruediger

    Edwards
Angell Palmer & Dodge LLP

    111
Huntington Avenue

    Boston,
MA  02199-7613

    Tel: 
617-239-0266

    Fax:
617-227-4420

    Email:  druediger@eapdlaw.com

     

    Beth
Duggan

    Senior
Legal Counsel

    DDJ
Capital Management, LLC

    130
Turner Street

    Building
3, Suite 600

    Waltham,
MA 02453

    Telephone
No.: 781.283.8549

    Fax No.:
781.419.9149

    Email:
eduggan@ddjcap.com

     

    If to the
Company:

     

    Haights
Cross Communications, Inc.

    10 New
King Street

    Suite
102

    White
Plains, NY 10604

    Attn:  Paul
J. Crecca, President and Chief Executive Officer

    Telephone:  (914)
289-9422

    Facsimile:  (866)
813-6464


    
      
         


      

      
        21

        
          

        

      

      
         


      

    


    with a
copy to:

     

    Brown
Rudnick LLP

    One
Financial Center

    Boston,
MA 02111

    Attn:     Philip
J. Flink, Esq.

     
Steven D. Pohl, Esq.

    Telephone:  (617)
856-8555

    Facsimile:  (617)
856-8701

     

    SECTION
26. Assignment; No
Third-Party Beneficiaries.  The
terms and provisions of this Agreement are intended solely for the benefit of
the Parties hereto and their respective successors and permitted assigns, and it
is not the intention of the Parties to confer third-party beneficiary rights
upon any other person.

     

    SECTION
27. Access to
Information.  The
Company shall, and shall cause its Representatives, financial advisers,
investment bankers and counsel to afford the Plan Support Parties, potential
financing sources and their respective authorized Representatives and legal and
financial advisers reasonable access to the Company’s management, offices,
properties, book and records for purposes of undertaking due diligence,
evaluating the Company’s business plan and participation in the Plan process;
provided, that if in the reasonable judgment of counsel to the Company such
access would void the right of the Company to maintain attorney-client, attorney
work product or any other applicable privilege as to non-disclosure of
information, then denial of such access shall not be a breach of this
Agreement.  To the extent such information is provided to
the  Credit Agreement Lenders it will be deemed subject to the
confidentiality provisions of the Credit Agreement, and any other Plan Support
Party shall execute a confidentiality agreement with the Company on comparable
terms and conditions.

     

    SECTION
28. Acknowledgment.  (a)
This Agreement is not and shall not be deemed to be, under applicable law, a
solicitation for acceptance of the Plan.

     

    (b)           The
Parties acknowledge that all representations, warranties and covenants made by
any Plan Support Party on behalf of the accounts that it manages are being made
only with respect to the Prepetition Indebtedness held in such accounts, and
shall not apply to (or be deemed to be made in relation to) any Prepetition
Indebtedness that may be beneficially owned by the entity on whose behalf such
accounts are managed that are not held through such accounts.

     

    (c)           Each
Plan Support Party acknowledges that this Agreement modifies certain rights and
remedies it may have under the Credit Agreement or the Indentures, and hereby
agrees that it shall not attempt to exercise any rights or remedies under the
Credit Agreement or the Indentures (or instruct the Agent or the indenture
trustees to the Indentures to exercise any such rights or remedies) in
contravention of the terms hereof.

     

    SECTION
29. Further
Assurances.  All of the parties hereto shall execute such
documents and use commercially reasonable efforts to perform such further acts
(including, without limitation, obtaining any consents, exemptions,
authorizations or other actions by, or giving any notices to, or making any
filings with, any governmental authority or any other person) as may be
reasonably required or desirable to consummate the
Restructuring/


    
      
         


      

      
        22

        
          

        

      

      
         


      

    


    SECTION
30. Indemnification.  The
Company hereby agrees to indemnify and hold harmless the Plan Support Parties
and/or the accounts the Plan Support Parties manage or advise, and each of their
respective affiliates, officers, directors, members, partners, employees,
agents, advisers, attorneys, and representatives (each an “Indemnified Party”)
from and against any and all claims (of the Company or any third party),
damages, losses, liabilities and expenses (including, without limitation,
reasonable fees and disbursements of counsel) that may be suffered or incurred
by or asserted or awarded against any Indemnified Party (including, without
limitation, in connection with or in relation to any investigation, litigation
or proceeding) arising out of or in connection with this Agreement or the
Transactions, except to the extent such claims, damages, losses, liabilities or
expenses are found in a final non-appealable judgment by a court of competent
jurisdiction to have resulted primarily from such Indemnified Party’s gross
negligence, bad faith or willful misconduct.  The foregoing indemnity
shall survive termination of this Agreement and shall constitute a joint and
several obligation of each entity constituting the “Company” as defined
herein.


    
      
         


      

      
        23

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the Company and the Plan Support Parties have executed this
Agreement as of the date first written above.

     

    
      
        	
                Haights
      Cross Operating Company

              
	 
      
	
                By:

              	
                /s/ Eugene Davis

              
	
                Name:

              	
                Eugene
      Davis

              
	
                Title:

              	
                Chairman
      of the Board

              
	 
      	 
      
	
                Haights
      Cross Communications, Inc.

              
	 
      
	
                By:

              	
                /s/ Eugene Davis

              
	
                Name:

              	
                Eugene
      Davis

              
	
                Title:

              	
                Chairman
      of the Board

              
	 
      	 
      
	
                SNEP, LLC (formerly
      named Sundance/NewBridge

                Educational
      Publishing, LLC)

              
	 
      
	
                By:

              	
                /s/ Eugene Davis

              
	
                Name:

              	
                Eugene
      Davis

              
	
                Title:

              	
                Chairman
      of the Board

              
	 
      	 
      
	
                Triumph
      Learning, LLC

              
	 
      
	
                By:

              	
                /s/ Eugene Davis

              
	
                Name:

              	
                Eugene
      Davis

              
	
                Title:

              	
                Chairman
      of the Board

              
	 
      	 
      
	
                Recorded
      Books, LLC

              
	 
      
	
                By:

              	
                /s/ Eugene Davis

              
	
                Name:

              	
                Eugene
      Davis

              
	
                Title:

              	
                Chairman
      of the Board

              


      

    

     

    
      
         


      

      
        24

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    	
                                                                            AMERICAN
      GENERAL LIFE INSURANCE 

                                                                            COMPANY

                                                                          
	 
      
	By:	
                                                                            AIG
      Global Investment Corp., Investment Adviser

                                                                          
	 
      
	
                                                                            By:

                                                                          	
                                                                            /s/
      Bryan Petermann

                                                                          
	
                                                                            Name:

                                                                          	
                                                                            Bryan
      Petermann

                                                                          
	
                                                                            Title:

                                                                          	
                                                                            Managing
      Director

                                                                          
	 
      	 
      
	 
      
	
                                                                            AMERICAN
      GENERAL LIFE AND ACCIDENT INSURANCE COMPANY

                                                                          
	 
      
	By: 	AIG
      Global Investment Corp., Investment Adviser 
	 	 
	
                                                                            By:

                                                                          	
                                                                            /s/
      Bryan Petermann

                                                                          
	
                                                                            Name:

                                                                          	
                                                                            Bryan
      Petermann

                                                                          
	
                                                                            Title:

                                                                          	
                                                                            Managing
      Director

                                                                          
	 
      	 
      
	 
      
	
                                                                            AMERICAN
      INTERNATIONAL LIFE AND ASSURANCE COMPANY OF NEW YORK

                                                                          
	 
      
	By: 	AIG
      Global Investment Corp., Investment Adviser 
	 	 
	
                                                                            By:

                                                                          	
                                                                            /s/
      Bryan Petermann

                                                                          
	
                                                                            Name:

                                                                          	
                                                                            Bryan
      Petermann

                                                                          
	
                                                                            Title:

                                                                          	
                                                                            Managing
      Director

                                                                          
	 
      
	 
      
	
                                                                            AIG
      LIFE INSURANCE COMPANY

                                                                          
	 
      
	
                                                                            By:   

                                                                          	AIG
      Global Investment Corp., Investment Adviser 
	 	 
	
                                                                            By:

                                                                          	
                                                                            /s/
      Bryan Petermann

                                                                          
	
                                                                            Name:

                                                                          	
                                                                            Bryan
      Petermann

                                                                          
	
                                                                            Title:

                                                                          	
                                                                            Managing
      Director

                                                                          
	 
      


                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         


      

      
        25

        
          

        

      

      
         


      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      	
                                                                              THE
      UNITED STATES LIFE INSURANCE 

                                                                              COMPANY
      IN THE CITY OF NEW YORK

                                                                            
	 
      
	By: 	AIG
      Global Investment Corp., Investment Adviser 
	 	 
	
                                                                              By:

                                                                            	
                                                                              /s/ Bryan Petermann

                                                                            
	
                                                                              Name:

                                                                            	
                                                                              Bryan
      Petermann

                                                                            
	
                                                                              Title:

                                                                            	
                                                                              Managing
      Director

                                                                            
	 
      
	 
      
	
                                                                              THE
      VARIABLE ANNUITY LIFE INSURANCE COMPANY

                                                                            
	 
      
	By: 	AIG
      Global Investment Corp., Investment Adviser 
	 	 
	
                                                                              By:

                                                                            	
                                                                               /s/ Bryan Petermann

                                                                            
	
                                                                              Name:

                                                                            	
                                                                              Bryan
      Petermann

                                                                            
	
                                                                              Title:

                                                                            	
                                                                              Managing
      Director

                                                                            
	 
      
	 
      
	
                                                                              EMD
      INVEST F.M.B.A.

                                                                            
	 
      
	By: 	AIG
      Global Investment Corp., Investment Sub-Adviser 
	 	 
	
                                                                              By:

                                                                            	
                                                                              /s/ Bryan Petermann

                                                                            
	
                                                                              Name:

                                                                            	
                                                                              Bryan
      Petermann

                                                                            
	
                                                                              Title:

                                                                            	
                                                                              Managing
      Director

                                                                            
	 
      
	 
      
	
                                                                              EMPLOYEES
      RETIREMENT SYSTEM OF TEXAS

                                                                            
	 
      
	By: 	AIG
      Global Investment Corp., Investment Adviser 
	 	 
	
                                                                              By:

                                                                            	
                                                                              /s/ Bryan Petermann

                                                                            
	
                                                                              Name:

                                                                            	
                                                                              Bryan
      Petermann

                                                                            
	
                                                                              Title:

                                                                            	
                                                                              Managing
      Director

                                                                            
	 
      


                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         


      

      
        26

        
          

        

      

      
         


      

    

     

    
      
        
          
            
              	
                      WESTERN
      NATIONAL LIFE INSURANCE COMPANY (FKA AIG ANNUITY INSURANCE
      COMPANY

                    
	 
      
	
                      By:

                    	
                      AIG
      Global Investment Corp., Investment Adviser

                    
	 
      	 
      
	
                      By:

                    	
                      /s/ Bryan Petermann

                    
	
                      Name:

                    	
                      Bryan
      Petermann

                    
	
                      Title:

                    	
                      Managing
      Director

                    
	 
      
	 
      
	
                      SUN
      AMERICA LIFE INSURANCE COMPANY

                    
	 
      
	
                      By:

                    	
                      AIG
      Global Investment Corp., Investment Adviser

                    
	 
      	 
      
	
                      By:

                    	
                      /s/ Bryan Petermann

                    
	
                      Name:

                    	
                      Bryan
      Petermann

                    
	
                      Title:

                    	
                      Managing
      Director

                    
	 
      


            

          

        

      

       

      
        
           


        

        
          27

          
            

          

        

        
           


        

      

       

      
        
          
            
              
                
                  
                    	
                            DDJ
      Capital Management Group Trust

                          
	 
      
	
                            By:

                          	
                              DDJ
      Capital Management, LLC, as attorney-in-fact

                          
	 
      	 
      
	
                            By:

                          	
                            /s/ Anthony M. Ranaldi

                          
	
                            Name:

                          	
                            Anthony
      M. Ranaldi

                          
	
                            Title:

                          	
                            Authorized
      Signatory

                          
	 
      	 
      
	
                            By:

                          	
                            /s/ Elizabeth B. Duggan

                          
	
                            Name:

                          	
                            Elizabeth
      B. Duggan

                          
	
                            Title:

                          	
                            Authorized
      Signatory

                          
	 
      
	 
      
	
                            DDJ
      High Yield Fund

                          
	 
      
	
                            By:

                          	
                            DDJ
      Capital Management, LLC,

                          
	 
      	
                            its
      attorney-in-fact

                          
	 
      	 
      
	
                            By:

                          	
                            /s/ Anthony M. Ranaldi

                          
	
                            Name:

                          	
                            Anthony
      M. Ranaldi

                          
	
                            Title:

                          	
                            Authorized
      Signatory

                          
	 
      	 
      
	
                            By:

                          	
                            /s/ Elizabeth B. Duggan

                          
	
                            Name:

                          	
                            Elizabeth
      B. Duggan

                          
	
                            Title:

                          	
                            Authorized
      Signatory

                          
	 
      
	 
      
	
                            DDJ/Ontario
      Credit Opportunities Fund, L.P.

                          
	 
      
	
                            By:  DDJ
      Capital Management, LLC, in its capacity as Investment
    Manager

                          
	 
      
	
                            By:

                          	
                            /s/ Anthony M. Ranaldi

                          
	
                            Name:

                          	
                            Anthony
      M. Ranaldi

                          
	
                            Title:

                          	
                            Authorized
      Signatory

                          
	 
      	 
      
	
                            By:

                          	
                            /s/ Elizabeth B. Duggan

                          
	
                            Name:

                          	
                            Elizabeth
      B. Duggan

                          
	
                            Title:

                          	
                            Authorized
      Signatory

                          
	 
      


                  

                

              

            

          

        

      

       

      
        
           


        

        
          28

          
            

          

        

        
           


        

      

      


      
        
          
            
              
                	
                        DDJ
      Capital Management, LLC, on behalf of certain accounts it manages,
      severally and not jointly

                      
	 
      
	
                        By:

                      	
                        /s/ Anthony M. Ranaldi

                      
	
                        Name:

                      	
                        Anthony
      M. Ranaldi

                      
	
                        Title:

                      	
                        Authorized
      Signatory

                      
	 
      	 
      
	
                        By:

                      	
                        /s/ Elizabeth B. Duggan

                      
	
                        Name:

                      	
                        Elizabeth
      B. Duggan

                      
	
                        Title:

                      	
                        Authorized
      Signatory

                      


              

            

          

        

      


      
        
           


        

        
          29

          
            

          

        

        
           


        

      

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  	
                                                          Newstart
      Factors, Inc.

                                                        
	 
      
	
                                                          By:

                                                        	
                                                          /s/ John V. Koerber

                                                        
	
                                                          Name:

                                                        	
                                                          John
      V. Koerber

                                                        
	
                                                          Title:

                                                        	 
      
	 
      
	 
      
	
                                                          Bennett
      Restructuring Fund, L.P.

                                                        
	 
      
	
                                                          By:

                                                        	
                                                          /s/ John V. Koerber

                                                        
	
                                                          Name:

                                                        	
                                                          John
      V. Koerber

                                                        
	
                                                          Title:

                                                        	 
      
	 
      
	 
      
	
                                                          Bennett
      Offshore Restructuring Fund, Inc.

                                                        
	 
      
	
                                                          By:

                                                        	
                                                          /s/ John V. Koerber

                                                        
	
                                                          Name:

                                                        	
                                                          John
      V. Koerber

                                                        
	
                                                          Title:

                                                        	 
      
	 
      
	 
      
	
                                                          Bennett
      Restructuring Fund, L.P.

                                                        
	 
      
	
                                                          By:

                                                        	
                                                          /s/ John V. Koerber

                                                        
	
                                                          Name:

                                                        	
                                                          John
      V. Koerber

                                                        
	
                                                          Title:

                                                        	 
      
	 
      


                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      


      
        
           


        

        
          30

          
            

          

        

        
           


        

      

      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    GoldenTree
      2004 Trust

                                  
	 
      
	
                                    By:

                                  	
                                    GoldenTree
      Asset Management, LP,

                                  
	 
      	
                                    its
      Investment Advisor

                                  
	 
      	 
      
	
                                    By:

                                  	
                                    /s/ George Hartigan

                                  
	
                                    Name:

                                  	
                                    George
      Hartigan

                                  
	
                                    Title:

                                  	
                                    Vice
      President

                                  
	 
      
	 
      
	
                                    GoldenTree
      Credit Opportunities Financing I, Ltd

                                  
	 
      
	
                                    By:

                                  	
                                    GoldenTree
      Asset Management, LP

                                  
	 
      	 
      
	
                                    By:

                                  	
                                    /s/ George Hartigan

                                  
	
                                    Name:

                                  	
                                    George
      Hartigan

                                  
	
                                    Title:

                                  	
                                    Vice
      President

                                  
	 
	 
      
	
                                    GoldenTree
      Master Fund, Ltd

                                  
	 
      
	
                                    By:

                                  	
                                    GoldenTree
      Asset Management, LP

                                  
	 
      	 
      
	
                                    By:

                                  	
                                    /s/ George Hartigan

                                  
	
                                    Name:

                                  	
                                    George
      Hartigan

                                  
	
                                    Title:

                                  	
                                    Vice
      President

                                  
	 
      


                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
           


        

        
          31

          
            

          

        

        
           


        

      

       

      
        
          
            
              
                	
                        GoldenTree
      High Yield Value Master Fund, Ltd

                      
	 
      
	
                        By:

                      	
                        GoldenTree
      Asset Management, LP

                      
	 
      	 
      
	
                        By:

                      	
                        /s/ George Hartigan

                      
	
                        Name:

                      	
                        George
      Hartigan

                      
	
                        Title:

                      	
                        Vice
      President

                      
	 
      


              

            

          

        

      

       

      
        
           


        

        
          32

          
            

          

        

        
           


        

      


      Exhibit A

       

      Term
Sheet

       

      
        
          
            
              	
                      Administrative
      Expense Claims

                    	 	
                      “Administrative Expense
      Claims” shall include (i) Allowed1
      claims for reasonable fees and expenses of professionals retained in
      the  Chapter 11 Case with the approval of the Bankruptcy
      Court, (ii) all reasonable fees and expenses incurred by the
      professional advisors to (A) the Informal Committee of Senior Notes,
      including, without limitation, Shearman & Sterling LLP pursuant to the
      terms of their pre-petition engagement letter with the Company, (B) the
      Agent and Credit Agreement Lenders and (C) the Company, including Houlihan
      Lokey Howard & Zukin Capital, Inc. and Brown Rudnick LLP,
      (iii) claims for reasonable out-of-pocket expenses incurred by (A)
      the members of the Informal Committee of Senior Notes and (B) the Agent
      and Credit Agreement Lenders and (iv) claims under
      section 503(b) of the Bankruptcy Code.

                    
	 
      	 	 
      
	 
      	 	
                      Each
      holder of an Allowed Administrative Expense Claim will receive payment in
      full in cash of the unpaid portion of such Allowed Administrative Expense
      Claim (i) on the Plan Effective Date or as soon thereafter as
      reasonably practicable, (ii) in the ordinary course of the Company’s
      business or (iii) as otherwise agreed by the Company and such
      holder.

                    
	 
      	 	 
      
	
                      Priority
      Tax Claims

                    	 	
                      Allowed
      claims under Bankruptcy Code section 507(a)(8) (“Priority Tax
      Claims”) will be treated in accordance with Bankruptcy Code
      section 1129(a)(9)(C).

                    
	 
      	 	 
      
	
                      Other
      Priority Claims

                    	 	
                      On
      the Plan Effective Date, or as soon thereafter as reasonably practicable,
      each holder of an Allowed claim under Bankruptcy Code section 507(a)
      other than an Administrative Expense Claim or a Priority Tax Claim will
      receive payment in full.

                    
	 
      	 	 
      
	
                      Credit
      Agreement Claims

                    	 	
                      All
      amounts owed under the terms of the Credit Agreement, including without
      limitation post-petition interest (including paid in kind interest and
      default rate interest, as applicable), shall be treated as an allowed
      claim under the
Plan.

                    


            

          

        

      

        

      
        

      

      
        	
                1

              	
                “Allowed”
      shall mean any claim that is determined to be an allowed claim in the
      Company’s bankruptcy case in accordance with section 502 and/or 506 of the
      Bankruptcy Code.

              


      


      
        
           


        

        
          33

          
            

          

        

        
           


        

      

       

      
        
          
            
              	 
      	 	
                      On
      the Plan Effective Date, each Credit Agreement Lender shall receive cash
      in the amount equal to its allowed claim under the Credit Agreement;
      provided, however, that in the event the Company, notwithstanding its
      commercially reasonable best efforts, is unable to procure financing in an
      amount sufficient to be able to make such cash payment (pursuant to the
      Financing Commitment or otherwise), each Credit Agreement Lender shall
      receive New First Lien Notes in an aggregate principal amount equal to
      such allowed claim amount.  Each Plan Support Party agrees that
      it will not contest (i) the claim amount of any Credit Agreement Lender
      (including based on any valuation) and (ii) the right of the Credit
      Agreement Lenders to receive adequate protection for interest and
      fees.

                    
	 
      	 	 
      
	
                      Senior
      Notes

                    	 	
                      On
      the Plan Effective Date, each holder of a Senior Note will receive its
      pro-rata share
      of:  (i) New Second Lien Notes, (ii) 92% of the common
      equity of the Reorganized HCC (the “Reorganized HCC Common
      Stock”), subject to dilution based on the Rights Offering, if
      consummated, and any Exit Warrants [and the Management Incentive Plan],
      plus (iii) the Rights Offering Proceeds (defined below), if
      any.

                    
	 
      	 	 
      
	 
      	 	
                      The
      Reorganized HCC Common Stock, among other things, shall (i) be the
      sole class of equity securities of Reorganized HCC and (ii) qualify
      for the protections afforded by section 1145 of the Bankruptcy
      Code.

                    
	 
      	 	 
      
	
                      Senior
      Discount Notes

                    	 	
                      On
      the Plan Effective Date, so long as the class representing the Senior
      Discount Notes has voted to accept the Plan, each holder of Senior
      Discount Notes will receive its pro-rata share
      of:  (i) 8% of the Reorganized HCC Common Stock, subject to
      dilution based on the Rights Offering, if consummated, and any Exit
      Warrants [and the Management Incentive Plan]; (ii) subject to the terms
      and conditions described below, a right to purchase up to [_]% of the
      Reorganized HCC Common Stock for net cash proceeds equal to the Rights
      Offering Proceeds; and (iii) the Exit Warrants.

                    
	 
      	 	 
      
	 
      	 	
                      So
      long as the class representing the Senior Discount Notes has voted to
      accept the Plan, each holder of Senior Discount Notes will be entitled to
      participate in a $32.5 million (the “Rights Offering
      Proceeds”) rights offering (the “Rights
      Offering”) to acquire [_]% of the Reorganized HCC Common Stock at
      the exercise price described below.  The Rights Offering shall
      be consummated prior to the hearing to confirm the Plan, and the terms and
      conditions of the Rights Offering shall be documented in the Disclosure
      Statement.

                    
	 
      	 	 
      
	 
      	 	
                      The
      per share strike price of the warrants and per share exercise price
      of the rights will be based on: (i) the aggregate principal amount of the
      New First Lien Notes, plus (ii) the aggregate principal amount of the
      Senior Notes, plus accrued but unpaid interest thereon through the
      Petition Date, less (iii) net cash of the Reorganized Company on the Plan
      Effective Date in excess of $15
million.

                    


            

          

        

      

       

      
        
           


        

        
          34

          
            

          

        

        
           


        

      

      


      
        
          
            
              	
                      General
      Unsecured Claims

                    	 	
                      On
      the Plan Effective Date, or as soon thereafter as reasonably practicable,
      each holder of an allowed general unsecured claim will remain
      unimpaired.

                    
	 
      	 	 
      
	
                      Equity
      Interests

                    	 	
                      The
      holders of equity interests in HCC will receive no distributions under the
      Plan on account of such interests.  All existing equity
      interests, including any options, right, warrants, or other similar
      interests issued by HCC will be cancelled on the Plan Effective
      Date.  Equity interests in direct and indirect subsidiaries of
      HCC will remain in place, as reorganized.

                    
	 
      	 	 
      
	
                      Executory
      Contracts & Leases

                    	 	
                      Subject
      to further review.

                    
	 
      	 	 
      
	
                      Management
      Incentive Plan

                    	 	
                      On
      or as soon as reasonably practicable after the Plan Effective Date, a
      management incentive plan (the “Management Incentive
      Plan”) acceptable to the Requisite Plan Support Parties and the
      Company shall be implemented for designated members of senior management
      of Reorganized HCC.

                    
	 
      	 	 
      
	
                      Employee
      Incentive Plan

                    	 	
                      TBD

                    
	 
      	 	 
      
	
                      Reporting/Trading

                    	 	
                      Reorganized
      HCC shall not, upon emergence, be a reporting issuer, and the Reorganized
      HCC Common Stock shall not be listed for trading on any exchange or
      automated quotation system.  Reorganized HCC shall provide
      security holders with audited financial statements prepared in accordance
      with “public” US GAAP including regular interim financial statements and
      “MD&A” and, to the extent permitted by applicable law prior to
      becoming a reporting company, make such audited financial statements
      publicly available.

                    
	 
      	 	 
      
	
                      Registration
      Rights Agreement

                    	 	
                      Noteholders
      acquiring more than [10]% of the Reorganized HCC Common Stock under the
      Plan shall, on the Plan Effective Date, enter into a registration rights
      agreement with respect to the Reorganized HCC Common Stock, reasonably
      acceptable to such Noteholders and the Company that provides for certain
      demand and “piggyback” registration rights, as well as customary cutback
      and lockup provisions reasonably acceptable to such Noteholders and the
      Company.

                    
	 
      	 	 
      
	
                      Shareholder
      Agreement

                    	 	
                      On
      the Plan Effective Date, Reorganized HCC and each holder of Reorganized
      HCC Common Stock shall enter into a shareholder agreement acceptable to
      the Requisite Plan Support Parties and the Company.

                    
	 
      	 	 
      
	
                      Corporate
      Governance

                    	 	
                      The
      initial board of directors of Reorganized HCC will consist of seven
      directors.  So long as the class representing the Senior
      Discount Notes has voted to accept the Plan, one director shall be
      selected by a majority of the holders of Senior Discount
      Notes.  The remaining directors shall be nominated by the
      Requisite Plan Support
Parties.

                    


            

          

        

      

       

      
        
           


        

        
          35

          
            

          

        

        
           


        

      

      


      
        
          	
                  Additional
      Conditions to be satisfied prior to the Solicitation Commencement Date or
      Prepackaged Plan Agreement Date, as the case may be

                	 	
                  The
      Company’s management shall have presented to the Plan Support Parties a
      business plan for Reorganized HCC for 2010 and 2011 to the Requisite Plan
      Support Parties.

                
	 	 
      
	 	
                  Confirmation
      that the Plan includes other customary conditions to effectiveness,
      including, without limitation, no stay of the confirmation order or
      occurrence of a Material Adverse
Change.

                


        

      

       

      
        
           


        

        
          36

          
            

          

        

        
           


        

      


      Schedule 1

       

      Terms
of the New First Lien Notes

       

      
        
          
            
              
                	
                        Item

                      	 	
                        Proposed Terms

                      
	 
      	 	 
      
	
                        Issuer

                      	 	
                        Reorganized
      HCOC

                      
	 
      	 	 
      
	
                        Guarantors

                      	 	
                        All
      domestic subsidiaries that currently guarantee the Credit Agreement, and
      such other foreign subsidiaries as may be required by the Requisite Plan
      Support Parties and any parent entity of Reorganized HCOC (together with
      the Issuer,  the “Note
      Parties”).

                      
	 
      	 	 
      
	
                        Initial
      Principal Amount

                      	 	
                        $100
      million

                      
	 
      	 	 
      
	
                        Amortization

                      	 	
                        None

                      
	 
      	 	 
      
	
                        Interest

                      	 	
                        LIBOR
      +1000 bps per annum.  LIBOR floor of 300 bps

                         

                        Interest
      shall be payable as follows: on the last day of selected interest
      periods (which shall be one, two, three and six months) (and at the end of
      every three months, in the case of interest periods of longer than three
      months); and upon prepayment, in each case payable in arrears and computed
      on the basis of a 360-day year.

                         

                        Default
      rate +2%

                      
	 
      	 	 
      
	
                        Funding
      Protection

                      	 	
                        Customary
      for transactions of this type, including breakage costs, gross-up for tax
      withholding, compensation for increased costs and compliance with capital
      adequacy and other regulatory restrictions.

                      
	 
      	 	 
      
	
                        Maturity

                      	 	
                        The
      date that is three years from the Plan Effective Date.

                      
	 
      	 	 
      
	
                        Call
      Premium

                      	 	
                        Year
      1 1%

                         

                        Year
      2 1%

                         

                        Year
      3 0%

                      
	 
      	 	 
      
	
                        Collateral

                      	 	
                        First-priority
      liens on all assets of HCC and the Subsidiary Guarantors, junior only to
      certain permitted
liens.

                      


              

            

          

        

      

      



      
        
           


        

        
          37

          
            

          

        

        
           


        

      

      
 

      
        
          
            
              
                	
                        Item

                      	 	
                        Proposed Terms

                      
	 
      	 	 
      
	
                        Mandatory
      Prepayments

                      	 	
                        Issuer
      shall make the following mandatory prepayments (subject to certain basket
      amounts and exceptions to be negotiated in the definitive
      documentation):

                         

                        1.            Indebtedness/Equity/Extraordinary
      Receipts:  Prepayments in an amount equal to
      (a) ●% of the net cash proceeds received from the incurrence of
      indebtedness, (b) ●% of the net cash proceeds received from the
      issuance of additional equity (but specifically excluding any net cash
      proceeds received in connection with the proposed rights offering with
      respect to the Company’s proposed plan of reorganization), including the
      Exit Warrants and (c) ●% of the net cash proceeds from the receipt of
      any extraordinary receipts (including, without limitation, insurance
      proceeds, tax refunds and similar receipts outside of the ordinary course)
      by the Note Parties (other than certain permitted indebtedness, issuances
      of equity to Issuer or any Guarantor by any of its or their subsidiaries,
      certain permitted securities having terms to be agreed upon and other
      exceptions and baskets to be agreed upon, as specified in the definitive
      documents and including capacity for reinvestment within a specified time
      period on terms mutually agreeable and in amounts to be determined),
      payable no later than the fifteenth (15) Business Day following the date
      of receipt.

                         

                        2.            Dispositions:  Prepayments
      in an amount equal to 100% of the net cash proceeds from the sale or other
      disposition of any property or assets of Borrower or its subsidiaries made
      outside of the ordinary course of business (including as a result of
      casualty or condemnation, subject to certain exceptions and baskets to be
      agreed upon), except for (a) the sale of inventory or obsolete or
      worn-out property in the ordinary course of business, and (b) certain
      other customary exceptions (including capacity for reinvestment within a
      specified time period) to be agreed upon by the Requisite Plan Support
      Parties.

                         

                        3.            Excess Cash
      Flow:  Beginning with the fiscal year ended [2011]
      prepayments in an amount equal to [50%] of the annual Excess Cash Flow of
      the Note Parties within ● days following the Issuer’s fiscal year
      end.  “Excess Cash Flow” to be defined in a manner consistent or
      no less favorable to the Issuer than the definition given to such term in
      the existing Credit Agreement.

                         

                        4.            Change of
      Control:  Mandatory redemption at 101% of principal
      amount plus accrued and unpaid interest.

                         

                        All
      net proceeds of such sales shall be applied in accordance with the
      Application of Payments section provided
below.

                      


              

            

          

        

      

       

      
        
           


        

        
          38

          
            

          

        

        
           


        

      

      


      
        
          
            
              
                	
                        Item

                      	 	
                        Proposed Terms

                      
	 
      	 	 
      
	
                        Application
      of Payments

                      	 	
                        All
      mandatory prepayments will be applied without penalty or premium (except
      for breakage costs, if any) and will be applied, first, to the
      New First Lien Term Notes until repaid in full, and second, to the
      New Second Lien Term Notes.

                         

                        All
      payments during an event of default shall be applied first to the
      outstanding principal amount and accrued and unpaid interest, expenses,
      costs and fees thereon under the New First Lien Notes until repaid in
      full, thereafter the New Second Lien Term Notes.

                      
	 
      	 	 
      
	
                        Representations
      and Warranties

                      	 	
                        Such
      representations and warranties by the Note Parties as are usual and
      customary for financings of this kind including, without limitation,
      financial statements (including pro forma financial statements); absence
      of undisclosed liabilities; no material adverse change; corporate
      existence; compliance with law; corporate power and authority;
      enforceability of documents; no conflict with law or contractual
      obligations; no material litigation; no default; ownership of property;
      liens and priority of the notes; intellectual property; no burdensome
      restrictions; taxes; ERISA; subsidiaries; environmental matters; solvency;
      labor matters; accuracy of disclosure; margin regulations; and creation
      and perfection of security interests.

                      
	 
      	 	 
      
	
                        Affirmative
      Covenants

                      	 	
                        Such
      affirmative covenants by the Note Parties as are usual and customary for
      financings of this kind including, without limitation, [obtaining a rating
      from S&P or such other agency acceptable to the Senior Noteholders and
      the Company], delivery of
      financial statements, reports, notices of default, litigation and other
      material events; payment of federal state and material local taxes and
      other obligations; continuation of business and maintenance of existence
      and material rights and material privileges; compliance with laws and
      material contractual obligations, except as would not have a material
      adverse effect; maintenance of material property and insurance (at levels
      and of the type maintained by similar sized business in the same or
      similar businesses); maintenance of books and records; and compliance with
      environmental laws; further
assurances.

                      


              

            

          

        

      

       

      
        
           


        

        
          39

          
            

          

        

        
           


        

      

       

      
        
          
            	
                    Item

                  	 	
                    Proposed Terms

                  
	 
      	 	 
      
	
                    Negative
      Covenants

                  	 	
                    Such
      negative covenants by the Note Parties as are usual and customary for
      financings of this kind including, without limitation, limitations with
      respect to other indebtedness (including negative pledge, guarantee
      obligations); liens; mergers, consolidations, liquidations and
      dissolution; sales and other dispositions of assets; dividends and other
      payments in respect of capital stock; capital expenditures; investments,
      loans and advances; payments and modifications of subordinated and other
      debt instruments with exceptions and baskets to be agreed upon;
      transactions with affiliates; changes in fiscal year; negative pledge
      clauses restricting subsidiary distributions; prepayment of other debt;
      and changes in lines of business, in each case, with exceptions and
      baskets to be agreed.

                  
	 
      	 	 
      
	
                    Financial
      Covenants

                  	 	
                    Financial
      covenants as are usual and customary for financings of this kind
      including, without limitation, maximum leverage, maximum capital
      expenditures, minimum EBITDA and minimum interest coverage (exclusive of
      non-cash pay PIK interest, if applicable) in amounts to be determined,
      each to be tested on a quarterly basis (with
      monthly financial reporting).

                  
	 
      	 	 
      
	
                    Events
      of Default

                  	 	
                    Events
      of default as are usual and customary for financings of this kind
      including, without limitation, failure to make payments of principal,
      interest or fees when due; failure to pay other amounts; material
      inaccuracy of representations and warranties; violations of
      covenants:  cross-default to material indebtedness to be agreed;
      certain ERISA events; material monetary and non-monetary judgments; and
      actual or asserted impairment of any guarantee or security document or
      security interests.

                  
	 
      	 	 
      
	
                    Governing
      Law and Jurisdiction

                  	 	
                    The
      Note Parties will submit to the non-exclusive jurisdiction and venue of
      the federal and state courts of the State of New York and shall waive any
      right to trial by jury.  New York law shall govern the Loan
      Documents.

                  
	 
      	 	 
      
	
                    Other

                  	 	
                    The
      foregoing is intended to summarize certain basic terms of the New First
      Lien Notes.  It is not intended to be a definitive list of all
      of the requirements in connection
therewith.

                  


          

        

      

       

      
        
           


        

        
          40

          
            

          

        

        
           


        

      


      Schedule 2

       

      Terms
of New Second Lien Notes

       

      
        
          
            
              
                
                  	
                          Item

                        	 	
                          Proposed
      Terms

                        
	 
      	 	 
      
	
                          Issuer

                        	 	
                          Reorganized
      HCOC

                        
	 
      	 	 
      
	
                          Guarantors

                        	 	
                          Same
      as New First Lien Notes

                        
	 
      	 	 
      
	
                          Initial
      Principal Amount

                        	 	
                          $80
      million

                        
	 
      	 	 
      
	
                          Amortization

                        	 	
                          None

                        
	 
      	 	 
      
	
                          Interest

                        	 	
                          L+1300
      bps per annum

                           

                          LIBOR
      floor of 300 bps

                           

                          100
      bps shall be permitted to PIK, subject to cash flow test which, if met,
      causes cash payment

                           

                          Interest
      shall be payable as follows: on the last day of selected interest
      periods (which shall be one, two, three and six months) (and at the end of
      every three months, in the case of interest periods of longer than three
      months); and upon prepayment, in each case payable in arrears and computed
      on the basis of a 360-day year.

                           

                          Default
      rate +2%.

                        
	 
      	 	 
      
	
                          Funding
      Protection

                        	 	
                          Customary
      for transactions of this type, including breakage costs, gross-up for tax
      withholding, compensation for increased costs and compliance with capital
      adequacy and other regulatory restrictions.

                        
	 
      	 	 
      
	
                          Maturity

                        	 	
                          The
      date that is four years from the Plan Effective Date.

                        
	 
      	 	 
      
	
                          Call
      Premium

                        	 	
                          Year
      1 3%

                           

                          Year
      2 2%

                           

                          Year
      3 1%

                           

                          Year
      4 0%

                        
	 	 	 
	Collateral	 	
                          Second-priority
      liens on all collateral securing the New First Lien Notes, subject to
      permitted
liens

                        


                

              

            

          

        

      

       

      
        
           


        

        
          41

          
            

          

        

        
           


        

      

      


      
        
          
            
              
                
                  	
                          Item

                        	 	
                          Proposed Terms

                        
	 
      	 	 
      
	
                          Mandatory
      Prepayments

                        	 	
                          Subject
      to the discharge of the New First Lien Notes, the Issuer shall make the
      following mandatory prepayments (subject to certain basket amounts and
      exceptions to be negotiated in the definitive documentation):

                           

                          1.          
      Indebtedness/Equity/Extraordinary
      Receipts:  Prepayments in an amount equal to
      (a) ●% of the net cash proceeds received from the incurrence of
      indebtedness, (b) ●% of the net cash proceeds received from the
      issuance of additional equity (but specifically excluding any net cash
      proceeds received in connection with the proposed rights offering with
      respect to the Company’s proposed plan of reorganization), including the
      Exit Warrants and (c) ●% of the net cash proceeds from the receipt of
      any extraordinary receipts (including, without limitation, insurance
      proceeds, tax refunds and similar receipts outside of the ordinary course)
      by the Note Parties (other than certain permitted indebtedness, issuances
      of equity to Issuer or any Guarantor by any of its or their subsidiaries,
      certain permitted securities having terms to be agreed upon and other
      exceptions and baskets to be agreed upon, as specified in the definitive
      documents and including capacity for reinvestment within a specified time
      period on terms mutually agreeable and in amounts to be determined),
      payable no later than the fifteenth (15) Business Day following the date
      of receipt.

                           

                          2.          
      Dispositions:  Prepayments
      in an amount equal to 100% of the net cash proceeds from the sale or other
      disposition of any property or assets of Borrower or its subsidiaries made
      outside of the ordinary course of business (including as a result of
      casualty or condemnation, subject to certain exceptions and baskets to be
      agreed upon), except for (a) the sale of inventory or obsolete or
      worn-out property in the ordinary course of business, and (b) certain
      other customary exceptions (including capacity for reinvestment within a
      specified time period) to be agreed upon by the Requisite Plan Support
      Parties.

                           

                          3.          
      Excess Cash
      Flow:  Beginning with the fiscal year ended [2011]
      prepayments in an amount equal to [50%] of the annual excess cash flow of
      the Note Parties within ● days following the Issuer’s fiscal year
      end.  “Excess Cash Flow” to be defined in a manner consistent or
      no less favorable to the Issuer than the definition given to such term in
      the existing Credit Agreement.

                           

                          4.          
      Change of
      Control:  Mandatory redemption at 101% of principal
      amount plus accrued and unpaid interest.

                           

                          All
      net proceeds of such sales shall be applied in accordance with the
      Application of Payments section provided
below.

                        


                

              

            

          

        

      

       

      
        
           


        

        
          42

          
            

          

        

        
           


        

      

       

      
        
          
            
              	
                      Item

                    	 	
                      Proposed Terms

                    
	 
      	 	 
      
	
                      Application
      of Payments:

                    	 	
                      All
      mandatory prepayments will be applied without penalty or premium (except
      for breakage costs, if any) and will be applied, first, to the
      New First Lien Term Notes until repaid in full, and second, to the
      New Second Lien Term Notes.

                       

                      All
      payments during an event of default shall be applied to first to the
      outstanding principal amount and accrued and unpaid interest, expenses,
      costs and fees thereon under the New First Lien Notes until repaid in
      full, thereafter the New Second Lien Term Notes.

                    
	 
      	 	 
      
	
                      Representations
      and Warranties

                    	 	
                      Such
      representations and warranties by the Note Parties as are usual and
      customary for financings of this kind including, without limitation,
      financial statements (including pro forma financial statements); absence
      of undisclosed liabilities; no material adverse change, except for the
      commencement of the Chapter 11 Cases; corporate existence; compliance with
      law; corporate power and authority; enforceability of documents; no
      conflict with law or contractual obligations; no material litigation; no
      default; ownership of property; liens and priority of the notes;
      intellectual property; no burdensome restrictions; taxes; ERISA;
      subsidiaries; environmental matters; solvency; labor matters; accuracy of
      disclosure; margin regulations; and creation and perfection of security
      interests.

                    
	 
      	 	 
      
	
                      Affirmative
      Covenants

                    	 	
                      Such
      affirmative covenants by the Note Parties as are usual and customary for
      financings of this kind including, without limitation, [obtaining a rating
      from S&P or such other agency acceptable to the Senior Noteholders and
      the Company], delivery of
      financial statements, reports, notices of default, litigation and other
      material events; payment of federal state and material local taxes and
      other obligations; continuation of business and maintenance of existence
      and material rights and material privileges; compliance with laws and
      material contractual obligations, except as would not have a material
      adverse effect; maintenance of material property and insurance (at levels
      and of the type maintained by similar sized business in the same or
      similar businesses); maintenance of books and records; and compliance with
      environmental laws; further
assurances.

                    


            

          

        

      

       

      
        
           


        

        
          43

          
            

          

        

        
           


        

      

      


      
        
          
            
              	
                      Item

                    	 	
                      Proposed Terms

                    
	 
      	 	 
      
	
                      Negative
      Covenants

                    	 	
                      Such
      negative covenants by the Note Parties as are usual and customary for
      financings of this kind including, without limitation, limitations with
      respect to other indebtedness (including negative pledge, guarantee
      obligations); liens; mergers, consolidations, liquidations and
      dissolution; sales and other dispositions of assets; dividends and other
      payments in respect of capital stock; capital expenditures; investments,
      loans and advances; payments and modifications of subordinated and other
      debt instruments with exceptions and baskets to be agreed upon;
      transactions with affiliates; changes in fiscal year; negative pledge
      clauses restricting subsidiary distributions; prepayment of other debt;
      and changes in lines of business, in each case, with exceptions and
      baskets to be agreed.

                    
	 
      	 	 
      
	
                      Financial
      Covenants

                    	 	
                      Financial
      covenants as are usual and customary for financings of this kind
      including, without limitation, maximum leverage, maximum capital
      expenditures, minimum EBITDA and minimum interest coverage (exclusive of
      non-cash pay PIK interest, if applicable) in amounts to be determined,
      each to be tested on a quarterly basis (with
      monthly financial reporting).

                    
	 
      	 	 
      
	
                      Events
      of Default

                    	 	
                      Events
      of default as are usual and customary for financings of this kind
      including, without limitation, failure to make payments of principal,
      interest or fees when due; failure to pay other amounts; material
      inaccuracy of representations and warranties; violations of
      covenants:  cross-default to material indebtedness to be agreed;
      certain ERISA events; material monetary and non-monetary judgments; and
      actual or asserted impairment of any guarantee or security document or
      security interests.

                    
	 
      	 	 
      
	
                      Governing
      Law and Jurisdiction:

                    	 	
                      The
      Note Parties will submit to the non-exclusive jurisdiction and venue of
      the federal and state courts of the State of New York and shall waive any
      right to trial by jury.  New York law shall govern the Loan
      Documents.

                    
	 
      	 	 
      
	
                      Other

                    	 	
                      The
      foregoing is intended to summarize certain basic terms of the New Second
      Lien Notes.  It is not intended to be a definitive list of all
      of the requirements in connection therewith.

                    
	 
      	 	 
      
	
                      Intercreditor
      Agreement

                    	 	
                      The
      intercreditor agreement shall contain terms and conditions that are
      customary for transactions of this nature and that is otherwise reasonably
      acceptable to the Senior Noteholders and Credit Agreement Lenders,
      providing for, among other things, lien priority and related creditor
      rights as between the New First Lien Notes and New Second Lien
      Notes.

                    


            

          

        

      

       

      
        
           


        

        
          44

          
            

          

        

        
           


        

      


      Schedule 3

       

      Terms
of the Exit Warrants

       

      
        
          
            	
                    Item

                  	 	
                    Proposed Terms

                  
	 
      	 	 
      
	
                    Issuer

                  	 	
                    Reorganized
      HCC

                  
	 
      	 	 
      
	
                    Expiry
      Date

                  	 	
                    Three
      years following the Plan Effective Date

                  
	 
      	 	 
      
	
                    Strike
      Price

                  	 	
                    A
      price per share of Reorganized HCC Common Stock based on the price
      described in the Term Sheet.

                  
	 
      	 	 
      
	
                    Total
      Shares Purchasable Under Warrants

                  	 	
                    10%
      of the issued and outstanding shares of Reorganized HCC Common Stock as of
      the Plan Effective Date

                  
	 
      	 	 
      
	
                    Adjustments

                  	 	
                    Splits
      or combinations and other customary anti-dilution
    protections

                  
	 
      	 	 
      
	
                    Other
      terms and conditions

                  	 	
                    Terms
      and conditions customary for securities of this
  nature.

                  


          

        

      

       

      
        
           


        

        
          45

          
            

          

        

        
           


        

      


      Exhibit B

       

      Assumption
Agreement

       

      Reference
is hereby made to that certain plan support agreement dated as of August [__],
2009 (as such agreement may be amended, modified or supplemented from time to
time, the “Plan
Support Agreement”) among Haights Cross Communications, Inc., Haights
Cross Operating Company and the Senior Noteholders, Senior Discount Noteholders
and Credit Agreement Lenders party thereto.  Capitalized terms not
otherwise defined herein shall have the meaning ascribed to such terms in the
Plan Support Agreement.  As a condition precedent to becoming the
beneficial holder or owner of [__________] dollars ($__________) in [___]
[Senior Notes][Senior Discount Notes][Credit Agreement Loans](as defined in the
Plan Support Agreement), the undersigned ______________ (the “Transferee”), hereby
agrees to become bound by the terms, conditions and obligations set forth in the
Plan Support Agreement as a Plan Support Party.  The Transferee hereby
makes, as of the date hereof, the representation and warranties to the other
Plan Support Parties set forth in Section 7 thereof.  This Assumption
Agreement shall take effect and shall become an integral part of the Plan
Support Agreement immediately upon its execution and the Transferee shall be
deemed to be bound by all of the terms, conditions and obligations of the Plan
Support Agreement as a Plan Support Party as of the date hereof.

       

      IN
WITNESS WHEREOF, the ASSUMPTION AGREEMENT has been duly executed by each of the
undersigned as of the date specified below.

       

      Date:  __________,
2009

       

      
        	 
      	 
      	 
      
	
                
                  Name
      of Transferor

                

              	 
      	
                
                  Name
      of Transferee

                

              
	 	 	 
	 
      	 
      	 
      
	
                
                  Authorized
      Signatory of Transferor

                

              	 
      	
                
                  Authorized
      Signatory of Transferee

                

              
	 	 	 
	 
      	 
      	 
      
	
                
                  (Type
      or Print Name and Title of 

                  Authorized
      Signatory)

                

              	 
      	
                
                  (Type
      or Print Name and Title of Authorized 

                  Signatory)

                

              
	 
      	 
      	 
      
	 
      	 
      	
                
                  Address
      of Plan Support Party:

                

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                Attn:

              	 
      
	 
      	 
      	
                Tel:

              	 
      
	 
      	 
      	
                Fax:

              	 
      
	 
      	 
      	
                Email:

              	 
      


      

       

      
        
           


        

        
          46

          
            

          

        

        
           


        

      


      Exhibit C

       

      IC
Acknowledgment

       

      Reference
is made to that certain Plan Support Agreement, dated as of August [__], 2009
among Haights Cross Communications, Inc., Haights Cross Operating Company and
the Senior Noteholders, Senior Discount Noteholders and Credit Agreement Lenders
party hereto.  Capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Plan Support Agreement.  HCC
and HCOC, on the one hand, and the undersigned Requisite Plan Support Parties,
on the other hand, acknowledge and agree that the forms of the Disclosure
Statement, and the Plan, and all related documents, exhibits, annexes and
schedules thereto, all as attached to this IC Acknowledgment, are not
inconsistent with the Term Sheet and otherwise are in form and substance
reasonably satisfactory to the Requisite Plan Support Parties, HCC and
HCOC.

       

      
        
          
            
              	 
      	
                      [REQUISITE
      PLAN SUPPORT PARTY]

                    
	 
      	 
      
	 
      	
                      By:

                    	 
      
	 
      	 
      	
                      Name:

                    
	 
      	 
      	
                      Title:

                    
	 
      	 
      	 
      
	 
      	
                      HAIGHTS
      CROSS 

                      COMMUNICATIONS,
      INC.,

                    
	 
      	 
      
	 
      	
                      By:

                    	 
      
	 
      	 
      	
                      Name:

                    
	 
      	 
      	
                      Title:

                    
	 
      	 
      
	 
      	
                      HAIGHTS
      CROSS OPERATING 

                      COMPANY

                    
	 
      	 
      
	 
      	
                      By:

                    	 
      
	 
      	 
      	
                      Name:

                    
	 
      	 
      	
                      Title:

                    


            

          

        

      

       

      
        
           


        

        
          47

          
            

          

        

        
           


        

      

      


      
        
          	 
      	
                  TRIUMPH
      LEARNING, LLC

                  SNEP,
      LLC

                  RECORDED
      BOOKS, LLC

                
	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	 
      	
                  [
      ]:

                
	 
      	 
      	
                  [title]
      for each of the above
entities:

                


        

      

       

      
        
           


        

        
          48